Money Matters

One Year Of Bad Banking Continues

August 29, 2008

Elaine Meinel Supkis

Time once again to look to the recent past so we can see clearly where things are going today. I am rather vain about the fact that I have nearly always called the future correctly based on incoming information each daily cycle. It is even rather scary, how prescient my predictions are. Well, this is due to knowing where money and power come from: that lovely golden Cave of Death. Anyway, we have a small pause today in the news, the major news being Mother Nature taking aim at US oil rigs right when both of our candidates for emperor are threatening Russia and daring Russia to cut energy to Europe. So oil prices are jumping upwards like a frog on a French frying pan. We get to visit the BIS headquarters in Europe to learn more about global currency markets. Yikes.

From August 28, 2007: What Lola Wants, Lola Gets...No More

Over half a trillion spent on goosing up the markets and there was less than two weeks of happy hysteria then reality returns and markets drop. The people destroying the economic power of the West aren't done yet. They can give this dead market a few more expensive jolts of electricity. But the debt ratios in the West are all nearing to or over 100% GNP. This means the economic rule of the European and American empires is about finished. The picnic at Jackson Hole this week is really a panic. The Bank of Japan is speaking there and will explain how to 'fix' everything, HAHAHA.

From Bloomberg:

The rally in 30-year Treasury bonds, the most profitable U.S. government securities in the past 15 months, may become a casualty of the Federal Reserve's efforts to ease a widening credit crunch.
Yields on so-called long bonds will increase because Fed Chairman Ben S. Bernanke may lower borrowing costs and cause consumer prices to rise at a faster pace, said Brian Carlin, head of fixed-income trading at JPMorgan Private Bank.

Investors will demand a ``higher risk premium,'' said Carlin, who helps oversee $100 billion of bonds in New York. ``Fed cuts may, in fact, turn out to be quasi-inflationary.''

This is the Horns of Dilemma, the Horn of Plenty is empty. As the US looks puzzled and shakes it ever harder hoping for goodies from Asia to pour out, it is time to talk about reality: the US cannot run all its economic systems in the red forever and forever. This is physically impossible. I have been saying this since the early 1970's. If we time-travel, we can see what was obvious back then.

HAHAHA. 'Quasi-inflationary'? What's that? Why, it is commodities shooting to the moon, that's what was so quasimoto about this desperate lunge to revive banking and global markets by handing out free loans to the biggest banking bandits. The hope was, this money would flow like a broken faucet into the pockets of US homeowners and thus, restarting the Home ATM machine business. People sit at home, it goes up in value, they go refinance themselves deeper into debt and continue being the Consumer Nation.

But it is the Crashing Nation. There is an upper limit to debt. All debtors hate this concept. The deeper into debt an entity, government, business, homeowner goes, the more debt they desire. This keeps things afloat. Once this is cut off, there is a cascade of unpaid bills that pile up rapidly the deeper into debt the entity is. This is why avoiding this condition is of greatest importance. This is all very sad, actually. The US experiment with eternal debt will end in the total loss of our entire empire and the dismemberment of our nation itself. History tells us this with greatest clarity.

When Spain went bankrupt trying to put down the Dutch and English 400 years ago, it gradually lost all of its many colonies and provinces ending with Napoleon invading and destroying the remainder of Spain. The Ottoman Empire nearly took Vienna in the 1600's even as Spain was fighting the Dutch. By 1800, the Ottoman empire was on the rocks. By 1920, the Ottoman empire itself was totally dismembered. The results of this are still relevant today. WWIII will probably be centered on wild attempts by Europe and the US to continue destroying and ripping apart that former empire. Only this probably won't happen. Not if the US goes bankrupt.

We see a clear pattern here: no empire lasts much after going bankrupt. Russia was very rapidly dismembered when it went bankrupt from 1990 to 2000. It is only beginning to reassemble itself. Now that Russia is solvent. Unlike the US which is deep, deep, deep in debt.

From August 28, 2007:PANIC, Part III

As I keep saying, the Dragon is very angry. And all the talk about the Fed dropping interest rates and weakening the value of the holdings of this dragon, it will not support this but figure, it is time to strangle the US golden goose and kill it off once and forever. The panic in the world stock markets resume as everyone realises this harsh reality. Bad housing news hits hard but this is the fault of the media spreading fake cheer all over the place just a few days ago. They will paper over this mess and 'save' the markets...again. But they can't do this to infinity despite the boasts. The Dragon will NOT allow this.
*snip*
The fantasies upholding our economy are falling one by one but not fast enough. There is still a belief that the US controls our interest rates and we can cheat the Chinese the same way we cheated the OPEC nations back in the 1980's or the Japanese in the 1990's. But everyone knows we will try to cheat everyone out of their investments and they are now moving to prevent this. OPEC has kept a good grip on the price of oil which continues to be high. Japan has us by the throat via their FOREX reserves and China is now figuring we are finished and is turning attention to destroying Japan's power.

From Market Watch:DAVID WEIDNER'S WRITING ON OFF THE WALL:

Sentiment is growing that Bank of America Corp.'s Kenneth Lewis may have won a place in the pantheon of great Wall Street titans by using his financial clout to help the country avoid economic ruin.
In some circles, Bank of America's (BAC:50.37, -0.50, -1.0%) $2 billion acquisition of a stake in Countrywide Financial Corp. (CFC:19.68, -0.32, -1.6%) is being seen as critical to the end of the Panic of 2007.

HAHAHA. The award for stupidest article this year goes to this story! This story assumes that the Bank of America did this due to smarts and not because Bernanke ordered them to do this if they wanted their overnight rate cut and $38+ billion bail out. Mr. Lewis will join those paragons of pathetic fools, the guys who tried to stop the collapse in 1929.

I was correct about the Bank of America. This bank is frantically running around the planet begging OPEC, China or Russia to buy it, please! The president of the Bank of America certainly will be on a pantheon of fools. Note how Market Watch fondly thought the G7 banking collapse was over and done with...after less than one month of hell? HAHAHA. New readers, do take the time to read these older articles. They are full of mischief.

Next, an educational article from exactly a year ago:

From August 29, 2007:

Stocks went up and everyone who put us in this economic mess now are convinced old Santa Bernanke will follow in Greenspan's footsteps. We will now enter a foolish cycle of sudden rises and sudden falls in interest rates that have no connection with reality. And indeed, I will prove that this has been so since the middle of the Vietnam war when Americans voted for Guns and Butter. We have been dining on this toxic dish nearly all my life. And it is bankrupting us gradually. This slow descent into financial death is now going to speed up if Bernanke pretends inflation is less than 4%.

Just to review today's astonishing news, here is Bloomberg:

The Federal Reserve will probably cut its benchmark interest rate to 4 percent as slowing U.S. economic growth restrains inflation, said Edward Hyman, chairman of International Strategy and Investment Group.
The worst housing slump in 16 years is weakening the economy after the Fed raised borrowing costs 17 times from June 2004 to June last year. A mortgage-market survey conducted by Hyman's firm showed conditions are ``pretty bad'' and ``among the lowest ratings we have ever gotten,'' Hyman said.

``They will start to ease in a measured way, 25 basis points every meeting,'' he said in an interview in New York. ``I think the economy will react favorably to it'' and probably avoid a recession, he said.

Hyman said he sees a ``better economy next year,'' with stocks and Treasury yields rising. Slacker growth this year will ``put inflation aside'' as a concern for the central bank, he said.

What has irritated me for many years now is the belief that spending is our economy. This is false. Only after we deduct our trade deficit, can we see if we 'grew' an economy and the answer is a resounding 'NO'. We are not growing anything except an ocean of red ink. Consumer spending is driving America into a very deep hole. We should NOT be encouraging spending, we should be encouraging SAVINGS. Debt has ballooned and savings has collapsed. Ergo, we need to rebalance them with each other.

Not only were these gnomes indulging in wicked wishful thinking, they were totally wrong in their analysis and therefore, their predictions stank. Why is that?

If wishes were fishes, we would all be swimming in the deep blue sea! These poor saps just wanted to get rich. So they figured, if they talked as if there was no crisis or it was a small mess and not a mega-mess, it would be small. Like little children who spill the milk taking it out of the fridge and then trying to drink directly from the spout, they can't just shove it back into the container. So if they minimize the damage, they can pretend there is no spilt milk. When the house is burning down, we don't want firemen saying, 'I don't see a fire and it is a little fire, oh, the roof is on fire? Well, that means the fire is about to go out. Let's pour on gasoline. That will fix it.'

The Fed poured gasoline on the inflation fires! I knew this. It was painfully obvious back then. Anyone who claims no one knew, is lying.

From August 29, 2007:Bernanke Will Drop Interest Rates To 4%!!!!!

BREAKING NEWS: BERNANKE WILL DROP INTEREST RATES TO 4%! ARRRRGH!
As expected, markets overseas echoed yesterday's panic on Wall Street. Ever since the .com crash, investors have begged wizards to write new spells that create instant wealth. The wizards used two spells: the 'let's exploit Chinese labor even more' spell and the 'let's create pre-Great Depression investment trusts of various sorts' spells. Both no longer produce easy wealth because the basis of both is piling on debts in the Western empire's populace. The last gasp of this long process of indenture came when Greenspan had to lower interest rates 4% below the real rate of inflation which caused the balloon we now see going bust. Today, I talk about SIV funds, another goofy creature created by these magicians.
*snip*
I was about to publish my story warning about repeating the Greenspan super-low interest rates while pretending there is no inflation when this hit the news wires! And of course, this is PURE INSANITY. And stocks are shooting up! Obviously, Bernanke and his gang surrendered to the financial class who brought this mess down on our heads in the first place.

Now they are safe...until China starts teaching us Mandarin. We are so doomed. But the party will roar on, houses will sell, America's debts will increase to 200% of our GNP instead of 100% and our empire will lose its entire industrial base and anyone saving money will be wiped out, totally.

I knew that was the beginning of the helicopter rescue Bernanke promised Congress. Instead of arresting him, they cheered him. The biggest wastrels on the planet earth is our Congress! They want infinite debt with all their hearts and souls. They are all criminal except for a forlorn handful. I grimly knew that Bernanke would drop rates to 1%. He has hesitated at 2% but itches to drop it further. This, in the teeth of epic inflation. The trick they are now trying is to lower the price of oil. This, they pray, will stop global inflation. A silly idea. They, themselves, spent the last 15 years, claiming that oil prices are not the basis of all domestic inflation.

No indeed. It is cheap money via sub-inflation level lending that fuels inflation. Oil simply rises to the surface, so to speak. It just makes the PAIN of inflation so hideous. And the masses notice this and begin to get somewhat agitated if not downright violent.

Now, on to today's news:

No Wall Street Credit Seizure at U.S. Open Grand Client Slam

(Bloomberg) -- The U.S. Open has one up on Wall Street. It's escaping the credit crunch unscathed.

The U.S. Tennis Association, organizer of New York's Grand Slam tournament, sold out its 84 luxury suites at an average price of $250,000 for the two-week event that ends Sept. 7, even with a $5,000 increase over last year.

Companies including MassMutual Financial Group, International Business Machines Corp. and JPMorgan Chase & Co. pay a total of $50 million a year to sponsor the tournament, according to the USTA. The Open attracted a record 715,587 visitors last year.

``The Open is one of the best corporate events,'' said Stephen Newman, 43, a director at the structured credit products group of Deutsche Bank AG in New York, at JPMorgan's hospitality tent just outside the National Tennis Center. ``You eat, talk and sit next to the person. It's kind of an ideal venue.''

Things are dire and the parties roar onwards. The wealthy financiers are not getting richer but they are certainly NOT poorer. Their income stream has slowed down but they have lots and lots of wealth. And they are out to make deals with other rich people. Golf, horse events and tennis are good for this because the pace is slow, there is no cheering or shouting to interfere with talking business. Making money is social. They make connections which are then exploited. This isn't business at all. This is cronyism a la ruling class nobility style.

The goofy parties these same people threw for our corrupt Senators in Denver are the same sort of game. The rules are harsher at these events so it couldn't be a sit-down dinner. Instead, it had to be 'spoon food' so the caterers made HUGE spoons and loaded these up with food. HAHAHA. Babies eat spoon food. Mama shoves it down the tykes' throats.

ABC news doesn't have to worry about being strangled and then threatened and arrested at the US Open. The Open is not on the radar because it is business, not political. Except it is political but we are not supposed to know this, of course.

Trade Winds Blow In Denver

Trade winds aren’t blowing in Washington these days, but business is puffing hard in the Mile High City.

Two prominent groups--the Consumer Electronics Association (CEA) and the U.S. Chamber of Commerce--are on a quixotic offensive at this week’s Democratic National Convention, pushing for approval of several free trade agreements stalled by the Democrat-controlled Congress.
*snip*
Undaunted, the CEA, a group whose 2,200-plus members include just about everyone having to do with electronics, from Microsoft (nasdaq: MSFT - news - people ) to Gibson Guitar, wasted no time in getting to work. They want to see trade deals approved so they can export electronics more cheaply to burgeoning markets.

On Monday, several hours before the convention officially opened for business, the group released a survey claiming that 62% of Democrats say they benefit from free trade. CEA is wrapping a seven-week, 28-state bus tour (to end at the GOP Convention in St. Paul, Minn.) called “America Wins with Trade.”

Why aren't workers attacking this silly bus? Heh. At least give it a flat tire. The US workers are still waiting for Santa Claus. Exports are up! Wow! Only the dollar shoots upwards. All our trade deficits since the Floating Currency was launched, have always happened during bad recessions. I suppose a great depression will make it level due to US no longer consuming imports. And this survey: hogwash.

Did the survey say, 'Did you save money buying manufactured goods from China last year?' for example. You bet. If the American public is this suicidal, I would blame the media. The media has been, across the board, totally pro-'free trade'. The NYT and Washington Post are certainly fearfully fond of this Flat Earth style economy! Try getting anyone with an anti-free trade voice access to the business or editorial pages!

Oil Rises in New York as Gustav Threatens U.S. Gulf Platforms

(Bloomberg) -- Crude oil headed for its biggest weekly gain in almost two months and natural gas rose as producers evacuated rigs before the arrival of Gustav, forecast to be the largest hurricane in the Gulf of Mexico since Katrina.

Royal Dutch Shell Plc and ConocoPhillips started pulling workers from Gulf of Mexico platforms and cutting production in a region that pumps 26 percent of U.S. oil and 14 percent of gas output. Louisiana officials said they will start evacuating residents today in two counties around New Orleans that house refineries owned by Exxon Mobil Corp. and Valero Energy Corp.

Look at how hurricanes are now popping up in the Caribbean:

From the NOAA hurricane page:

Right on time for the US to try to pick a fight with one of the world's largest energy export countries, Russia. The effects of this inflation will savage the US consumers. And will be more of an excuse for Bernake to drop interest rates to near zero. We seem to have a poor method of learning about cause and effect. I suppose another epic hammering of the US economy might finally drive this lesson home.

BIS Working Papers
No 252

The evolution of trading
activity in Asian foreign
exchange markets
by Yosuke Tsuyuguchi and Philip Wooldridge

The depth and breadth of Asian foreign exchange markets have improved markedly in recent years. Volumes grew rapidly and the diversity of market participants increased. Activity in Asian currencies remained concentrated in onshore markets to a much greater degree than that in major currencies, indicating that foreign exchange controls are having the intended effect of stalling the internationalisation of Asian currencies. At the same time, foreign exchange controls appear to be restraining the development of Asian foreign exchange markets by depressing derivatives trading and fragmenting activity between on- and offshore markets.

The development of foreign exchange markets is closely linked to the participation of foreign investors in local bond markets. The absence of a liquid derivatives market in which to hedge currency risk might deter foreign investment in local currency bonds and, therefore, limit the diversity of bond market participants. Managers of multi-currency bond portfolios typically prefer to hedge the associated currency risk because the volatility of currency returns is greater than the volatility of most bond returns; open currency positions are usually found to
add volatility to bond portfolios without adding much return (Ramaswamy and Scott (2005)). This contrasts with equity portfolios, where the case for hedging is less convincing because the volatility of equity returns is much higher. The link between foreign participation in equity
markets and the development of foreign exchange markets is correspondingly weaker.
*snip*
These same factors were undoubtedly responsible for part of the increase in the turnover of Asian currencies, although their relative importance was less than was the case for the major currency pairs. Certainly algorithmic trading had a much smaller impact on Asian currencies than on internationalised currencies (Wright (2007)). Foreign investment both to and from Asia has increased sharply since 2002, in the process creating direct and indirect demand for foreign exchange. The IMF estimates that in 2007 inflows to the region totalled about $650 billion and outflows $500 billion, for a combined total of $1150 billion (Graph 1). By contrast, in 2004 inflows and outflows summed to less than $500 billion. In addition to foreign direct investment, portfolio investment increased, including purchases of local-currency debt
securities. Leveraged trades concentrated in IDR, INR and PHP, which were popular target currencies over this period (Gyntelberg and Remolona (2007)).

The importance of this chart is the Hong Kong factor: look at how much bigger it is compared to all the others. And the growth rate. It more than quadrupled in less than 3 years. Grew more than 6 times greater in just 6 years. Like all the charts and graphs tracking money and trade, it is shooting upwards. All systems are now so totally out of balance, the parts that are going into the red are plunging into the red at ever-faster rates and the parts growing like the Derivatives Beast, have shot upwards, straight upwards. This divergence is totally unstable and unsustainable. The games being played using currency and interest rate systems that grew out of the crash of the US gold/dollar dual system is getting more and more out of control.

Vast fortunes have been made out of thin air, playing these totally unnecessary and destructive monetary games. The Floating Currency is at fault here. The US experiment in having the world's biggest empire run on fake money has failed. The failure is great and growing worse by the hour. Until we give this notion up, the banking crisis will only worsen. Imagining a bit of tinkering and assistance from the World Bank and the International Monetary Fund coupled with the banks ravaging the US economy 'assisting' will fix this mess is PURE INSANITY.

Note how, in this last year, the Bank of Japan cannot sustain the US entirely by itself. Indeed, first China then Russia ended up funding our banking system. As well as OPEC. And they can't feed the monster further since the US decided this year to run thing totally out of control, in the red. Handing out tax cuts and rebates like so many candy canes.

The rapid growth of turnover and increase in intra-regional trade and investment flows has not lessened the pre-eminence of USD crosses in the trading of Asian currencies. USD was on one side of about 97% of all transactions involving Asian currencies in April 2007 (Table 4 and Graph 6). This share was unchanged from previous surveys. In short, turnover data give no indication of a decline in the use of USD as a vehicle currency among Asian currencies. A vehicle currency is an international medium of exchange. It is the currency through which transactions between other currencies are settled. Currencies which are used as a vehicle are typically those with the lowest transaction costs. Provided that transaction costs are a decreasing function of the volume of transactions, the cost of trading two currencies directly is likely to be greater than the cost of transacting indirectly through a large third currency market (Krugman (1980), Hartman (1998), Rey (2001)).15
Among Asian currencies, the proportion of transactions against currencies other than USD is small and stable. For all currencies except the major ones, turnover by currency pair is available only for onshore trading. To the extent that these data are representative of total turnover, they indicate that the importance of non-USD trades ranges from 7% of IDR and THB turnover to 1% of HKD and PHP turnover (Graph 6). By contrast, 28% of EUR trades, 21% of JPY trades and 10% of AUD trades are against currencies other than the USD. IDR, SGD and THB are the only Asian currencies to have seen the share of non-USD transactions increase perceptibly, from 2% in 2001 to around 7% in 2007.

The graphs are clear: this is yet another system in divergence. One part is 'normal' and not really growing all that much while other parts that are easier to manipulate are shooting upwards at an increasing speed. These sorts of charts are indications of great danger and future pain.

Note how New Zealand, in its attempt at stopping inflation, became a favorite vehicle of the Japanese Carry Trade juggernaut.

The system is fatally flawed. Redesigning this is never mentioned except at the furthest fringes of online, non-mainstream commentary. The childish hope is, this mess can simply roll onwards forever. This is a stupid belief. It is obviously not fixable in the present form. Whoever does fix this properly will be the next ruler of the planet. And it won't be Americans doing this, either.

It will be the communists.

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We Rain On Mr. Sunshine's Parade

August 27, 2008

Elaine Meinel Supkis

I have to go out and fix a roof today so this is a quick story: Mr. Sunshine is an economist who says some very dumb things at Seeking Alpha. I and other readers tear him apart. Fun times, go enjoy. Also, we notice that our anger about the ending of the M3 data was correct, the news about the global monetary system still shows the collapse continuing. Even as commodity inflation fades temporarily, the underlying trade mess still continues. The US saw its trade deficit fall but this was 100% due to the weakening dollar. The cost of this fall in imports was very, very high: we paid through the nose for oil. Everyone in America is significantly poorer thanks to this.

First, Mr. Sunshine Man attacks the heros who struggle to keep the M3 data going despite the criminals at the Federal Reserve hiding this information:

Mark Sunshine at Seeking Alpha: Prominent Economists Make Up Data That Doesn't Exist

Many so-called “prominent economists” in the United States and Great Britain were late to understand Federal Reserve monetary policy and are now covering up their past incompetence by making up data and presenting it at as both authoritative and accurate. The issues surrounding the destruction of money supply as result of the credit crisis were obvious but often ignored during the second half of 2007 and the first half of 2008.

Despite having the Great Depression’s monetary history as a guide, many economists that were critical of Federal Reserve policy in the international media didn’t bother to think before talking. These economists didn’t understand that the Federal Reserve’s emergency liquidity facilities were designed to prevent a wholesale destruction of the monetary base and that once the money supply was stabilized, the Federal Reserve could resume its current hawkish stance.

Here is my reply:

This is Elaine Supkis of Culture of Life News:

I was one of the many people who protested very loudly when the Fed capriciously suddenly said, no one needed to see M3 numbers anymore. A number of central banks still publish this data but not the privately-owned Federal Reserve!

When the Fed made that announcement back when we were at the very peak of the housing bubble, oil inflation was just beginning to really take off. I figured, this M3 data was being terminated because Bernanke and Greenspan, as one left office and the other entered, knew that we were on the eve of global hyper-inflation.

And I was right. Immediately, inflation took wing and shot upwards. This is very significant because it happened precisely when asset values of things like properties, etc. began to lose value, rapidly.

A classic situation that M3 helps track was this rapid wealth destruction in assets running during a raging rise in commodities. We saw this in the past like in the stagflation years of the seventies, for example.

We know from history, the only cure for this is to raise interest rates. Instead, now we are 'driving blind' and the first wave of hyper-inflation has hit shore and the next is definitely on the horizon. Until the Fed and the Bank of Japan cease making loans below the rate of real inflation of COMMODITIES, these future inflation waves will destroy the value of global trade monetary icons. Already, the world's #2 economy, Japan, has killed its currency to the point, even the Japanese don't want it anymore.

Now, the #1 economy has set out to do the same. The frightened Europeans are trying desperately to up the value of the dollar but they will fail. Not with both China and Japan, the #2 and #3 economies, flooding Europe with exports or blocking European exports to third parties like the OPEC nations, etc.

For ultimately, none of this is really about monetarist values. It is all about TRADE. With 'free trade' we have a system of 'beggar your neighbor' trade that is extremely hostile and dangerous. The only way the US can get out of this trap is to install tariffs and barriers. This is because we are the world's #1 trade deficit nation. This is utterly unsustainable.

And when we look at debt, trade and monetary policies all at once, we then understand, the 'money creation' business is just a symptom, not a cause.

Also, where does Seeking Alpha find these 'economists'? Mr. Sunshine is pretty close to the bottom of the pit where these poor guys live.

I didn't mention Mr. Sunshine's attacks on the good people who try their best to keep us informed about the M3 information. Other outraged readers tore into him about that. And they are right and Sunshine is a rain cloud. Or cloud coo coo land.

The news this morning clearly shows that the continuing mess is due to the US trying to weaken the dollar so we can increase exports and dampen US appetites for imports. This is a cruel way of balancing trade. Tariffs feed Federal revenues. Whereas a weak dollar kills the consumer and the savers at the same time. We get inflation in import prices while getting no relief with taxes! Our sensible ancestors understood this very clearly. The deflation cycle of the Great Depression spooked economists and politicians to the point, they misunderstood what happened back then and thought, the way to avoid depressions is to have no barriers to trade. This childish ideal is proving to be very bad for the workers in the US which as become the main destination of global exports.

Orders for Durable Goods in U.S. Unexpectedly Gain

(Bloomberg) -- Orders for U.S. durable goods unexpectedly increased in July, indicating growing demand from abroad is still helping companies weather a slump in consumer spending.

The 1.3 percent gain in bookings of goods meant to last several years matched the previous month's rise, which was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders climbed 0.7 percent after a 2.4 percent increase a month earlier.

Sales overseas have helped U.S. factories withstand the three-year housing slump and tighter lending rules that have caused Americans to cut back. Still, economies abroad are now also weakening, signaling companies will not be able to count on sustained gains in exports.

The ICE raids show that US manufacturing has coped with inflation by bringing in a hoard of illegal aliens and undercutting US working wages. This is why the US has seen no worker agitation for higher wages. The illegal aliens have to be silent or else they get deported. This is the cure for inflation. Like Japan, depressing wages. This depresses the local economy and it is spreading. As the dollar weakens, this hammers worker's buying power and causes all assets purchased by workers to decline in value even as the things needed for survival, food, fuel and medicine, shoot upwards.

This causes a 'hand to mouth' economy to develop and this is a third world economy. Taxes are cut but this worsens the credit rating and the need to pay interest to foreign powers makes the trade situation worse, not better. The cruel methods of dealing with trade imbalances rests ENTIRELY on beggaring the working class.

Lockhart Says Fed's Rate Is `Consistent' With Slower Inflation

(Bloomberg) -- Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank's interest-rate stance is ``consistent'' with slowing inflation, while signaling readiness to raise borrowing costs if needed.

``Current Fed policy is consistent with an easing in overall inflation given the dynamics of the economy,'' Lockhart said in the prepared text of a speech today in Atlanta. At the same time, ``I am mindful of today's elevated risks and am prepared at any point to change tactics to ensure inflation expectations do not become unanchored.''

Policy makers agreed on Aug. 5 that their next change in rates would be an increase, according to minutes of their meeting released yesterday. A number of officials concerned at rising risks of inflation favored an increase earlier than traders expected, the minutes also showed. Lockhart will vote on rates for the first time in 2009.

The first wave of inflation has passed. The second is on the horizon. We see it pretty clearly. The only tool left to stop this commodity wave is for the US workers to be totally destroyed like the Japanese workers. This takes us to the election this year:

Financial Crisis Is Absent From Agendas of Parties, Candidates

(Bloomberg) -- The U.S. is facing the worst financial crisis since the Depression. You would never know that from the Democrats' platform in Denver or its Republican counterpart, or from listening to Barack Obama or John McCain.

While both candidates have bemoaned the ravages of the subprime crisis, they have yet to spell out steps for tackling it, such as using taxpayer money to shore up banks and housing.

``They fail to come to grips with the biggest danger that is going to hit the next president in his first few months in office: the crisis in the capital markets,'' said David Smick, a Washington-based consultant to hedge funds and author of ``The World is Curved: Hidden Dangers to the Global Economy.''

The born again Christians want no abortions. This way, women will be forced to have children while having declining incomes! Japan's workforce has nearly totally ceased to reproduce itself and is now declining, rapidly. The US will do the same. Neither candidate talks about Japan's policies. This is peculiar but of course, I must be the only other human on earth who is tracking Japan's economy and analyzing its bad effects! I worry much more about Japan than China for obvious reasons: we are imitating the worst aspects of Japan's 'economic miracle'. China is very dynamic. The workforce, quite restive.

Japan is quiet. Dying. Like the older US industrial workforce, the workers there accept all the hammer blows that make Toyota and Sony stronger and themselves, poorer. I am very alarmed about this and seeing unions give up the ghost here is scary. The unions support Obama but he is not a union supporter, himself. He is part of the New World Order. The New World Order is nervous about McCain because his literally insane.

Reagan was a happy, friendly senile old man. McCain is a bitter, angry, ill tempered senile old man. And this is the only major difference between the two AIPAC candidates. But then, analyzing things so they make sense is very difficult. Since tariffs have been removed from the table, it is nearly hopeless, trying to fix things. We can't fix things unless we first understand what is going on. And to do this, we must look into history. And to understand history, we have to stop accepting old chestnuts of wisdom and look for walnuts of intellectual understanding from a new perspective.

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1930 All Over Again

August 27, 2008

Elaine Meinel Supkis

We get to bounce back and forwards in history as we try to figure out what is going on. The echos from 1930 is very strong indeed. Pensions are vanishing in England and the US. Japan is on a buying binge that has shot up 91% and they are buying up US systems. Once again, I explain how some gold bug or silver bug websites give very, very bad advice. Buyers, please beware! Ulrich, an accountant, sued the IRS and won. Over 100 lenders this year have been forced to fold their tents and go bankrupt. Housing prices are still down but not dropping like a rock. They are just dropping sort of like in 1930. People forget, the Great Depression was supposed to be very short and not all that painful. The banking system took 3 long years to collapse. We barely are entering the second year of this present collapse. We don't hit bottom for another 24 months or more! And ICE makes another mass arrest, setting records. Seems much of our industrial workforce has been displaced by illegal aliens.

First, a look at exactly one year ago.

Super-rich Brats Complain About Cheap Bernanke Santa

After deliriously rising on the news that the big housing developers managed to sell new houses last month without inquiring as to how they did this deed, the markets are now in danger of fainting away due to the very bad news that existing housing is collapsing in value and sales. And the happiness in Japan will also vanish as they contemplate the possibility their number one chumps, the US, will go under. And everyone wonders if the magician, Bernanke, can pull a hell hound out of his hat instead of a skunk.
*snip*
I'm angry that the goofs who run our media and our government both adamantly refuse to admit the big boom/bubble built by Greenspan in 2002 with his fake 1% interest rates has collapsed. It fell apart way back in late 2005, for crying out loud! The remaining sectors collapsed one by one over the last 2 years. As the Fed and the investing classes frantically built new financial structures or designed new hedges or new dikes and barriers, they all fell down. So now the bankers and the top officials running the world's economies...oh, leaving out China, of course....are all frantically trying to use backhoes and bulldozers pushing huge mountains, historically huge mountains of money in a frantic attempt to turn the tide.

Again, it pays to read past postings here. Older readers might remember this stuff. But even I forget what I wrote in the past. Must be getting old! Anyway, the accuracy of these postings is most satisfying. Now, on to the present. England and America are doing the same thing: reducing workers to third world status. This, the rulers imagine, will fix inflation and recapitalize their own bank accounts.

Time running out for final-salary schemes

Employers are rushing to close final-salary schemes to new members to escape the extra cost of their employees' increasing longevity.

A record low of 17 per cent of British final-salary schemes are still open to new applicants, down from 28 per cent last year, according to research by Aon Consulting. In 2003 about half of final-salary pension schemes - which offer guaranteed pensions regardless of market movements - were still available to new employees.

Companies are moving away from final-salary schemes, also known as defined benefit schemes, because of tighter regulation, the present volatile market conditions that have depleted many pension schemes, people living longer and fears over future developments in accounting for pensions.

Across the entire 'First World' universe which is mainly the NATO countries, the US, Canada and Japan, are all dropping worker's wages, dropping pension funds and dropping all sorts of civilized things. Soon, workers get to return to the Victorian model universe of capitalism, red in tooth and claw. The systems are so underfunded and loaded down with debt, the only way to capitalize left is to destroy wages by undercutting the workforce. If everyone works real cheap and gets no retirement, this means more money will flow into offshore investment bank accounts where it can't be taxed! See, isn't that a glorious future for the first world nations' workforces?

Across this toxic, blasted landscape, the governments run lotteries. Winners get to live like kings. Everyone has an equal but one in a 20 million chance to strike it rich. Lady Luck gets to decide who lives in a McMansion or who dies in a cardboard box. This is highly popular with people. Everyone thinks, they will be the winner. So this supports unfair taxation that treats the poor like the rich: both get to pay the same percentage. But one gets to get richer while the other gets even poorer. This is why all third world system feature extremely rich people paying little to no taxes and a great mass of poor peasants who barely can stay alive! Why the US wants this baffles me. I suppose it is human nature: people hate democracy and sharing. They think, if only they can win the lottery, they can be the rulers, too! No lottery winner ever joins the ruling class, by the way. The winnings get frittered away. Seldom does it end up in some capitalist venture that makes the wealth grow. And all the rich rulers know that if you spoil the kids, they turn rotten.

Lottery winners tend to want to spoil their families. None of this stern, 'You better make it on your own before I give you a penny' stuff I grew up hearing. The fact is, even lottery winning peasants are basically socialists if they could confine this socialism to their own ethnic/religious group. It is the business of sharing it with rival groups that irritate so many. This is part of the 'fracturing empires' business: everyone wants to be king of the hill even if it is a mole hill or worse, a red ant hill.

Newmont's O'Brien Says Gold May Reach New Records in a Year

(Bloomberg) -- Newmont Mining Corp. Chief Executive Officer Richard T. O'Brien said gold prices ``probably'' will reach records in the next year as investors seek a buffer against accelerating inflation.

Gold has declined 20 percent since credit market losses and a weak dollar drove the price to an all-time high of $1,033.90 an ounce in March. Investor interest in the metal may be revived as inflation reduces the value of other assets, O'Brien said yesterday in an interview from Denver, where the company is based. Newmont is the largest U.S. gold producer.

O'Brien's view that inflation will accelerate contradicts that of Federal Reserve Chairman Ben S. Bernanke, who said last week that price increases may slow later this year as oil declines and the dollar strengthens. Higher energy and food costs pushed consumer prices to the steepest gain in 17 years in the 12 months through July, government figures show.

One of the features of a true global economic meltdown is how nothing works. Absolutely nothing works. Everyone hopes for a pot of gold at the end of a rainbow. Everyone hopes to win the lottery. Everyone hopes to marry a rich heiress or sugar daddy. Everyone runs around, looking under the furniture or behind the sofa for spare change. Everyone prays that Santa Claus is real. I lost a number of readers when I suggested that gold is a mere commodity like so many others. Hell, paper money is now a commodity! And all of these are manipulated in surprising ways. Namely, a gaggle of wild investors are rushing from one life raft to another. As each one gets overloaded with a host of hedge funds, investors, pension funds, OPEC princes, etc.----it sinks! This is why all economic collapses feature not one but many multiple bubbles.

The bears and bulls wear themselves out by this constant thrashing about by all these frightened investors. This is part of the destruction of wealth process unleashed by the dire Goddesses. These beings are Lady Luck, Inflation and Depression. All of them are impossible to stop. Only when they are done and Libra rises up from Her starry throne, do these three Gorgons return to their Isle of the Setting Sun. Libra picks up the pieces and restarts the systems. Sometimes, it takes humans a thousand years to work out how to do things again. Money vanishes. And is totally gone. This is a very real possibility in our futures: if we experiment with WWIII nuclear hell, this will happen again. Several times, the ability to read and write, do numbers greater than a dozen, to do simple civilized tasks, collapses.

Gold might go up. But this is predicated on people having paper money with which to buy gold. I don't see too many people using gold to buy cars, for example. It has to be translated into paper money. The FX markets were sold to gullible savers as a guaranteed market for increasing the value of one's savings, for example. This, too, has been thrashing about and destroying wealth just like everything else. I look around and see fewer and fewer systems capable of an easy return.

Oil, by the way, has ceased declining. It is bouncing about at the $111-120 range. Ditto, gold has stabilized. If the world economy continues to shrink and I expect it to shrink, both will stay at this level or decline, too. The inflation/deflation whipsaw will continue to ravage various markets. Just like it did in the 1930s.

Two-Cent Pennies: a Window on Inflation

Johnny Carson might have quipped about the economy, "Inflation is so bad these days… that pennies are now selling on the street for two cents."

This joke may not be all that funny, even with the great Carnac delivering it, but it does have the underpinnings of good comedy: an absurd story based on a kernel of truth.

Old pennies are routinely traded at premium prices, sometimes twice or more their face value. This is not because they are rare or precious — they were minted by the tens of billions — but simply because they are worth more as metal than as money.

Because of this "bullion premium" on the older pennies, a small cadre of penny hoarders is actively searching through America's stock of pennies to pick out these undervalued coins.

Casual observers are not struck with a deep sense of economic import when they learn about penny hoarding. Neither are most economists. The government dealt with the problem by simply making the coin out of a much cheaper metal: zinc. So what's the big deal?

The government would LOVE to get rid of the penny. This is a fancy way of saying, 'Let's get rid of one of the zeros'. Zeros have this habit of going to infinity. So if we whack them off at the lower end, all will be well, eh? As a penny pincher, I always get a good grip on my pennies. And they do count. And accumulate. Buy ten items at 99¢ @, we get 10¢ in savings. This is one tenth a dollar. The US can't keep up the fiction of having any hard currencies if we let inflation roar out of control. Most nations solve this by dissolving their currency values totally and starting all over again. The Germans did this in an epic way and are very nervous about repeating this. South American southern European nations do this like clockwork and shrug it off. But now, the southern Europeans are being trapped in the paranoid German system. Heh. They hate it.

Amateur Hour in the Precious Metals Markets
Richard J. Greene

When investors saw gold get bashed after the Fannie Mae debacle it was the last straw. They came to the conclusion that there is nothing that can happen that will make gold work. While this is understandable it is also very regrettable because the very forces that caused this to occur are probably the same that are sitting back with bids under the market price to accumulate at giveaway prices. The commercial shorts on the COMEX can now have a field day covering their massive short positions. It is time for investors to hold tight and add to their positions and to speak out against the interventions. As Ed Steer of the GATA clan has said, ‘there are no markets now, only interventions”. If you are willing to give up your only protection in the face of this you are announcing your willingness to be a slave and you will eventually be a slave.

Silver has dropped over 40% from its highs just before Bear Stearns went belly up while the average listed silver stock is down 51%. There are many silver stocks with just sparkling earnings reports including one that is growing over 40% and trading at less than three times earnings and very few people would be able to name that stock. Investors in today’s markets know only one thing: that a stock that they know by name only has broken some chart level that they consider means this company is automatically tossed on to their junk heap. Throw out your charts and step up to buy companies growing 20-60% that are absolute jewels. There are only two ways to invest in this market to avoid this constant smashing. Build a big position in physical gold and silver and if you do not want to arrange to store it do not trust the ETFs. Quality gold and silver stocks are a different investment than physical gold and silver but they provide some security most investors don’t appreciate. The metal investment is secure because it is still in the ground, especially if the drill results are high quality by reputable firms.

Look, many of the gold and silver bug sites are filled with some very strange insects. Assuring readers that the gold is safer because it is not being mined is total hogwash. Mines are NOTORIOUS for being uncertain. Politically as well as geologically uncertain. The ONLY way to deal with gold or silver is the third world method: you wear it and carry a gun. If you put it in a safe, you have to have a secure fortress to protect it. This means family members and big dogs you can trust. And it has to be hidden very, very carefully. Throughout history, the method used the most was to bury it in the ground. Then, when the holder is killed or dies, no one can find it and it is found thousands of years later by strangers. Oops.

We have to be reasonable: if the three goddesses who rule our fates are determined to zero down wealth, they will. No matter what we do. We can survive not by hoarding anything or doing something strange. Oddly enough, the best route is the Libra one: build a strong family, take care of the family. Join with neighbors in group projects. Keep a wary eye on the weather and on the schemes of rivals. And stay out of debt as much as possible. This means living within one's means. This also means finding new ways to be capitalists.

Lone accountant takes on IRS and wins

It took seven years, but Charles Ulrich did something many people dream about, but few succeed at: He beat the IRS in a tax dispute. Not only that, but tax experts say potentially millions of other taxpayers could benefit from his victory. The accountant from Baxter, Minn., challenged the method the IRS has used for more than 20 years to tax shares and cash distributed by mutual life insurance firms to their policyholders when they reorganize as public companies.

A federal court recently agreed with his interpretation.

Good for Mr. Ulrich. This is how we fight back. Taxes are a complicated mess. Every time they are simplified, they are made complex very rapidly as a hoard of lobbyists go to work. And the politicians create more and more tax loopholes. We hold shares in a mutual fund life insurance business. And yes, they go private so the executives can line their own pockets. Generally, these deals make little or negative sense for the share holders. Who are bullied around by the executives who are really executioners seeking to slay the golden goose so they can grab an egg.

Trucking Stocks Stall

CF Industries (nyse: CF - news - people ) is in the headlines, as news breaks that the company is going to be added to the S&P 500 list after the close of trading on a date yet to be announced. We have highlighted the company in the past as one of the leading ways to play the fertilizer boom.

CF Industries had been a solid performer up until early August. We removed the shares from our "recommended" list on Aug. 8, at the $140 level. The stock is currently trading at the $145 level, but our concern is that momentum investors have dominated trading in the agriculture/fertilizer names.

Like at the beginning of the Great Depression, transportation of goods is collapsing. Just like housing. This is a bad sign. Flooding the US with Mexican trucks won't fix this. It will drive down prices even more and cause even more fury in the hinterlands. And both parties will exploit this rage if they can. Except they don't dare do the Hitler thing. Which means someone will come out of the dark and do it.

Home Prices Fell at Record Pace in June

Home prices fell a record annual 15.9 percent in June, but the monthly rate of decline slowed from May which suggested the decimated housing sector may be stabilizing, according to Standard & Poor's on Tuesday.

"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level," said David Blitzer, chairman of the index committee at S&P, in a statement.

The S&P/Case-Shiller composite index of 20 metropolitan areas slipped 0.5 percent in June from May, bringing the measure down 15.9 percent from June 2007.

The month-over-month drop in the 20-city index was the smallest since July 2007.

The good news? They really think prices are nearly done dropping and will take off if only someone drops the interest rate to 1% again. This is too sad.

ICE: Nearly 600 detained in Mississippi plant raid

The largest single-workplace immigration raid in U.S. history has caused panic among Hispanic families in this small southern Mississippi town, where federal agents rounded up nearly 600 plant workers suspected of being in the country illegally.

One worker caught in Monday's sweep at the Howard Industries transformer plant said fellow workers applauded as immigrants were taken into custody. Federal officials said a tip from a union member prompted them to start investigating several years ago.
*snip*
Those detained were from Brazil, El Salvador, Germany, Guatemala, Honduras, Mexico, Panama, and Peru, said Barbara Gonzalez, an ICE spokeswoman.

From housing to trucking, in nearly every factory, insidiously, illegal workers poured in and drove down wages. If this wasn't happening, even more manufacturing would have moved offshore. This is why I push relentlessly for tariffs and barriers! Geeze! The ruling elites loved this flood of semi-slaves. These people were outside the system and therefore, easier to exploit. They never complained. They didn't hang around to become annoying retirees demanding services. They can't vote! As the ICE goes from factory to farm, the numbers of these people is most astonishing. It should have never been allowed and the US was quite capable of preventing this. But refused because this was a major component of the 'stop inflation' business. Cutting wages is the #1 way of stopping inflation. It is also the best way to make a depression.

If no one takes charge of this mess, we will definitely see some vicious person going about the poorer parts of the US, raising cain. And it is now nearly inevitable. Someone waving a gun and yelling, 'Let's go get them!' will be immensely popular if we go into a depression. Inspiring ethnic warfare will be all the rage. The liberals agitating for Tibet to be 'free' should look more closely at what they are advocating. For this is logically, support for ethnic warfare. And even more so: Jewish support for Israel, one of the more vicious ethnic cleansing states on earth.

Japan Goes on Buying Spree, Shrugging Off '80s Bubble

(Bloomberg) -- Japanese companies are increasing overseas acquisitions, using their cash-hoards to snap up assets beaten down by the global credit crisis and economic slowdown.

The value of foreign purchases by Japanese companies this year has already topped 2007's total by 91 percent, according to data compiled by Bloomberg. That's the biggest gain among the world's 10 largest markets and contrasts with fewer deals in the U.S. and U.K., where credit is drying up after the subprime rout.

I have hammered away at this topic for several years. Japan has NOT been in a depression at all. Japan's workers are being repressed. This is different from a depression. Depressions hit banks, businesses, etc. Japan's businesses at the top are roaring ahead. They had more growth this last 8 years than in their entire history. Japan is a RIVAL. And is working on her own behalf as all rivals are prone to do. Instead of reacting to this, the US has rolled over, dead. We cannot be allowed to understand this. Israel's economy is growing like gangbusters. And so has Japan's export markets. Both have huge surpluses with the US. Both use the US for their own ends. Both are buying out the US. And both are 'untouchable'. As we go broke, they come in with checkbooks and buy us out. This is NOT A GOOD THING. IT HAS TO BE STOPPED.

Again, any patriotic person who can rise up and get the masses agitated will be an unstoppable force. The idea that we should be looking after America is one most people find nearly impossible to conceive. Anyone who does is called a 'xenophobe' and told to shut up. This business is very strongly connected to racism, ethnic cleansing and other ugly forces...but then look at Israel and Japan! Both have extraordinary immigration hurdles. Only people who are specifically of one ethnic/religious affiliation BY BLOOD are allowed to gain citizenship in either racist state. Both are very firmly attached to the US. Which is a multi-ethnic/religious state in grave danger of collapse. The US cannot sit idle while these nations move in to secure our mutual wealth systems. Any more than we should be idle when rival empires throw a net of debts over us.

The people in our government who are enabling and allowing this are traitors. The media that lies about this, ditto. This is why we have this very strange and unpleasant election. People praying to be saved while not being saved at all. Otherwise, we would be hearing talk about illegal immigrants undermining US workers or the debt load held by foreign rivals.

ONGC Agrees to Buy Imperial Energy for $2.58 Billion

(Bloomberg) -- Oil & Natural Gas Corp., India's biggest exploration company, agreed to buy Imperial Energy Plc for 1.4 billion pounds ($2.58 billion) to tap Siberian deposits and make up for dwindling output at home.

The cash offer of 1,250 pence a share is 61.9 percent more than Imperial Energy's stock price on July 11, the day before the London-based company said it received a bid, according to a statement distributed by Regulatory News Service. China Petroleum & Chemical Corp. indicated today it may bid for Imperial Energy.

India and China are busy buying up commodity distribution systems. The dead British Empire is holding a fire sale. There isn't much left. Most industry has been already sold or removed. We are on the same trajectory.

Carteret Mortgage Will Close, Chief Executive Says

(Bloomberg) -- Carteret Mortgage Corp., a closely held mortgage broker that originated more than $4 billion in loans in 2006, plans to close in several weeks, said Chief Executive Officer Eric Weinstein.

``We ran out of money,'' Weinstein, 49, said in an interview today. ``We're not technically out of business yet, but we're winding it down and trying to do the best we can for everybody.''

More than 100 lenders have halted loans, closed or sold themselves over the past 18 months amid the worst housing market since the Great Depression. Weinstein said the Centreville, Virginia-based company has about 800 employees, including 40 at headquarters.

In 1930, there were still quite a few functional banks. Most people thought, the downturn was pretty much over. Hoover worked hard to stimulate the economy. So did the Fed, actually. But the global economy was collapsing due to this being the only way to cope with the massive WWI debts and reparations. Until this destruction of these debts was done, no one could do any business, really. It kept getting worse and worse each year. The US has taken on similar debts to pay for the Cold War. We are reacting to the collapse of our banking system by trying to restart the Cold War. I guess the thinking is, our trade rivals would then be scared into funding our wild spending. I fear, they are unable to do this or in the case of Japan, are openly hostile and using this as an opportunity to destroy the US economy and enslave the US public.

Here are some headline stories from exactly 78 years ago:

Aug. 18, 1930---- Bearish Britain

Gloomier than any other nation at present is Great Britain. Few bullish items appear any more in its financial papers; article after article tells of mysteriously shrunken profits, disgruntled shareholders, deep depression. Last week, although imports of gold from Brazil balanced the steady drain of British gold by France, Britain turned more bearish. Unemployment, steadily rising throughout Europe, passed the 2,000,000 mark in Great Britain last week, the worst since 1921. Further increase seemed certain.

A new Nadir of outspoken pessimism was reached in a trade forecast issued last week by the British Electrical Manufacturers' Association. This potent group went on record as predicting the present trade depression will almost surely last through 1931, that any recovery in 1932 will be only temporary. The U. S.. said this forecast, will take longer to recover than in 1921, being retarded by too large a production capacity, overcapitalization of earning assets.

Aug. 18, 1930---- Drought Relief

President Hoover last week took up the kind of national problem with which he knows best how to deal. A drought,* worst since the Civil war, was upon the east and midwest (see p. 15). Husbandmen across a checkerboard of devastation faced immense crop and livestock losses. President Hoover could not bring rain, but he could and did organize relief agencies

¶To President Hoover last week was sent a report by Commissioner of Indian Affairs Charles J. Rhoads on his Bureau's program "to make the Indian a self-sustaining, self-respecting American citizen." The Indian Bureau will "discourage the proclivity of the average Indian to participate in circuses, rodeos, Wild West shows and similar enterprises."

Aug. 18, 1930---B.&O.'s Portion

Last week B. & O. announced that, acting through the great railroad house of Kuhn, Loeb & Co., it had acquired control of C. & A. The total cost to B. & O. was estimated at $21,500,000 against the I. C. C.'s 1928 valuation of C. & A. at $75,000,000.
The deal was done entirely through the purchase of bonds, which carry voting control. Puzzling in the case was unusual strength in C. & A. stock issues early last week with both the common and preferred selling at 7¼, before dropping to 3⅞ (common) and 3 (preferred). Even the wary New York Times said flatly: "There will be nothing left for stockholders."

Aug. 11, 1930---- Wage Symposium

Widely quoted as a bearish argument have been recent wagecuts by such large companies as Chrysler Corp. and National Cash Register Co. (10% each last month). Last week Roy Dickinson, alert associate editor of Printers' Ink (22,645 circulation, advertising trade weekly) telegraphed a list of tycoons to learn what future wage reductions may be in store. Some of the replies which he received:

James A. Farrell, president of the United States Steel Corp. (224,980 employes in 1929): "I heard a steel man say the other day, in fact more than one recently, that wages should come down. I said, 'Oh no, wages in the steel industry are not coming down; you can make up your mind to that fact. If you are going out to sell your goods and eliminate your profit and expect to get it out of the men in the mills you are greatly mistaken.' "

George Francis Johnson, president of Endicott Johnson Corp. (shoes, 17,000 employes): "Reduction of income of labor is not a remedy for business depression; it is a direct and contributing cause."

Richard S. Shainwald, president of Paraffine Companies, Inc.: "The Paraffine Companies, Inc. has made no reductions in personnel . . . nor has it made any wage cuts . . . believes such reductions can be and should be avoided."

Chesley Robert Palmer, president of Cluett, Peabody & Co. Inc. (5200 employes) : "A general reduction of wages and salaries at this time is entirely unwarranted."

Walter A. Sheaffer, president of W. A. Sheaffer Pen Co.: "Believe it would be a serious mistake."

Albert Russel Erskine, president of Studebaker Corp.: "Have not even considered reducing wages or salaries."

Charles Ruffin Hook, vice president of American Rolling Mill Co.: "Wage reductions would, in our opinion, retard and not stimulate business."
Albert C. Loring, president of Pillsbury Flour Mills Co.: "We have not contemplated any reduction in wages. . ."

Oh, god. Look at that! This last 8 years, all the media has trumpeted the collapse in wages as a GOOD thing. Our grandfathers knew better. All of the top employers were very anxious, one year after the Black Tuesday to reassure everyone, they are not going to depress wages and thus, deepen depression. Everyone whose wages dropped found themselves unable to pay for things and this made things worse. Well, today, the Fed and our government, our media, EVERYONE in power celebrates cutting wages! 'Inflation is DOWN!' they shout. Well, depression has been spreading like wildfire thanks to this process.

For the U. S. farm situation never looked less happy than it did last week when Chairman Alexander Legge of the Federal Farm Board returned to Washington from a swing through the suntanned wheat belt (TIME, July 21). Chairman Legge had harangued planters on the economic necessity of reducing wheat acreage to eliminate their surplus. Their retort, through their Governors and Senators, was a demand for the farm board to buy more wheat and more and more until the surplus vanished and the price went up from 60¢ per bu. Already staggering under more wheat than the whole state of Nebraska produces in a year. Chairman Legge had flatly refused.

"Bunk." When he got back last week to his large Washington office on the seventh floor of the old Southern Railway Building one block from his room at the Willard Hotel, Chairman Legge summoned newsmen and told them what he thought. Said he:

"The farm board was created to assist the farmer and not for politics. From now until November politicians will be so busy saving the farmer, it might be just as well to take a vacation. . . . "I notice the Democratic National Committee has adopted as a slogan 'the failure of the farm board.' This seems to be copied almost word for word from the grain dealers and the Chamber of Commerce of the United States,. . . .

"Certain interests [he meant the grain brokers] which seem to feel they have a God-given right to handle the products of the farmers, and who have accumulated immense fortunes in doing so ... doubtless will be easy picking for any politician of any party who is willing to play their game.

"However, farmers as a class . . . seem to be aware that their present unhappy condition is a result of long years of unregulated production, while they listened to gigantic schemes that high-powered statesmen have had to offer.
*snip*
Legge declares: "We've no authority to give anything away, to China or any other country. . . . I've discussed these proposals with President Hoover but no solution has been found.'' Others have suggested that wheat be fed to cattle since it is now cheaper than some other feeds. Mr. Legge rejects that scheme as unfair to the raisers of other feeds.

History runs in cycles. This is increasingly painfully obvious. Or rather, history is a spiral since we can't go back in time, we can follow the same trajectories. But we make a new path, doing this. Gravity is at work here.

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The Bernanke Horror Show

August 26, 2008

Elaine Meinel Supkis

China has sent us a very loud warning. If we default on our many billions in debts to China, there will be a blinding, hideous retaliation. I expected this would happen after the Olympics closed with China taking the lion's share of gold medals. We look back to a year ago to see how this present banking collapse was proceeding last August. And we look at August, 1930. Similar situation! Not unexpectedly. The US empire is bankrupt. Biden was chosen to herd Obama into office. Biden's son is a credit card lobbyist. Arrest everyone. The Bushese are even more corrupt: they are owned by the Chinese and Saudis. Today is a grim day after a grim year. The US empire is dead but still rolls onwards due to inertia and fear.

First, we visit Culture of Life News exactly one year ago:

August 26, 2007: Rashomon: Everyone Tries To Explain Death Of Banking

In the famous movie, 'Rashomon', four different people tell four different stories about a rape/seduction/murder. The present economic meltdown is similar: so many people are lying or concealing stuff, it is very hard to sort out what is true, what is fake and where this will end except I know it will end badly. We have had a philosophy of global trade/global banking for quite a few years now yet many people trying to make sense of this latest...and not so unusual...banking collapse tend to overlook key players and misunderstand key philosophical banking issues. China and Japan are NOT playing the same game or using the same rules Europe and the USA use.

The bizarre financial systems we see today was set up in the West, with the collapse of communism. When communists coupled their own, new system with the Cold War economic alliance which was set up so that the two losers in WWII could hyper-prosper, thus has created a New World Order that is totally insane and utterly impossible to sustain. The US was persuaded to rebuild the communist empires. The thinking was, if they became stronger and more capitalistic, they would become friends of the US.

This infantile way of thinking is due to propaganda put out by the elites, themselves. The grave danger of all propaganda is, one ends up believing the fake stories. This is why a cold-eyed look at reality is necessary. History never was a conflict between economic systems. It was and still is a conflict between EMPIRES. Empires have been founded on every possible sort of system, style, philosophy and economics. But they all have many, many things in common. This is why recognizing the history of empires and the dynamics of domination are more useful than dickering over details.

The old article from last year is important reading. In it, I tried to explain how the collapse which had barely begun last August, would evolve. I knew this was a major, major global banking collapse due to too much lending, too much overspending. And I knew that the key to all this was in the US global empire: the US was already bankrupt. No one wants to admit this. Everyone wants the US to continue paying its debts. The last thing they want is for the US to do what Germany did in 1933: totally default on all international debts.

Just as the US tried, from 1923 onwards, a desperate stream of continuing lending to Germany to keep their economy afloat so Germany could pay WWI reparations and therefore, fund England and France's repayment of loans from America to run that ruinous war. The collapse of this circle of higher and higher lending coupled with a flood of foreign savings pouring into the US markets from 1922-1929, destabilized international banking and commerce. Which was still, despite the bankruptcy of England, run on the English currency as the base.

Note here how empires run along as if they are alive and well, long after they have died! This is a characteristic feature! Important as all hell. For dead empires always keep moving from sheer momentum. Electrical shocks are applies to keep the dead beasts going and they go and go. The Ottoman Empire, locus of WWI's energies, was dead in 1750. But all the European rising empires kept it alive because they were competing with each other over dismembering that older empire. The whole thing finally came apart in 1914 when the heir to the Viennese throne was assassinated. Now, the Ottoman Empire is a small rump, Turkey. And the rest is being shattered into ever-smaller slivers.

England sailed merrily along after basically being destroyed in WWI. But when the Japanese and Germans poked at the paper tiger of bankrupt England, it all collapsed so fast, the armies and navies of Germany and Japan could barely keep up. The 'Blitzkrieg' aspect of all this was due to the utter collapse of English power.

The US empire is DEAD. Yes, dead. Not totally in the grave...yet. But it is financially dead. The military will follow suit. Our only solution is total warfare, I fear. The summer conventions this year are very dark indeed, as I will explain later. Back to money matters: neither candidate has the solution to our financial destruction since both support wild military overspending. And we are bankrupt. This is part of the international instability. The US cannot pay for the empire we saddled ourselves with. We can ruthlessly cut off our free protection services to Europe and Japan! And we might survive our own collapse.

But this option is not allowed. Unlike in the 1930's when the Asian and European powers wanted us to eat their bitter war fruits while they invade our markets, our own nation took severe measures to withdraw and protect itself. This may have caused WWII but I would state here that we would have LOST WWII without a single bullet being shot if we took up the burden of the entire French and English empires! There was no way we could afford that. Nor would it make any sense. Later, when we tried this in Indochina, we were thumped, hard. At least with WWII, both England and France had to surrender significant degrees of autonomy in order to have us rescue them from the messes their dying empires created.

Financial crisis enters new, uncertain stage

Losses expected to double, while Fed remains under microscope

(MarketWatch) -- The financial crisis has entered a new phase and will likely bring total credit losses above $1 trillion, according to a leading academic who has been studying the turmoil since its beginning a year ago.

Princeton University economics professor Hyun Song Shin says the subprime mortgage crisis has already cost financial institutions roughly $500 billion. Now, however, the problem has spread to the real economy, and losses on credit cards, consumer and business debt should match or exceed those from subprime mortgages and the like, he said.

"We'll see as much as the subprime losses again on the other side, at the very least," Shin in an interview Saturday with MarketWatch on the sidelines of the Federal Reserve's two-day annual economic seminar in Wyoming.

The International Monetary Fund has estimated that financial institutions will suffer a total $945 billion in credit losses. Shin said that remained a credible number, but was still probably on the low side.
"We are probably half way [through the financial turmoil], "Shin said. "The first stage is done -- we're at the second stage. ... The real issue is how much is how much the prime mortgage portfolio is going to be affected. That is going to depend on how far house prices will fall."

I wasn't invited to this picnic. So I will hang out with the grizzly bears outside the Jackson Hole fences and yell at them all: 'Hey, you guys are supposed to be EXPERTS and some of you dudes even claim to be experts about the Great Depression! So why are you guys all so utterly clueless?' I am happy that this one intellectual giant can see part of the truth. About time. Yes, indeed, we are in the 'second stage' of this epic banking collapse! Wow.

Um, this being year 2 in the collapse, I have been running past postings on anniversary days to show clearly, where we were a year ago and where we are going today. It is striking! The Second Great Depression or GDII is an echo of the previous one just as WWII was an echo of WWI. The Great Depression II is going to probably be worse than the previous one just as WWII was worse than WWI. The British Empire was big. But the US empire dwarfs that. England didn't have troops in the majority of the world's countries. The English economy didn't overwhelm all other economies. The expenses for running the British Empire were far less than the epic hemorrhaging of red ink by the US during times of low-level colonial wars.

Enraged mobs might wipe out British interlopers in India or China but were helpless when fairly small armies with little equipment were hauled in to kill civilians or poorly-paid native troops. The US occupation of hostile territory, on the other hand, is tremendously expensive. And deliberately so. The US military is very anxious to spend as much money as humanly possible, as fast as they can. This is immensely profitable.

And we are bankrupt. The fact that our entire financial system is collapsing as fast as the World Trade Center fell on 9/11 is significant. For they are one and the same. The people who benefited most from that attack were our military/industrialists and the global revolutionaries seeking to destroy US economic powers.

The housing bubble was launched because the US emperor, Bush, wanted Americans to be enthusiastic about widening the empire and overspending on wars. Instead of a punishing rise in taxes and restrictions in trade, the US tried the usual imperial solution to pesky revolutionaries: throw money out the window to the masses. This created global inflation. And destroyed international values, trade and banking. Not the act of buying those stupid houses, it was blasting that huge hole in the Cave of Death so we could get rich, killing civilians far away. If everyone in America paid their debts, the #1 debt to pay is to pay taxes to cover the costs of war. Since war money flows OUTWARDS, this is a much greater danger to our financial welfare than social services. Social services are INTERNAL. War is EXTERNAL.

We became stronger after WWII because despite external flows of goods and money, we taxed ourselves to the hilt to pay for this. But since wages and jobs went up due to the dominance of the US in industrial output, all was in balance. Today, we are a global industrial MIDGET. And what production we now have, increasingly, it is owned by the people we defeated in WWII or defeated in the Cold War!

Freddie, Fannie Failure Could Be World `Catastrophe,' Yu Says

(Bloomberg) -- A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China's central bank.

``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu said in e-mailed answers to questions yesterday. ``If it is not the end of the world, it is the end of the current international financial system.''
*snip*
``The seriousness of such failures could be beyond the stretch of people's imagination,'' said Yu, a professor at the Institute of World Economics & Politics at the Chinese Academy of Social Sciences in Beijing. He didn't explain why he held that view.

China's government hasn't commented on Fannie and Freddie.

The Olympics are over. After the West earned the Gold Medal in Whining About The Hosts and after the US got the Gold Medal in Sneak Attacks On Russians, we are entering a new system today! The news from China is very dire. The Chinese are losing patience with the US. They held off slitting our economic throats due to the anticipated Olympics. But the US and NATO did a dual attack: they continued to demand the dismemberment of China while attacking Russia's borders.

China and Russia are solvent. The US is bankrupt. Now, China 'be bank'. Frankly, the Chinese are NOT shocked about the US going bankrupt. THEY PLANNED THIS. They knew that if they held the keys to the bank vaults, they could strangle the US. This silence from Beijing is not stupid. It isn't from annoyance. It is PART OF THE PLANS.

Few people believe me when I say, this plan was cooked up in the US back in the 1980's when the Chinese finally understood capitalism and saw clearly how the US had gone off the financial cliff after the Vietnam War. The US ruling class cannot claim they had no idea the Chinese figured things out. I told everyone until blue in the face, what was going on. Bush Sr. wanted to be ambassador to China back in the seventies because he knew he could make a financial killing and in addition, get Chinese support for getting more power in America.

For Bush was head of the CIA before hiking off to China to get rich. He had all the inside information from my mom and dad. It was my mom and dad who suggested to the CIA, they have the Chinese officials live in my house, for example. We all know each other. Just as I knew Moynihan and D'Amato when they were the Senators for New York. All of them knew about China and China's desire to get a grip on capitalism so they could make their empire stronger. They also knew of the Chinese cynicism about bribery. After all, they spied on Bush when he was ambassador! And they were VERY inquisitive when it came to spying, by the way.

For example, once when my mother and father wanted to talk privately, they went into the shower. A frustrated Chinese agent burst into the bathroom, demanding they stop it, now. This was during Madame Mao's days.

China's silence today is tactical. Being very aware about the entire issue of 'face', they send out courtiers to step forwards and issue threats and demands. Only these are 'suggestions.' The Chinese have made it utterly clear, the US cannot fob off all losses onto China. If the US does this, unnamable horrors will occur. I have said in the past, the rulers of China won't hesitate to whack us very, very hard. They don't want an army of super-rich in China, either. They want to balance state power with private power. Unlike the US which has utterly divorced the people from the power at the center, handing it over to the hyper-rich. Both alien and domestic. The Chinese want to use Bill Gates, not create him.

The international financial systems are broken. They cannot be fixed unless the oath breaker, the US, resumes fiscal responsibility. None of the US allies, Japan, Germany, France or England, want this. They need to keep the US misspending money protecting THEM. Even as they poke at Russia and China. Every tiny principality and statelet also wants this. They can all call upon the US to protect them while they roar defiance to their neighbors. Gads. So instead of us turning aside from this bankrupt situation, it increases. All the war bellows we will be hearing at the Conventions will confirm this to the Chinese: the US thinks it will have enough money from Europe and Japan to keep going.

THIS IS FALSE. If Europe and Japan can fund the US empire, it will be only for a few more years, if that. And only if the US keeps away from conflicts with Russia and China over other nations such as Georgia or Iran. If we insist on confrontations, they will give this to us. By bankrupting the US. If Europe and Japan want to buy ALL the US dollars and debts held by Russia And China, they can! BE MY GUEST. Try keeping the dollar 'strong' while buying up $3 trillion in communist held US debts and dollars!

THIS IS IMPOSSIBLE. They could do this by getting loans from each other. This will increase global inflation, of course. We tried this after losing the Vietnam War. Unlike in 1980, the US can't scare Saudi Arabia into our embrace. The kings were terrified of communists. But now, they are terrified of the bin Laden religious revolution. Which has not died. It is stronger than ever and eating up Pakistan pretty rapidly. It has defeated the US. We just won't admit this.

Both China and Russia can protect the Saudi royals. As the US collapses, the Saudis are already being hammered by US financial losses. If the US goes bankrupt to China and Russia, ALL OTHER SYSTEMS WILL FOLLOW SUIT. This is unavoidable. We can't do a selective bankruptcy. If we cheat the Saudis out of their oil profits just like we did in the 1990's, they will rush to China and Russia for help and protection. And they will join them in basically suing the US for past financial damages. Using the UN. Which still exists. And will be run by a consortium of holders of US debts. Trust me on this.

Rapid rise of dollar may endanger U.S. and world economies

So why has the dollar climbed 7 percent against a basket of currencies since July 15? It is all relative. The outlook for the American economy may be grim, but that of the rest of the developed world is deteriorating rapidly. "This spreading weakness abroad - and it is worse now in Europe and Japan than it is in the U.S.A. - is the primary reason for the dollar's recovery," said David Rosenberg, an economist at Merrill Lynch.

Data released Friday showed that Britain's economy did not grow at all in the second quarter. The euro zone recorded its first-ever contraction during that period.

Revised figures due Thursday are expected to show that the U.S. economy grew at a solid 2.7 percent annual rate in the second quarter, according to economists polled by Reuters, well ahead of the 1.9 percent pace that was initially reported.

But don't expect much of a celebration on Wall Street, because few investors believe this pace can be sustained. Ironically, the recent resurgence in the dollar is part of the reason why.

For the global economy, a strengthening dollar is a mixed blessing. It is good news for European exporters, who have long complained that an expensive euro was hurting their business. It is not such great news for the U.S. economy, which has relied on export demand to compensate for sluggish domestic spending.

Indeed, foreign trade added 2.4 percentage points to second-quarter U.S. gross domestic product, its largest contribution in nearly 28 years, according to calculations from the research firm Global Insight. The revised data Thursday may show that it provided an even stronger kick of 3.2 percent. In other words, without trade, the second-quarter GDP figure could very well have been negative.

If we subtract the US budget deficit for this year which is rapidly approaching a trillion dollars and subtract our trade deficit, the 'growth rate' falls to well below zero. Goosing our economy with that $600@ gift to US tax payers worked. But it increased our debts to China and Russia. So it simply made our situation worse. No sane human overseas is fooled by our GDP figures. Besides, some of this was due to the sudden hike in US exports when food and fuel shot up. The US exports lots of food.

Special to The New York Times.
September 18, 1930

EXPORTS IN AUGUST ABOVE JULY TOTAL;

Amount, Though, Is Far Below That of Month in 1929--Imports Lowest in 10 Years.

DRIFT OF GOLD CONTINUES. Steady Stream of Money Metal Flowing From Country Lately-- Silver Movement Shrinks. Foreign Trade in Merchandise.

One year after the fall in stocks in 1929, this was the headlines! How similar it is today! Metals of all sorts are flowing out of America. I get emails and see stories in the news about the inability to buy gold or silver in physical form. See how this was happening in the past? Imports were lowest and look at today: our government is boasting that imports are down. Japan and Europe can't save the US finances if they are losing the ability to export to the US. This is part of the deflationary liquidity trap.

1930 NYT: AUGUST FLOTATIONS ARE YEAR'S LOWEST;

Offerings of Stocks and Bonds Total $236,250,000, Against $564,739,000 in July. SALES OF SHARES ARE FEW Most of Lien Securities Put Out In Last Eight Months Are of Public Utilities. Offerings Show Big Changes. August Offerings Are Compared.

Looks like today's news. Now, back to today:

Borrowing at Merrill, Wachovia Hit With Record Refinancing Bill

(Bloomberg) -- Merrill Lynch & Co., Wachovia Corp., Lehman Brothers Holdings Inc. and the rest of the U.S. finance industry are about to find out how expensive credit has become.

Banks, securities firms and lenders have a record $871 billion of bonds maturing through 2009, according to JPMorgan Chase & Co., just as yields are at their most punitive compared with Treasuries. The increase in yields may cost them as much as $23 billion more in annual interest versus a year ago based on Merrill Lynch index data.

Higher refinancing expenses will restrict the ability of banks to borrow in the capital markets and lend, further cutting off credit to consumers and businesses and curbing what is already the slowest growing economy since 2001. Standard & Poor's said last week that it had a ``negative'' outlook on almost half of the 50 highest-rated financial institutions in the U.S. as of June 30, the highest proportion in 15 years.

Even as the bigger bankers are paying more and more to access money, thanks to the Federal Reserve cheating savers in our bankrupt nation, rates are rising for them. But not for savers. This is STUPID. And totally infuriating. The US bankers, instead of attracting savings, are BORROWING and doing this overseas. They used to go to Russia, China and Saudi Arabia for funds. But as we can see, these three entities are increasingly united in refusing us this option.

One trillion in bonds will be maturing this next year. Someone with money has to buy them. Who are these people? Will people being cheated out of their savings by the collapse of Fannie Mae and Freddie Mac buy these bonds? HAHAHA. NO. The minute we understand this, we have to get on our hands and knees and crawl to the Dragon Throne, the the Double Eagle Throne and to Mecca's rulers and head to the floor, beg for mercy. Is this being discussed?

NO! Not at the Teddy Bear Picnic at Jackson Hole. Nor was it discussed at the Bilderberger Meeting in DC. HAHAHA. Actually, it was. With fear and trembling. 'How can we kow tow without letting the peasant masses see this?' was what they said to each other. Once the proud flag waving, gun owning American peasants figure out, the ruling elites in America are fools and stooges of the communists and Arabs, they will revolt. If they think McCain isn't a stooge, well, they should watch the Three Stooges. He ain't Larry. He is the bald guy who crashes into walls.

Obama is being led by the hand in the art of kow towing while pretending to be Kennedy. Kennedy was at the apex of our power. Obama is at the nadir. The best we can hope here is, he is enough a gentleman to do this with enough grace, the real rulers in China, Russia and Saudi Arabia will allow him to pretend to be proud and not a beggar at their gates. But the advisors to Obama want to confront China and Russia. And hate Saudi Arabia. I don't see how any of this is possible, frankly.

Obama Aides Defend Bank’s Pay to Biden Son

During the years that Senator Joseph R. Biden Jr. was helping the credit card industry win passage of a law making it harder for consumers to file for bankruptcy protection, his son had a consulting agreement that lasted five years with one of the largest companies pushing for the changes, aides to Senator Barack Obama’s presidential campaign acknowledged Sunday.

Mr. Biden’s son, Hunter, received consulting fees from the MBNA Corporation from 2001 to 2005 for work on online banking issues. Aides to Mr. Obama, who chose Mr. Biden as his vice-presidential running mate on Saturday, would not say how much the younger Mr. Biden, who works as both a lawyer and lobbyist in Washington, had received, though a company official had once described him as having a $100,000 a year retainer. But Obama aides said he had never lobbied for MBNA and that there was nothing improper about the payments.
*snip*
“Senator Biden has a 35-year record fighting for people against powerful interests, whether it’s drug companies, oil companies or insurance companies,” David Wade, a spokesman for the Obama campaign, said in a statement. “He took plenty of knocks from the largest employer in his state because he demanded changes in the bankruptcy bill. But legislating requires compromise. Senators cast tough votes. Congress worked on the bankruptcy bill for nearly a decade, over five Congresses, to forge a bipartisan compromise.”

ALL the teeming relatives of the Senate and other seats of power are lobbyists. 'Hey, dad, hey, honey, hey, gramps, can you sign this bill for my employers?' these flock of locusts babble. They are legion and they are a sign of corruption. Nearly everyone in DC is corrupt these days. Give them money, they give back corruption. The use of family members as lobbyists should be outlawed. Arrest them all! McCain has a paid lobbyist for Georgia where we just saw a sneak attack on Russia. These people are TRAITORS. I can't emphasize this enough. Corrupting the political system is treason. When our lawmakers are lawbreakers, we get a broken system. Broken systems go bankrupt. We are going bankrupt.

Frontline: Secret History of the Credit Card Industry

But it was 1980, South Dakota's economy was a mess, and suspicion was an instinct that Janklow could not afford. "We were in the poor house,'' he recalled. "It cost 42 cents a bushel in 1980 to haul wheat. When something's only selling for $2.20 a bushel, you certainly can't afford to be paying almost 50 cents a bushel to ship it.''

The calls were from Citibank, which was having a serious problem of its own. "It was very simple,'' said Walter Wriston, then the chairman of Citibank. "We were going broke.''

The bank had lost more than $1 billion on its audacious foray into the credit card business, and the future looked even worse. The trouble, simply put, was that the rate of inflation exceeded the amount of interest Citibank was allowed to charge its credit card customers under New York usury laws.

But the bankers saw opportunity and salvation in the plains of South Dakota. Within days of those first phone calls, a team of top executives arrived from New York with a proposal for Mr. Janklow: If South Dakota would quickly pass legislation that would enable Citibank to move its credit card operations to the state, they would bring hundreds of high-paying white collar jobs to the state.

The unlikely alliance would clear the way for Citibank to turn a money-losing credit card operation into a vastly profitable business. "All of their senior people used to say it,'' Mr. Janklow said. "That South Dakota saved Citibank. I believe it did. That South Dakota saved Citibank.''

Congress protects systems that are set up to bleed the US public dry. Everyone wants laws that protects this process and are willing to buy up all our political leaders to gain this. Citibank is always in the news. Despite this scam they pulled 35 years ago, they are still going bankrupt! They are basically owned by the Chinese and Saudis. Citibank is grossly overextended and hasn't near enough capital to stay alive much longer. All the tricky schemes to bleed money from the US consumer have failed, in the end. There is no going back. After bankrupting the consumer, the consumer can't consume. The scheme to flood the consumer market with new lending has now failed. The housing bubble was the last grasp at piling unpayable debts upon the US consumers.

Even if all the sons, daughters, wives, husbands, cousins, and other relatives beg Congress to pass bad laws, this won't bring in a flood of money to the sponsors of these craven family members seeking greater and greater wealth. Nearly all of Congress is multimillionaires now. The Clintons, when Hillary took office, were in debt. Then, over the course of just 7 years, they raked in over $100 million by selling Hillary like she was a political Monica giving blow.

The two candidates for President who were not multimillionaires were Kucinich and Ron Paul. Both were brutally muscled aside by the media. The media has a whole flock of relatives of the rich and powerful, working with or for them.

Culver knocks Agriprocessors, company answers back

Iowa Gov. Chet Culver has some harsh words for an embattled kosher meatpacking plant that's accused of child labor violations and was the site of a huge Immigration raid.

It's an unusual move for a governor to knock a company that employs hundreds in a rural part of the state, but Culver said past violations and new allegations at Agriprocessors Inc. in Postville called for the criticism.

He published his thoughts in a guest column in the Des Moines Sunday Register, where he said Agriprocessors has "chosen to take the low road in its business practices." Culver also charged that the meatpacker has taken advantage of a failed federal Immigration system.

"In doing so, this company has fallen far short of meeting the high business standards that Iowans expect," Culver said.

Note that the powerful Jewish owners are NOT being arrested. Being connected helps. This mirrors the US punishing the lowest level guards in Iraq in the torture cases there. Punishing the guys following orders is typical. And corrupt. The failure of immigration right in the wake of 9/11 is treason. The borders are closed to people like myself. If I try to cross, I will lose my computer. And since I write about stuff like when I was a hippie and took LSD, why, this is also grounds for grounding me. But illegal aliens flowed back and forth with total impunity. Back in earlier times, the US government said they would prosecute owners of factories who fire Americans and rehire illegal aliens. So what happened?

Lobbyists. This is not being fixed. Our legislators want to get rich, not serve the nation.

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Culture of Life News Main Page

Collapse Will Get Worse, Not Better

August 25, 2008

Elaine Meinel Supkis

As the unhappy central bankers and their wealthy investment banker buddies all wipe the crumbs off of their faces a the Teddy Bear Picnic, they have to deal with the crumbling banking system of the G7 nations. Things are getting worser and worser. We just walked in one big circle for a year, trying to escape from the Cave of Death and ended up in the same cave were a grizzly bear, the Derivatives Beast, is waking up from its hibernation. All the solutions these bankers have cooked up are all attempts at regaining the previous status quo. With some small fixes that would prevent too much easy funny money creation except they want to create more funny money. This is pure insanity.

To understand how we made zero progress in fixing the banking system, let's go back exactly one year to see the news back then, at my own blog:

Federal Reserve Sugar Daddy To Rich

What's this? What the hell is this? Remember the little children's fairy story our financial wizards read just the other day, the story of the good little bankers who went to the Gingerbread house and pretended they weren't really hungry at all, they were going to sample the sweets and set an example so other good little borrowers could see, the Gingerbread house was not a trap! Each nibbled $500 million and then smugly told us, they really didn't need one red cent. Not even one brass farthing. Hahahaha.

Right. Now more ugly details are coming out. We all must play Sherlock Holmes and figure out the riddle of this hokus-pokus banking scheme. Um, according to this letter a certain bank, the Bank of America, is in very big trouble. Oops. And it has to rescue a certain entity which shall not be named...Vortehedge Fund LLC! This dying doggie has to be rescued. It ate too many bad tranches and got very sick. The act of basically deciding it is OK to break the law since the Federal Reserve is a retirement home for addled wizards, sort of the final resting place called Hogheaven. And so we see the Bank of America 'borrowing' from 'itself' a tiny sum of money. Heh.

It was truly bizarre last year. All the biggest banks and the EU/UK/US banking consortiums all pretending there was no crisis. And pretending the systems being set up were experimental, not fundamental changes in the way the banking system was being run. And all parties assured each other and the rest of the world, the present global financial, monetary and trade systems would all work just fine in the future. No changes at the top were necessary. This desire for the old, dead status quo is still very, very powerful.

We see it at work in the American popularity contest for emperor: everyone is promising things that are impossible, dangerous and stupid. There is nearly zero talk about doing sane things to fix the mess. It is nearly universal, this desire for a happy-times, Santa-style economic system. We still want empire, too. Nothing has changed. Despite talk about change, all efforts are towards preventing even the smallest changes. The right wing is utterly defunct. They simply want to live in the fake Potemkin past of Reaganism. They really think that was a system that worked!

The lunacy is immense. Under Reagan, the US budget deficit ballooned. The trade deficit took off. The Derivatives Beast was born. The imbalances from trade and monetary values was so great, the US had to go to Japan and Germany and negotiate a series of agreements to weaken the dollar. Every single provision of the Plaza and Louver Accords was violated by all parties, right down the line. This should have caused a diplomatic break down with the winners of WWII, Germany and Japan. Instead, living in lotus-land, the US continued with the fiction that the US ruled the world and was not in harness with a bit firmly yanking on the US mouth.

All of this finally came to a head last August when the Japanese carry trade abruptly ended. Here is another story from a year ago:

Bear Market Will Rip Apart This Economic Termite-Riddled Tree

The building boom we went through was a total waste. It did not build energy-efficient housing. It didn't retrofit all housing with solar energy. It didn't improve our commuting except in NYC where the higher prices housing was concentrated in concentric rings around Manhattan, the only 'up' market left in America.

Wells Fargo lent to goofy buyers looking for housing way outside of cities where the commutes are killers. These houses are going to be abandoned when oil hits $150 a barrel. Already, oil is half way there. If these houses with 30 year mortgages will be 'habitable' in 30 years, this is pure fantasy. Impossible. My mansion, by the way, was a short hop to the oldest commuter line in New Jersey, the train to lower Manhattan. This is where stock brokers would move and this is why it was a valuable property even in a bad recession.

It is good to look backwards. Last year, oil was $75 a barrel. I predicted it would rise to $150 a barrel due to the US and Israel hammering on Iran. I also predicted a year earlier which was two years ago, the US/Israeli efforts at isolating Iran would lead to a world oil shortage and this would destroy the US economy. The parts of the US where housing values shot up the most are being abandoned. From Reagan onwards, the US political map was redrawn with huge, huge support for GOP-style politics in the 'exurbs'. These distant commuter enclaves were drawn to the hokey-pokey economics of wild overspending/wild money creation. This made exurbia possible. For it is very expensive. And extremely unproductive.

All politicians recognized the rising power of the outermost suburbs as America openly abandoned almost all the city cores. Using the new highway system, people moved as far as possible from the cities. Unlike in Europe, for example, where people want to live at the center of the city as much as possible, gasoline in the US was kept much cheaper so the ability to spread was much greater.

Today, the markets and media go crazy whenever gas prices fall. Now, oil is 'only' $115 a barrel. But just one year ago, it was $50 a barrel less. The hope is, the price of oil will collapse. But even with consumption down, the US is still using far more oil today than in Reagan's day.

Here is an article about the IMF last year. The president of the IMF, Rato, gave a hysterically funny speech. As usual, he had nasty things to say about Russia and China. But didn't say a thing about the Japanese carry trade or the US trade and budget deficits.

IMF Praises Imperial Money Creation By US and Europe

The IMF is now a puppet show for small children. The rats and vampires who inhabit its halls no longer strike fear in the hearts of the third or second tier nations. Indeed, they are rapidly outpacing the European/American empire! And this is thanks to the greedy rulers of that empire! Hahaha. Talk about turning of tables!

Watch how the demented fool running the IMF talks about hege funds and private equity as being good things! Wow! And then he hedges his rash, foolish comments by talking about how SOME of them MAY have overreached and not understood risk.

IMF head Rato's speech:

6. The economic fundamentals, both in the large industrial economies and in most major emerging economies, including Brazil, remain strong. Our latest projections anticipate sustained global growth of about 5 percent both in 2007, and 2008, with major emerging markets leading the way. However, the balance of risks has tilted to the downside when compared with a few months ago, reflecting the impact of the recent turbulence in financial markets. These risks bear close watching.
7. The principal risk is that financial market developments affect the real economy through declining asset prices, tightening financial conditions with a repricing of risk, and weaker confidence. In such circumstances, the concern would be that consumption could suffer in the United States, producing knock-on effects elsewhere. However, to the extent that financial conditions return to normal, we believe these risks will likely be mitigated, as most corporations remain highly profitable and household finances continue to be sustained by solid employment growth. Thus, the U.S. economy should continue to grow at a moderate pace this year.

After last year's Teddy Bear Picnic, all the financial wizards who destroyed the global banking systems were certain they succeeded in preventing this collapse. So they went back to assuring us, all was well. We read Rato's speech with amazement. He was dead wrong about everything. He was a liar. He is still a liar. He should resign in shame. How can he live with himself, knowing he was this stupid, one year ago?

These clowns all imagine that finances is all about psychology. They think they control these systems. But when the systems break down, these same people claim they can't control these systems. But they understand them. Only we can see clearly that they obviously do NOT understand these systems. Indeed, these systems are breaking down because of this ignorance coupled with wizard-level hubris. These miserable wizards really think, all they have to do is chant the same formulas and all will be fixed. All they need to do is reassure everyone and Prosperity would then come around the corner, not the other Medusa-hags, Inflation and Depression.

When he made this stupid speech, the price of oil was shooting upwards. Never, never, NEVER does the US economy grow when oil prices climb. This is an iron rule. The US coped with the long rise from $11 a barrel to $150 a barrel by going into debt. This process doubled US debts in less than 8 years. Now, it can't be used anymore. We hit our credit limits. The only way to bring down oil prices is to stop using so much of it. The mechanism for this is a bad recession. Once the recession becomes very, very bad, then the number of people able to heat homes or drive from exurbs will drop, they will either live in the center of the cities or the displaced poor will live on street corners and die.

The IOUUSA movie sponsors are hoping to cut social services and retirement funding so the poor can die faster. Then all will be fixed. The rich don't get eaten by the Derivatives Beast and the poor get eaten by the Depression hag. Now, let's go to today's news:

Mersch Says ECB to Change Collateral Rules Soon

(Bloomberg) -- The European Central Bank will announce changes to the rules governing its money-market auctions in coming weeks to head off the risk of abuse by financial institutions, council member Yves Mersch said.

``At the margins there can still be cases where you see dangers of gaming the system,'' Mersch said in an interview on Aug. 23 in Jackson Hole, Wyoming. ``The Governing Council has been discussing the whole issue'' and has agreed on a ``certain amount'' of refinement to the existing rules, he said.

ECB officials have become increasingly concerned that banks are taking advantage of collateral rules that are broader than those used by the Federal Reserve and the Bank of England. The danger is that banks struggling to sell securities damaged by the credit-market turmoil will dump them on the ECB and become overly reliant on central-bank funds.

Sigh. Once upon a time, central banks had bank vaults. In these vaults were blocks of gold. This was used as the basis of all banking. In addition, all the member banks had to collect something we called 'savings'. This was also called 'liabilities' by the bankers since THEY had to pay these savers 'interest'. The interesting thing about interest is, this money has to be relent at a higher rate so the bankers could then collect interest, too. And they were allowed to do this on a reserve of savings of less than 10%. Even with the central bankers controlling this reserve requirement, the member banks often ended up in the ditch, overextending loans too much.

This is because they love collecting interest rather than paying interest! The investment bankers decided to play this game with less than 1% reserves. To do this, they needed the Bank of Japan's 0% lending. At 0%, a bank can lend forever. Doing this, the Bank of Japan was able to squirrel away a FOREX fund of over a trillion US dollars. US banks sit on virtually no reserves while Asian banks sit on mega-reserves. And this is hyper-unbalanced. And mirrors unbalanced trade relationships.

Now, the central bankers no longer hold more and more gold as they lend. They don't hold more and more capitalist profits. Or more and more worker's savings. The FAKE interest rates are responsible for this situation! Since all the central banks set rates below the rate of real inflation, everyone is putting their money into various instruments that they hope will grow faster than the other nasty hag, Inflation. But Inflation gets stronger and bigger, the faster money grows! The more everyone seeks a greater return outside of the banks, the more powerful Inflation is and Her gold and crimson wings beat ever-faster.

Instead of making banks the destination of savings and profits, the central bankers for the last year have been doing the EXACT OPPOSITE. Killing savings totally. Destroying anyone's desire to park even a penny in a bank! Instead of encouraging everyone to put money in banks and make bankers pay the price of realistic lending, the central bankers are desperate to make it easier for bankers to dump loans and bonds making no profit, in the central banks.

So these pirates can sail off leaving the mess in the hands of the central banks which then dump the entire mess on top of the governments of the sponsoring nations. If saving the investment and lending houses ends up killing entire governments, whole empires, this is NOT A FIX. It is a disaster. But the bankers own the politicians in the 'liberal democracies' so they feel they can pull this off and then stand back and pretend they are not responsible for the messes they created.

Libor Signals Tighter Credit as Banks Balk at Lending

(Bloomberg) -- Most of the bond strategists and salesmen that Resolution Investment Management Ltd.'s Stuart Thomson talked to last August expected the credit crunch to be long over by now. Instead, money markets show there's no end in sight, and it may even worsen.

``It's like an ongoing nightmare and no one is sure when we're going to wake up,'' said Thomson, a money manager in Glasgow at Resolution, which oversees $46 billion in bonds. ``Things are going to get worse before they get better.''

In a replay of the last four months of 2007, interest-rate derivatives imply that banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens. Binit Patel, an economist in London at Goldman Sachs Group Inc., said in an Aug. 21 report that nations accounting for half of the world's economy face a recession.

The premium banks charge for lending short-term cash may approach the record levels set last year, based on trading in the forward markets, where financial instruments are sold for future delivery. Back then, concern about the health of the banking system led investors to shun all but the safest government debt, sparking the biggest end-of-year rally for Treasuries since 2000.

``These problems going into year-end are likely to be worse this time round because of the amount banks have to refinance in December,'' Thomson said, citing a figure of $88 billion. ``The suspicion is that banks are still hiding losses. The banking system relies on trust and at the minute there quite simply isn't any.''

The bankers can't trust each other because they are all criminals. Arrest them all. Hell's bells! Don't they realize what they are saying? The central bankers are rivals, not buddies. The US persists in this childish notion that if we spend trillions of dollars protecting our 'allies' when they are all reaming us out in global trade. But we are all rivals and deadly rivals, at that. All negotiations over monetary matters are equally dishonest. Everyone rushes home and madly seeks ways of violating any rules, systems or mutual agreements! This is much closer to rival Mafia gangs rather than some sort of international accord and common goals. The common goal is for everyone to assist the US in going bankrupt.

Note also how one picnic visitor to Jackson Hole admits the mess this August is WORSE than last year. Arrest all the central bankers! Their failures are now totally obvious to even dimwitted people. Which, of course, excludes politicians. They are still blissfully unaware of how this is all evolving. The bankruptcy bill was supposed to fix the possibility of too many bankruptcies, for example. This led to a flood of bankruptcy filings right smack dab in the middle of the housing bubble!

Everyone who feared bankruptcy all filed at once. This was a huge bleeding wound in the banking system starting at the end of 2005. If anyone is talking about the connection of this mad rush to go bankrupt before the bill passed and the collapse of the housing bubble, I haven't heard it yet. Well, the bankers got what they wanted and this ended up being a knife in the chest. The recent bill to fix the mortgage mess is similiar: it fixes NOTHING. But encourages more skipping out on previous loans. So no one is responsible for any promises and thus, cannot be trusted. What a surprise.

Bernanke, Buiter, Draghi Diverge on How to Forestall Crises

Fed Chairman Ben S. Bernanke, European counterpart Jean- Claude Trichet, former officials and economists meeting in Jackson Hole, Wyoming, split over whether central banks should be made responsible for financial stability and how closely to heed the concerns of Wall Street.

``We shouldn't delude ourselves into thinking we are going to build a panic-proof system,'' former Fed Vice Chairman Alan Blinder, who attended the conference, said in an interview with Bloomberg Television. ``But there are choices between less and more panics, more virulent ones, less virulent ones, and that is the way we want to push the system.''

HAHAHA. As the banking system collapses totally, they are still talking about panics? I would suggest, they should all be in a panic! They created this giant mess. And are still creating it. Far from controlling panics, their every action insures future panics. Instead of removing the punch bowl when the party got hot, they poured 150 proof vodka into the punch bowl. Now, everyone is passed out on the floor or puking up into the Fed toilet. And the solution?

More vodka. Like boys at a frat party, they crawl around the floor littered with broken glass, seeking another drink. Alan Blinder is just as incapable of understanding what is going on as all the others. He admits, the Fed can't control things. But he spend the 1990's imagining that the lack of inflation and the growth of jobs was good. Even though it was fatally based on two things: the destruction of US industry as we sent our manufacturing overseas. And cheap oil. The thought that oil would be cheap forever was the delusion at the center of US thinking. Oil may get cheaper again. But it is very unlikely.

View of economy somber from Fed mountain retreat

(Reuters) - A towering grizzly bear guards the doorway to the Federal Reserve's annual policy retreat in this Teton Mountain resort, serving a reminder to central bankers of the battle to sooth the credit crunch.

"This turmoil is not going to go away quickly and will require serious efforts to overcome it," a top official of the International Monetary Fund, John Lipsky, told Reuters. "A year ago there was a real sense of uncertainty and confusion. People were perplexed by the turmoil that had come on quite suddenly. I would say the mood this year is one of greater clarity...let's call it a bit more somber," said Lipsky, the IMF's first deputy managing director.

I am including the above story because it illustrates how hideous things really are. The entire reason I am linking to older articles is because I knew what was wrong long, long ago. It isn't enough to be a 'bear.' One has to carefully explain the mega-complex with all its parts and then locate the points of greatest danger. And in the present case, virtually no one is noticing the insanity and bizarreness of the Bank of Japan's near-0% interest rates as being a major force in the collapse of global banking. So long as this exists, this black hole continues, international banking will collapse. The ending of this business last August caused the obvious collapse to finally manifest itself. Restoring the carry trade only worsens things, not fixes them.

And this is why I rage so much! Every time the status quo of June, 2007 is revived, all these guys sigh with relief and run back to Tokyo with their hands open, begging for more funny money! They are not honestly trying to fix this. Many economics professors focus entirely on China and there is a near-total silence about Japan's ZIP code, the Zero Interest Program's dire effects are ignored.

Jackson Hole in the head:

"The financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided, and its effects on the broader economy are becoming apparent," Bernanke told the conference on Friday.

Lipsky said the U.S. economy might contract slightly in the second half of the year. Even if it skates the generally accepted rule of thumb for a recession -- two consecutive quarters of contraction -- he warned it will suffer a clear period of sluggish growth, with the IMF forecasting growth of 1.3 percent this year and 0.8 percent in 2009.

The US really didn't grow this last 8 years. It's debts grew very rapidly. The GDP was nearly all consumption, not manufacturing growth. Sane commentators noted this repeatedly. But until the goofy wizards at the top of the banking system notices this, we are doomed. This is why I want them all removed. Every last one of them. 35 years of abject failure has to come to an end!

By the way, we have to now go into the other dire matter, the Holy Land. The US is not growing. But a certain economy which has people that now have a higher standard of living than 90% of this planet, their economy is growing and growing pretty fast. Faster than the US economy, even when we use the fake figures, is growing. The US has not managed better than 3.5% growth during a huge bubble. But Israel is growing very fast even as it gets huge amounts of funding from the US taxpayers.

Israeli Second-Quarter GDP Grew at 4.2% Annual Pace

(Bloomberg) -- Israel's economy grew faster than expected in the second quarter, as booming chemical and fertilizer sales drove exports.

Gross domestic product expanded at a 4.2 percent annualized rate in the April-June period, the Jerusalem-based Central Bureau of Statistics said in an e-mailed report today. That beat the median forecast of 4 percent growth from five economists surveyed by Bloomberg. Still, growth was the slowest since the 2006 war in Lebanon, and eased from 5.6 percent in the first three months.

``A 4.2 percent rate doesn't really amount to a slowdown, it's actually a good pace of growth,'' Vered Dar, an economist at Psagot Investment House Ltd., said in an interview. ``There will be real slowdown in second half.'' Today's figures don't include ``anything that changes my expectations,'' he said.
*snip*
Although the shekel has lost about 8 percent of its value since the central bank increased its daily purchases of dollars on July 10, the currency is still up about 16 percent from the same time a year ago.

This little nation has the ability to milk the US political system from top to bottom. Israel has a huge trade surplus with the US. The US funds Israel's military spending, we pay for their ghetto walls they are surrounding the Palestinians with and we outsource a lot of military spending to this leech country. Note also how they are manipulating the value of their currency to maintain all these advantages. Note also how all the economics professors are silent about these matters.

The head of the Israeli central bank was at Jackson Hole this week. You can bet, no one yelled at him any more than they yelled at the Japanese bankers. Instead, the talk was about how to punish Russia somehow. And keep the oil flowing from the Arab kings. Without interfering with Israel's domination of Palestine and the US.

By Mike "Mish" Shedlock

One key point here that none of the articles above have addressed is that it's not just Lehman that has lost control. The Treasury and the Fed have lost control as well. If there are no US buyers, and I believe it would be a good thing if there are not, neither the Treasury or the Fed is in a position to bail out Lehman.

The Fed and Treasury may not like it one bit, but the flood of dollars those dollars foreigners are sitting on eventually have to come home. And they will come home by buying US assets. That is the price the US has to pay for the unsustainable US credit binge we have been on. So if a huge deal with Korea is announced, expect to see the Treasury begging Congress to approve it.

Mish is always a good read. The US is for sale. Top of list: our politicians. This looming election will go down as the most corrupt, most expensive in US history. The corruption is now painfully obvious. We whittled down our selection to twin warmongers, twin wild spenders, twin fatalists seeking to return us to a dead status quo that is killing our country. The owners of the media want this. The bankers want this. And the American people must want to want this! The money pouring into this election is mostly from hostile powers seeking to destroy us. Just like our present inability to buy up our own systems that are for sale, we can't buy our own politicians anymore. Even when people scratch together their own hard-earned money to support candidates, these same candidates turn around and whore themselves to the Real Rulers, the super-rich.

AIPAC's list of potential donors dwarfs most fund raising attempts by people like the readers of Kos, for example. They are petty cash, not the people who call the shots. This is why they get shot down so often by politicians who use Kos to start but run off the to great lobbies to run for office. Then there are the super-rich. The media is yelling about Obama using the flap over McCain's senility about his own houses and cars. The guy has so many, he can't keep track. The media claims, this is a low blow. But it is material!

McCain's vast wealth, like the Clinton's corruption money that has flowed to them ever since Hillary became a Senator, is not enough. The Clintons wasted many millions of their bribery money, running for office. McCain has spent his wife's fortune the same way. But if there is any sign of someone gaining the emperor's throne, money pours in from all over the planet. So we have a bunch of rich billionaires telling us Obama is an elitist. Then they turn around and bribe him just like they bribed Bubba Clinton. And McCain's pretense at campaign finance reform has dissolved into this rancid search for hundreds and hundreds of millions so he can run stupid ads comparing his rival to cute white chicks!

Here is reality:

The New York Legislature Cuts Medicaid So Severely It Will Have The Effect Of A Neutron Bomb Culturally Destroying Health Care

In a special session of the New York State Legislature on August 20, lawmakers agreed with Democratic Governor David A. Paterson to make hundreds of millions of dollars in budget cuts in order to reduce the state’s budget deficit for this and future years. The cuts will immediately reduce the $122 billion budget for this fiscal year by $427 million. They are expected to cut next year’s budget by $1 billion and slash another $2.4 billion by fiscal year 2011-2012.

The legislature passed a 6 percent reduction in services, including $141 million in cuts to health care. This includes a reduction to Medicaid funding, which services the health needs of poor people, by $127 million.

The state cuts in payments to hospitals and nursing homes will be especially painful, due to the reduction in matching funds from the federal government.

People will die. Foreign people will also die. Most dying empires thrash about quite violently. The US will be no exception. The value of all the hyper-military complex corporations shot up this month thanks to US saber rattling right on Russia's front doorstep. Oh, goodie. We get to revive our economy by spending more and more money on nuclear bombs and missiles aimed at Russia.

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Bernanke's Second Teddy Bear Picnic Hell

August 23, 2008

Elaine Meinel Supkis

Time for the annual Teddy Bear Federal Reserve Picnic at Jackson Hole. Last year, Bernanke was yelled at a lot. I guess the new window blasted into the Fed Reserve was too small? Well, the Fed continues to struggle to save the very wealthy from their own weaknesses which is easy money, easy women and easy riding. Zroom! Off they go. Detroit wants a $50 billion bail out. If Fannie Mae and Freddie Mac and Iraq all get multi-hundreds of billions, what is another $50 billion? And the dollar is strong! Got that? HAHAHA.

First, we must look at a year ago to see if anything has changed at all:

Final Analysis of Bernanke's Teddy Bear Picnic In Idaho

As even the dimmest bulbs in the tulip trade finally can see, we are ending a wonderful and utterly fake bull run here and bad things are accumulating as fast as snow here on my mounatain in January or March or even in April when we can get heroic blizzards. Now they are trying desperately to undo this mess and the wand waving is most magical and utterly funny, I fear my Watchers will die laughing and I will be bereft of their amusing fixation on messed up things that end badly. All eyes were on the Federal Reserve Ranch and Picnic Panic and so far, people seem satisfied but all is not going to plan and this is due to the fact that the US may run the world's reserve currency but we don't have any RESERVES as I keep pointing out, our Federal Reserve is rotten to the core! Where are our RESERVES????

From Bloomberg:

Federal Reserve officials, wrestling with a housing recession that jeopardizes U.S. growth, got an earful from critics at a weekend retreat arguing they should use regulation and interest rates to prevent asset-price bubbles.

Otmar Issing, former chief economist at the European Central Bank, and Stanley Fischer, head of the Bank of Israel, were among guests at the Fed's summer symposium in Jackson Hole, Wyoming, to challenge the hands-off approach. Fed Governor Frederic Mishkin reiterated his view in a paper at the conference: Officials should only respond to the effects of asset prices on the outlook for economic growth and inflation.

``The position that `this isn't an issue for central banks' has lost some support,'' Issing said in an interview at the gathering, which ran from Aug. 30 to Sept. 1. ``The tide is turning.''

The tide turned in 1972. This isn't a tide, this is the worm turning. Oroboros is eating his tail. This is the tale of two currencies: the Dying Dollar and the Yeti Yen. The US has allowed Japan to ravage our import markets. This was to balance the power of Russia and China. Only both also are trading with the Western Empires and thus, both run huge surpluses just like Japan! And Russia has Europe in its bear hug and Europe has a trade surplus with the US.... So we have THREE major empires running huge trade surpluses with the US and how are they balancing each other? Indeed. This is never, ever mentioned by anyone in charge of this mess.

Back to our Federal Reserve that has chosen to keep only $60 billion in reserve and of that, if they need any reserves, they print up a few extra trillion and peddle this to the three major trade surplus nations that used to buy these up without flinching only none of them are doing this anymore so we are in the middle of one honking, huge bank crisis. The solution so far is to run deeper into debt. So the Fed just keeps manufacturing money by waving its little wand with a pink ribbon bow tied on the shaft. Santa Claus likes this. We hope.

I expect even more yelling at this picnic. It will be like going on a picnic with an elderly auntie and ten teenagers who were told to leave the Wii and the iPods home. Snarling, sneering, sarcastic spoiled brats all trying to put salt in Auntie Bernanke's cup of tea or kicking at squirrels or throwing rocks at that Russian grizzly bear ripping up trees....oh my. Then there is the angry dragon circling overhead with the flock of vultures. Yes, this is one fun picnic.

Of course, we are not invited. Not even as ants. We can only hear rumors of what is going on in this vast outdoor food-fight. Well, one thing happened: Joe Biden was chosen to escort the youthful Obama. From the land of credit cards and the first openly piratical state of Delaware! The state that is a tax haven right onshore! The one that pioneered the concept of destroying America while leeching off of it. A wonderful state. When New York had strong anti-usury laws, Delaware worked hard to change this. Now, all of America gets outrageous and out of control usury. Isn't that dandy?

Treasuries Drop as Haven Demand Eases, Inflation Concern Rises

(Bloomberg) -- Treasury 10-year notes posted the biggest weekly drop in more than a month as the haven appeal of government debt faded as investors grew more confident that the U.S. will support Fannie Mae and Freddie Mac.

Yields on two-year notes rose the most in almost four weeks yesterday after Federal Reserve Chairman Ben S. Bernanke signaled that the central bank is relying on slowing growth to contain inflation. Concern that the fallout from credit market losses will spread also eased after the Korea Development Bank said it's ``considering'' an investment in Lehman Brothers Holdings Inc.

``There's a little less anxiety in the financial markets,'' said Mark MacQueen, a money manager in Austin, Texas, at Sage Advisory Services, which oversees $6.5 billion. At the same time, ``Bernanke remains highly concerned about inflation but has little willingness to do anything about it.''

Rubbish. Pure rubbish. Bernanke is pretending he controls things. He doesn't. He throws money around like a maniac but it does whatever it wants to do. I remember when he revved up his helicopter. He said he was doing this so America can 'grow' no matter what! Now, he is saying, a recession will fix inflation! By having millions of Americans lose jobs and compete with each other for jobs, thus killing wages further, this will fix inflation! WOW. Hey, I hear hints of the Japanese system here! Japan has utterly crushed its own workers to the point, they struggle to even have families. These families are vanishing. Along with any hope of any decent paying, secure work. Japan crushed inflation for YEARS this way.

But inflation rages there! It worked only for a while. Now, it isn't working. If we have a bad recession here and don't buy a flood of Japanese goods, maybe there will be a crushing recession in Japan and workers there can lose even more purchasing power and this will kill inflation. See? So if we all have our own wages fall through the floor, inflation will die. Due to Americans being unable to buy food, fuel or live in houses.

And why is there little anxiety in the markets? I find it horrifying how everyone is happy if outsiders come to America to take over here. Hey, the Saudis will buy our banks! The Koreans will buy our banks! The Chinese will buy our banks! Oh, my god! Russia is buying our banks! All is well. HAHAHA.

Bloomberg:

Bernanke called dollar stability and price declines in oil and other commodities ``encouraging.'' Still, the inflation outlook remains ``highly uncertain'' and the Fed ``is committed to achieving medium-term price stability and will act as necessary to obtain that objective,'' he said at the Fed Bank of Kansas City's annual symposium in Jackson Hole, Wyoming.

``It's status quo as far as the Fed's concerned,'' said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley's individual-investor clients. ``He's still trying to walk that tightrope between economic and market risk.''

He is hanging onto the tightrope with his fingertips. Everyone is very anxious to assume the status quo is safe and we can walk this tightrope forever. But the truth is, the vultures are circling and the Dragon of China is eyeing us as we hang over the Abyss. Every few weeks, like the little figures in a German clock, pundits and big shots appear in the news, all telling us that the worst is over and prosperity is around the corner. They did this during the Great Depression. Endlessly. When anyone tried fixing the mess back then, they all lined up to howl about the changes in the laws. Now, there is no party that dares suggest even the slightest reforms like the simple one of re-instating all those laws from the Great Depression.

Here is another story from one year ago:

Cerberus Plots To Eliminate Health Care

Cerberus is my icon for all evil hedge funds. Today, we learn they are truly evil and want to kill their employees rather than follow the law. This deadly organization of para-pirates let go of most of the Aegis employees but first cut their health insurance in the hopes that then, the employees could not use COBRA which allows them to continue to be covered while they look for work! I say, all these hedge funds should be regulated by law and the laws protecting workers should be strengthened. Another large group joins the 50 million uninsured!

Back to today's news, surprise, surprise! GM and Ford want huge hand-outs.

GM, Ford Seek $50 Billion From U.S., Double Request

(Bloomberg) -- General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.

The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.

GM and Ford lost $24.1 billion in the second quarter as consumers, battered by record gasoline prices, abandoned the trucks that provide most of U.S. companies' profit and embraced cars that benefit overseas competitors such as Honda Motor Co. U.S. auto sales may drop to a 15-year low this year and fall even more in 2009, analysts have said.

Let's be honest here: each year in Iraq and Afghanistan costs us $180 billion. This has been on top of half a trillion spent on our luxurious and inept military. To do one of the worst jobs of dominating the planet as an empire, it costs us an arm and a leg. We could save Ford and GM more than three times over, every year, for years and years and still not catch up with what we are wasting on Iraq and Afghanistan!

Maybe we can move all our truck factories to Iraq and Afghanistan and have them get blown up. Then we can have GM and Ford collect insurance and open a Tata plant here. Make mini-cars. End of story.

Subprime Mortgage Bonds Lead `Extinct' Credits, Moody's Says

(Bloomberg) -- Subprime mortgage-backed bonds lead credit products rendered ``extinct'' by the collapse of the U.S. housing market, according to Moody's Investors Service.

Collateralized debt obligations packaging loans and structured investment vehicles will also disappear as investors refuse to buy debt linked to U.S. housing market losses, Jennifer Elliott, Moody's group managing director in the Asia- Pacific, said today at conference in Melbourne.

``These are products that have just disappeared and we certainly don't expect to be coming back,'' Hong-Kong-based Elliott said. ``There is an overwhelming level of investor concern about what will happen in credit markets, as opposed to what has happened, that is impacting issuance.''

Are CDOs and SIVs old instruments with a long history? HAHAHA. NO. They are all recent inventions of geniuses like the criminal mastermind who first hatched the idea of selling Collateralized Debt Obligations. Which were peddled as part of the Dread Derivatives Beast. Because these things were, in their inception, a fraud and a Ponzi scheme, they have collapsed exactly like any old Ponzi pyramid.

Collateralized debt obligations (CDOs)

are an unregulated type of asset-backed security and structured credit product. CDOs are constructed from a portfolio of fixed-income assets. These assets are divided by the ratings firms that assess their value into different tranches: senior tranches (rated AAA), mezzanine tranches (AA to BB), and equity tranches (unrated). Losses are applied in reverse order of seniority and so junior tranches offer higher coupons (interest rates) to compensate for the added default risk. CDOs serve as an important funding vehicle for fixed-income assets.

The first CDO was issued in 1987 by bankers at now-defunct Drexel Burnham Lambert Inc. for Imperial Savings Association, a savings institution that later became insolvent and was taken over by the Resolution Trust Corporation on June 22, 1990. A decade later, CDOs emerged as the fastest growing sector of the asset-backed synthetic securities market.

A major factor in the growth of CDOs was the 2001 introduction by David X. Li of Gaussian copula models, which allowed for the rapid pricing of CDOs.

According to the Securities Industry and Financial Markets Association, aggregate global CDO issuance totaled US$ 157 billion in 2004, US$ 272 billion in 2005, US$ 552 billion in 2006 and US$ 503 billion in 2007. Research firm Celent estimates the size of the CDO global market to close to $2 trillion by the end of 2006.

Protecting these creepy pieces of paper required bloating the Derivatives Beast. So when these Pyramid CDOs shot up from $150 billion just a mere 4 years ago to $2 trillion, the Beast swelled from $100 trillion to $600 trillion in 2007. So here we are, watching this mega-monster die. Since the CDOs have died and the SIVs shriveled up, the Beast is not far behind.

A review of what a SIV is supposed to be:

A structured investment vehicle (SIV) is a fixed income maturity transformation fund, similar to a CDO.

Unlike CDOs, which are terminating structures that typically wind-down or refinance at the end of their financing term, Structured Investment Vehicles are permanently capitalized variants of CDOs, with an active management team and infrastructure. Structured Investment Vehicles plan to stay in business indefinitely by buying new assets as the old ones mature.

An SIV may be thought of as a virtual bank. It borrows money using commercial paper (CP), which it traditionally issues close to the interest rate of LIBOR. It then uses the money to purchase bonds - effectively lending it out much as a bank would provide loans. The bonds usually selected by an SIV are predominantly Aaa/AAA rated Asset-Backed Securities and Mortgage-Backed Securities and hence the SIV is effectively providing the funds for mortgages, credit cards, student loans and similar products.

As of May 2007 there were estimated to be about 30 SIVs in existence, with total assets of more than 300 billion dollars. Most SIVs are run or sponsored by banks, however a number are managed independently.

SIVs are a viral bank. Like the anthrax assassin's methods. It is much smaller than the epic CDO mess. Anyone who thinks that making trillions of dollars vanish is an easy trick is someone who should never be allowed to handle even $300 dollars. Much less three trillion! The money we are hemorrhaging in our failed wars is just numbers to the Pentagon and Congress. Both are content with this: these numbers mean a percentage goes into their own bank accounts! So they are happy to add more zeros to whatever numbers they are adding up.

As the consumer/domestic economy collapses, Congress simply adds more numbers to our ballooning budget deficits. They can save all our corporations, all our banks, all the consumers simply by grandly waving a wand and yelling, 'Money, appear!' And then this debt has to be sold to someone. The news that people are still buying this debt is interesting. For I cannot see how any of this will ever be repaid. But then, the people buying this debt are simply making money out of thin air. Then they buy our debts. Isn't that encouraging?

And the latest, latest news is, inflation is dead! See? It is dying because workers across the world have lost their jobs or are seeing their pay decline. So they can't buy! This means, more money for everyone else. I guess.

Then we have to worry about irritated workers who want more money. History is full of escapades of such disgruntled masses.

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Anniversary Of The New Money Window At Fed

8/22/2008

Elaine Meinel Supkis

Gold coin sales have been suspended at the Mint due to lack of raw gold. This is a signal that gold will begin to climb again, not bounce lower. And this is the anniversary of the New Borrowing Window at the Fed. Worth reading how it all began. And stocks rose today on the hopes that Asians will buy up all our banks. But the biggest bank on earth is now a Chinese bank, by the way. The Chinese succeeded in their desire to 'be bank.' And Kristof of the NYT talks stupid about China while palming himself off as a China expert who understands the economy.

8/22/2008: Big Banks Get Big Bucks From Bernanke

In the future, the guys who are making this mess can rehabilitate themselves by doing useful work as we see below. Meanwhile, the top banks and the Federal Reserve play a game they played back in 1929 when they needed to 'stop the panic'. It will be just as useless. Nearly 40,000 mortgage company employees are without work in just ONE WEEK. And more companies are folding faster than umbrellas at Yankee Stadium after a summer shower.
*snip*
Our government is going bankrupt. It can't pay for everyone all at once. And the sums used to help regular people are far smaller than the epic funds (infinity?) used to protect wild business wheeler-dealers.
Here is a Market Watch headline that boasts about the stupid rescue operation that has now made things infinitely worse:

'V' for 'Very Fucked Up.' Normally, stocks do NOT do a violent down and then an equally violent upwards move without any real news happening. Namely, no Presidents were assassinated, no terrorist attacks on Wall Street. Nothing except a very dangerous banking crisis caused by wild spending, wild lending and ridiculously low interest rates below the rate of inflation. All the main banks in the world except for China, used every possible trick to reinflate this stupid bubble. This should never have happened. The US went off a cliff long ago and is now falling through space. The entire economy became focused on building and selling houses.

From Associated Press:

Four major banks said Wednesday they each borrowed $500 million from the Federal Reserve's discount window, lending weight to the central bank's efforts to restore liquidity to tight markets.
In going public with the moves, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Wachovia Corp. each stressed they have "substantial liquidity" and the ability to borrow money elsewhere. The borrowings, at least in part, seemed meant to reassure investors' jitters about the credit crunch rattling Wall Street.

In a joint statement, the latter three banks said they decided to borrow the money to demonstrate "the potential value of the Fed's primary credit facility" and encourage its use by other banks.

Hey, give me $500 million. I like these stupid rich people: they trot off to a private bank run as if it were a government agency and they hold out their slimy paws and get $500 million magic dollars, no questions asked. Not only that, they all said they didn't need the money at all! Well, hell's bells, give it to me! This charity from the same clowns who hate Social Security and whine about giving health care to children, are suddenly Santa Claus and Trick or Treating their good buddies and golf partners! And the statement that this is to demonstrate that the Fed is primarily a credit facility...good grief! You mean to tell me our bankers didn't already know this? Are they this stupid?

One year ago, Bernanke used dynamite to blow a small hole in the side of the US Federal Reserve's vaults. His buddies in Goldman Sachs [I keep writing 'Gollum Sachs'] and JP Morgan and others then reached inside and put down SIVs and CDOs that were nearly worthless and took cash out. 'It's only $500 million,' said Bernake as these pirates, gnomes and no goodniks all rushed to the new 'window' to 'borrow' money.

Note how these criminal minds all tried to laugh it all off back then! It was an 'experiment'! They were just testing to see if this new system just might work. Eh. Right. Well, nothing bad happened so they blasted a huge, gaping hole in the side of the Treasury and are now openly looting it to the tune of many billions a month. The amount rises astronomically. This summer, it was closer to $500 billion than $500 million.

I correctly analyzed this whole scam from day one. A matter of personal pride. This is easy because I love picture images. The crooks who pulled off this scam had to use the word 'window' to describe this gaping hole. Since I emphatically believe that all money-based wealth comes from the Cave of Death, the image of Bernake and his buddies blasting a hole in it and calling it a window didn't fool me. The word 'window', by the way, is Old Norse for 'Eye of the Wind'. It is a hole that lets the wind blow, a hole at eye-level.

The howling hurricane of wealth destruction is shrieking as it tears through this hole. And Bernanke has widened this whole hole repeatedly until basically, there is no barrier between 'money' and its movement to the outer world where 'money' becomes 'real'. And what is this feeding?

The dire goddess of Inflation. She who can fly faster than thought. One of the daughters of Lady Luck, also known as Miz Risky or the Whore of Babylon. This is the lady the banking gnomes worship and desire with all their souls.

Paulson Risks Goldman Standard as Fannie, Freddie Shares Erode

(Bloomberg) -- As soon as he became secretary of the U.S. Treasury in July 2006, Hank Paulson started preparing for a crisis.

In August 2006, at a meeting with President George W. Bush and his economic team at Camp David, Maryland, the former Goldman Sachs Group Inc. chief executive officer gave a talk about the capital markets.

Paulson held up over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street's face and affect the whole economy. ``My point was that we had gone eight years since the last serious problem in capital markets and that there'd been all of this innovation,'' Paulson said in an interview in late July.

Paulson also revived the President's Working Group on Financial Markets, a council of regulators consisting of the Federal Reserve, the Treasury, the Securities and Exchange Commission and the Commodities Futures Trading Commission.

Founded after the stock market crash of 1987, the group had fallen into disuse. Paulson began to build relationships among the agencies, figuring that the financial markets panel would be key to addressing the next crisis, no matter what that would be.

Hell's bells around the necks of all gnomes! This story is HILARIOUS. HAHAHA. OK: Snow resigned because he told Bush of the train wreck right around the corner. Paulson had to drop his normal gnome activities of making himself rich via destroying our economy. He rushed into the Treasury with his hammers, tongs and pitchforks. He immediately prepared for the Crash he knew was looming. He knew this because he is smart and he is the cause of the looming crash. He figured, if he spend three years protecting himself and his buddies, it would be worth it. He figured this would be a piece of cake. All he had to do was get Bernanke to blast a hole into the side of the Treasury and loot it.

Which was done. Only it didn't work. This is why understanding the nature of the Cave of Death is so important. Remember Pandora? She opened the Cave of Death only in her case, it was a casket which is pretty much a coffin, and out came all the world's ills: depression, inflation, stagnation, war and death. But one thing was left: hope.

Lord! All we can now do is hope! Thanks a lot, guys.

U.S. Stock Futures Rise on Speculation Lehman May Be Purchased

(Bloomberg) -- U.S. stock-index futures advanced, indicating the Standard & Poor's 500 Index may trim its weekly decline, on speculation Lehman Brothers Holdings Inc. may be acquired and as oil's decline buoyed the earnings outlook for airlines and automakers.

Lehman, the brokerage that's lost almost 80 percent of its value this year, surged 14 percent after Reuters reported Korea Development Bank said it's open to purchasing the firm. UAL Corp., the parent company of United Airlines, rose 6.8 percent in New York trading and General Motors Corp., the biggest U.S. automaker, gained 1.9 percent as crude slipped $1.36 a barrel.

S&P 500 futures expiring in September added 9.50, or 0.7 percent, to 1,285 at 8:21 a.m. in New York. Dow Jones Industrial Average futures climbed 81 to 11,489. Nasdaq-100 Index futures rose 11 to 1,918.25.

``There's a ton of petro and trade dollars sloshing around the world now looking for a parking spot,'' said Michael Mullaney, a Boston-based portfolio manager at Fiduciary Trust Co., which manages $10 billion. A sale of Lehman to a strategic investor provides ``an orderly way to work their way out of positions, as compared to a fire sale.''

This news is yet another mainstream attempt at explaining the random ups and down of the stock markets. This story makes NO SENSE. Why? Well, look at yesterday's story:

Lehman Is Candidate for Hostile Takeover, Ladenburg's Bove Says

(Bloomberg) -- Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm, is a candidate for a hostile takeover, Ladenburg Thalmann & Co. analyst Richard Bove said. He raised his rating on the shares to ``buy.''

``Management is unwilling to sell out at a deeply distressed value,'' Bove wrote in a note to clients. ``The stage is set for a hostile bid to take over the whole company.''

The Financial Times reported today Lehman failed to sell a 50 percent stake to Korea Development Bank and China's Citic Securities Co. The buyers walked away after deciding Lehman demanded too high a price, the FT said, citing people familiar with the Asian lenders.

As my series of charts on Wednesday, all of our mega-financial banks are going under. Not one of them is sailing along, merrily on the pirate seas of the Caribbean. Now that they are all sinking in this mega-hurricane, the pirates hope to sell every one of these to....ASIA! America is #1, all right: #1 For Sale. Only the Asians don't want our bankrupt banks. Duh. Problem here, no? If Lehman is 'ripe for a takeover' then everyone including the clever Asians will wait to see if Paulson and Bernanke will sweeten the deal like they did with Bear Stearns.

The 'hostile take-over' here is for the FED to take over the crappy parts of Lehman which are considerable and attached to the fearsome Derivatives Beast. The problem of taking over without the Fed grabbing hold of the gigantic Beast is due to the reality, the Beast will come to life and devour any bank that touches Lehman Brothers! Once the Lehman fools are passed through the magic window the size of a moving van, into the Treasury, the remains of that corporation can then drive out the front door, minus all the parts attached to the Derivatives Beast. Got that? Good. If not, hang around, I hope to make a cartoon making this all clear.

The world's biggest bank is Chinese
Duncan Mavin in Hong Kong, Financial Post

As of today, there should be no remaining doubts as to the tectonic shift in the global economy -- the world's largest and most profitable bank is Chinese.

While banks in North America and Europe are still counting massive credit crunch losses, Industrial and Commercial Bank of China has surged ahead of its international competitors thanks to a booming domestic economy that has dramatically boosted profits.

In a statement from Beijing last night, ICBC said its half yearly earnings jumped an astonishing 57% to US$9.4-billion, up from US$5.9-billion last year.

The results catapult ICBC ahead of international global powerhouse HSBC PLC -- the most profitable bank in the world last year -- where earnings fell 29% in the first six months of 2008 to US$7.7-billion. Even before Thursday's earnings announcement, ICBC was already the world's biggest bank with a market capitalization of about US$235-billion.

Why should the Asians buy our banks that are deep in the claws of the Derivatives Beast when they can create their own damn banks, themselves? Eh? Thought of that, Bernanke? Paulson? Of course, the Chinese figured this one out long, long ago! Too bad, our own bankers couldn't do this. A major theme here is that NO banking system can exist without SAVINGS. Japan, the US and England are experimenting with the 'no savings, no problemo' system. But it is obviously not working. The ZIP [Zero Interest Payments] regime launched by Japan is a resounding failure. But don't tell the Japanese. They don't want to hear this.

China’s Rise Goes Beyond Gold Medals By NICHOLAS D. KRISTOF

This transition to Chinese dominance will be a difficult process for the entire international community, made more so by China’s prickly nationalism. China still sees the world through the prism of guochi, or national humiliation, and among some young Chinese success sometimes seems to have produced not so much national self-confidence as cockiness.

China’s intelligence agencies are becoming more aggressive in targeting America, including corporate secrets, and the Chinese military is busily funding new efforts to poke holes in American military pre-eminence. These include space weapons, cyberwarfare and technologies to threaten American aircraft carrier groups.

President Bush was roundly criticized for attending the Beijing Olympics, but, in retrospect, I think he was right to attend. The most important bilateral relationship in the world in the coming years will be the one between China and the United States, and Mr. Bush won enormous good will from the Chinese people by showing up.

Having won that political capital, though, Mr. Bush didn’t spend it. Mr. Bush should have spoken out more forcefully on behalf of human rights, including urging Beijing to stop shipping the weapons used for genocide in Darfur.

It’s a difficult balance to get right, but China’s determination to top the gold medal charts — and its overwhelming efforts to find and train the best athletes — bespeaks a larger desire for international respect and legitimacy. We can use that desire also to shame and coax better behavior out of China’s leaders.
*snip*
When the Chinese government sentences two frail women in their late 70s to labor camp because they applied to hold a legal protest during the Olympics, as it just has, then that is an outrage to be addressed not by “silent diplomacy” but by pointing it out.

Gah. Stupid NYT wretch. Yes, even dumb NYT pundits finally had to admit, China roundly thrashed us at the Olympics. Bush didn't gain face by going. If he went graciously, yes. But he and his Hausfrau had to creep crab-like towards Beijing while insulting and cursing the Chinese for doing what we do all the time with a straight face! China is evil, arming other countries so they can oppress the Palestinians....oops. They aren't humans, they are cattle. It is OK to kill cattle. No, the US had to criticize China for attacking breakaway provinces like Ossetia! That's right! Evil! Pure evil!

The Chinese fumed and were furious about this insulting behavior from the US dictator. But then, they had the last laugh as usual. The air which had all the ninnies in hysterics before the Olympics, was just fine. And China won the most golds. So there. Then there is the prohibition for demonstrating. Um....America allows it, barely. Only if no one sees or hears about it. One can stand on a remote street corner until the cows come home. But try protesting near any of our rulers who are either Republican or Democratic, and boom.

As Kerry said, 'Interesting question,' as a young student was repeatedly tasered by heavily armed guards.

Pelosi Clashes With Protesters Over Impeachment
By Jason Leopold and Alan Breslauer
The Public Record

Halfway through her discussion at The American University of Judaism, where more than 300 people paid $30 each to hear Pelosi speak about her upbringing and her family's impact on her political career as detailed in her book Know Your Power: A Message to America’s Daughters, the topic shifted to Congress's historically low approval rating and how it reflected on Pelosi’s tenure as Speaker.

American University of Judaism's Rabbi Robert Wexler, who moderated the 75 minute discussion, which did not include a question and answer session with the audience, asked Pelosi to analyze a recent Rasmussen poll that found nine percent of voters dpolled believed Congress was doing a good job, far lower than President Bush's overall approval rating.
*snip*
Her response led Peter Thottam, founder of the LA Impeachment Center, to demand Pelosi "do her job" and pursue impeachment hearings against President Bush for launching a war on false pretenses.

"Who gave you the right to take the constitution and shove it down the toilet? Who gave you the right to take impeachment off the table? Nobody told them to do this,” Thottam shouted at Pelosi moments before Secret Service agents removed him from the packed auditorium and turned him over to officers with the Los Angeles Police Department. “One million Iraqis are dead. Five thousand Americans are dead. You have destroyed the First, Second, Fourth, Fifth and Eighth Amendments."

Pelosi seemed stunned by the outburst, but the way she addressed Thottam’s charges further fanned the flames and led to additional verbal protests over her decision not to hold the administration accountable for what many individuals in the audience believe are High Crimes and Misdemeanors by President Bush.

When a member of the activist group Code Pink stood up and insisted Pelosi brush up on her reading regarding evidence of the Bush administration's long list of alleged constitutional violations, Pelosi reacted angrily.
*snip*
At the conclusion of Monday evening’s presentation, Pelosi signed books but refused to answer questions about her policy decisions. The Public Record asked Pelosi whether she would authorize the full House to vote on contempt charges against former White House political adviser Karl Rove, who has refused to comply with a congressional subpoena to testify about his role in the alleged political prosecution of former Alabama Gov. Don Siegelman, a Democrat.

Immediately following his query to Pelosi, The Public Record's Alan Breslauer was grabbed by Secret Service and dragged away from the table where Pelosi was signing copies of her book. The Speaker did respond to Breslauer's question, however, saying a vote on contempt charges against Rove is "up to [House Judiciary Committee Chairman John] Conyers."

Reporters asking unpleasant questions: 'Interesting question,' snaps the angry Pelosi who just finished a speech at a Zionist University. She was there to be with friends who want her to attack Palestinians, Lebanese and Iranian Muslims. China is EVIL but using the SS to harry and harass anyone breaking the bubble surrounding our corrupt Congress or corrupt and stupid Presidents is pure...Chinese, eh? Well, Kristof? When are you going to write about THAT?

Never, of course.

Commodities Rally, Heading for Biggest Weekly Jump Since 1975

(Bloomberg) -- Commodities headed for their biggest weekly gain in 33 years as oil rose for a third day and a weakening dollar revived demand for raw materials as alternative assets.

The Reuters/Jefferies CRB Index of 19 commodities soared 3.7 percent to 405.92 in New York. A settlement tomorrow at that level would mark a 6.2 percent gain for the week, the most since July 1975. The dollar dropped the most against the euro since June today and oil jumped more than $5 a barrel.

Gold and oil fell as our dictator and his gangster buddies like Pelosi all worked like the very fiends of hell to reverse reality. They tried to bottle up the goddess of Inflation. Wall Her off in the Cave of Death. Only that damn, pesky little window the size of the Titanic is still gaping open! Instead of staying in the Cave for two years like in previous attempts at blocking her back in 1974, 1977 and 1987, She was pushed into the Cave of Death, She saw the huge hole and climbed right back out, a mere three months later! DUH. These gnomes get dumber each decade, don't they?

This is why looking at this business from a mythological/anime-type universe is so much better than mere statistics or heaven help us, books by economists! This is why I can be right far more often than ordinary pundits. The commodities markets will again, start off with precious metals and oil taking off. Then food will follow. So long as the US is making funny money faster and faster, this will happen. The flood of liquidity won't flow into properties. Or even stocks. Want to buy Lehman stock? HAHAHA. Nope. Stocks went up today due to OIL stocks going up.

By the way, as usual, online there are many very good pundits, virtually none of whom get on the mainstream media:

The Boogey Man

Yesterday I left off with a promise to talk about the Boogey Man. Well, the Boogey Man is the dark side of the pension funds. Let’s start off with our dear friend Hank Paulson and his latest plan to allow Wall Street to acquire and manage pension funds. I swear to you, I didn’t make that up. Paulson actually sent a plan to Congress to allow Wall Street firms to buy and manage pension funds. These are the same guys that brought us Auction Rate Securities (ARS), Credit Default Swaps (CDS), Collateralized Mortgage Obligations (CMO) and Structured Investment Vehicles (SIV) and all the derivatives and funny-money plans to extort fees from you and me.

Busted Pension Funds – Most pension funds are underfunded and will never be able to meet the obligations they have promised their members. That’s a fact that we can’t avoid. Wall Street and the managers of pension funds can spin it anyway they way, but the bottom line is . . . pension funds are underfunded. READ: The Ponzi Scheme that Tops The Housing Bubble.

Very good, easy to understand analysis. Highly recommend it. Speaking of Ponzi schemes:

Florida university used in massive Ponzi scheme

CNN) -- A Florida man used facilities at the University of Miami to run a multimillion-dollar Ponzi scheme and recruited school employees for the operation, angry investors and investigators tell CNN.

Andres Pimstein, a UM business school graduate, has confessed to operating the scheme in which some investors were promised returns of 18 percent, Miami-Dade County police said.

People across the country lost an estimated $30 million in the scheme, which collapsed this year, said Wayne Black, a Miami private investigator hired by one investor.

"Pimstein was able to convince a couple people there to use their computers to control the bank accounts that he laundered the money through," Black said.

Ponzi schemes are illegal. So why does the Federal Reserve get to play Ponzi schemes with the Treasury? Tell us, please. Thanks in advance.

GATA: Congressman extracts statement from Mint on gold coin shortage

The U.S. Mint today supplied to U.S. Rep. John B. Larson, D-Connecticut, the statement appended here about its suspension of sales of one-ounce gold coins. GATA requested Larson's help on Monday after two days of calls to the Mint failed to elicit the responses that were promised each time GATA called. As of this hour the Mint still seems to have provided no statement on the subject to the public, nor to have posted any statement on its Internet site:
*snip*
FACT SHEET ON ONE-OUNCE GOLD BULLION COIN DEMAND
MENTIONED IN THE WALL STREET JOURNAL TODAY

The United States Mint does not sell bullion coin products directly to the public but to "authorized purchasers" who then sell these products to the public and price the bullion based on market factors. Authorized purchasers are required to meet high standards and must guarantee to maintain a two-way market for their customers to ensure the liquidity of these investment-grade coins.

By law, the United States Mint must mint and issue gold bullion coins in quantities sufficient to meet public demand. Therefore, the sale of bullion products takes precedence over other "numismatic" products made by the United States Mint. Accordingly, obtaining bullion blanks from our vendors and producing bullion products to meet demand takes priority over other uses and product lines that may use the same metals.

Because our vendors are not able to supply enough one-ounce gold bullion blanks to meet the unprecedented demand we are experiencing, the United States Mint notified our authorized purchasers on August 14, 2008, that we must temporarily suspend sales of the 2008 American Eagle One-Ounce Coin.

For the last several years, the gnomes running the systems have told us, 'Gold doesn't matter. Shut up, bitches.' Well, gold was dropping drastically in price even as there is a severe shortage of available gold....IN AMERICA....not Russia, by the way. And so the price should go up. Instead, the Treasury simply shuts the GOLD window while opening the Cave of Death funny money window even wider. Ever since we dropped the gold peg, everything is now a mere commodity and moves rapidly in all sorts of directions which is extremely unstable and bad in the long run. It tempts gnomes into ignoring all this and simply manufacturing NUMBERS. Which is what our system is: numbers, not things. And numbers is exactly where the Goddess of Inflation lives and breaths. She and the fearsome Derivatives Beast love infinity. Both are Death Denizens!

Chart from the Privateer, a gold site that has been around since 1984:

Gold's sudden plunge was totally bizarre back last week. But now, its rebound is going to astonish. This is because it is the anniversary of the blasting of the hole into the wall of the Cave of Death! Anniversaries matter, this is why I am focused on them this last two months. We think we have moved forwards in time but we have not at all. We are exactly where we were in 2008 this day, only deeper in the hole.

DZZ: How To Short Gold by Going Long

The DB Gold Double Short ETN (DZZ) is a relatively new way to take advantage of gold price action. This gold fund provides double the movement that the GLD ETF or the price of gold does, providing bigger opportunities in the gold sector. I have just recently started to use DZZ ETN for trading and have found it to be very useful, which you will see in the charts below.

A Couple of Benefits of DZZ

The fact that it’s a leveraged fund provides more of an opportunity to the small investor, as they can have twice the amount of gold exposure without having to use margin, pay interest, and open a margin account. While trading with leverage is a two sided knife, if done properly, potentially higher annual profits can be obtained.

Another reason gold ETNs are becoming popular is because they allow gold traders and investors to trade both sides of the gold sector within their 401k, IRA or Canadian RRSP accounts. Being able to take advantage of the short side during bear market conditions can double your annual return on investment.

This article explains gold futures hedging games. Please read the whole thing if you are investing in gold. These guys don't need real gold, just paper talking about gold. This greatly speeds up their ability to play games with the value of gold. And they are using what?

FUNNY MONEY! From the central banks! The liquidity from the hole in the Cave of Death! They don't buy gold with it and hold, no, they play the futures markets with leverage. This will also drive up the value of gold since the value of other things aren't rising. The guys who promised fellow gnomes, Bernanke and Paulson, that they would not do this, have changed their minds. Typical gnome behavior. They need more money and will slit their grannies' throats to get more gold. Sex is the main drive here. They need it for more sex. Try stopping them.

Paulson could use his bazooka. Right?

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Joe Bazooka Paulson Shoots Self In Foot

August 21, 2008

Elaine Meinel Supkis

Two stories from last year at this blog are very pertinent for today's news. The harmonic echoes from exactly a year ago are most astonishing! The price of oil is going up due to the US and EU itching to fight yet another major oil exporting nation, this time the very nuclear Russia with a long, long history of winning wars with Europe. Yikes in spades! And the dollar is weakening, duh. Paulson's 'bazooka' he pulled out to reassure investors ended up blowing investors out of the water. Another 'Duh' moment in economic history. We visit Seeking Alpha which sounds more like 'Seeking Alfalfa'. A clueless professor talks very stupidly about inflation. Why can't I teach economics? History shows that my analysis has been very good so far! Rats.

Federal Reserve Picks Up Many Bad Mortgages

It was just only this last year that the fiat femme fatales tried it again. All the bankers in Europe and the US united to tell us that gold was worthless. Despite it rising from $260 to $650 in the last couple of years, they said this was silly, why stocks and the value of houses beat gold hands down! But as the value of both of those begin to falter and fall, the central banks have been selling of tons and tons of gold and this has kept the price down but this is a form of mass suicide, not to be copied. True, when a depression hits, the value of gold will drop just like all other assets but unlike fiat currency, it won't VANISH. For this is what all holders of paper fear. Stocks don't just go up or down, they VANISH. The only way gold can vanish is if the government confiscates it or someone robs you, both being quite obvious hazards!

But even if you keep your paper in a safe and watch over it with a gun, it can be reduced to zero value with no one coming within 1,000 miles! This is the inherent hazard of holding any sort of paper wealth. All paper wealth is just a proxy for something else.

This brings us to the news today: the Federal Reserve couldn't just hand out money to the banks for free! So they 'temporarily' took pieces of paper with addresses and signiatures on them that are IOUs made out to mortgage companies who loaned money to a bunch of dead beats! OK: so what are these scraps of paper really worth? Eh? $100 billion or more like $0? In the real world the answer is 'ZE-fucking-RO! Zen zen, nothing, nada, zilch.' If these worthless pieces of paper were worth $100 billion they would have been sold out in the open and not in this ridiculous fashion where we can't see them and we won't know if they are worth anything at all and is this the 'rescue' that our rulers are pulling off at our collective expense?

OK, everyone! When did anyone notice that the Feds have been heavily interfering with private housing markets? How about since the Great Depression! This time around, they are not saving house buyers but the banks themselves. Lending has become a government agency. But the profits flow to the banks who are merely a conduit to the government! This means, if the bankers can write infinite mortgages, they get infinite fees while the Feds have to cope with the defaults. This is rapidly finishing off our reckless, wild-spending government systems. How very revolutionary this is! Bankrupting our government in order to save bankers who gave out bad loans so they could collect fees is the height of stupidity.

Germany Slides Off Economic Cliff Thanks To Strong Euro

As I predicted, re-establishing the weak yen/weak dollar/strong euro status quo will swiftly lead to a collapse of the European economy for this is a near-perfect repeat of the strong yen/weak dollar/no euro economy of the early 1990's. Japan's yen became very strong, the Japanese flew all over the earth, buying things, investing and vacationing like mad. Then suddenly, it all collapsed and as the American economy got stronger, Japan went into a real depression. Now it is in a fake one but the signs are all pointing to Europe going into a real depression soon.
*snip*
All this year, the US and Japan cleverly joined Europe as they all told China there was no earthly reason to increase their FOREX reserves to over a trillion dollars. I mocked this effort. I even suggested Japan put its dollar reserves where its mouth was but of course, Japan simply wanted China to be punished and reduced as a trade rival. China was not fooled by all this. Either they read me or they are smart. I am betting on the 'smart' part. I found them to be very swift learners when things happen fast.

The IMF and World Bank joined the propaganda effort to stop China from running the world's biggest FOREX reserves. Then Russia suddenly appeared out of nowhere with the world's #3 FOREX reserves! Even I was taken back by this sudden surge. I did recognize what it meant, though: Europe's battle with Russia was lost. Russia could now control relative values of the euro and the dollar via their FOREX reserves! For the last 10 years, while Japan patiently built up their economic firepower via their FOREX reserves, I have warned the Federal Reserve about this and warned them, the US MUST MATCH JAPAN by buying up yen! In equal amounts!

The US continues to refuse to hold much in the way of euros or yen. This is because we can depend upon our allies and trade partners and leeches to balance our currency one way or another. We are content to have no sovereignty over our own currency. No nation should allow other nations to hold such power over the national purse. Yet, not only do we allow the central bankers of Europe but also Japan, determine the value of our currency and to do so for their own benefit. Germany got caught in the gears because they fear a weak currency. This year, they are fully involved in weakening the euro. Now, on to today's news:

Paulson's Fannie-Freddie `Bazooka' Shakes Investors

(Bloomberg) -- U.S. Treasury Secretary Henry Paulson's ``bazooka'' may be intimidating the same investors he intended to reassure.

The powers Paulson won from Congress last month enabling a government rescue of Freddie Mac and Fannie Mae -- authority he likened to a weapon whose mere existence made it unlikely it would have to be fired -- may end up making a bailout more likely, say analysts and investors.

They say the threat of government action is creating uncertainty that is raising the companies' borrowing costs and increasing the odds Fannie and Freddie will need taxpayer funding.

Joe Bazooka Paulson! He hauls out his big shot shooter and shoots himself in the foot. His offer to save the fair maid, Fannie Mae and her loutish brother, Freddie Mac simply meant all of Congress and the Federal Reserve and all those bankrupt bankers piled in and dumped these two vagrants into Paulson's lap. And who will rescue Paulson?

The Federal government. As I predicted, by the way, the Housing Bill passed by Congress is fixing exactly nothing except extending the agony of defeat in the banking sector. Everyone hopes to limp along for one more year. Then all will be well. But as I showed yesterday in the many graphs of the biggest banks in the US, they are nearing penny stock levels of value and can't raise money via selling stocks anymore.

Oil Rises More Than $6 on U.S.-Russia Tensions, Dollar Weakness

(Bloomberg) -- Crude oil advanced more than $6 after the signing yesterday of a missile-shield agreement between the U.S. and Poland bolstered concern that Russia may disrupt the flow of oil.

The U.S. missile shield in Europe, which has ``a real anti- Russian potential, won't increase the continent's security,'' Russia's Foreign Ministry said. Russia is the world's second- biggest oil producer. Oil also climbed as the dollar fell to the lowest against the euro in a week.

``The tensions between Russia and the West were supposed to be simmering down but they are now ratcheting up because of Poland's agreement with the U.S.,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``The fall of the dollar is sending a huge investor flow into commodities.''

Way to go, Europe! Join the US in expanding NATO so that the Russian Bear gets totally pissed off. Then do a sneak attack on Russian allies and kill Russian soldiers in bed. Then sit back and watch a very enraged bear rip Europe to shreds! The stupid Georgian war against Russia is like hunting grizzly bears with a revolver. The bear eats lead and then eats the revolver and then eats the hunter. Even Paulson's bazooka isn't enough. Indeed, if one wishes to win a full scale war with Russia, one has to nuke all of Russia. Unfortunately, Russia can nuke all of Europe and America. So the price of oil is going up and this is another 'Duh' moment from our lovely gang of neocon nut cases.

Oil is also being restricted by Saudi Arabia. Saudi Arabia is losing money in our banking stocks. But they tried to save our economy with hyper-pumping of precious oil. Their reward was scant, to say the least. Now, the US is openly talking about throwing away Fannie Mae and Freddie Mac and thus, ripping off not only a very angry Russia with many nuclear bombs but a clever China that holds the same and our main oil supplier to the West, Saudi Arabia. As well as Japan. This won't work. We can do this if we want everyone out to nail our hides to the wall.

U.S. Stocks Drop on Writedown Concern; Lehman, Goldman Retreat

(Bloomberg) -- U.S. stocks dropped, extending the first weekly loss in a month, as investors speculated credit writedowns at financial firms will increase and a rise in oil damped earnings prospects for automakers and airlines.

Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. led financial shares in the Standard & Poor's 500 Index to a one-month low after Citigroup Inc. cut their profit estimates. General Motors Corp. fell as much as 4.1 percent and US Airways Group Inc. plunged 11 percent as oil advanced the most in two months. Supervalu Inc. and Safeway Inc. slipped 3 percent after UBS AG said inflation will cut into supermarkets' profits.

Just three months ago, the media was told that Goldman Sachs was NOT hurt by the banking/lending collapse. Their clever dealers had schemes bringing in more loot. Which, incidentally, was directly connected to a fast series of very serious bubbles in all types and kinds of commodities. Especially oil. Now, the commodity markets are dropping, sort of, and Goldman is losing money! So Goldman wants commodities to rise again, they can't get rich any other way! They are truly torn in two. Stuck on the classic Horns of Dilemma here! And this is true of the entire system.

It was allowed to morph and grow totally in wacky ways to evade the obligation of the US to balance its trade and government budgets! We wanted to have our cake and eat it too and this meant we got stuck on these stubborn horns. Whatever we do to fix things will make other important things worse. If we set up better domestic energy and transportation systems starting with Nixon, we might have been able to survive this trap. Instead, we did the exact opposite.

If we retracted our empire after extracting ourselves from the Vietnam war, we might be able to survive. But we did the exact opposite after the Soviet Union fell apart. We expanded. And we went from tiny wars with barely armed Caribbean micro-islands to huge confrontations with Russia, all in a leap and a bound. This irresponsible action on our parts was unnecessary and deadly. We can't win even medium-sized wars, much less, this.

The US won't get rich poking Russia in the nose. Quite the contrary. The Pentagon is salivating over the possibility that McCain will rule us and open the spigots for wild, super-wild military spending on Cold War toys. Many manufacturers are praying for this. A good number of workers are hoping for this, too. But we can't afford this without heavy taxation. During the 1940-1970 era, we had high taxes to pay for this. Now, all we want is those tax cuts and hedonism.

Core Inflation Is Low and Stable by Mark J. Perry, Ph.D.

What about annual core inflation? It's been flat for 10 years now at about 2%, see chart above, is lower now than it was several years ago, and less than 50% of the long-term 4.58% average.

As I suggested before on several posts, unless and until core inflation rises like it did in the 1970s (see chart above), inflation can't be "a clear and present danger," as Brian suggests.

This clown is a classic clueless economics professor. They were cranked out by the thousands from the Nixon era onwards. Nearly all of them, right wingers. 'Marxists' were systematically cleaned out from 1055-1975.

Balderdash
Aug 21 03:54 AM

If you only weigh my skeleton, my weight hasn't changed in 10 years!

My comment:

Balderdash, that is the BEST remark yet! Love and and will use it on my blog.

All inflation graphs MUST show the various changes in tracking inflation. Otherwise, it is full of bullhockey. I used to be part of the annual inflation collection system whereby a Federal agent would come to my house and he and I would spend hours going over what I bought that year and how much it cost. I kept all my receipts for this purpose. He was the same man every year and we got to chat a lot about inflation statistics.

This was from 1975- 1982. Then, he ceased coming by. The first 'reform' of the statistics was launched! Since then, we have been inflicted with a goofy and worsening system that grossly undercounts real inflation.

Just like Japan is now doing. As inflation ravages the average Japanese, they get no recourse at all since the statistics refuse to reflect this.

Here is yet another story from Seeking Alfalfa:

Obama's Economic Policy and Reagonomics by Mark Thoma

This article by David Leonhardt describes Barack Obama's view of economic policy, and it is very similar to my own. Most of the time, it is best to leave markets alone, to let them work without intervention, and that should be our starting point. But markets fail, and part of the disagreement with those holding more conservative views is over how often markets fail, whether they can easily self-correct when there are problems, and how effective the government is at fixing problems when they exist.

On the last point, I am a proponent of market-based regulation when it is possible to use it. For example, if you want to regulate the profit of a public utility, one way to do it is through rate of return regulation. Under this approach, prices are set so as to guarantee investors a particular "fair" rate of return. The problem with this is that there is no incentive for the firm to control its costs, the rate of return to investors will be the same whether it is efficient or inefficient.

This writer endorses Obama over McCain. McCain's economics program is McInsane. But Obama wants us to remain stuck on the Horns of Dilemma forever. The hope is, we slightly raise taxes on the rich and we continue onwards with slight reductions in imperial spending, sort of except AIPAC owns Obama these days and we have no choice. As usual. Here are some more remarks from this story's comments section:

robert.b.ferguson
Aug 21 09:47 AM

Lets see: raise taxes in a down economy, stifle energy production during a demand surge and remove incentive for growing wealth. sounds like a winning formula. good luck with that.

My comments:

Raise taxes? HAHAHA. The US is GOING BANKRUPT, everyone! Thank you, GOP, in particular.

But both parties are now spending like fiends. And the US public, like spoiled brats before Xmas, expect Santa Claus to come down the Federal Chimney and open us a bag of manufactured in Asia goodies.

We have to eliminate all our foreign bases, stop all our foreign wars, erect tariffs and barriers to imports and rebuild this nation before we go totally zombie. Anyone who thinks the present system can run another 25 years is insane.

Our entire nation is entirely in debt. We are up against the Great Wall of China. Our creditors are communists!!!! Hey, ever think about what this really means, anyone?

We are so messed up. Go ahead, America, cut taxes even more.

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Sigh. I feel rather old. Since LBJ, I have suggested we cut military spending so we can constrain our budgets. This seldom happens. Only when a Democrat is elected these days, does the GOP cut military support. They won't support wars like in Bosnia, for example. They won't support anything. This clips the military's wings somewhat. If the Democrats run things with a GOP President, the same thing happens. Maybe having a divided government is the only solution. Better still, have the Parliament system with more parties so we can pressure the two big ones better.

The US doesn't want to pay any bills. There are many, many lies told about taxes. For example, when talking about the budget, seldom do the 'no new taxes' people mention that the US working class is funding the government much more than the statistics show. Most people who want to persuade us into thinking only the rich pay most taxes conveniently leave out mention of the SS surplus funding. This skewers the data grossly.

Since Reagan spooked everyone into upping the SS withholding payments, the working class as lost ground in the economic games. Wages are falling vis a vis inflation. And the contribution of the SS funds to running the government is concealed or deliberately excluded the same way food and fuel have been removed from inflation statistics. Ideologues would far rather dishonestly win arguments rather than seeking the truth.

The truth really isn't all that hard to find. She may be blind, but She is also a Goddess. She is also called 'Libra' and has those pesky scales we hate so much.

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Many Banks Becoming Penny Stocks!

August 20, 2008

Elaine Meinel Supkis

An epic series of bank stock charts clearly show the nearly universal bubble in banking and how it is, across the board, everywhere, going off the cliff. From $170 a share to penny stock in less than three months! The banking collapse, far from being done, is destroying everything in its path. It is getting worse, not better. The list of banks on the ropes or hanging by a thread is long, long and hideous. All our top banks are in deep, deep trouble. And we go to the Bank of Japan to look at yet more graphs and statistics. What a mess! And Germany decides to throw up barriers to being devoured by the Russian Bear. Yet, Germany wants to do the same to the US. We have to learn about tariffs and barriers before we are crushed underfoot.

CHUCK JAFFE
Crunch time
Commentary: Even the best borrowers will feel the brunt of the credit crisis

MarketWatch) -- Some bad news headlines hit home more than others.
Gas prices and inflation, for example, are tough to avoid. Falling real estate prices may not be an immediate concern -- assuming you are not trying to sell your property into a sinking market -- but they clearly have an impact on net worth.

The credit crunch is the one area that many consumers think they can sidestep if their financial situation is not perilous. After all, the term "credit crunch" was just put into the Concise Oxford English Dictionary, defined as "a severe shortage of money or credit," so anyone with decent credit or stable cash flow is likely to believe that credit headlines represent someone else's problems.
Unfortunately, the same pervasive situation that made "credit crunch" a household term has also made it a household problem, in ways that many consumers don't immediately see.

Credit crunch? How about a full-blown banking collapse of epic proportions? The US can't hand out loans if our banks are kaput. We can't go to the bank if the bank is dead. We can't use the Home ATM machine or even the bank ATM machine if the banks are broke and bankrupt. Let's look at a series of stock charts today that clearly show just how bankrupt our banks are:

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Freddie Mac's stock history is a classic bubble/crash:

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Ditto, Fannie Mae:

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But wait! So is Lehman Brothers. I expect them to be bankrupt by the end of the year unless Bernake's helicopter has oodles of dollars:

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Citigroup is groping in the hot deserts of Araby for more money to save it from bankruptcy:

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The JP Morgan Pirates might end up in the same three-headed dog house Bears Stearns was in when they were finally shot dead by Bernake. Old Yeller, here we come!

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Bank of America becomes Banco de Mexico. Heh. Hoard them pesos!

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Washington Mutual is wishing it were DCing with the stars, not falling flat on the dance floor.

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Wells Fargo is as cold as Fargo, North Dakota, not exactly the world's hottest real estate market:

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Wachovia is waning fast, its moon is green cheese.

As we scan down all these top banking graphs and these are some of the biggest of the biggest banks, we see the same thing over and over and over again: they all started to suddenly climb in value. Their stocks began to soar, all at the same time. They all have the same rise. And the same crashes, the only difference is how far each is off the cliff this last quarter. Some are just about at rock bottom. Dropping from around $100 a share to less than $5 a share is a 95% drop. And these stocks are still dropping. At a 50% rate per week for the Fannies and Freddies, for example. But they are all in the same trouble. It is painfully obvious even to the people at the very top. we are off a cliff, Mr. Jones! We are OFF THAT CLIFF!!!! Like, flying down!

Just last month, the media breathlessly announced the banking crisis was over. This is a very common theme. They never tire of it. From the President to Bernanke on down, the same song is sung. 'The housing crisis is over! The banking collapse is over!'

Last summer, it was, 'There is no banking crisis, there is a liquidity shortage!' By now, that stupid story should be laid to rest. It is dead, Mr. Jones. Dead, I say! Give it up.

Today, all talk of the banking crisis being over is now over. No sane person looking at these graphs above can even slightly entertain the idea, all is well and look at all the BARGAINS one can buy! Wow! Our entire banking system is... PENNY STOCKS?????? HAHAHA!!! Lehman is definitely on death watch. Bears Stearns may have been pushed of the cliff by naked short trading gnomes and trolls. But Lehman has been protected by Goldman Sach's troops of Gollums who run the Treasury. Naked short selling which was supposed to be a myth, has now been verboten! No one may do it for the nex 60 days!

But will this trick save the dying banks?

NO!!! They MUST raise cash. This means, selling stocks. If I sold some pieces of paper for $100@, I could get a lot of loot if 10,000 give me this. Sounds cool! How about it? But if I were selling penny stocks at $1@ this would get me only $10,000. Hey, I'm not greedy! This is like the thing we kids used to talk about in grade school. 'If everyone on earth gave me a penny, I would be a billionaire!' The only trick was, tricking everyone on earth into giving a penny each! Difficult, to say the least.

The Great Consumer Crash of 2009
by James Quinn August 19, 2008

In conclusion, the gathering storm has arrived. It will be long, painful and destructive. Those who prepared for the storm by not taking on excessive debt and living above their means, will ride it out unscathed. Those who built their house on sand by leveraging up and living the “good” life, will see their house swept out to sea. The storm will pass and we will rebuild. Our country is resilient. The purging of this massive debt will result in the creative destruction that is the hallmark of American capitalism. New opportunities, new technologies and a new attitude will put us back on course.

There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The “material generation” needs to dematerialize. My biggest concern is that our politician leaders and their cronies running our government will continue to try and reverse the normal capitalistic course of recession and expansion. Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue. Government intervention in this natural process could lead to a decade long depression. Let’s hope that reasonable heads prevail.

A very good article with many graphs and charts. Here are two of them:

First, the Bears Stearn's graph. I found this article while searching for graphs of Bear Stearns. Since it has been delisted, it is hard to get.

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This is an excellent graph showing the fake GDP statistics. Like the stupid story of Mr. and Ms. Thrifty, they were really up to their pretty eyeballs in debts that were draining their bank accounts. So it is here: the US counts as GDP massive debt growth. One can't say an economy is growing when it has a huge hole in the bucket. Like I noted yesterday, you can't milk a cow with a hole in the bucket!

Here is another excellent analysis:

Charles Hugh Smith: Saved by U.S. Savings? Don't Count On It

The new happy talk goes like this: Americans are getting thrifty, paying down debt and saving money. Interest rates will drop because they're going to dump all their savings into safe U.S. Treasury bonds. Once they've lowered their non-mortgage debt payments to 10% of income from the current 14%, then this gloriously low-interest rate environment and these trillions in new savings will spark the next Bull Market cycle of growth--in, say, mid-2009.

Nice story, and I love the Hollywood ending. But is there any shred of reality in the fairy tale? It turns out academics have been struggling for the past 15 years to explain the declining U.S. savings rate, which dropped into negative territory in 2006 and 2007. The number of causal agents in the U.S. economy is huge, so quite naturally there is no one academically vetted "answer." Nonetheless, there are a few theories which have gathered some constituencies.

A reader in the Philippines sent me this link:

Jim Rogers is often right but he doesn't understand history all that well, alas:

If you look back at previous countries that have declined, you almost always see exchange controls – all sorts of controls – before failure. America is already doing some of that. America, for example, wouldn’t let the Chinese buy the oil company, wouldn’t let the [Dubai firm] buy the ports, et cetera.

But I’m really talking about full-fledged, all-out exchange controls. That would certainly be a sign, but usually exchange controls are not the end of the story. Historically, they’re somewhere during the decline. Then the politicians bring in exchange controls and then things get worse from there before they bottom.

Before World War II, Japan’s yen was two to the dollar. After they lost the war, the yen was 500 to the dollar. That’s a collapse. That was also a bottom.

These are not predictions for the U.S., but I’m just saying that things have to usually get pretty, pretty, pretty, pretty bad.

It was similar in the United Kingdom. In 1918, the U.K. was the richest, most powerful country in the world. It had just won the First World War, et cetera. By 1939, it had exchange controls and this is in just one generation. And strict exchange controls. They in fact made it an act of treason for people to use anything except the pound sterling in settling debts.

I really get annoyed at people who talk about history but know little real history. England was the world's most powerful creditor nation in 1900. It was a beggar at the gates of Washington, DC, a nation it thoroughly despised for 100 years! It had to beg on its knees for loans during WWI. At the end of that disastrous war, England was basically bankrupt. Germany was definitely bankrupt! Both applied for endless US loans. All the nations owing the US began, starting with Germany, to default in 1928 onwards. This caused the Great Depression.

The English empire, instead of retracting and concentrating on saving England, kept trying to expand their military empire. Both Germany and Japan swatted down the British empire nearly effortlessly from 1934 onwards. If neither Russia nor the US entered the war [classic European sneak attack on Russia insured this and the Japanese sneak attacked shoved the US into the war, too] then Russia and the US both crushed all the opposing empires in less than 5 years.

When talking history, one must keep in mind all sorts of information. Reading many books and memorizing tables helps tremendously. I highly, highly recommend Kennedy's famous work, one that the Chinese leaders have embraced, 'The Rise and Fall of Great Powers.' Memorize the charts!

Jim is totally correct about this historical tidbit:

Now the only thing that saved the U.K. was the North Sea oil fields, even though Prime Minister Margaret Thatcher likes to take credit, but Margaret Thatcher has good PR. Margaret Thatcher came into office in 1979 and North Sea oil started flowing. And the U.K. suddenly had a huge balance-of-payment surplus.

England was a defacto OPEC country. Protected militarily and economically by the US. By 1979, the US was fading as an oil supplier. Our consumption began to outstrip our production of oil. But England saw oil pour out and exported it. Manufacturing died in England but who cared? Oil paid the bills. Now, suddenly and far swifter than expected, the Hubbert Oil Peak effects have hammered English oil output. It is rapidly declining. This is why England has clung to the US in its many oil wars of the last 8 years.

Japan's Exports Rebound, China Becomes No. 1 Customer

(Bloomberg) -- Japan's exports rebounded in July as China replaced the U.S. as the nation's largest customer.

Shipments overseas rose 8.1 percent from a year earlier, after declining for the first time since 2003 in June, the Finance Ministry said today in Tokyo. Shipments to China climbed 16.8 percent to a record, with the value surpassing those sent to the U.S. for the first time.

Today's number may not be enough to alleviate concern that waning global demand will tip the world's second-largest economy into a recession. The Bank of Japan this week described growth as ``sluggish'' for the first time in a decade, citing weakening exports as well as higher commodity costs.

Asia is trading with Asia. Although all of Asia still desires to flood the US with exports, their mutual economies are still growing, albeit, a tad slower right now. Time to visit the latest Bank of Japan economic statistics report!

Bank of Japan
Monthly Report of Recent Economic and Financial Developments
July 2008

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

Exports have continued to be on an increasing trend, although the pace of increase has slowed lately. Corporate profits have been decreasing mainly due to the deterioration in the terms of trade, and business sentiment has become more cautious. In this situation, the pace of increase in business fixed investment has become slower. Household income has continued rising moderately, but growth in private consumption has recently been somewhat sluggish against the background of the continued increase in prices mainly of petroleum products and food. The recovery in housing investment has come to a halt. Public investment, meanwhile, has been sluggish. With these developments in demand both at home and abroad, production has recently been somewhat weak.

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

Just as maliciously clueless as the US reports! The Japanese apparatchiks are every bit as dim as the communist Soviet apparatchiks in the fading days of that empire.

Bank of Japan:

Central banks implement a low interest rate where the scope for cutting the policy rate is very limited. For example, the Japanese economy has faced a defationary environment for a prolonged period. The Bank of Japan (BOJ) set their operational short-term interest rate -the uncollateralized overnight call rate- virtually equal to zero for almost seven years from
February 1999 to June 2006. Moreover, a low interest rate environment, where the policy interest rate equals 0.5 percent, has continued up to now (July 2008), as shown in Figure 1. In the United States, the Federal Reserve Board (FRB) temporarily set the federal funds rate as low as one percent in 2003 and 2004, which was a historical low. In Switzerland, the Swiss National Bank reduced its policy rate to almost zero percent from 2003 to 2005.1 Central banks can no longer ignore the possibility of hitting the zero (percent) lower bound on nominal interest rates.

Here is the Japanese graph:

Up until 1994, the US and Japanese rates were relatively in harmony. Then the Japanese rates fell like a rock and then laid there, utterly inert. Inflation might rage in Japan! So what. Rates are near zero and staying there. For good, I suspect. Or until someone drops nuclear bombs on Japan again. Note how, when Greenspan dropped US rates to 1%, Japan squashed theirs down to 0%. And outlasted us.

Rob G. gave me this link today:

Germany acts to halt the 'giant locusts'

Germany's cabinet is expected to approve a far-reaching new law this week to stop "giant locust funds" from Russia, China and the Middle East from launching takeover raids on the country's prized industries.

The controversial measure will enable Germany to stop foreign investors from outside the European Union buying more than 25pc of any company when "public order and security" are at stake. The wording creates an elastic definition that goes far beyond the current law, which is restricted to the defence industry.

The proposals have set off a storm of controversy and raised fears that the country is drifting towards protectionism. The German Chamber of Trade and Industry (DIHK) has been highly critical of the draft law, warning that it risks provoking retaliation and is starkly at odds with the country's interests as the world's top exporting nation.

HINT TO ALL INTERNATIONAL LEADERS: WHEN YOUR NATION IS UNDER ATTACK, YOU HAVE TO DEFEND IT! Ask Putin about this dynamic. The US threw up protective barriers in the Great Depression and when WWII rolled around, had an intact industrial base capable of expanding and feeding the war we had to fight!

When England's currency died, they protected it by passing laws forcing people to use pounds, not dollars. Japan is throwing its own currency aside and making it useless for Japanese to bank with yen. This is stupid in the long run! Killing the currency for trade advantage can lead to losing important sovereignty!

Germany has some dim memories of WWII and being split in two. They are very worried about losing sovereignty. They better understand that Russia is even more annoyed about sovereignty. And China is a growing patriotic power, the 'pro-China' attitude is reflected in the Olympics. The US has more silver and bronze medals but the Chinese have left the US in the dust when it comes to gold medals! This is feeding the feeling of nationalist pride there.

I find it rather amusing that Putin is buying up Airbus and Deutsche Telekom. The Germans won't allow this. But then, they are doing THE EXACT SAME THING TO THE US. When will we wake up?

Well, falling off the banking cliff should wake even the deepest dreamers! Except the campaign rhetoric this year is yet more tax cutting and jokes about 'who is rich?'

I'll tell everyone the answer: Hu is rich. He has sovereign wealth. And Putin in his back pocket.

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Banking System Collapse Gathers More Steam

August 20, 2008

Elaine Meinel Supkis

A year ago, it was obvious that the US could not sustain its present position as the consumer of all global resources and manufacturing. The dislocations we are suffering today are part of this collapse in our ability to be the top global consumers. Fannie Mae and Freddie Mac are about to collapse totally. Japan's government is about to collapse due to their cruel methods of killing inflation by destroying working wages and allowing global inflation to rage out of control at home. Obama and McCain talk about wealth, taxes and Santa Claus. More hedge fund hell hounds in trouble with the SEC. Got to return all that loot they swindled people out of, you see. And major banks are about to go belly up. Not so easy to fix, Mr. Bernanke.

Dangerous World Trade/Banking System Reset To Continue

Investors have been abusing liquidity like mad. They have not been using it to build factories and to improve the infrastructure. They used it to build inappropriate housing much of which needed lots of gasoline for commuting to work. The #1 industry in the US was to build housing and the #2 industry was to finance housing and business take overs. Namely, our dynamic part of our nation's economy is to churn money and generate increasing levels of debt.

The debt load has a limit. Obviously, we reached this with the housing business since the proportion of people taking non-traditional loans went from less than 3% to more than 45% in less than 7 years. Home buyers no longer had the income or the status to qualify for traditional loans which were set in place after the Great Depression. It is pretty amazing to me to watch everyone and I do mean, EVERYONE celebrating this obvious capitulation of the Federal Reserve to the present system.

This is a friendly reminder that I figured out, the essential, most important aspect of the evolving global banking break down was to deal with the business of the US importing far, far too much and spending far, far too much on global imperial domination. Until this is fixed, the international banking and trading systems will continue to destroy itself. No one can revert to the pre-destructive system or they will be destroyed by a flood of free funny money that is still trying to pour out of the US and Japanese banking systems. The central bankers of both Japan and the US are trying to solve this imbalanced system by dropping interest rates! Yet both are the ultimate cause of global inflation.

The global banking system is desperate to be recapitalized. But we can't do this at 0.5% or 2% rates! Since the two entities trying this scheme are the world's top two economies, this dooms all other efforts to correct this mess by raising interest rates to attract savings. Instead, as Europe and China discovered, this attracts fake money churned out by the US and Japan and it ends up causing huge inflation surges and a collapse of one's ability to trade. So we are now seeing a global push to drop interest rates and destroy currency relative values! This is a spiral into nothingness. As my cartoon from last year show.

Fannie, Freddie Bailouts May Hinge on Debt Rollover

(Bloomberg) -- Fannie Mae and Freddie Mac's success in repaying $223 billion of bonds due by the end of the quarter may determine whether they can avoid a federal bailout.

Fannie, based in Washington, has about $120 billion of debt maturing through Sept. 30, while McLean, Virginia-based Freddie has $103 billion, according to figures provided by the government-chartered companies and data compiled by Bloomberg.

Rising borrowing costs and evidence that demand for their debt was waning last month led Treasury Secretary Henry Paulson to seek the authority to pump unlimited amounts of capital in Fannie and Freddie in an emergency. Their interest costs are again increasing amid concern that credit losses are depleting the capital of the beleaguered mortgage-finance companies.

Directors and controllers are supposed to direct and control. We have set up a system of barriers, hedges and systems designed to prevent wild lending leading to a Great Depression. All of these were overturned or burned to the ground so the system could run riot. Fannie Mae and Freddie Mac were emergency systems set up temporarily to fund lower class housing during the Great Depression. After WWII, the government expanded these systems to house the GIs who were having sex like hot rabbits with their wives, creating the baby boom generation.

Since the US was now definitely the world's most powerful manufacturing giant, this was OK since the working classes now had a thing we call 'jobs'. And this made export stuff as well as things we consumed at home. I vividly remember when Japan began to outstrip us. It started very, very small. The US was boasting about our space program, our nuclear bomb program, our big car business. Japan came out with the very first transistor radios. Which came in bright colors, too! I remember because a rich kid in my school bought one right away so he could listen to the Pirates/Yankee World Series game in 1960 which was pretty close to when these radios became available to the general American public.

I was 10 years old and agitating to join the Little League. My older brother was a pitcher and I played catcher for him when he practiced. So I hung out with the boys at the far corner of the school playground, listening to the Games which were during the day, not evening like we see today. Sony was created thanks to the US manufacturers clinging to big systems and refusing to manufacture transistor radios at all. This is 'innovation' for you!

The US has gone down this road because of the need to make big, expensive things due to labor costs here. The Japanese dealt with all this was easy: they cheerfully crush their own workers no matter what. The US, on the other hand, had to compete with communism and so it had to allow unions and improving worker's living conditions. This, in turn, created the Golden Age of Unionism. But it also doomed our manufacturing systems here. As we see with GM and Chrysler, our system is sort of like the old Soviet Union's manufacturing: big, obese, poorly engineered manufacturing that is mostly sold internally.

Back to today: the US needs desperately to recapitalize our entire systems. As we saw in yesterday's stupid CNN story about 'thrifty' rich kids deep in debt, thinking they can retire at 40, the economics writers and our representatives as well as the top 2% of this nation seriously think that wealth is debt. I warn people, when they use 'leverage' to get rich, when a downturn happens, all the people doing this get crushed to death by economic forces! So it is with our nation: our debts are NOT assets. They are destructive like cancer which also can grow at an amazing speed.

Fed's Lacker Clashes With Paulson on Fannie, Freddie

(Bloomberg) -- Richmond Federal Reserve Bank President Jeffrey Lacker called for ``demonstrably'' privatizing Fannie Mae and Freddie Mac, becoming the first Fed official to publicly clash with the Bush administration's strategy of keeping them as federally backed firms.

``I would prefer to see them credibly and demonstrably privatized,'' Lacker said today in an interview with Bloomberg Television. He agreed with former Fed Chairman Alan Greenspan's view that the two largest U.S. mortgage finance firms ought to be nationalized, then split up and sold off.

Um, they were 'privatized' roughly at the same time our government launched the catastrophic Floating Currency regime. All our present woes go right back to that time, 1974. All charts and graphs detailing the last 35 years of whatever history we choose to track all show the same dynamics: things started to grow, swell, shoot upwards beginning with this momentous experiment of the global empire deciding to use ONLY fake funny money! It doesn't matter what the graph is tracking: it shoots upwards or downwards with tremendous and gathering strength. Scientists know that any system whether it be gerbils or galaxies, when systems are set to shoot upwards or downwards at faster and faster speeds, this always ends in collapse or explosions. The Big Bang is just such an example. Bam!

Childishly, many of our systems operators mistake all this as 'good news.' If something is shooting upwards including their precious profits and bonuses, this is 'good', not a sign of a system heading towards collapse. Indeed, as these bonuses and benefits shot upwards for the top 2% of the global systems, the wages of workers in the older democracies and empires began to collapse. This collapse is equally fast as the rise in incomes of the top 2%. The spread between the top 2% and the bottom 60% of the G7 and allied nations is very striking and extremely dangerous as global inflation takes off.

Splitting apart the behemoths of Fannie Mae and Freddie Mac fixes ABSOLUTELY NOTHING. The problem is at the other end: the US homeowner has stupidly gone off a cliff. As we saw in yesterday's story about Mr. and Ms. Thrifty, they sold their condo for a huge profit due to the California real estate market taking off. Then, they used this money as a down payment for buying several properties in other states. These are now 'underwater' and unsellable except at a very bad haircut financial loss and the rents are too small to cover the overhead so they are losing over $7.000 a year holding these dying investments. Housing was bid up far, far too high. Between the illegal aliens flooding the housing market due to the insane idea that no one should have to prove finances, citizenship or anything to buy a house as well as multiple house buyers seeking easy profits flipping properties, we overshot any reasonable valuation for housing.

The lenders who sucked up the mortgages handed out like candy are now dying rapidly because none of the people who bid up houses from 2004-2006 are capable of paying for all this! The US has a huge overabundance of housing. And a shortage of JOBS. Jobs that pay incomes to pay for the mortgages on existing houses is even scarcer. No matter what size the new 'entities' created from the dying Fannie Mae/Freddie Mac systems, they will all go bankrupt, big or small. The hazard here is great: our trade rivals have bought huge hunks of our housing debts. Trillions of dollars of this debt. They are increasingly angry about this matter.

If the US tries to weasel out of this and wipe out trade profits garnered by our trade rivals, this will cause them to retaliate. If they cease trading with us, this will be a mixed blessing. The US has to regain its manufacturing base. And change the way we live. We must all be 'thrifty'. And not like that goofy couple in the earlier story.

Fannie, Freddie subordinated debt CDS hit record

(Reuters) - The cost to insure the subordinated debt of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) hit new highs on Monday, a day after Barron's reported an increasing likelihood the U.S. Treasury may essentially take over the mortgage finance companies.

Merrill Lynch analyst Kenneth Bruce also said in a note to clients that Freddie Mac may have to raise $5.5 billion in capital as early as the third quarter, instead of the second quarter of 2009.

The only place they can raise $5.5 billion is to go to that magic window run by Bernanke. This is super-funny money. It is created very much out of thin air. And very inflationary. If this was a one-time thing, OK. But we can see from my stories exactly a year ago, beginning in August, 2007, the G7 central bankers began to gush huge sums of funny money. Indeed, it is now well over a trillion dollars. Virtually no strings attached. And at ridiculously low interest rates well below the rate of global inflation. As I expected last year, this inflation took off exactly when this flood of free money began to pour outwards. It migrated rapidly into commodity markets.

Today, oil is beginning to climb again. The exhausted joy in the markets that all will be 'normal' and the status quo would return, is fast fading. As the banking system continues to collapse, fears that the rescue operations only made things worse, begins to dawn. This reminds me that the Three Gorgons of ancient lore lived on an island where the sun rose and set.

Five-Year Swap Spread Tops 100 on Risk Aversion: Chart of Day

(Bloomberg) -- Interest-rate derivatives are showing that investors are preparing for another round of turmoil in credit markets amid renewed concern that the U.S. will have to bail out Fannie Mae and Freddie Mac.

``Risk aversion is continuing in the market,'' said Suvrat Prakash, an interest-rate strategist in New York at BNP Paribas Securities Corp., a unit of France's largest bank. ``These firms really may very well be closer to insolvency than we thought.''

The CHART OF THE DAY shows the five-year interest rate swap spread rising above 100 basis points in the past year ahead of the unwinding of structured investment vehicles, the collapse of Bear Stearns Cos., the seizure of IndyMac Bancorp Inc. and now mounting concern that the two-largest U.S. mortgage finance companies may need to be propped up by the federal government. The spread is the premium charged over Treasury yields to exchange floating for fixed-rate payments.

The Derivatives Beast is stirring yet again. Every time it shivers and shakes, markets roil. And markets roil because US consumers can't afford to consume or take on more debt. The flow of money is very sensitive to changes in direction. Small alterations in direction or speed have greater and greater consequences. So we have a system that is now changing rapidly. And we can't stop this force. The US cannot take on infinite debt. The super-cheap lending of the Fed is being challenged by the Derivatives Beast. And the Beast is much, much bigger than the Fed. It is global and was allowed to grow at a tremendous rate ever since it was born in desperation in 1980 at the height of the high interest rate cycle in the G7 nations.

Dollar intervention

Here's the chart of the balance of Euro in the U.S. ESF (Exchange Stabilization Fund) account, along with the USDX and Euro values themselves on the right hand scale.

The European Central bankers tried desperately to drop the euro. It will fail. They want contradictory things: a strong social base and exports to the US which is falling apart due to its social systems collapsing. This is obvious market manipulation of the dollar. All our trade partners are doing this!

Credit crunch may take out large US bank warns former IMF chief

The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed today, fuelling another battering for banking shares.

Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.

Kind of late. The IMF sat idle while the US ran up debts. The IMF knew back in 1980, there was a problem with the US trade balance. But the US was rich back then and deliberately ignored all this while chiding other nations about their own trade problems.

PAAM Hedge Fund, Founder Ordered to Pay $300 Million

(Bloomberg) -- Philadelphia Alternative Asset Management Co. and the hedge fund's founder, Paul Eustace, were ordered to pay almost $300 million by a federal court after U.S. commodities regulators accused him of defrauding clients.

Eustace consented to an order that he pay $279 million in restitution, plus a $12 million fine, the Commodity Futures Trading Commission said today in a statement. PAAM, which collapsed in 2005, must pay an $8.8 million fine and may be required to pay $276 million in restitution if Eustace doesn't.

And all the scam artists should be arrested. Certainly, they must return the wealth they defrauded from savers and investors. There should be more fear in the hedge fund world, not less.

Now we go to the recent visit of McCain and Obama to that mega-church. Modern American Christians mostly worship money. They follow the Whore of Babylon slavishly. They want Santa Claus, not Jesus. This is very clear. McCain put on his Santa Claus suit and pranced around, promising everyone 'get rich quick' schemes. He is, by the way, part of the 0.1% of the nation when it comes to wealth. The uneven tax codes coupled with easy money has made him and his wife very, very wealthy.

Obama vs. McCain on Fiscal Responsibility

WARREN: Ok, on taxes, define “rich.” Everybody talks about taxing the rich, but not the poor, the middle class. At what point - give me a number, give me a specific number - where do you move from middle class to rich?

Is it $100,000, is it $50,000, is it $200,000? How does anybody know if we don’t know what the standards are?

MCCAIN: Some of the richest people I’ve ever known in my life are the most unhappy. I think that rich should be defined by a home, a good job, an education and the ability to hand to our children a more prosperous and safer world than the one that we inherited.

I don’t want to take any money from the rich — I want everybody to get rich.
*snip*
We should not and cannot raise taxes in tough economic times.

So, it doesn’t matter really what my definition of “rich” is because I don’t want to raise anybody’s taxes. I really don’t. In fact, I want to give working Americans a better shot at having a better life, and we all know the challenges, my friends, if I could be serious.

America is obviously going bankrupt. We are now overspending in the government to the tune of nearly a trillion dollars this year and will be doing the same, next year. Yet the 'no new taxes' game roars onwards. McCain's popularity grows as he promises no taxes. The rich are grossly undertaxed. But the lower classes, hammered by inflation, desperately want this fixed and the rich candidate is cheerfully letting them get what he wants: no obligations to support our government military spending. And he plans to increase military spending, greatly.

He was very well received by his right wing audience. They willfully refuse to understand how they and their ilk have created this massive mess. This desire to follow the Santa Claus anti-christ is extremely powerful. Like the Christians who prayed for cheaper gas and then, when prices began to fall slightly before an election, thought God did this, not the oil overlords trying to keep the GOP in power.

OBAMA: Yes, well - depending. I don’t know what housing practices are going. I would argue that if you’re making more than $250,000, then you’re in the top three percent, four percent of this country. You’re doing well. Now, these things are all relative. And I’m not suggesting that everybody is making over $250,000 is living on easy street. But the question that I think we have to ask ourselves is, if we believe in good schools, if we believe in good roads, if we want to make sure that kids can go to college, if we don’t want to leave a mountain of debt for the next generation. Then we’ve got to pay for these things, they don’t come for free, and it is irresponsible [to act as if they come for free].

I believe it is irresponsible intergenerationally for us to invest or for us to spend $10 billion a month on a war and not have a way of paying for it. That, I think, is unacceptable. So nobody likes to pay taxes. I haven’t sold 25 million books but I’ve been selling some books lately, and so I write a pretty big check to Uncle Sam. Nobody likes it. What I can say is under the approach I’m taking, if you make $150,000 or less, you will see a tax cut. If you’re making $250,000 a year or more, you’re going to see a modest increase. What I’m trying to do is create a sense of balance, and fairness in our tax code. One thing I think we can all agree on, is that it should be simpler so that you don’t have all these loopholes and big stacks of stuff that you’ve got to comb through, which wastes a huge amount of money and allows special interests to take advantage of things that ordinary people cannot take advantage of.

Even this modest increase in taxes is hammering Obama in the polls. He has to promise us candy canes and toys, not the harsh reality of real taxing. So long as the US imagines we can spend like fiends and never pay taxes, the more likely we will end up in history's dumpster as a defunct empire.

Stimulus to come at a cost

The outline of an economic stimulus package being drawn up centers on insulating the domestic economy from stagnation and soaring gasoline prices.

But with a possible snap Lower House election on the horizon, the package--which will be finalized by the end of the month--will likely include electoral sweeteners in the form of "measures to relieve public anxiety" in daily life.

To create financial backing for the package, the government and the ruling coalition of the Liberal Democratic Party and New Komeito plan to compile a hefty supplementary budget.

During a news conference Monday, Kaoru Yosano, state minister in charge of economic and fiscal policy, indicated the government was fully committed to the budget, saying, "We cannot cancel what we have decided because we lack financial resources."

Fearful for their seats in a coming election, lawmakers within the ruling bloc are increasingly demanding dole-out measures to appeal to voters. Among the demands are income tax cuts and a bulky supplementary budget to support them, even though such moves run counter to the government's financial reconstruction efforts.

The Japanese are in the same fix: the government needs to make the workers happy and the industrialists don't want to pay higher wages so let's cut taxes and increase government spending! HAHAHA. The Japanese government is very deep in debt. But the industrialists are rolling in dough. Tax them! But nope. Savings in Japan has collapsed due to raging inflation. Public fury over this is rising. So hand out the Santa Toys. Don't fix the underlying problem which is over reliance on trade with the US.

Merrill, Wachovia in Danger of Failing: Strategist

Merrill Lynch, Wachovia and other financial companies are at risk of failure as the cost of raising capital soars at a time when the banks need to pay settlements over auction rate securities, David Kotok, chairman & chief investment officer from Cumberland Advisors, told CNBC Monday.
*snip*
The cash companies need to shore up bad investments, "is up to about $50 billion and will probably top $100 billion before it's over," he added.

The banking collapse continues. The death watch widens. Citigroup is dying, too. Place bets, who will go belly up by Xmas.

And now for Olympic news: here are some charts of the top medal winners in the past and in this Olympics. Note the relative position, over time, with China vis a vis the US:

1996 Atlanta Olympics:

2000 Sydney Olympics:

2004 Athens Olympics:

Beijing Olympics today:

China is wiping us out in the gold medal count this Olympics and tying us overall. We have more bronzes. But they are not the top super-power in sports! This is significant. It shows relative public global power. We are losing our #1 spot even there.

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