Will the US Devalue the Dollar?

Darryl Schoon, FSU

The ability to wage war on credit gave the West an insurmountable advantage over the East. The West’s credit, however, has now turned to debt and the West has lost its advantage. But the return to parity will not be easy.

The three hundred year economic expansion fueled by debt-based capital markets is coming to an end and with it, the hegemony of the West over the East. During that period, debt-based paper money propelled first England then the US to world dominion because of the ability to wage war on credit and to print money ad infinitum.

That era is now ending because the critical balance between credit-driven expansion and debt-driven contraction has now shifted significantly in favor of the latter; and in 2010, both East and West now find themselves on the edge of a growing deflationary sinkhole created by the sequential collapse of two large US bubbles, the dot.com and US real estate bubbles.

The US caused the 1930s deflationary depression and is again cause of the current contraction; and although similarities exist between the two, the differences between them insure a far more consequential outcome today than in the 1930s.

Global demand is again falling as credit contracts, a sign that debt-driven deflation is back but, today, there is an additional danger as well. Since 1971, because of the US default on its gold obligations, money no longer possesses intrinsic value and the consequences will soon become apparent. Deflationary depressions and a collapse in the value of fiat money have happened before but never simultaneously. Soon, they will.

We are in what Stephen Roach, Chairman of Morgan Stanley Asia, calls the end-game, the resolution of past monetary excesses and imbalances, excesses and imbalances that reached never-before-seen heights in the last decade. The long awaited day of reckoning has arrived.

Read more here
 

Is The Recovery Real?

Paul Craig Roberts, VDARE.com
Happy news! The government has come up with a 5.9 percent GDP growth rate in the fourth quarter of 2009. The recession is over.

Or is it? Statistician John Williams has informed us that 69 percent of this growth, or 4.1 percentage points, is the result of inventory accumulation. That leaves a 1.8 percent growth rate, and the 1.8 percent is likely due to the underestimate of inflation and other statistical problems.

The Federal Reserve’s own monetary evidence contradicts the recovery assurances from Fed chairman Ben Bernanke. The Federal Reserve continues to pour massive reserves into the banks. The monetary base, which consists of currency in circulation and bank reserves (the basis for new loans), has surged from $850 billion in 2009 to $2.2 trillion on February 24.

Despite this potential for massive new money creation, the broadest measure of money growth is still contracting. The banks are too impaired and so are consumers for the banks to create new money by making loans.

The economy, in other words, is going nowhere.

As I have emphasized for years, an economy that moves its high productivity, high value-added jobs offshore is going nowhere but down. Except for the super-rich, there has been no growth in people’s incomes for a decade. To substitute for the missing income growth, consumers took on more debt. The growth in consumer debt kept the economy going. However, most consumers have now reached their maximum debt load, and millions went beyond their limit, resulting in foreclosures and lost homes.

Read more here
 

Muslims Are Their Own Worst Enemy

Paul Craig Roberts, VDARE.com

Muslims are numerous but powerless. Divisions among Muslims, especially between Sunni and Shi’ites, have consigned the Muslim Middle East to almost a century of Western control. Muslims cannot even play together. The Islamic Solidarity Games, a regional version of the Olympics, which were to be held in April in Iran, have been cancelled because the Iranians and the Arabs cannot agree on whether to call the body of water that separates Iran from the Arabian Peninsula the Persian Gulf or the Arabian Gulf.

Muslim disunity has made it possible for Israel to dispossess the Palestinians, for the U.S. to invade Iraq, and for the U.S. to rule much of the region through puppets. For example, in exchange for faithful service, Egypt receives $1.5 billion a year from Washington, which enables President Mubarak to buy off opposition. The opposition had rather have the money than support the Palestinians. Therefore, Egypt cooperates with Israel and the U.S. in the blockade of Gaza.

Another factor is the willingness of some Muslims to betray their own kind for U.S. dollars. Don’t take my word for it. Listen to neoconservative Kenneth Timmerman, head of the Foundation for Democracy, which describes itself as "a private, non-profit organization established in 1995 with grants from the National Endowment for Democracy (NED) to promote democracy and internationally-recognized standards of human rights in Iran."

Read more here

Pound and Euro Enter Bear Market Territory vs. Dollar

Both the Pound and the Euro have turned decidedly lower as financial markets focus on the crisis in Europe, all the while ignoring the one raging back home. In the case of both the Pound and the Euro their 50 day moving averages (green lines) have now crossed below their 200 day moving averages (red lines), pointing to developing technical bear market in these two currencies.

5 year chart of GBP/USD

5 year chart of EUR/USD

Hedge fund driven currency speculative frenzy has no doubt exacerbated the downward trend in both the pound and the euro, resulting in the illusion of the dollar as the "safer" currency. As the dollar rallies upwards it is causing the carry trade to unwind, helping propel it even higher such that it has now entered bull market territory. A graph of the US Dollar index shows that the 50 day moving average (blue line) has now climbed above the 200 day average (red line), signalling a technical bull market in the dollar.

We expect dollar strength coupled with a weakness in the euro and the pound, to continue since trends in currency markets once established usually persist for some time.

Note that on the back of the weakness in both the euro and the pound, gold hit new highs when measured in those two currencies (see charts below). As long as the dollar holds its upwards trajectory gold will most likely fail to break new highs in dollar terms i.e. cross $1200. Just like the stock market we expect gold too to remain range bound till the middle of this year ($1000-$1200), with a test of $1000 being a lower probability event. The Indian purchase price of ~$1050 has set a pretty strong floor for gold so it will take a lot of pressure for it to break that zone. Also any overt purchase of IMF gold by China is unlikely, since that will immediately drive down the value of their dollar reserves. China being one of the largest producers of gold is most likely filling up its coffers from its own mines, and supplementing this stash with covert purchases.

Note that the long-term path of the dollar is most certainly downhill but in the short term we will see rallies such as these as the markets tend to digest problems sequentially - one at a time. Remember the earlier sequence: Bear Stearns, then Lehman, then AIG, then Merrill, then Morgan Stanley and Goldman. For the currency/sovereign debt markets the sequence has been similar (smallest to largest): Iceland followed by Dubai, then Greece, now Britain and soon Spain, Portugal and Italy, then the Euro zone as a whole, with the last stop being the United States.

Gold in Pounds

Gold in Euros

Gold in USD

"Instead of Uniting Against a Common Enemy, We Need to Unite for the Common Goal of PEACE" - Vietnam War Veteran

For More Jeff Danziger cartoons visit his website: Danziger Cartoons

The following is an excerpt from James Quinn's piece Charlie Don't Surf. James excellent social commentaries can be found on his website The BurningPlatform.com

The absolute folly of American imperialism is perfectly reflected in the pre-emptive invasion of a sovereign country that posed no risk to our safety and security. Faulty and/ or fake intelligence regarding weapons of mass destruction was used as the basis to launch a pre-emptive attack on Iraq. President Bush and his neo-con advisors obscured the War on Terror, created false links to 9/11 and al Qaeda, declared the certainty of weapons of mass destruction, and promoted visions of mushroom clouds over U.S. cities to railroad the American public into a war of choice.

The irrationality of this war is evident by the launching of 800 cruise missiles from ships at sea to destroy key infrastructure, power plants, and bridges in a public relations TV display of Shock & Awe geared for the 52 inch boob tube mesmerized American public. As President Bush declared Mission Accomplished after a month of combat operations the United States was left with the task of spending billions, borrowed from the Chinese, to rebuild the infrastructure and bridges that we had just destroyed. Meanwhile, bridges in the U.S. were collapsing with commuters being killed.
The hypocrisy and madness of U.S. leadership is exasperating. After combat operations the American imperial ruler in Iraq Paul Bremer inexplicably disbanded the Iraqi military. These trained killers then joined the insurgency, killing thousands of American soldiers and innocent Iraqi citizens. The American “Surge”, four years after the mission had been “accomplished”, succeeded because the American military handed out wads of cash to the insurgent Sunnis who were killing American soldiers. The hypocrisy and irony of borrowing money from the Chinese to pay foreigners to not kill us in their country that we invaded under false pretenses, seems to have been lost on the neo-con hardliners like Dick Cheney.

Today, the War on Terror is code for subjugating the Muslims of the Middle East. Americans view the natives occupying Iraq, Afghanistan, Pakistan, and Iran as no better than dirty uneducated street people who worship an evil god and hate our way of life. This view permits the use of overwhelming firepower against people living in huts and caves. When another human life is considered not as valuable as your own, it is easy to call the deaths of women and children – collateral damage. The United States “liberation” of Iraq has left 5 million orphans out of 12 million children under 18. The insanity of the civilized versus savages can be seen in Iraq & Afghanistan as the natives use homemade explosives versus the U.S. military’s vast array of high tech weapons that cost millions.

The few thousand terrorists in the world have already won. On 9/11 the terrorists committed the greatest act of terror in history and murdered 3,000 innocent Americans. They killed .001% of the American population. They could not do permanent or long lasting damage to our country. We’ve done it for them. George Bush’s imperialist response to an act of terror was to double the national debt, start two wars, sacrifice thousands of young Americans, killing hundreds of thousands of people in their own countries and taking away freedoms and liberties of US citizens.

Imperialism will always be framed by those in power as beneficial to those being “civilized”. The most evil atrocities will be committed in the name of advancement. The human impact of imperialism is madness. The hubristic delusions of emperors, kings, generals and presidents ultimately put average men into morally ambiguous circumstances.

Every man has the capacity to hand themselves over to evil if put into a chaotic, dangerous, vague situation for a long period of time. Any man could degenerate when moral and physical restraints are taken away, because when no one is watching, the darkness of the human heart can escape from its deepest recesses. The acts of barbarism committed in the Congo, Vietnam, Iraq, and Afghanistan by seemingly ordinary men were the result of madness. Some committed murder, others torture, but the majority internalized their inner ordeal resulting in post-traumatic stress disorder. When men know their mission is not morally legitimate, thecir souls become tormented. There is vagueness to our existence that we may never fathom – a real heart of darkness.

As long as imperialism is practiced by empire builders, men will be driven mad by these ambitions. Those who get pushed over the edge will pray for the end. It will be their only friend. Empires always collapse under the weight of their imperialistic ventures. The cost of imperial overreach and the moral descent into a heart of darkness ultimately mark the end of an empire. The American empire is on this path.

The only question is whether it will end in a whimper or in a blaze of fire which brings the entire world to an end.

Ralph Nader Was Right About Barack Obama

Chris Hedges, Truthout

We owe Ralph Nader and Cynthia McKinney an apology. They were right about Barack Obama. They were right about the corporate state. They had the courage of their convictions and they stood fast despite wholesale defections and ridicule by liberals and progressives.

Obama lies as cravenly, if not as crudely, as George W. Bush. He promised us that the transfer of $12.8 trillion in taxpayer money to Wall Street would open up credit and lending to the average consumer. The Federal Deposit Insurance Corp. (FDIC), however, admitted last week that banks have reduced lending at the sharpest pace since 1942. As a senator, Obama promised he would filibuster amendments to the FISA Reform Act that retroactively made legal the wiretapping and monitoring of millions of American citizens without warrant; instead he supported passage of the loathsome legislation. He told us he would withdraw American troops from Iraq, close the detention facility at Guantánamo, end torture, restore civil liberties such as habeas corpus and create new jobs. None of this has happened.

He is shoving a health care bill down our throats that would give hundreds of billions of taxpayer dollars to the private health insurance industry in the form of subsidies, and force millions of uninsured Americans to buy insurers’ defective products. These policies would come with ever-rising co-pays, deductibles and premiums and see most of the seriously ill left bankrupt and unable to afford medical care. Obama did nothing to halt the collapse of the Copenhagen climate conference, after promising meaningful environmental reform, and has left us at the mercy of corporations such as ExxonMobil. He empowers Israel’s brutal apartheid state. He has expanded the war in Afghanistan and Pakistan, where hundreds of civilians, including entire families, have been slaughtered by sophisticated weapons systems such as the Hellfire missile, which sucks the air out of victims’ lungs. And he is delivering war and death to Yemen, Somalia and perhaps Iran.

Read more here

China Army Officer Urges Challenging US Dominance - Says "China Cannot Escape War With U.S."

CNBC/Reuters

China should build the world's strongest military and move swiftly to displace the United States as the global "champion," a Chinese PLA officer says in a new book reflecting swelling nationalist ambitions.

The call for China to abandon modesty about its global goals and "sprint to become world number one" comes from a People's Liberation Army (PLA) Senior Colonel, Liu Mingfu, who warns that his nation's ascent will alarm Washington, risking war despite Beijing's hopes for a "peaceful rise."

"China's big goal in the 21st century is to become world number one, the top power," Liu writes in his newly published Chinese-language book, "The China Dream."

"If China in the 21st century cannot become world number one, cannot become the top power, then inevitably it will become a straggler that is cast aside," writes Liu.

His 303-page book stands out for its boldness in a recent chorus of strident Chinese voices demanding a hard shove back against Washington over trade, Tibet, and arms sales to Taiwan, the self-ruled island Beijing claims as its own.

Read more here

Hedge Funds/Banks Punching Holes in their Own Boat - Will their Credit Default Swap Chickens Come Home to Roost?

Ann Pettifor, in the Huffington Post

Citizens are rightly angry at the way both the Bush and Obama administrations, aided by Governor Ben Bernanke -- pretty well unconditionally bailed-out the bankers of Wall St., just like governments in Europe and Asia.

While politicians and regulators rushed to dampen the flames of financial crisis with taxpayer funds, what happened to those guilty of financial arson?

Besides the odd rogue and loner like Bernard Madoff, none has gone to jail for crimes against the people, as far as I know.

As if to rub our collective noses in it, bankers have paraded their contempt for both politicians and taxpayers by using bail-out resources to post massive capital gains and bonuses. It's hard to believe they could be guilty of worse.

But believe it you must. For now these self-same bankers are turning on their rescuers -- the governments that bailed them out.

Bankers, hedge and pension-fund managers, including Goldman Sachs, are attacking the very European governments that pay their fees; that provide banks with 'free money' in the form of negative rates of interest that guarantee their liabilities, and that in effect bailed them out unconditionally with taxpayer largesse.

Read more here

Corporate Lobbyists and Public Relations Firms behind Cable News Outlets

Sherwood Ross, former reporter for the Chicago Daily News

Since 2007, at least 75 registered lobbyists, public relations representatives and corporate officials have appeared on cable news broadcasts "with no disclosure of the corporate interests that paid them," The Nation magazine (March 1) reveals.

Many of these people are "paid by companies and trade groups to manage their public image and promote their financial and political interests," writes the magazine's Sebastian Jones, a freelance reporter after a four-month-long probe.

"Many have been regulars on more than one of the cable networks, turning in dozens---and in some cases hundreds---of appearances," Jones reports.

For example, Tom Ridge, identified as the former governor of Pennsylvania, appeared on MSNBC's Hardball With Chris Matthews urging the White House to "create nuclear power plants." What viewers were not told, though, is that Ridge since 2005 has pocketed $530,659 in executive compensation for serving on the board of Exelon, the nation's biggest nuclear power company, Jones writes.

On the same day, last Dec. 4th, retired general Barry McCaffrey, told MSNBC viewers the war in Afghanistan would require a three-to-ten-year effort and "a lot of money." Unmentioned, Jones says, was the fact DynCorp paid McCaffrey $182,309 in 2009 alone and that DynCorp has a five-year, $5.9 billion deal to aid U.S. forces in Afghanistan.

Jones describes MSNBC as "the cable network with the most egregious instances of airing guests with conflicts of interest." He notes, "Only on MSNBC was a prime-time program, Countdown, hosted by public relations operative Richard Wolffe and later by a pharmaceutical company consultant, former Governor Howard Dean, with no mention of the outside work either man was engaged in. And MSNBC has yet to introduce DynCorp's Barry McCaffrey as anything but a 'military analyst.'"

Moreover, last January 22nd, MSNBC's Morning Joe audience saw Mark Penn, identified only as a Clinton administration pollster, suggest the Obama administration put healthcare reform on ice. Unmentioned, says Jones, was "Penn's role as worldwide CEO of Burson-Marsteller, which has an entire healthcare division devoted to helping clients like Eli Lilly and Pfizer 'create and manage perceptions that deliver positive business results.'"

Jones reports that what transpires on MSNBC also occurs on Fox News, Fox Business Network, CNN and CNBC. These outlets "eager to fill time and afraid of upsetting the political elite, have often looked the other way (and)at times...have even disregrded their own written ethics guidelines." MSNBC may be the most flagrant example of deception but the other networks do not appear far behind.

During a Sept. 18, 2008, Fox News appearance to discuss Sarah Palin, Bernard Whitman, president of Whitman Insight Strategies---whose clients include marketing/PR firms like Ogilvy & Mather---lambasted Sen. John McCain for proposing to "Let AIG fail," saying his position demonstrated "just how little he understands the global economy today." Whitman's "ongoing work" for AIG was not mentioned!

"When there's a whole host of pundits on the airwaves touting the same agenda at the same time, you get a cumulative effect that shapes public opinion toward their agenda," Janine Wedel, an anthropologist at George Mason University told Jones. Another academic, Jay Rosen, journalism professor at New York University, said, "More disclosure is good---I'm certainly in favor of that---but why are these people on at all?"

That's a very good question. MSNBC, Fox, and the others guilty of deceptive journalism owe their viewers an apology. Such broadcasts are neither fair nor balanced. They are deceptive, slanted, and contrary to the public interest. The cable broadcasters need to pledge to their viewers to reveal the hidden corporate agendas of their guests. Until that time, viewers can always turn them off.

Liquidating the Empire: Is the Military Budget on the Chopping Block in 2012?

Pat Buchanan, Creators.com

A decade ago, Oldsmobile went. Last year, Pontiac. Saturn, Saab and Hummer were discontinued. A thousand GM dealerships shut down.

To those who grew up in a "GM family," where buying a Chrysler was like converting to Islam, what happened to GM was deeply saddening. Yet the amputations had to be done — or GM would die.And the same may be about to happen to the American Imperium.

Its birth can be traced to World War II, when America put 16 million men in uniform and sent millions across the seas to crush Nazi Germany and Japan. After V-E and V-J Day, the boys came home.

But with the Stalinization of half of Europe, the fall of China, and war in Korea came NATO and alliances with Japan, South Korea, Taiwan, the Philippines, Thailand, Pakistan and Australia that lasted through the Cold War.

In 1989, however, the Cold War ended dramatically with the fall of the Berlin Wall, the retirement of the Red Army from Europe, the break-up of the Soviet Union and Beijing's abandonment of world communist revolution.

Overnight, our world changed. But America did not change. As Russia shed her alliances and China set out to capture America's markets, Uncle Sam soldiered on. We clung to the old alliances and began to add new allies. NATO war guarantees were distributed like credit cards to member states of the old Warsaw Pact and former republics of the Soviet Union.

We invaded Panama and Haiti, smashed Iraq, liberated Kuwait, intervened in Somalia and Bosnia, bombed Serbia, and invaded Iraq again — and Afghanistan. Now we prepare for a new war — on Iran.

Author Lawrence Vance has inventoried America's warfare state. We spend more on defense than the next 10 nations combined.

Read more here