Sunday, February 28, 2010

Paul Craig Roberts on America's Illegal Wars and Trickle Up Economics

Paul Craig Roberts was Assistant Secretary of Treasury in the Regan Administration. His latest article is The Road to Nuclear Armageddon.

US Banks to their British Cousins: We Won't Take a Pay Cut Because That Would Be "Socialist". Huh? Where was the "Socialist" Thesis When Banks took a Govt. Bailout?

Margareta Pagano, The Independent
America's top bankers quashed attempts by their British counterparts to persuade the industry to bring down salaries in response to public outrage after the world's governments spent billions rescuing the system.
Chief executives from the world's banks discussed the plans at a secret dinner held at Claridge's, the London hotel, last October, at which several leading British bankers are said to have suggested that the sector should take greater responsibility for its part in the crash, and do more to reduce the vast bonuses paid to staff.
But the recommendations were met by stiff opposition from the US banks JP Morgan, Morgan Stanley and Goldman Sachs, according to one source. "Some of the US bankers were furious about attempts to reduce pay throughout the industry, arguing that any such move smacked of socialism and would be fiercely resisted," the source said on Friday. "It's not the way the Americans like to go about their business."
Read more here

Saturday, February 27, 2010

Our Prayers Go Out to the People of Chile who were Struck with an 8.8-Magnitude Earthquake

New York Times
A massive 8.8-magnitude earthquake struck Chile early Saturday, shaking the capital of Santiago for 90 seconds and sending tsunami warnings from Chile to Ecuador.
At least 47 people were killed, Reuters reported, with the toll expected to rise. The quake downed buildings and houses in Santiago and knocked out a major bridge connecting the northern and southern sections of the country.
It struck at 3:34 a.m. local time and was centered about 200 miles southwest of Santiago, at a depth of 22 miles, the U.S. Geological Survey reported. The epicenter was some 70 miles from Concepcion, Chile’s second-largest city, where more than 200,000 people live.
Read more here

SHOCKING! U.S. First Graders Fail to Identify Vegetables Such as a Tomato

Friday, February 26, 2010

VIDEO: Iraq for Sale: The War Profiteers

The War Profiteers is an excellent 75 min film that documents the relentless destruction (of lives and tax payer dollars) wrecked by for profit military contracting corporations. The film is the work of acclaimed director Robert Greenwald and was released in 2006. The director takes you inside the lives of soldiers, truck drivers, widows and children whose lives have been horrifically impacted as a result of profiteering in the reconstruction of Iraq. Iraq for Sale uncovers the connections between private corporations making a killing in Iraq and the decision makers who allow them to do so.
If you have not seen this film we highly recommend it. You can purchase the DVD or alternatively, a cheaper option is to watch the VOD for $2.99 at
To rent/buy the full movie DVD click the link here: Iraq for Sale: The War Profiteers
(To watch the movie on VOD for $2.99 click the link directly below the image on
Another great film by Greenwald is Outfoxed: Rupert Murdoch's War on Journalism and its VOD/DVD can be accessed here: Outfoxed

Below is a brief trailer for Iraq for Sale: The War Profiteers.

Thursday, February 25, 2010

Is the Market Entering a BIG Trading Range?

The current action in the market elicited some superb thoughts from Bill Fleckenstein, of Fleckenstein Capital. which we enclose in the highlighted box below. As we at The Firecracker Report have pointed out earlier, while the upside catalysts to push the market higher have dissipated, the downside is also protected by:
1. The Fed's printing press
2. Endless supply of liquidity (banks are sitting on $1 trillion of reserves and no place to deploy)
3. Fed's Plunge Protection Team.
4. On top of all this the SEC today announced new rules on short selling. Expect more follow-up action on this front. Another repeat of 2H 2008 will not be allowed easily now.
Thus we believe the government will try its level best to prop up the stock market (as long as possible), to keep the facade of economic stability & recovery going. They know that any crack in this facade will likely take down the whole ship as can be seen with the sovereign crisis in Iceland, Greece and Dubai. We probably won't see a big collapse at least till 2H 2010 the catalyst for which would be an attack on Iran. If the war draws in a response from China or Russia the situation could deteriorate rapidly.
Enclosed below is the commentary from Bill:
Bill has a paid annual subscription which we highly recommend. (Please note we do not receive any compensation from Bill for this).
Supposedly, everyone was on hold [yesterday] in front of Bernanke's testimony. As my good friend Fred Hickey noted, it's so absurd that the whole world would be waiting for a man with nothing to say.
Which is pretty much the situation with Bernanke. He can do all the tough talking he wants. But he's not going to take very much action to reduce liquidity, given the fact that the economy does not appear to be in a self-sustaining mode and the recent data has been on the soggy side.
Yesterday a reader asked if I thought that we're now experiencing the failing rally which I've talked about in the past. I have to say that we could be, but I'm not necessarily sure what it means. In the past, when I thought that the equity or housing bubble was in the process of peaking, I was always looking for a failing rally, thinking that what came next might be a collapse. Eventually, that's what happened.
However, if we have a failing rally invthe current environment, I'm not as sure that it will lead to a collapse in the stock market (as long as the Fed has credibility and/or a printing press) -- because almost certainly, stock weakness combined with economic weakness would move the Fed and in all likelihood the other central banks to provide additional easy money.
So, while I could easily believe the highs have been seen and that we will lapse into a trading range (which has been my thought for many months now, as I've noted), I'm not sure that simply because the market can't go up it will get smashed right now.
I think for sure that the easy money in the stock market (caused by easy money from the Fed) has been made. But I just don't have a good feel for the downside at this moment in time, knowing what the Fed's response to weakness might be. Thus, I feel that both the long and short side are somewhat uninvestable, with some exceptions.
In my opinion, we could see a very big trading range with 1150 on the topside and 850/900 on the downside. I just don't know, but I do think that folks need to be very careful with their picks prospectively.

An Attack on Iran Could Draw in Russia & China Leading to World War III

A UN nuclear watchdog report suggests Iran could be developing a nuclear bomb, apparently confirming long-held suspicions in the West. But Tehran denies the claims, again insisting that its atomic intentions are peaceful.
Michel Chossudovsky, who's from an independent Canadian policy research group, believes that what Iran says hardly matters, because the U.S. is planning for war.

Debt Dynamite Dominoes: The Coming Financial Catastrophe: Assessing the Illusion of Recovery

Andrew Gavin Marshall, Global Research
Understanding the Nature of the Global Economic Crisis: The people have been lulled into a false sense of safety under the ruse of a perceived “economic recovery.” Unfortunately, what the majority of people think does not make it so, especially when the people making the key decisions think and act to the contrary. The sovereign debt crises that have been unfolding in the past couple years and more recently in Greece, are canaries in the coal mine for the rest of Western “civilization.” The crisis threatens to spread to Spain, Portugal and Ireland; like dominoes, one country after another will collapse into a debt and currency crisis, all the way to America.
In October 2008, the mainstream media and politicians of the Western world were warning of an impending depression if actions were not taken to quickly prevent this. The problem was that this crisis had been a long-time coming, and what’s worse, is that the actions governments took did not address any of the core, systemic issues and problems with the global economy; they merely set out to save the banking industry from collapse. To do this, governments around the world implemented massive “stimulus” and “bailout” packages, plunging their countries deeper into debt to save the banks from themselves, while charging it to people of the world.
Then an uproar of stock market speculation followed, as money was pumped into the stocks, but not the real economy. This recovery has been nothing but a complete and utter illusion, and within the next two years, the illusion will likely come to a complete collapse.
The governments gave the banks a blank check, charged it to the public, and now it’s time to pay; through drastic tax increases, social spending cuts, privatization of state industries and services, dismantling of any protective tariffs and trade regulations, and raising interest rates. The effect that this will have is to rapidly accelerate, both in the speed and volume, the unemployment rate, globally. The stock market would crash to record lows, where governments would be forced to freeze them altogether.
Read more here

Wednesday, February 24, 2010

China Fires the First Warning Shots at Washington

U.S. China tensions are growing rapidly with China now firing warning shots at Washington over increasing U.S. interference in China's domestic affairs. China appears to be hitting back at increased U.S. rhetoric over the yuan's revaluation, freedom of Internet and speech (the Google fracas), Iran (a huge supplier of oil to China), arms sale to Taiwan and Tibetan sovereignty (Obama's meeting with the Dalai Lama legitimized the struggle for Tibetan autonomy from China). The Telegraph is reporting that:
Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first. A front-page story in the state’s China Information News said the record $34bn sale of US bonds in December was a "commendable" move.
It follows a piece last week in China Daily, the Politburo’s voice, citing an official from the Chinese Academy of Sciences praising the move to "slash" holdings of US debt. This was published on the same day that US President Barack Obama received the Dalai Lama at the White House, defying protests from Beijing.
"There are ongoing spats between the US and China on so many fronts so you have to assume that this is some sort of implicit threat," said Neil Mellor, a currency expert at the Bank of New York Mellon, who cautioned that it can be hard to read the complex signals from China.
In addition, Chinese regulators appear to have thrown a wrench in a Chinese company's acquisition of Hummer for $150m. In October of last year, Sichuan Tengzhong announced plans to buy Hummer, but the deal is still pending approval from Chinese regulators. The explanation offered by the Chinese Commerce ministry, is that the deal is pending approval because the ministry is yet to receive the acquisition application from Tengzhong. This strikes to us as really bizarre, because the deadline for the completion of the deal is Feb 2010. Surely Sichuan Tengzhong would have filed for approval by now. It is clear that the Chinese are either stalling to gain political mileage or are planning to reject the deal outright. Remember GM is in Obama's mid-western home base and many workers stand to lose their jobs if the deal falls through.
Webster Tarpley, a historian and terrorism expert sums up the situation:
US-Chinese relations are now rapidly deteriorating towards a new Cold War or something worse. The entire foreign policy of the United States is strongly motivated by anti-Chinese considerations. Pakistan is targeted for destruction in large part because it could function as an energy corridor between Iran and China, to the benefit of the latter. What is done by the United States in Yemen, Somalia, Sudan, Zimbabwe, Burma, and many other points across the globe is fundamentally dictated by a desire to checkmate China.
The news is that China is fighting back far more effectively. At the recent Copenhagen climate change conference, the basic strategy of the US and the British was to use global warming to institute a world carbon dictatorship which could then be used to strangle the economic development of China, India, and other developing sector nations.
As accounts in the British Guardian have pointed out, Chinese Prime Minister Wen directed a successful blocking operation with the help of countries such as Sudan, Venezuela, Cuba, Bolivia, and others, personally snubbing Obama several times in the process. When it comes to sanctions against Iran, the Chinese are signaling that they will block them in the UN Security Council, and they are also circumventing them in various ways.
For a number of decades, Chinese diplomacy was typically extremely cautious, with a very low profile and a low-key approach. Prime Minister Wen’s successful operations in Copenhagen are a clear indication that major changes are afoot in this department.

Dylan Ratigan: Both Progressive and Libertarian Values Find Home in Ron Paul

Tuesday, February 23, 2010

Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs

Richard Teitelbaum, Bloomberg News
When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury Secretary Timothy F. Geithner got the most attention.
Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.
A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.
These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.
Read more here

How the Mainstream Media is Drowning Out Qualified Candidates Like Ron Paul - Media Corruption is Now at Unprecedented Levels

In our post yesterday, we outlined the real strategy behind Fox News' active promotion of the unqualified "tea party" candidate Sarah Palin, while drowning out the qualified "tea party" candidate Ron Paul. Not to mention how with one swoop both Fox and the left-wing media, have succeeded in labeling ALL of Ron Paul's supporter "crazy tea-party folks".
Reality could not be farther from the truth. In fact Paul's base, as he says himself comprises largely of young college going voters. Moreover many finance professionals, who are equipped to truly fathom the extent of damage caused by the Fed's insane policies, count themselves as Ron Paul's supporters. This is evidenced by the wild success of Paul's "End the Fed" movement.
Not only this, many of Google's young and highly educated engineers, are also a part of these "crazy tea-party crowd" that supports Ron Paul, as can be seen in this excellent interview of Ron Paul organized by Google in 2007, where he outlines his ideas in detail. (Move to the end of the video, where Google employees ask Paul questions, and the extent of their admiration is clear). Thus unlike the media's portrayal, Ron Paul's base actually comprises of highly educated and intelligent people, not rural/right wing/neocon folks who can be roused by empty rhetoric.
Most interestingly, after Ron Paul's stunning win of the CPAC Presidential poll, a humiliated Fox News has been deliberately underplaying the event. According to a Raw Story report:
On its web site, Fox News said that the vote is "not necessarily a good forecaster" of conservatives' leanings nation wide. It is way early, it is unscientific," said a Fox News host, even as the split-screen showed Glenn Beck on stage at the conference.
Huckabee, now a paid Fox News contributor, joined other conservatives in kicking sand on Paul's victory, telling one of his coworkers that he abstained from CPAC because it had been taken over by libertarian activists.
CPAC has becoming increasingly more libertarian and less Republican over the last years, one of the reasons I didn’t go this year," he said, according to Politico.
Today, the main stream media is actively trying to prevent sensible candidates from gaining a foothold in the Presidential election. And ALL media outlets are complicit in this endeavour. While we especially dislike Fox News, MSNBC and CNN were not far behind in their blind adulation of Obama an untested candidate, whose policy views were unknown. They succeeded in drowning out the sensible candidate Dennis Kucinich.
As one analyst said today (unfortunately we forget his name or which channel he was on): the whole Presidential election strategy is now to throw out "fresh" faces in the election because then the media can ascribe any message to them. Tried and tested candidates have become "toxic", because they do not play well in the media blitz campaign. Which is why, Obama was the perfect candidate. No one knew anything about him. He was a blank slate and the media could ascribe "Hope" and "Change you can believe in" to him. The same goes for Scott Brown, the senator from Massachusetts. The only thing anyone knew about him was the fact that he drove a truck with 200,000 miles on it.
What has happened unfortunately is that the entire nation now votes based on which candidate is chosen by the main stream media such as Fox, CNN, MSNBC, Forbes Magazine etc.
Is this a Democracy?
Actual qualifications for the job no longer matter. People continue to blindly support either the Democrats or the Republicans (although, this is changing) and fail to see that BOTH parties are stuck in quicksand. Democrats do not want to cut any spending for the welfare state. Republicans don't want to cut any spending on defense or raise taxes on the rich. They both fail to see that their stalemate is causing the dollar to lose its reserve status and is ushering in a period of extreme suffering for ordinary folks along with the end of the American Empire.
As Ron Paul says: What we need today is a CUT in BOTH Welfare and Warfare. Of course the war fare cuts should come FIRST, and the welfare cuts should be tackled intelligently so that people are not driven to desperation. (Watch this video where he explains his strategy in detail). Before America goes preaching to Iran, perhaps the political class should fix things back home first.
Here are 2 interesting videos on this subject.

Even Pat Buchanan is talking a lot of sense these days.

Monday, February 22, 2010

China New Village Makes Chanos See Dubai 1,000 Times

William Mellor, Bloomberg News
The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades.
Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) -- almost four times the national average -- allows Huaxi to claim it’s China’s richest village.
Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue.
Read more here

A Ray of Hope: Ron Paul Upsets Fox News' "Palin 2012" Cart and Completely Shreds Their Credibility (if they had any left) by Winning CPAC's Presidential Poll

The single most stunning development over the weekend was Ron Paul's win of the Conservative Political Action Conference's (CPAC) Presidential straw poll. Paul received 31% of the votes, trumpeting not only Mitt Romney (22%) but most importantly Fox News' new found darling Sarah Palin (7%).
Given that both Ron Paul and Sarah Palin represent the rapidly emerging "Tea Party" base that Fox News has been desperate to capture, we find it fascinating that Fox decided to place all their chips in the utterly incompetent Ms. Palin's bag. Why not choose the extremely competent Ron Paul?
Fox's blind support for Palin, captured aptly by the crocodile tears filled Glen Beck, in his stomach churning ode to Palin equating her to an enigma, pales in comparison to their comparatively scant coverage of Ron Paul whom they parade out occasionally for his very popular Audit the Fed campaign. Glen Greenwald of points out Fox's charade in his must read piece "The GOP's "small government" tea party fraud":
The Party that spat contempt at Paul during the Bush years and was diametrically opposed to most of his platform now pretends to share his views. Standard-issue Republicans and Ron Paul libertarians are as incompatible as two factions can be -- recall that the most celebrated right-wing moment of the 2008 presidential campaign was when Rudy Giuliani all but accused Paul of being an America-hating Terrorist-lover, for daring to suggest that America's conduct might contribute to Islamic radicalism -- yet the Republicans, aided by the media, are pretending that this is one unified, harmonious, "small government" political movement.
Why would Roger Ailes, Fox's President and an extremely shrewd and cunning man, so heavily support someone that Stephen Colbert nationally outed as "a retard"? The reasons are many and we outline them below:
  1. Firstly the Republican Party is no different from the Democrats when it comes to actual on the ground policies. The two parties election rhetoric's may differ, but once in office they both work to propagate corporation driven agendas with scant regard for the Constitution or the will of the people.
  2. In promoting Sarah Palin, Fox News is determined to create a repeat of the Bush-Cheney years by putting an utterly incompetent but easily manipulated person, in the Presidents office. Just as Bush, a functional retard, carried out the military industrial complexes perpetual war agenda, the banksters loot the treasury agenda and blithely shredded civil liberties through the imposition of the Patriot Act, so will Sarah Palin. When you have neither the brains to question nor the conviction to stand up to corporate interests, that makes you a very valuable tool in the hands of the mighty corporations.
  3. Obama too, has proven to be no different. He too is a corporate tool, intellectually superior to both Bush and Palin but completely lacking in the sheer guts to stand up to his profit driven overlords. When he campaigned for "Change" all the American people got was a change in parties but NOT policies. The media's successful anointment of Obama as a "peace" candidate has succeeded in quelling the domestic anti-war sentiments that were snowballing during the Bush-Cheney years. BUT the fact remains that NOTHING has changed: Obama has widened the war well-beyond Iraq into Afghanistan and Pakistan. In fact he has taking the war mongering to a whole new level by not only threatening Iran, but also engaging in a covert cold war with both China and Russia.
  4. Progressive and independents who supported Obama have now been put on the defensive - if they rally against Obama's war policies they will be labeled as "stupid" and "unable to make the right decisions". With the opposition silenced, the entire nation has ended up supporting Obama's right-wing Republican agenda of ever expanding wars, destruction of democracy and invasion of civil liberties.
  5. In fact, if elected in 2012 (and we do not say this lightly): Sarah Palin will be the final nail in America's coffin - the next step will be a military dictatorship. The militarisation of America has already reached dangerous levels: Consider the insane levels of fear, the movement to subvert civil processes and try terrorists (who are no worse than criminals who rape and kill people) in military tribunals, the movement to bring back torture, the rapidly expanding wars, a trillion dollar annual military budget and high unemployment forcing desperate folks to join the only employer left in town - the military. If the country moves down the right-wing led Palin path, the nations bankruptcy and a currency collapse are 100% assured. At that point American military might would be thoroughly used to control any internal/external movements of dissent. (This may still happen but with Palin the probability is 100%).
Which brings us back to Ron Paul. We most definitely like him, along with Dennis Kucinich and Ralph Nader. His win in the CPAC convention, is yet another indication that the traditional 2 party system in America is fracturing. Just like Massachusetts upset the Democrats, Ron Paul has upset the Republicans. Americans are completely fed up and are beginning to support new independent candidates. Ron Paul is no right wing Republican and everyone knows that he is a complete misfit in the traditional republican party. As we wrote in our post titled "Massachusetts a Harbinger for a NEW Independent Third Party":
Americans are increasingly disenchanted with BOTH political parties and the movement for a NEW independent third is currently underway. Both Democrats & Republicans continue to hold the nation in a paralysed state as they engage in traditional partisan bickering and doggedly hold on to outdated belief mantras such as "free-markets" and "unrestrained government support for Wall Street, defense and the military establishment but no spending/help for "main street". This ground swell movement for an independent third party in 2012 is only going to grow.
For now many of these "independent" minded candidates are being forced to take refuge under either the Democratic or Republican party umbrellas, but look for them to separate out once 2012 approaches.
As for the Tea Party movement it is legitimate and will only grow in the coming days. The Fox dominated right-wing republican camp is trying their best to en cash on the tea party folks but as Ron Paul's win indicates they are failing miserably. Support for Palin is at 7% - that sums up the picture quite well that no one is buying their right wing agenda.
And even though the left has chosen to label ALL tea party folks as write-offs (due to Fox's branding of them as Palin and Beck supporters), many of they are intelligent, sensible and truly patriotic Americas - otherwise Ron Paul would not appeal to them.
Greenwald points out in the same article that "the tea partiers that has been (largely though not exclusively) dominated by libertarians, Paul followers, and other assorted idiosyncratic factions who are hostile to the GOP's actual approach to governing. This is a huge wedge waiting to be exposed -- to explode -- as the modern GOP establishment and the actual "small-government" libertarians that fuel the tea party are fundamentally incompatible".
Which is why we are hopeful and happy that the re-education of Americans is finally happening. The ship is turning if ever so slowly. Here is an excellent 1 hour interview of Paul; and here are some of the policies he supports:
1. Audit the Fed - so that we know the true extent of book cooking and currency debasement fraud that Bernanke, Greenspan and his banking cohorts have perpetuated.
2. Protect civilian privacy and expose government secrecy.
3. Take away Bernanke's printing press. We need a sound currency backed by hard assets.
4. Real Small Government, unlike the one propagated by Glenn Beck, Fox News and many Republicans. Which means:
  • Ending the trillions in senseless military spending.
  • Ending the insane wars in Afghanistan and Iraq. Stop nation building and policing the world.
  • Bring the troops home.
  • Stop belligerent behavior against Iran - which is not a threat to America.
  • End government meddling and spying on civilians by suspending the Patriot Act.
  • End welfare.
  • Bring deficits under control.

5. Stop letting the rest of the world steal American jobs when we have plenty of homegrown talent right here.
6. Disband the CIA.
7. The Constitution while imperfect needs to be upheld, because that is the rule of law. The executive branch, congress and the judiciary are hell-bent on shredding it.
8. End unconstitutional wars such as those in Iraq and Afghanistan.

Sunday, February 21, 2010

Texas’ Debra Medina, The Fahad Hashmi case: Grounds for Hope and Despair

Paul Craig Roberts in
My February 16 column, A Country of Serfs Ruled By Oligarchs, received confirmation from high places on the very day it appeared. Popular Indiana Democratic U.S. Senator Evan Bayh announced that he was quitting the Senate. Yahoo News gave this account:
"In an interview on MSNBC this morning, newly retiring Sen. Evan Bayh declared the American political system 'dysfunctional,' riddled with 'brain-dead partisanship' and permanent campaigning. Flatly denying any possibility that he'd seek the presidency or any other higher office, Bayh argued that the American people needed to deliver a 'shock' to Congress by voting incumbents out in mass and replacing them with people interested in reforming the process and governing for the good of the people, rather than deep-pocketed special-interest groups."
In short, Senator Bayh got tired of being a wh*** for the corporate lobbyists who rule the U.S. As Shamus Cooke noted the same day, I the last election voters gave the Democrats a super majority in the mistaken belief that Democrats would remove U.S. policy from the corporate/neocon grip only to find that the result was a surge in America’s wars of aggression.
There are grounds for hope in the fact that some of the Tea Party people understand that Americans have been betrayed and abandoned by both parties.
Read more here

America—A Country of Serfs Ruled By Oligarchs

Paul Craig Roberts in
The media has headlined good economic news: fourth quarter GDP growth of 5.7 percent ("the recession is over"), Jan. retail sales up, productivity up in 4th quarter, the dollar is gaining strength. Is any of it true? What does it mean?
The 5.7 percent growth figure is a guesstimate made in advance of the release of the U.S. trade deficit statistic. It assumed that the U.S. trade deficit would show an improvement. When the trade deficit was released a few days later, it showed a deterioration, knocking the 5.7 percent growth figure down to 4.6 percent. Much of the remaining GDP growth consists of inventory accumulation.
More than a fourth of the reported gain in Jan. retail sales is due to higher gasoline and food prices. Questionable seasonal adjustments account for the rest.
Productivity was up, because labor costs fell 4.4 percent in the fourth quarter, the fourth successive decline. Initial claims for jobless benefits rose. Productivity increases that do not translate into wage gains cannot drive the consumer economy.
Housing is still under pressure, and commercial real estate is about to become a big problem.
The dollar’s gains are not due to inherent strengths. The dollar is gaining because government deficits in Greece and other EU countries are causing the dollar carry trade to unwind. America’s low interest rates made it profitable for investors and speculators to borrow dollars and use them to buy overseas bonds paying higher interest, such as Greek, Spanish and Portuguese bonds denominated in euros. The deficit troubles in these countries have caused investors and speculators to sell the bonds and convert the euros back into dollars in order to pay off their dollar loans. This unwinding temporarily raises the demand for dollars and boosts the dollar’s exchange value.
Read more here

Exposing Our Enemy - Meet the Economic Elite

David DeGraw, AmpedStatus Report
“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies, all who question its methods or throw light upon its crimes… As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money powers of the country will endeavor to prolong it’s reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.” – Abraham Lincoln

I don’t view the Economic Elite as a small group of men who meet in secrecy to control the world. They do feature elements of conspiracy and are clearly composed of secretive organizations like the Bilderberg Group - this is not a conspiracy theory, this is a conspiracy fact - but as a whole the Economic Elite are primarily united by ideology. They’re made up of thousands of individuals who subscribe to an ideology of exploitation and the belief that wealth and resources need to be concentrated into the fewest hands possible (theirs), at the expense of the many.
That being said, there are some definite lead players in this group and it is important that we are not too vague and expose the individuals who publicly lead them. Focusing on the fundamental structure of the US economy, we have people like Hank Paulson, Tim Geithner, Ben Bernanke, Robert Rubin, Larry Summers, Alan Greenspan, Lloyd Blankfein, Jamie Dimon, John Mack, Vikram Pandit, John Thain, Hank Greenberg, Ken Lewis, John J. Castellani, Edward Yingling and Tom Donohue.
Read more here

Saturday, February 20, 2010

Wall Street Oligarchs Eying Social Security

Paul Craig Roberts, VDARE
Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term.
Hank Paulson, the Gold Sachs bankster/U.S. Treasury Secretary, who deregulated the financial system, caused a world crisis that wrecked the prospects of foreign banks and governments, caused millions of Americans to lose retirement savings, homes, and jobs, and left taxpayers burdened with multi-trillions of dollars of new U.S. debt, is still not in jail. He is writing in the New York Times urging that the mess he caused be fixed by taking away from working Americans the Social Security and Medicare for which they have paid in earmarked taxes all their working lives.
Wall Street’s approach to the poor has always been to drive them deeper into the ground.
As there is no money to be made from the poor, Wall Street fleeces them by yanking away their entitlements. It has always been thus. During the Reagan administration, Wall Street decided to boost the values of its bond and stock portfolios by using Social Security revenues to lower budget deficits. Wall Street figured that lower deficits would mean lower interest rates and higher bond and stock prices.
Two Wall Street henchmen, Alan Greenspan and David Stockman, set up the Social Security raid in this way: The Carter administration had put Social Security in the black for the foreseeable future by establishing a schedule for future Social Security payroll tax increases. Greenspan and Stockman conspired to phase in the payroll tax increases earlier than were needed in order to gain surplus Social Security revenues that could be used to finance other government spending, thus reducing the budget deficit.
They sold it to President Reagan as "putting Social Security on a sound basis."
Along the way Americans were told that the surplus revenues were going into a special Social Security trust fund at the U.S. Treasury. But what is in the fund is Treasury IOUs for the spent revenues. When the "trust funds" are needed to pay Social Security benefits, the Treasury will have to sell more debt in order to redeem the IOUs.
Social Security was mugged again during the Clinton administration when the Boskin Commission jimmied the Consumer Price Index in order to reduce the inflation adjustments that Social Security recipients receive, thus diverting money from Social Security retirees to other uses.
Read more here

Friday, February 19, 2010

Dollar Death Dance Has Begun

Jim Willie, 
The Dollar Death Dance part II began in December 2009 with the loud Dubai gong. The US$ rallies again because fiat currencies appear to be in death throes. The Competing Currency War is brisk, more like a Reverse Beauty Pageant. As monetary crisis comes full circle, pushed by gargantuan government deficits on a global basis, the US$ will again resume its powerful decline. The Enronization of US financial structures is gradually being exposed, replete with false accounting, diverse hidden tentacles, and prolific slush funds.
The credit climax will be a global shock wave, a grand restructure of financial structures, tremendous disorder & chaos, dislocations of important supply chains, and enormous challenge. Prepare for storms! Gold, silver, and platinum will be survivors left standing!! They have been offered in recent weeks at heavy discount in U$ terms, but quite the opposite in Europe. Only the alert and prudent will exploit the artificially low posted paper gold & silver prices.
The US is an oversized Third World nation. It ranks poorly relative to other nations in its debt structure and exposure. The United States is in worse condition than almost all nations in the Western world, equally bad as those in Europe currently denigrated in crisis mode. Left to finance its own debt, the USGovt would suffer an immediate cave-in. It has the Printing Pre$$ at its disposal, and a USMilitary to roam the planet, thus creating an unstable system. The US has an 80% debt/GDP ratio, easily to hit 100% next year. The US meanders with false confidence, yet besides Greece, the US is worse off than all the PIIGS nations criticized as basket cases so readily.
USGovt spending and tax revenue are diverging. The path is actually a pathogenesis, not sustainable. A monetary crisis comes, accompanied by a sovereign debt crisis. The United States will not be spared. Focus on war is the ruin on the exterior, while destructive focus on inflation is the ruin from within. Witness the climax of the Fascist Business Model, a final chapter. The status of USGovt finances reads like a Banana Republic. Often a picture is 1000 times more clear than any concisely written paragraph. The red line is spending. The blue line is tax revenue.

Bubbles approach their climax before the bust by demanding, draining, and destroying an exponentially increasing amount of money. The USTreasury Bond is no different, whose securities finance the yawning USGovt debt. Both are manifested bubbles. The difference between spending and revenue is deficit, and the USGovt will rack up well over $1.5 trillion in fresh 2010 deficits despite claims last year to the contrary, all false.

When a system reaffirms itself with an endorsement of grand errors and corruption, it guarantees its failure. Identify the endorsements of failure. The signature of the Obama Admin is no change. Nations often are given opportunities to change course. The United States with these important decisions, has chosen to seal the path of ruin, institutionalizing further its banker devotion, even after fraud has been exposed, failed policy recognized, and participants identified. At the end of the road lies firm rule by a police state and USTreasury default, my ongoing unswerving forecasts. Both might be disguised. The complete lack of moves toward reform or true remedy, in my view, serves as an EPITAPH on the imperial tombstone. To date we only see bigger funding lifelines to the same big financial locations that caused the problems. The USEconomy is moribund and is simply not going to recover, stuck in deterioration mode, lifted only by USFed steriods and Congressional adrenalin. Next comes shock. The important decisions of endorsed failure:
  1. Approval in October 2008 of the TARP funds totaling $700 billion to be distributed like a vast slush fund to Wall Street banks, with Goldman Sachs in charge of dispensation and first in line for reception.
  2. Selection and confirmed appointment of Tim Geithner as Treasury Secy in January 2009. The Wall Street financial center continues its stranglehold, enabling easier continued lack of resolution for insolvent banks and mortgage bond loss claims.
  3. Decision made at several points in time to continue the endless wars. The USCongress approved the sacred status of war, instead of rebuilding the US economic structures. Still nobody searches for the missing $50 billion from the Iraq Reconstruction Fund.
  4. Empty Economic Stimulus Bill signed into law in February 2009, when it was only a set of important plugs to the massive state budget shortfalls. In this sense, the bill was merely a grand band-aid patch applied to a hemorrhage wound, not even a tourniquet.
  5. Blessing given to the relaxed accounting rules offered by the Financial Accounting Standards Board, approved by the USCongress, effective in April 2009. The rule change enabled big banks to declare any value for assets they wished, according to any model they chose, without scrutiny, without any connection to reality of markets.
  6. Confirmed reapointment of Bernanke as Chairman of US Federal Reserve in late January. Bernanke was confirmed by the weakest vote (70 - 30) in the history of the USFed. Threats of calamity accompany calls for full disclosure of the USFed itself. A NO vote would have signaled an upheaval of the USFed as command center. The US Supreme Court is next in line for a crucial vote.

Nobody can dispute that Europe has captured global attention with the threat of sovereign debt defaults, a string of them potentially. During the misdirection toward the paper gold price in US$ terms, pushed down by incredible shorting of futures contracts at a time when never the COMEX nor LBMA metals exchanges have been in possession of less gold & silver metal in inventory, the real story is the Gold price in Euro terms. It has broken out past €800. A runup should continue for around an 18% move, like to the €940 to €945 range. What a strong uptrend in Euro terms, a strong moving average uptrend, and strong stochastix index! The strength of the Gold price in Euro terms should continue until the Germans establish clarity with the New Core Euro. They will order the financial surgeons to remove the PIIGS surplus matter, leaving the Central Europe core without the shattered nations that boast busted housing bubbles, busted banking systems, outsized federal deficits, heavy import needs, and capital requirements impossible to meet. When the New Core Euro is clear, then the surviving form of the Euro currency will rise and rise and rise, certainly challenging the USDollar. Only then will the Euro push toward 200/US$ in its exchange rate.

The Gold price in US$ terms, despite the hue & cry, is hanging on well. It maintains support above the $1050 price. It has succumbed to two powerful downdrafts, aided to be sure by selling golden papyrus. In fact, the suppression of the paper gold price has resulted in production ironically of physical metal placed by honest brokers as margin collateral. See margin calls and forfeited collateral. Its long-term 50-week moving average remains in uptrend. In the last week, gold investors have been treated to a bullish stochastix crossover in the making. When the New Core Euro is clear, watch the US$ DX long-term decline resume, and do so powerfully. The globe will face the worst monetary crisis in history, with epicenter the USDollar. The sovereign debt defaults will come full circle, the start being September 2008, the conclusion an attack on the USTreasury Bond. The USGovt debt is unsustainable, growing worse, and will eventually break. Pure financial physics. Gravity will sink the US Flagship and its economic flotilla. The global reserve currency in the USDollar stands as the biggest travesty in the history of global finance.

Thursday, February 18, 2010

The Rise of the Economic Elite

David DeGraw, AmpedStatus Report
“The war against working people should be understood to be a real war…. Specifically in the U.S., which happens to have a highly class-conscious business class…. And they have long seen themselves as fighting a bitter class war, except they don’t want anybody else to know about it.” — Noam Chomsky
As a record number of US citizens are struggling to get by, many of the largest corporations are experiencing record-breaking profits, and CEOs are receiving record-breaking bonuses. How could this be happening; how did we get to this point?
The Economic Elite have escalated their attack on US workers over the past few years; however, this attack began to build intensity in the 1970s. In 1970, CEOs made $25 for every $1 the average worker made. Due to technological advancements, production and profit levels exploded from 1970 - 2000. With the lion’s share of increased profits going to the CEOs, this pay ratio dramatically rose to $90 for CEOs to $1 for the average worker.

As ridiculous as that seems, an in-depth study in 2004 on the explosion of CEO pay revealed that, including stock options and other benefits, CEO pay is more accurately $500 to $1.

Paul Buchheit, from DePaul University, revealed, “From 1980 to 2006 the richest 1% of America tripled their after-tax percentage of our nation’s total income, while the bottom 90% have seen their share drop over 20%.” Robert Freeman added, “Between 2002 and 2006, it was even worse: an astounding three quarters of all the economy’s growth was captured by the top 1%.”

Due to this, the United States already had the highest inequality of wealth in the industrialized world prior to the financial crisis. Since the crisis, which has hit the average worker much harder than CEOs, the gap between the top one percent and the remaining 99% of the US population has grown to a record high. The economic top one percent of the population now owns over 70% of all financial assets, an all-time record.
Read more here

Wednesday, February 17, 2010

The Economic Elite Vs. The People of U.S.A: 99% of US Population No Longer Has Political Representation

David DeGraw, AmpedStatus Report

Casualties of Economic Terrorism, Surveying the Damage
“The American oligarchy spares no pains in promoting the belief that it does not exist, but the success of its disappearing act depends on equally strenuous efforts on the part of an American public anxious to believe in egalitarian fictions and unwilling to see what is hidden in plain sight.” — Michael Lind, To Have and to Have Not
It’s time for 99% of Americans to mobilize and aggressively move on common sense political reforms.
Yes, of course, we all have very strong differences of opinion on many issues. However, like our Founding Fathers before us, we must put aside our differences and unite to fight a common enemy.

It has now become evident to a critical mass that the Republican and Democratic parties, along with all three branches of our government, have been bought off by a well-organized Economic Elite who are tactically destroying our way of life. The harsh truth is that 99% of the US population no longer has political representation. The US economy, government and tax system is now blatantly rigged against us.

Current statistical societal indicators clearly demonstrate that a strategic attack has been launched and an analysis of current governmental policies prove that conditions for 99% of Americans will continue to deteriorate. The Economic Elite have engineered a financial coup and have brought war to our doorstep. . . and make no mistake, they have launched a war to eliminate the US middle class.
Read more here

The Military and Wall Street Led Economic Elite are Destroying America. Is a Violent U.S. Insurgency in the Making?

David DeGraw, AmpedStatus Report

AF-PAK WAR RACKET: The Obama Illusion Comes Crashing Down
The economic elite have escalated their attack on the U.S. public by surging military operations in Afghanistan and Pakistan.
As Obama announced plans for escalating the war effort, it has become clear that the Obama Illusion has taken yet another horrifying turn. Before explaining how the Af-Pak surge is a direct attack on the US public, let’s peer through the illusion and look at the reality of the situation.

Now that the much despised George W. Bush is out of the way and a more popular figurehead is doing PR for Dick Cheney’s right-hand military leader Gen. Stanley McChrystal, who is leading his second AF-Pak surge now, and with long time Bush family confidant Robert Gates still running the Defense Department, the masters of war have never had it so good.

Barack Obama, the anti-war candidate, has proven to be a perfect decoy for the military industrial complex. Consider all the opposition and bad press Bush received when he announced the surge in Iraq. Then consider this:

The Bush surge in Iraq deployed an extra 28,000 US troops. Under Obama, back in March, a surge in Afghanistan, that also further escalated operations inside Pakistan, deployed an extra 21,000 troops. However, in an unannounced and underreported move, Obama added 13,000 more troops to that surge to bring the total to 34,000 troops. Obama actually outdid Bush’s surge by 6000 troops and brought the overall number of US troops in Afghanistan to 68,000, double the number there when Bush left office.
Read more here

Economic Death Squad Analysis: Goldman Sachs’ $2.5 Trillion Global Oil Scam

Philip Davis, Phil’s Stock World

$2.5 Trillion - That’s the size of of the global oil scam.
It’s a number so large that, to put it in perspective, we will now begin measuring the damage done to the global economy in “Madoff Units” ($50Bn rip-offs). That’s right - $2.5Tn is 50 TIMES the amount of money that Bernie Madoff scammed from investors in his lifetime, yet it is also LESS than the MONTHLY EXCESS price the global population is being manipulated into paying for a barrel of oil.

Where is the outrage? Where are the investigations?

Goldman Sachs, Morgan Stanley, BP, TOT, Shell, DB and Societe General founded the Intercontinental Exchange in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate ”dark pool” trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel.

A Congressional investigation into energy trading in 2003 discovered that ICE was being used to facilitate “round-trip” trades. “Round-trip” trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands. But when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company. This is nothing more than a massive fraud, pure and simple.
Read more here

Tuesday, February 16, 2010

Credit Default Swaps The New Weapons of Economic Terrorism

Author: Jeff Nielson, Bullion Bulls

When Wall Street planned and executed the U.S. housing-bubble (and all its related scams), it destroyed the lives of tens of millions of Americans. Then, when it subsequently 'crashed' global markets, it inflicted hardship on most of the world. But the Oligarchs were just getting started.
As governments responded in a totally predictable manner, Wall Street began to collect on its interest-rate swap scam (see “WHO were the WINNERS in Interest Rate Swaps?”). With this scam the Oligarchs progressed from merely destroying companies and individuals to destroying schools, hospitals, towns and even states.

However, as we are now finding out, those were merely Wall Street's “appetizers”. For their “main course”, the Oligarchs have moved up to destroying nations. Here, I must confess to once again underestimating the Oligarchs. I had thought that the latest propaganda campaign was merely a tactic to pull the worthless, U.S. dollar out of yet another nose-dive. How wrong I was!

I should have been tipped-off by the obsessive/excessive “coverage” from the U.S. media of Greece's (and now the rest of the “PIGS”s) financial problems. The indifference of Americans to any and all events which take place outside of their own borders is legendary. Apart from wars, Americans generally have as much curiosity about the “rest of the world” as the average house-fly.

Read more here

Monday, February 15, 2010

Testing the Limits of Imagination: If Greece is Fudging its Debt, MOST CERTAINLY U.S.A. is Too!

So it turns out corporations are not the only ones fudging their balance sheet. Entire nations have joined that list. A recent Der Spiegel report outlines that the Greece's government not only knowingly excluded certain debts from the national debt tally, but also used derivatives structured by Goldman Sachs to mask the true extent of its budget deficits. According to the Der Spiegel report:
Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent.
The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat [the European Union's statistical office] consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.
"Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products. Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.
But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.
This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.
Of course Greece is "small fry" in this global game of chicken with rating agencies, debt and currency investors. Imagine the extent of fudging that goes on in the maestro balance sheet fudgers (a.k.a. U.S. banks) home base the U.S.A. Consider this little fact: the United States government routinely accounts for Fannie and Freddie activities as off-balance sheet. According to Reuters:
The ultimate off balance sheet vehicles are the GSEs themselves: Fannie, Freddie and Ginnie Mae (which securitizes FHA loans). Though backed by taxpayers, the nearly $5.0 trillion worth of mortgages they guarantee aren’t included on Uncle Sam’s balance sheet.
And this is stuff we know off. Like Greece, Bernanke the currency imagineer's "ring-leader" has many such derivative and currency swap skeletons in his closet, that he is trying his best to not divulge. Not to mention his secret deals with other central banks (primarily the U.K's) to prop up U.S. Treasury purchases at the now weekly auctions.
Now one reason why the U.S. Government has not been tough on the very banks that brought down the global economy, is because they are hand in glove with each other. It is a case of "you scratch my back and I will scratch yours". Bernanke needs Goldman Sachs, JP Morgan and the rest of Wall Street to syndicate/bid for his colossal $1+ Trillion of annual U.S. Treasury auctions. He needs their support to "hide" who actually bids at these auctions.
We know that last year out of the $1.5 trillion U.S. Treasury auction, foreign central banks purchased only $300bn. The Fed purchased the rest through their quantitative easing (QE) operations. As the Fed's QE operations end in March 2010, it will be interesting to see who bids on the next batch of $1 trillion of U.S. Treasuries. Bernanke for sure does not want you to find out. The banks are obviously complicit in the U.S. government's efforts to hiding trillions in liabilities. Were it not for all these gimmicks the U.S. Dollar would have collapsed by now. No wonder Goldman's CEO thinks he is doing God's work.
And regulators and the Fed do their part by turning a blind eye to the banks shenanigans. Consider the most recent.
According to Reuters Wells Fargo alone has over $2 trillion in off balance sheet loans. That is Trillion with a "T". And this is just Wells Fargo...add in Citigroup, JPMorgan and other Wall Street banks and the numbers will soon crash even a supercomputer. (Note that for a bank, the loans that it makes are classified as "assets", since the bank earns interest income on them). Of course when a bank makes a loan it is required to hold regulatory capital (Tier 1 and Tier 2 capital) against those loans.
Now new accounting rules that went into effect on January 1, 2010, require banks to consolidate all off-balance sheet loans and bring them back on their balance sheet. Of course that would require banks to raise billions in new regulatory capital. For example if Wells Fargo were to consolidate the entire $2 trillion of off balance sheet loans, it alone will need to raise $200bn in equity to meet a 10% capital ratio requirement. Now why would Wells Fargo, a masterful fudger, go for a $200bn capital raising headache? It is much too clever a bank for that.
According to Reuters, with a little bit of "hope" mixed in with plenty of accounting "imagination" Wells Fargo has consolidated only $10 billion out of the $2 trillion. Hey Presto! Problem Solved! Or at the very least brushed under the taxpayer carpet. When s**t hits the fan on the off balance sheet loans Wells Fargo will get bailed out.
In conclusion, the one thing this crisis is doing is testing the limits of imagination. The bankers have put even Disney's "imagineers" to shame. At this point we are in the midst of a global financial crisis of unimaginable magnitude. Were it not for all the accounting and derivative tricks, we would have seen a global currency collapse by now. However accounting tricks can take you only so far. The world continues to be a hair's breadth away from systemic collapse.
Which is why we reiterate our older recommendations: The goal for everybody is to become "self-sufficient" - own alternative currency (gold and silver) that cannot be printed away. (Yes Bernanke will try his level best to push gold down this year, but that is all the better, he just lowered your purchase price). Buy a farm or plan a kitchen garden. Keep excess food supply for emergency. Although we are staunchly against guns, in this crisis we are breaking that rule. Buy a gun. You may need it for self-defense.

Sunday, February 14, 2010

Will Obama Play the War Card?

Author: Patrick J Buchanan,
Republicans already counting the seats they will pick up this fall should keep in mind Obama has a big card yet to play.
Should the president declare he has gone the last mile for a negotiated end to Iran’s nuclear program and impose the "crippling" sanctions he promised in 2008, America would be on an escalator to confrontation that could lead straight to war.
And should war come, that would be the end of GOP dreams of adding three-dozen seats in the House and half a dozen in the Senate.
Harry Reid is surely aware a U.S. clash with Iran, with him at the president’s side, could assure his re-election. Last week, Reid whistled through the Senate, by voice vote, a bill to put us on that escalator.
Senate bill 2799 would punish any company exporting gasoline to Iran. Though swimming in oil, Iran has a limited refining capacity and must import 40 percent of the gas to operate its cars and trucks and heat its homes.
And cutting off a country’s oil or gas is a proven path to war.
Read more here

Saturday, February 13, 2010

Sovereign Alchemy Will Fail

Author: Egon von Greyerz, Matterhorn Asset Management
When we look at the world economy today, wherever we turn we see a wall of risk. And sadly this is an insurmountable wall with risks that are totally unprecedented in history. There has never before been a potentially catastrophic combination of so many virtually bankrupt major sovereign states (US, UK, Spain, Italy Greece, Japan and many more) and a financial system which is bankrupt but is temporarily kept alive with phoney valuations and unlimited money printing. But governments will soon realise that they are not alchemists who can turn printed paper into gold. The consequences of the global financial crisis are potentially catastrophic.
As the Austrian economist von Mises said: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”
In our view, governments like the US and the UK and many others will not abandon further credit expansion. They are committed to printing increasing amounts of worthless paper money in order to finance the growing deficits and the rotten financial system. Therefore there is no chance of Quantitative Easing ending but instead it will accelerate in 2010 and after. The consequence of this will be a hyperinflationary depression in many countries due to many currencies becoming worthless. No economy in the world, including China, will avoid this severe economic downturn which is likely to have a major impact on the world economy for many, many years to come.
Read more here

America's Terrorism Derangement Syndrome: Fear, With Good Reason

Author: Barry Eisler, Truthout
Last week, Dahlia Lithwick had a terrific piece in Slate in which she ponders America's "Terrorism Derangement Syndrome [TDS]."
America does seem to be in the grip of morbid fear, doesn't it? Khalid Shaikh Mohammed could irradiate Manhattan if he's given a trial there ... terrorists can melt the walls of supermax prisons ... the Underwear Bomber is so diabolically clever he would laugh off traditional interrogation methods. With all this terror, you might even think ... I don't know, that terrorism is working pretty well.
Lithwick attributed some of the cause of TDS to Republican fear-mongering and to Democratic acquiescence in GOP scare tactics. I agree - but I think there's something more fundamental going on, something that explains both the fear and the fear-mongering.
Something like ... our own policies.
I believe some deep-seated part of our national consciousness is aware there will be consequences for what we've done, and continue to do. The wars, and kidnappings, and illegal imprisonment, and off-the-mark Predator strikes, and, most of all, torture - we sense a reckoning for all this, a conflagration waiting to engulf the combustible materials we insist on piling recklessly, relentlessly higher. Our tactics worsen the danger.
Read more here

Colbert: Mr. Spitzer, if Bernanke Can Get Re-elected Despite a Global Screw Up, You Certainly Have a Chance

Friday, February 12, 2010

Fed's "Red Bull" Party Drawing to a Close...If Only Temporarily

In March 2009, with stock markets swooning towards a bottomless abyss, the Fed decided to throw a party. Their theme was Quantitative Easing and they proceeded to pour out $1.75 trillion of freshly minted greenback "Red Bull" for market participants. The party was launched with the announcement that the Fed would purchase $1.25 trillion of agency mortgage backed securities, $200bn of agency debt and $300bn of long term treasuries (a grand total of $1.75 trillion).
Add a comfortable 3-4x leverage on $1.75 trillion and you can see the enormity of the cash that got pumped into the asset markets. Here is how the Fed's Red Bull pump worked:

PIMCO's Classic Pump and Dump Scheme
Now one interesting point to note is that the Fed's $300bn purchase of U.S. Treasuries ended in October 2009. At that time, most sensible people (including us ;-)) had speculated that yields on the long bond would widen (as prices fall since the government bid disappears from the market). However it was not until December 2009 that U.S. treasury prices actually began to fall. Even now the U.S. Treasuries have rallied somewhat as a "flight to quality (i.e. trash)" trade has reemerged on account of the PIIGS crisis. So what happened?
Bill Gross of PIMCO provides the explanation. According to him, although the Fed stopped buying U.S. Treasuries in October, they nevertheless continued buying MBS from the likes of PIMCO etc. And PIMCO, like the old faithful dog was funneling this money provided by the Fed right back into the market to buy what else...U.S. Treasuries. So the U.S. Treasury prices were supported quite well until December 2009.
Of course what PIMCO was actually doing was buying from one hand and quietly offloading with the other. As we have reported earlier, in January 2010, PIMCO announced that it had offload most of its U.S. Treasury portfolio and was now looking to invest in German bonds. This announcement came within 3 months of PIMCO announcing to the world (in October 2009) that everyone should BUY U.S. Treasuries. Talk about pump and dump!

Even the Old Faithful Dog Can Get a Rabies Attack
Ever since January 2010, knowing that the Fed's Quantitative Easing party is coming to a close, PIMCO the Fed's trusted hound has been getting a case of rabies every time someone mentions U.S. Treasuries. Bill Gross is steering clear of them completely and offers a logical explanation, and we believe him this time:
Here’s the problem that the U.S. Fed’s “exit” poses in simple English: Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve.
Of course they purchased more 30-year Agency mortgages than Treasuries, but PIMCO and others sold them those mortgages and bought – you guessed it – Treasuries with the proceeds. The conclusion of this fairytale is that the government got to run up a 1.5 trillion dollar deficit, didn’t have to sell much of it to private investors, and lived happily ever – ever – well, not ever after, but certainly in 2009. Now, however, the Fed tells us that they’re “fed up,” or that they think the economy is strong enough for them to gracefully “exit,” or that they’re confident that private investors are capable of absorbing the balance. Not likely.
To REPEAT that again: The federal deficit for 2009 was financed by issuance of $1.5 trillion in U.S. Treasuries. Of these only $300bn was purchased by foreigners including the Chinese. The REST $1.2 trillion of U.S Treasury issuance were purchase by OUR OWN GOVERNMENT through the Fed's Quantitative easing pump.
Is this CRAZY or WHAT? And the media says Greece has a problem?
But Fear Not Folks...the Fed Will Soon Throw Another Party
The asset markets propped up since March 2009 by the Fed's gargantuan money supply have off late begun to swoon as the Fed prepares to temporarily shuts off the tap. Stock and commodity markets have already dived and high yield and corporate bond markets will soon follow. However do not expect a repeat of 2008's nose dive performance. If stock market dives too far (say the S&P dives below 1000), the Fed will throw another party. Actually regardless of any stock market dive the only way to finance the never ending stream of $1+ trillion of annual deficits, is for the Fed to throw many more Quantitative Easing parties.
But What About an Economic Recovery?
Anyone still left in the economic recovery camp only have Geithner, Summers and Bernanke for company. Yikes! Everyone else has left that camp, knowing full well that there is going be no recovery because the U.S consumer is completely tapped out. We leave the explanation to Bill Gross who says it best (yeah we dislike PIMCO, but he makes sense here, so bear with us):
There have been numerous changeups and curveballs in the financial markets over the past 15 months or so. Liquidation, reliquification, and the substituting of the government wallet for the invisible hand of the private sector describe the events from 30,000 feet. Now that a semblance of stability has been imparted to the economy and its markets, the attempted detoxification and deleveraging of the private sector is underway. Having survived due to a steady two-trillion-dollar-plus dose of government “Red Bull,” Adderall, or simply strong black coffee, the global private sector is now expected by some to detox and resume a normal cyclical schedule where animal spirits and the willingness to take risk move front and center. But there is a problem.
While corporations may be heading in that direction due to steep yield curves and government check writing that have partially repaired their balance sheets, their consumer customers remain fully levered and undercapitalized with little hope of escaping rehab as long as unemployment and underemployment remain at 10-20% levels worldwide. “Build it and they will come” is an old saw more applicable to Kevin Costner’s Field of Dreams than to today’s economy. “Say’s Law” proclaiming that supply creates its own demand is hardly applicable to a modern day credit-oriented society where credit cards are maxed out, 25% of homeowners are underwater, and job and income creation are nearly invisible.
There is no point in corporations producing any goods if no one has money to buy them. And jobs are certainly not coming back unless Obama decides to move U.S. industries back home from China. There is no other way to create jobs en mass to employ the jobless millions.
From 2000 onwards the entire U.S. economy was running on real estate fuel. Real industrial jobs displaced to China were filled by the growing ranks of real estate brokers, home flippers, home decorators etc. Think of all the people who lost jobs in real estate and related industries. Is there ANY other industry that can absorb the unemployed mortgage brokers, real estate agents and construction folks? Not to mention the jobs lost in peripheral sectors: home appliance, home improvement and finance sectors? We think not. And you certainly cannot retrain real estate brokers to do green jobs, most of which require highly skilled engineers.