Investors in droves are pulling their money out of funds and banks to buy government securities even at near-zero interest rates - also buying gold an

Investors Flood Out of Money Markets and Banks to T-Bills

As new evidence emerges that major money market funds have significant exposure to the collateralized debt obligation (CDO) crisis, worried investors are withdrawing billions from their banks and money market funds and pouring them into government-backed Treasury Bills, or T-Bills.
As news spread today that the Reserve Primary Fund fell below $1 a share in net asset value because of its losses on debt issued by Lehman Brothers Holdings, cash depositors across the banking and investment sector have been flocking to safer havens.
Early Wednesday, the rate on U.S. Treasurys had fallen to as low as 0.23 percent on three-month T-bills, the lowest since 1954, reports Bloomberg News.
And 30 day T-bills on Wednesday dipped briefly to a zero percent return.
Editor's Note: Monster Financial Disaster. We Warned You First! Read More
Just over a week ago the 90-day T-bill rate stood at 1.71 percent. But huge demand is driving investors into the vehicle, even if the interest rate paid is close to nil.
"The panic going round the money market world is what they've been investing in is not as safe as they thought it would be,'' Dominic Konstam, the head of interest-rate strategy in New York at Credit Suisse Securities, told Reuters.
"If the banks don't want to lend to each other they don't want to lend to the banks. That means where else are they going to put their money — they're going to put it in T-bills for safety.''
As Moneynews.com reported more than a year ago, many major market funds are vulnerable to the CDO crisis and it would be doubtful they could hold their value at $1 per share.
Though many money markets hold their $2.5 trillion under management in super-safe T-bills, a number of major funds had veered off into exotic, credit-backed securities.
Bloomberg magazine first detailed an alarming number of big-name funds that had been investing in collateralized debt obligations backed by subprime mortgage loans.
At the time, subprime had grown to represent $11 billion worth of supposedly safe money market funds.
Bloomberg cited Bank of America, Credit Suisse, Fidelity, and Morgan Stanley among such funds, noting they had more than $6 billion worth of subprime debt as of June 2007.
Now comes the news that Reserve Primary Fund, a money-market mutual fund in New York, has "broken the buck," falling to 97 cents a share Tuesday afternoon. The fund is reportedly making investors wait a week to take out money.
Primary Fund assets have fallen to $23 billion, down from $65 billion just a few weeks ago, reports Reuters.
Although the fund was not necessarily directly invested in CDOs, it held debts from Lehman Brothers Holdings, which went into bankruptcy due to subprime lending problems.
Bruce Bent, the chairman and founder of Reserve Primary Fund and the "father" of the money market mutual fund industry, warned the wire service a year ago that too many funds were being managed like stock and bond funds, not as safe cash havens.
"The people who have been managing many of these funds are not money fund managers, not cash managers," Bent said then.
"They are asset managers of different classes of assets, and they have imposed the psychology of managing stocks and bonds on money funds, and they are wrong," Bent said.
But Bent also claimed that his funds had not gone down that track and were immune to the credit crisis.
Bent in 1970 created the first money market fund, The Reserve Fund. No money market fund should invest in subprime debt, he said a year ago.
"It's inappropriate," he said. "It doesn't have a place in money market funds.”
Now, Bent’s Reserve Primary Fund is the first domino to fall.

List Of bailouts, Educate Yourself!

List of government bailouts in past century
By The Associated Press
September 21, 2008

A look at some U.S. government interventions and bailouts in the past century:

1932 -- The Hoover administration creates the Reconstruction Finance Corp. to facilitate economic activity by lending money in the Great Depression.

1933 -- The Roosevelt administration creates the Home Owners' Loan Corp. to buy $3 billion in bad mortgages from banks and refinance them to homeowners to stem a rise in foreclosures. The government makes a small profit.

1971 -- Congress saves Lockheed Aircraft Corp., the nation's biggest defense contractor, from bankruptcy by guaranteeing the repayment of $250 million in bank loans.

1979 -- Congress and the Carter administration arrange for $1.2 billion in subsidized loans to bail out automaker Chrysler Corp., then the nation's 10th-largest company. There ultimately was no significant cost to the government, since the loans were repaid.

1984 -- Congress effectively takes over the ailing Continental Illinois National Bank and Trust, which failed with $40 billion of assets. The Federal Deposit Insurance Corp. injects $4.5 billion to buy bad loans.

1989 -- Congress establishes the Resolution Trust Corp. to take over bad assets and make depositors whole. Resolving the S&L crisis takes six years and $125 billion in taxpayer money -- roughly equal to $200 billion in today's dollars.

1998 -- The government brokers a $3.6 billion private bailout in the collapse of the Long-Term Capital Management hedge fund, although no government money is involved.

2001 -- Congress authorizes $5 billion in cash after the Sept. 11 terror attacks to help shore up the airline industry and follows up with $10 billion in loan guarantees.

2008:

March 16 -- The Federal Reserve agrees to guarantee $29 billion of Bear Stearns' assets in connection with the government-sponsored sale of the investment bank to JPMorgan Chase & Co.

July 11 -- Federal regulators seize IndyMac Bank's assets after the mortgage lender succumbs to the pressures of tighter credit, falling home prices and rising foreclosures. The Federal Deposit Insurance Corp. says it will cost about $8.9 billion out of its $53 billion insurance fund.

Sept. 7 -- The Treasury Department seizes teetering mortgage finance institutions Fannie Mae and Freddie Mac, temporarily putting them in a government conservatorship with plans to inject up to $100 billion into each.

Sept. 16 -- The government announces an $85 billion emergency loan to rescue American International Group Inc., the world's largest insurance company, in return for a 79.9 percent stake in AIG.

Sept. 19 -- The Bush administration announces a plan to let the government buy hundreds of billions of dollars of bad mortgages and other forms of toxic debt that have been weighing down U.S. financial companies.

No Hosing Out The Great Lakes.........

While the Senate is stressing over the bailout today, the House is quietly waging early skirmishes in the water war. The House began debate yesterday on a bill that would outlaw any diversion of water from the Great Lakes’ natural basin.
Nearly 20% of the world’s fresh surface water rests in the region. The states surrounding the lakes are growing concerned that other states -- maybe other nations -- might soon be interested in nabbing their precious commodity. Under the new measure, no water would be diverted from the basin without approval from all eight states bordering the lakes.

$50 Million To Mint $36 Million In Change...No Wonder We're Screwed

Ugh… and what the hell is this?

The U.S. Mint proudly unveiled designs for four new pennies that will be minted in 2009. To “honor” Abe Lincoln’s 200th birthday, the U.S. government has opted to spend millions of dollars redesigning a coin that is -- literally -- no longer worth the metal it’s minted on. Poor Honest Abe, a man born in poverty and champion of social innovation, must be tumbling in his dusty grave.
According to the Treasury, 3.6 billion pennies have been minted so far this year -- $36 million in pocket change that cost $50 million to mint.

Doug Casey On Gold

“Gold is grossly undervalued compared to the stock market,” notes our colleague Doug Casey. Doug sent over this chart today -- a startling example of the potential upside for gold:

“Since 1975, the ratio between the 1-ounce price of gold and the S&P 500 has averaged just over 1.3. Even at today’s $900 gold price, the ratio remains beneath its historical average, and exponentially below the levels of the last major gold bull run, in 1980, when rampant inflation and a declining dollar plagued the U.S. economy. Sound familiar?”

Gold Run? We'll See....................

FROM THE GOLD PAN...INFLATION, DEFLATION AND PRECIOUS METALS

by Byron King
Have you followed the recent rise in value of the U.S. dollar? Through late summer, the dollar increased in value against the euro, as well as the yen and numerous other currencies.
Also, as August rolled on, gold fell from a price over $900 to under $800 per ounce. And oil tumbled from a price point near $145 to $111-115 per barrel. This is quite a drop. And a lot of observers credit the drop to the strengthening dollar. So what’s going on?
Usually, a currency strengthens when there is some sort of good news about the underlying economy. But is this the case for the U.S. and the dollar?
The banking crisis is still with us, as is the ongoing housing meltdown. And many insiders say that there are still more tough innings in this game. So where is the good news?
Indeed, Kenneth Rogoff, an economics professor at Harvard and the former chief economist of the International Monetary Fund, recently predicted that there is still more bad news to come from the worldwide credit crunch and financial turmoil. According to Rogoff, “The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come.”
Rogoff added an ominous prediction, stating, “We’re not just going to see mid-sized banks go under in the next few months. We’re going to see a whopper. We’re going to see a big one - one of the big investment banks or big banks.”
So if the U.S. financial system is in such a precarious state, is the rise in value of the dollar really justified? Will it be good for the U.S. economy to have a major bank failure? Or on the other hand, will it be good for the economy if the U.S. government has to step in to bail out a large bank? It all seems like a “lose-lose” proposition.
Another well-respected commentator, Richard Russell, who has published Dow Theory Letters since 1958, believes that we are on the eve of world deflation.
According to Russell, the big problem facing the world economy is not inflation, but deflation:
“From what I see, the markets are telling us to prepare for hard times, and a global spate of the worst deflation to be seen in generations. This is why gold has been sinking, this is why stocks have been falling - big money, sophisticated money, is cashing out, raising cash, preparing for world deflation.”
According to Russell, “Smart money is selling into the stock market, day after day.” People and institutions are raising cash. When deflation rules, this will usher in a strong dollar.
Russell offers an illustration for why people are raising cash:
“Look, if you have $5 million and you are receiving only 2% in interest on your money, that’s only an income of $100,000 on your $5 million. Big money realizes that in a deflation, you need a mountain of cash to keep up your lifestyle.”
So Russell anticipates an era of deflation, accompanied by low interest rates. Hence the need to raise cash to support an income stream over time.
Then again, what if the markets are anticipating an increase in interest rates over the medium to long term? Could this be prompting a rise in the value of the dollar? Think of how much new “money” is floating around out in the world due to just the recent creation of credit as the Fed has bailed out insolvent banks and investment houses.
Where has all that newly created money gone? It’s lurking out there, somewhere in this world. And that new money could show up at any moment, bidding up the prices of whatever happens to be the “big thing” on any given day. Thus, while Richard Russell thinks we are on the eve of deflation, we are also confronting the specter of inflation.
The last historical experience the world market has had with high inflation rates and stagnant growth was back in the late 1970s and early 1980s. To combat inflation, then-Fed Chairman Paul Volcker increased interest rates to double-digit levels. High interest rates hit the economy like a ton of bricks, but that was the idea. High interest rates broke the back of inflation for a generation.
You have to look back even further, to the 1930s and the time of the Great Depression, to find the last long-term era of deflation. What do you see? The price of gold and gold mining shares actually increased during the 1930s.
The key to the rising price for gold in the 1930s was the effort by President Franklin D. Roosevelt to raise the nominal price of gold from $20 to $35 per ounce. It was still - in many respects - a gold standard world back then. But in raising the gold price, FDR also indirectly spurred the market capitalization of much of the mining industry.
One thing to keep in mind is this. We know a few things about inflation, both practically and from economic theory. We don’t know nearly as much about deflation. If deflation shows up at the door, will anyone really know what to do about it?
So this prompts the question. Where are prices for precious metals headed? If we encounter deflation, will we just retrace the run-up of the past six years or so? Will we see gold back at $300 per ounce, and silver at $3 per ounce? I doubt it.
I think that we will look back at the summer of 2008 as a time when precious metals had a correction after a relatively quick move upward. To put it in terms of technical analysis, the prices “outran their support.” It’s like the tanks of Gen. George Patton outrunning the fuel trucks in the closing days of World War II. Patton had to stop advancing, while the trucks caught up.
When the dollar strengthened in mid-2008 - for a variety of reasons - it prompted a pullback in prices for precious metals and the related mining shares. If you are cautious, you will hold cash and sit it out. If you are bold, you’ll look for bargains and buy shares.
Long term, I don’t think you will get hurt by buying into share price weakness. Over the long term, precious metals and the mining shares should still continue to rise in a market in which dollars are getting cheaper and things of real value are becoming scarcer.

Is this "Socialism for Wall Street" or Something Far More Sinister?

Not far from America's financial epicenter, universally known as "Wall Street," is a huge, empty crater where the Twin Towers of the World Trade Center once stood.
Within weeks of the disaster that annihilated those once-glorious free market icons, fear served as the justification for a panicked U.S. Congress to enact the so-called PATRIOT Act.
Without even seeing the text of the bill, the congressional herd mentality to "do something!" produced one of the greatest assaults on the American Constitution ever passed into law. Its odious impact on our liberties still remains today. And barring the miracle of a new Congress emerging with both courage and common sense, it will continue on for years to come.
And now we find ourselves 7 Septembers after 9-11, in a different yet all too familiar national media "panic."
"The experts" are telling us that the Congress must act immediately to bailout Wall Street, adding nearly a trillion dollars to the national debt. (The existing public debt alone figures out to be US$31,600 for every man, women and child in America, and this new demand will add another estimated US$2,300 for every American).
But wouldn't hindsight prompt us to think before acting this time around?
Welfare on Wall Street
I am not going to review here the immediate and past history that TV talking heads recite ad nauseum that leads to a media-induced national migraine. Instead, let's go back to the beginning.
Wall Street's name is a direct reference to a defensive wall that Dutch settlers erected on the southern tip of Manhattan Island in the 17th century. The area didn't become famous as America's financial center until the end of the 18th century, when 24 of America's most prominent brokers signed an agreement that created the New York Stock Exchange.
But now, in my humble opinion, it is time to resurrect that wall, at least figuratively, and certainly politically and legislatively - in order to defend America against Wall Street.
The garrulous Senator from Delaware, Joe (The Mouth) Biden made the news last week in saying that paying greater taxes was wealthy Americans' "patriotic duty." But even he could not foresee the dimensions of what would come next...
Yes, the "panic" came quickly. Lehman Brothers Holdings Inc. filed for bankruptcy protection. The government took control of AIG. Liquidity froze up. They're saying this could be the most dire market malfunction since the crashes of 1987 - or even 1929.
But the crash was not a surprise to everyone. Here at The Sovereign Society we have long been warning you individually and collectively for quite some time. We told you that the House of Cards was going to collapse - it was just a matter of when. And we have been offering sound investment alternatives to avoid the disaster.
What Lies Beyond the "End of an Empire" Closeout Sale?
"The financial market crisis of 2007 may be remembered as the beginning of the nationalization of a large part of the financial system." So wrote Floyd Norris in The New York Times. (Dec. 14: A Worrisome New Wrinkle in Bailouts).
Norris also noted that it was foreign governments' billion dollar "sovereign wealth funds" that came to the rescue last year: "It took a [Singapore] government bailout to shore up UBS...it was Citigroup that got [Abu Dhabi] government aid to help recover from its bad investments."
Now we are told that the United States government, headed by a Republican president, must create its own US$700 billion sovereign wealth fund (or sovereign debt fund) to rescue us once again. This fund must buy up an untold amount of investment vehicles gone bad - home and other real estate mortgages, sub-prime derivatives, exotic instruments few understand and no one seems able to evaluate - except by calling it "junk."
And all this, only weeks after Congress adopted a US$300 billion housing bill that was supposed to solve the crisis!
If It Looks Like a Duck and It Quacks Like a Duck...
Bank bailouts may or may not be necessary to avoid a major economic recession, but government owning private businesses and banks smacks of fascism.
Yes, dear readers, if you enjoy reality TV shows, you'll love the reality of the same kind economic fascism once promoted by Mussolini, Hitler and Juan Peron, among other economic crackpots. Hugo Chavez, anyone?
America, welcome to "backdoor fascism."
Added to all their other horrors, these fascist leaders put their national economies under government control without outright confiscating the means of production.
Fascist governments nationalized key industries - especially banks - managed currencies and made massive state investments. True, fascist economies were based on private property and private initiative. But these were contingent upon agreement with and service to the state.
The industrial and business aristocracy of a fascist nation often put the government leaders into power. In doing so, they created a mutually beneficial business/government relationship and power elite.
Have you checked how much Wall Street has donated to both Democrats and Republicans in Congress who are now writing the new emergency bailout laws?
Fascist regimes were governed by groups of friends and associates who appointed each other to government positions. They then used power and authority to protect their friends from accountability. Fascist governments instituted state-regulated allocation of resources, especially in the financial sectors.
"Oh, but that can't happen here," you protest.
Hey, folks, just look around. Isn't any of this beginning to appear sickeningly familiar? What is past is prologue!
At Least Someone Out There is Making Sense
Newt Gingrich is one of the few urging Congress to step on the brakes in this US$700 billion bailout plan,
In National Review online, former speaker of the U.S. House of Representatives, Gingrich writes: "Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess."
In an NPR radio interview, Gingrich said he thinks the bailout plan is "just wrong," and that "it's likely to fail, and it's likely to make the situation worse over time."
Will America ever Wake Up and Smell the Totalitarianism?
Wouldn't it be unusual - even heroic - if the two current candidates for the U.S. presidency stopped their irrelevant hollering at each other? If they dropped their absurd daily nostrums that even they know will never become law?
Isn't it about time that they cancel their campaign whistle stops and return to the U.S. Senate Chamber, (where, after all, they are both still members), and participated in a real debate? Perhaps about where America and the national economy truly should be headed - and what they would do about it?
If ever there has been a point in modern times when true leadership was needed, that time is now.

Nicely Said....................

"No nation ever can or did make itself prosperous by taxation. Taxes prey upon national wealth and industry. Governments do not produce wealth. They consume it." -Ashton C. Shallenberger

Let's Examine The Numbers............

Let’s scribble on the back of our proverbial envelope for a moment:
$700 billion bailout package for Wall Street$438 billion projected deficit in the federal budget for FY 2008$200 billion for Fannie Mae and Freddie Mac$150 billion in rebate checks under the guise of “stimulus”$85 billion for AIG$29 billion for Bear Stearns
Hmnn… $1,602 billion…. that’s quite a bill for the year… not to mention the nearly $1.6 trillion in Treasury swaps and short-term paper the Federal Reserve has lent out during its auction facilities.
Who’s going to pay for all this?
The national debt ceiling will have to be raised for the second time in as many months to accommodate the request… this time to $11.3 trillion… boosting the national debt to over 70% of GDP. The highest the national debt got during the Great Depression was 44% of GDP.

McCain & Obama Support This Bailout Plan......We're Doomed

Like most Americans, I'm sure you were glued to the news about the "financial crisis" and the government's "fix" for the problem. You probably heard that the government was going to come in and save the mortgage industry by bailing out failing corporations. And, you probably heard both Barack Obama and John McCain say that this bailout was necessary, and good for the economy. What you probably didn't hear was that it was going to cost up to $1 trillion dollars, and you were responsible for this money. "American taxpayers will come up with the money," says the New York Times. Such a number is hard to conceptualize if you're not the government. So, in order to show you just how much $1 trillion dollars really is, we've put together these figures:One trillion dollars ($1,000,000,000,000) is enough money:
~To buy everybody living in Los Angeles at least one Lamborghini Gallardo.
~To buy 88,052, 394' custom mega yachts; enough to stretch around ¼ of the world.
~To buy everyone living in Belize and Malta a Manhattan apartment.
~To get half of the Democratic Party into a fundraiser for Barack Obama at the $28,500 admission price.
~To give one out of every two men in the United States a Men's Presidential Rolex watch.
~To buy every woman in the United States a Tiffany Diamond Starfish Pendant.
~To get two Mitsubishi 73" HDTVs for every household in America.
~To buy four copies of The Office: Season Four on DVD, to every person on earth.
~To send everybody in America on an all-inclusive vacation to Tahiti (and some people can stay a few extra days). AND…$1 trillion is enough money for everyone in Buffalo, NY to buy their own 65-acre island in Panama. This is how much the government is going to cost you (roughly $3,278 for every man, woman and child in the United States). Barack Obama is for it. John McCain is for it.

The Silver Boys...................

FACT VERSUS SPECULATION
By Theodore Butler
Mid September 2008
(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)
What’s happening in the silver and gold markets is, without a doubt, the most sordid scheme in the history of finance. It makes a mockery of financial regulation and the rule of law. It allows a large financial entity, or entities, to rip off the investing public and gouge them for obscene profits.
It is cronyism, back-room dealing, market fixing and inside information at its worst. I am terribly disappointed and dismayed that such a thing could happen in our great country. In the following paragraphs I will outline and explain how a major bank or banks, in likely concert with the U.S. government, pulled off financial shenanigans that will literally take your breath away. This is an outrage that should not be allowed to stand.
The recent revelations in the CFTC’s Bank Participation Report for August provided stunning proof of concentration and manipulation in the COMEX silver and gold futures markets. Two U.S. banks held a short position in COMEX silver futures, as of August 5, of 33,805 contracts, or almost 170 million ounces, an increase of 138 million ounces in one month. That increase is equal to 20% of the world mine production. If one or two entities bought or sold 20% of the annual world production of oil or wheat in a month, it would bring about a congressional feeding frenzy.
In gold, no more than 3 U.S. banks sold short in one month more than 10% of world annual mine production. This was the largest short position in gold and silver ever recorded by U.S. banks. After the massive and concentrated silver and gold short position was established by these U.S. banks, the markets experienced a historic decline in price. It all took place during the first widespread retail silver shortage in history. It is completely at odds with how the law of supply and demand works.
The facts are so clear that the CFTC should have provided an immediate explanation as to why this doesn’t constitute manipulation. They should move against the manipulators just as promptly. Silence is not an option. The U.S. banks (or bank) in question are at the top of the financial food chain when it comes to size, power and importance. They are publicly owned by millions of investors. These banks are generally open about their financial dealings, which are closely scrutinized. There is an archaic rule that prevents the CFTC from revealing the identity of these banks. But there is no rule preventing these banks acknowledging they were responsible for these silver and gold short sales and explaining the economic justification behind them. These are material transactions that should be disclosed to their shareholders. Apparently transparency does not apply to manipulative transactions.
One U.S. Bank?
While the report lists two U.S. banks in silver and three in gold, it may be that only one bank, and perhaps the same bank, held the greatest amount of the total short position in silver and gold. The published data is not specific enough, but objective analysis raises the strong probability that just one bank held 30,000 or more short silver contracts (150 million ounces), and 75,000 gold contracts in the current report. What are the odds of two or three banks suddenly deciding to short unprecedented amounts of silver and gold contracts spontaneously? If it were two or three banks it would raise the issue of collusion. If it was just one U.S. bank, it would mean that bank held 34% of the entire COMEX silver market and 30% of the gold market. Such a concentration would be manipulation to any reasonable person.
The Bank Participation Report is a monthly snapshot on a predetermined single date. Therefore, it is unlikely to capture the extreme high or low holdings of participants. Based upon the weekly Commitment of Traders Report (COT) for positions as of July 22, the 4 largest traders, including the big U.S. banks, held a record net short position of 63,740 silver contracts, or 7,779 more contracts than they held for the COT and Bank Participation Reports of 8/5. Thus, it is almost certain that the big U.S. bank(s) held a substantially larger position on 7/22 than it held in the Bank Participation Report of August 5. That would mean the true net percentage of the entire market possibly held by one U.S. bank could be even higher than 34%, and may in fact, exceed 40%. That is truly shocking.
I have a simple solution to determine if what I am suggesting is true. Let the CFTC tell us. I’m not asking them to violate the rule that they and the big traders hide behind, the one that protects the identity of the traders. I’m asking they tell us what the one largest trader held in silver and gold. That will settle the matter. Let them protect the identity, just tell us how many contracts the big U.S. bank held on July 22 and August 5.
This is a perfectly reasonable request. There is no taxpayer cost involved. It will take one employee only a few minutes to determine this. There is no valid reason why the CFTC, in the interest of monitoring concentration and preventing manipulation, should not disclose what the very largest trader in every market held. The CFTC should answer forthwith. If they don’t, we must make them, through our elected representatives. They will try to weasel out of this reasonable request. We can’t let them.
A U.S. Government Silver Intervention?
For many years, I have openly alleged an ongoing manipulation in the silver (and gold) market. As that message became more believable to growing numbers of readers, their feedback indicated that their most popular motive behind the manipulation was some type of U.S. Government involvement. I rejected these "conspiracy" theories, preferring instead my simple explanation of control by big financial firms.
There were a few things I didn’t report on in my previous article, "The Smoking Gun" (By the way, since so many have referred to that article, let me acknowledge and thank Carl Loeb for his valuable contributions to that article.) It wasn’t just that 2 U.S. banks were short almost 34,000 silver futures contracts, as of August 5. It was also that they replaced what the other big financial entities had been short. The key here is the replacement angle. The data in the weekly COTs, and in the monthly Bank Participation Report, confirm this. What does this data mean?
I am going to speculate based upon the known facts. Maybe I will be proven correct, maybe not. The nature of this speculation is so disturbing, that I hope I am wrong. But I need to state it because if I am close to the mark, the implications for the silver market are profound.
I think the data in the COT and the Bank Participation Reports indicate that the U.S. Government may have bailed out the biggest COMEX silver short by arranging for a U.S. bank to take over their position. This coincides with JP Morgan’s takeover of Bear Stearns. In fact, it would not surprise me if the bailout was JP Morgan taking over Bear Stearns‘ short silver position, at the government‘s request. While this silver bailout (if it happened) was no doubt undertaken with financial system stability in mind, it has disturbing implications of legality and equity.
JP Morgan has been mentioned as a possible big silver and gold short. If it’s not them, it is someone like them. How many big U.S. banks fit the profile? Certainly, if JP Morgan isn’t one of the big silver or gold shorts, they can instantly dismiss such talk by stating so.
Logically, there would appear to be no way that a big money center U.S. bank would choose this time and place to suddenly decide to short 150 million ounces of silver and 7 million ounces of gold voluntarily. The banks are hemorrhaging losses due to poor quality mortgages and other ill-advised bets. They’ve cut back credit and are circling the wagons. A CEO, like Jamie Dimon, is not going to risk the wrath of shareholders with a massive and dangerous impromptu bet on the short side of precious metals. No bank CEO would, as it is too reckless to contemplate. And no CEO would do it without prior approval from the regulators.
I believe the bank involved did not seek approval, but merely followed the request of the U.S. Government to sell quantities of silver and gold to bailout the former big short. If that former big short bought back this position, we would have seen $50 or $100 silver in a flash. If my speculation is correct, someone in the government wished to prevent that. Worse, the government (most likely Treasury and the Federal Reserve) allowed the new short to further rig the market to the downside with a variety of dirty tricks.
In other words, it was the U.S. Government that arranged and sanctioned the sell-off. That the government might undermine confidence in our markets and sanction manipulation and illegal market behavior for any reason is beyond my understanding. I love this country. But I certainly don’t love our government. Nor do I trust them. What to do about it?
Well, a start is to insist that the CFTC disclose how many contracts the largest trader held short in COMEX silver and gold futures on 7/22 and 8/5. Ask them and ask your elected officials to ask them. I’m including the e-mail addresses of the commissioners and the Inspector General.
Wlukken@cftc.gov Mdunn@cftc,gov Bchilton@cftc.gov Jsommers@cftc.gov Alavik@cftc.gov
Now that the Chicago Mercantile Exchange Group is the new owner of the NYMEX/COMEX, they should be notified of the alleged manipulation and also asked to provide the number of contracts held net short by the largest short position holder on 7/22 and 8/5. I’m including the e-mail address of the Chief Regulatory Officer. Dean.payton@cmegroup.com
If my speculation is close to the mark that the U.S. Government is now involved in the silver manipulation, does this mean the manipulation can be extended indefinitely? In my opinion, the answer is no. In the end, what will terminate the manipulation will be a lack of adequate wholesale supplies of silver to the industrial users. It’s similar to what is now happening in the retail market. Uncle Sam does not have any silver, and is powerless to secretly subsidize the users. Additionally, the government is more subject to scrutiny than others. The single inevitable solution to this manipulation is higher prices; sharply higher prices.
What I’ve explained here, if true, cannot be condoned for any reason. It’s illegal and contrary to everything that America stands for.
SILVER STATUS
On September 3, Ted Butler wrote the following memo to our staff of 40 brokers:
Jim Cook asked me to write something for you. He did not have to twist my arm. In yesterday’s Internet commentary, I confined my remarks to the growing evidence of the silver manipulation and what people could do about it. I intentionally chose not to highlight the bullish price aspects of silver, and why this is a particularly great time to buy. Let me do that now.
What I left out yesterday was that the market structure has improved dramatically. In fact, we have the best market structure in silver and gold, as defined by the COTs, than we have had in a year. In other words, the speculative longs (tech funds and others) have been sold off and have a smaller long position and the total commercial short position is lower than in a year. That’s what the intent is behind these sell-offs - to allow the dealers to clear the decks for the next move up. That’s the only intent and the only reason ever.
The fact that this last sell-off was a Lu-Lu, the most severe sell-off ever by many objective measures, tells us the next move up is likely to be just as dramatic or more. The pain of these sell-offs is directly proportionate to the gain of the resultant rallies. Forget the COTs, trust your own eyes. Go back and look at any chart for the past 5 years and see what great buys were presented after every dramatic sell-off.
This sell-off occurred because the dealers know the price is about to explode and are doing everything they can do to get the last leveraged speculators to sell, so the dealers can buy every contract they can get their hands on. You should be mimicking the dealers step for step. The fact that we are oversold and at historic amounts below the moving averages suggest that we could have a sudden jump in price and the opportunity to buy at these depressed levels will be gone in a heartbeat.
If the price of silver is manipulated as I contend, not only should we be outraged, we should also be thrilled at the opportunity the artificially depressed price represents. That so much paper silver has been sold and not yet delivered or bought back, guarantees that the price is lower than it should be. Anything artificially depressed in price is "on sale" or marked down. This is sale that won’t last for long.
This is the time you earn your pay and your reputation and the respect of your clients. They don’t need to be convinced to buy when prices are high and rising. They need to be convinced when prices are low and falling. Like now. Yes, it’s harder to convince them at times like this. It’s also better, for you and them.
Finally, the combination of lower prices and current availability of product is not something that may last indefinitely. You know that there are many reports of unavailability at too many retail dealers to assume you will always have the current ideal set-up of having good quantities of product to sell. This, in spite of the great job your company does at securing supply. You have to make hay while the sun is shining. For the professional salesman, good pricing and product to sell is the sun shining.
(This memo was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)
WHAT THE SILVER MANIPULATION MEANS TO ME
By Israel Friedman
(Israel Friedman is a friend and mentor to Theodore Butler. He has followed silver for many decades. He has written articles for us in the past. Investment Rarities does not necessarily endorse these views.)
I don’t think that any intelligent investor can now argue that the metals market, especially silver, isn’t manipulated as Mr. Butler claims. While I tried to be quiet about it, I always questioned the manipulation and tended to side with the authorities who said no manipulation existed. I changed my mind totally with Mr. Butler’s discovery that two U.S. banks sold 140 million ounces of silver and 8 million ounces of gold in one month, followed by the collapse in prices.
I am surprised that the miners who live and die to get a price above their real production costs of $16.50 for silver and $850 for gold, are not the ones complaining. Why are they letting Mr. Butler do their dirty work for them?
I asked Mr. Butler why he is the front runner, carrying the manipulation flag? His answer was simple - it was the right thing to do and there was no one else doing it. He sees the big danger that the silver market manipulation can bring catastrophic consequences to the U.S. When the shortage of silver comes, it may force the COMEX to close, a scandal that would bring great shame to our country.
Plus, silver is a vital and strategic metal. The U.S. has a reliance on silver imports more extreme than it does on oil. I would not be surprised in the time of a silver shortage, that a big producing country might restrict exports of silver to get even higher prices. What will the U.S. do without silver, let factories close down and send their workers home? When you look far ahead, you see the danger the silver short manipulators are putting our country in.
In my opinion only a shortage will bring truly higher prices for silver. The current retail shortage is a good sign. The premium on my favorite form of silver, U.S. Silver Eagles, is the highest in history and demand has never been greater. I think you know that I am not too surprised at that. I think this is just the start. Wait until you see the premium when the U.S. Mint stops producing them one day.
There are now 440 million ounces of silver in the world’s inventory. I mean COMEX stocks, the ETFs and other silver investment vehicles. There are also large holdings of silver held personally by many individuals. But we know those personal holdings are not available up to at least $20 or higher, otherwise there wouldn’t be this tightness in the retail market.
Against this 440 million ounce world stockpile owned by investors, we have almost one billion ounces held short. Isn’t that crazy? It is this short position that represents a danger to everyone. The 440 million ounces is worth only $5.3 billion. One oil Sheik could pay that. We are lucky they buy gold, not silver. I hope silver stays at home and you who believe in silver will benefit. I think 20 to 30 years from now someone holding 100 ounces of silver will be considered wealthy and a genius investor. If I am not here to witness your good fortune, maybe you will offer a kind word about me.
One day in the future this 440 million ounce visible inventory will stop growing and begin to decline. This will be the ultimate signal for shortage and that the industrial users are now drawing down these inventories. The biggest question is will we be able to act on this signal and buy silver. I have discussed this with Mr. Butler endlessly over the years. He says the short sellers will understand what is happening before any of us and will have bid up the price in their hunt to get as much silver as possible. He says you must buy before that day, when it looks like there will never be a shortage.
When the silver inventory starts to go down and the price explodes, the shorts and the users and the CME directors will scream to the CFTC to stop the upward manipulation. It will be the reverse of now. But who will help them? Who can help them? Not the U.S. Government as they gave up their billions of silver ounces decades ago. Maybe you and I will help them a little at some crazy high prices. Others around the world will be learning how rare silver really is and may be anxious to buy. These manipulators who kept prices artificially low for so long will pay the price.
It is hard to look ahead to sunny days when a hurricane is upon you. But this down draft will not last forever. Soon there will be an even stronger force pushing silver prices much higher and for longer than any of us can imagine.
FANNIE & FREDDIE
Analyst, Jim Sinclair wrote, "A cursory look at the takeover suggests to me that the National Debt could rise by more than $5 trillion. Not even the government can be that stupid – or can they be?"
James McShirley wrote, "These trillions of derivatives, which in likelihood have already failed, can now be whitewashed with the able assistance of the U.S. taxpayer. Also, the true values of their mortgage portfolios gets deep-sixed. This is no doubt the single largest financial failure in the history of the world…. Can you imagine what is about to happen to the dollar supply once this catastrophe starts getting paid for?… The inflationary implications will become VERY evident."
Michael Berry asks, "How many large financial entities can be saved? Can we tax and print enough fiat money?"
Newsletter author, John Williams, wrote, "All factors considered, the broad outlook remains the same: further intensification of the inflationary recession and a deepening systemic and banking solvency crisis…. Despite continuing softness in oil prices, current levels (anything above $90 a barrel) remain highly inflationary. Over the longer term, U.S. equities, bonds and the greenback should suffer terribly, while gold and silver prices should boom.
Economist Bud Conrad writes, "While some level of government deficits may be acceptable over modest periods of time, the U.S. deficit is now well past the point of being acceptable…. the government is faced with hard choices. The easy path of just letting the dollar fall is the most likely…. The result of this is that the inflation rate, interest rate, food, energy and precious metals are heading higher as the dollar is debased."
INDIAN SILVER
Financial Analyst, Chris Powell wrote about silver in India on September 6: "The last closing price of the silver contract was Rupees 18800 Rs. 18900. But the people who have opted for deliveries, the exchange has imposed a closing price of Rs. 20,040. To me, it implied a backwardation on the closing price. Also in the physical spot market, silver is selling at a 10% premium to the exchange price. That in the largest retail silver consumer market. It’s puzzling."
SILVER WARNINGS
By James R. Cook
The silver shortage continues. We’ve been able to get very few Silver Eagles. We don’t sell what we don’t have. It appears that many dealers are selling Silver Eagles based on a promise of future delivery from a supply source. This could be dangerous. One major supplier has warned us not to sell them. Only buy silver coins or bars where timely delivery is assured. In this kind of volatile market anything can happen. Most dealers have little money and a couple of bad decisions could spell ruin. Those with tiny margins are inevitably doomed. The failure rate in the gold and silver business is amazingly high. Sooner or later a lot of people are not going to get the coins or bars they ordered. Their money will be gone.
Those who refused to follow our advice on margin buying have been decimated. Those who ignore our advice on pool accounts are at risk of losing everything. Those who chase the lowest buck on the Internet are taking a chance on a dealer who may not survive. Often ridiculously low prices are a come-on for leverage, pool accounts, rare coins or some other trick. It always amazes me to see someone sending a wire for six figures across the country to an unknown dealer who could be using the money to make his car payment. Some of these dealers have failed and reopened several times.
Recently, the economist, best-selling author and newsletter writer, Mark Skousen, recommended Investment Rarities to his readers. Mark and I go back many years to the old Howard Ruff conferences. Mark has started a great new monetary conference in Las Vegas. He thought our reports on silver were worth reading. We pay him nothing for this kindness. That’s not always the case with newsletters who recommend their favorite coin dealer. Sometimes there is a kickback. This practice is highly unethical. If a newsletter recommends a dealer, and they’re getting a part of the commission, they need to disclose this fact to their readers. Otherwise it’s sleazy and could even be illegal.

Nicely Said.................

"We pass a law and consider a problem solved. That's as naïve as electing a Republican Congress and thinking government is going to get smaller." -Harry Browne

The Calvary............?

Good thing Congress is making “tremendous progress” and the bailout is “almost a done deal.” According to Pennsylvania Rep. Paul Kanjorski, a senior member of the House Financial Services Committee, the “votes are there” for a passage from both chambers.
“Tell the American people the cavalry has arrived,” Kanjorski said, without cracking a smile. Just what we were afraid of.
For their own enjoyment, the House also quietly approved a $630 billion spending bill, ostensibly to keep the government’s doors open through March. The 2009 spending bill, passed by a vote of 370-58, greased along with over 2,300 “pet projects” for individual representatives.
The spending bill includes a $25 billion loan to U.S. automakers, which they’ll have to pay back over 25 years at an interest rate of 5%. Yeah, that’s a free market. They’re also giving a record $488 billion to the Department of Defense.

Will the American people be guillable enough to buy Paulson's plan? Heh...............

Will the American people be guillable enough to buy Paulson's plan? Without a doubt.
There might be some tweaking here and there but the basic plan will pass. It's just the next chapter in the socialization of our country. I am reminded of Frederick Hyack's "The Road to Serfdom". As you look at what has happened to this country since Woodrow Wilson passed the Federal Reserve Act and the Income Tax we have steadfastly progressed along the lines of Karl Marx's plan. This is but another gigantic step in that direction.
Unfortunately, I do not believe it is possible to turn this supertanker around. The direction is established. Reagan was able to turn it around for a short time but I think that time has passed. Democracy doesn't work. Were it possible to go back to the original intent of our Founders and return to a Republic we might have a chance, but I think only a revolution will do that and that would likely turn into a dictatorship.

There's A Little Problem With The Bailout Plan....

The bailout plan, though it may be modified during the week, was originally written to include some very disturbing language.

As the bailout bill was originally written, it authorizes the Secretary of the Treasury "to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States," and "to take such actions as the Secretary deems necessary to carry out the authorities in this Act".

"Mortgage related assets" are defined as "residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008."

Finally, near the end of the bill, one section reads "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

The biggest concerns I see here are threefold: The proposed legislation, in its original wording would (a) put a huge some of money (nearly three quarters of a trillion dollars) under the control of one person, who (b) is answerable to no one except the President, and (c) who could, with a good team of lawyers, twist the meaning of "other instruments that are based on or related to such mortgages" to mean things as far removed as stock in a global fast-food franchise owning many retail outlets, or shares in a real estate investment trust owned by the President's favorite lobbyist. With no recourse to regulatory agencies or the courts, the Secretary need not be concerned about consequences of ineffective or even corrupt decision making.

This strikes me as a really bad idea.

Maybe, before the members of Congress adjourn at the end of this week, they'll pass a version of this bill that has some safeguards and constraints. Maybe they'll go with a smaller-scale interim bill for now, to buy some time until they can design a more suitable long-term solution. Less likely but still possible is a decision to let the markets control things from here on out, with the chips falling where they may.

But given the history of the Presidency and the Congress over the last two years, I will not be a bit surprised if after a lot of steam and rhetoric, the Paulson/Bernanke bill passes in essentially its original form. And then Henry Paulsen will become the most powerful man in America. That's Henry Paulsen, Secretary of the Treasury, former CEO of Goldman Sachs, and the man who just this past July said "It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."

The Bailout Breakdown

How Buffett Saved Paulson's Bacon (And Made a Killing, Too)by Justice Litle, Editorial Director, Taipan Publishing Group
“You know, it's not like Pearl Harbor where you could look at what happened with your own eyes and decide you had to do something that day. But this is sort of an economic Pearl Harbor we're going through. And I think most of [congress] will get it. And I do believe they will do what's right for the country. They may vent their spleen a little bit by getting mad about the people that brought us into that, and I don't blame them for that. I might do that privately, too. But in the end, you know, Republican, Democrat, I think they've got the interest of the country at heart and I think they will do the right thing. But I hope they do it soon.”
- Warren Buffett, CNBC interview transcript, in defense of the Paulson bailout plan
And the wild swings continue... The Dow is up 250 points as I write, on sweetened odds that a bailout deal will come through. Round and round and she goes; where she stops, nobody knows.

It would be more accurate to say we're all damned furious. As is colleague, Adam Lass.
On Thursday Adam wrote, “I do not think that we should be handing the keys to the vault to the same group who robbed it in the first place. And we certainly should not give away our right to ask them what the hell they are doing with our money. Or to put them in jail if they lie about it.”
If my inbox is a fair judge, most of you would not quibble with Adam’s view.
I have to admit, from a personal standpoint, I’m not nearly as angry about all this as many of you. It’s not that I’m OK with it. Far from it. More that this kind of thing has been going on for so long, my internal rage-o-matic has run out of gas. (That’s why I gave up cable news a long time ago.)
We are in this predicament because of human nature... and human nature is old as the hills. The greed-hubris-crisis cycle has been rising and falling with the tides for thousands of years. (It probably kicked in when the Lydians invented money, back in the sixth or seventh century B.C.) As long as empires have been around to rise, they have been around to fall. And this is simply how it happens.
I like to talk about the von Mises prophecy -- the “Austrian Endgame” that foresaw this decades ago -- but the predictability of human nature stretches back even further than that.
In fact, one could argue that Scottish historian Alexander Frasier Tytler saw all this coming centuries ago. These are the words of a man born in 1747 -- 29 years before America was born:
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.The average age of the world's greatest civilizations has been two hundred years. These nations have progressed through this sequence. From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance, from abundance to complacency; from complacency to apathy, from apathy to dependence, from dependence back into bondage.
Doesn’t make for fun reading. But it does help explain a few things, no?
The Real Reason Congress Is Upset
As you have no doubt seen if you’ve turned on the news, Congress is hopping mad about the sweeping nature of the Paulson plan. Some of them are livid over the unchecked power grab (as my colleague Adam is).
But you know what the politicians on Capitol Hill were really upset about ? The fact that they weren’t getting their fair share.
In other words, with all this loot being handed out for Wall Street, where is the loot for Main Street? If we’re going to ransack the Treasury, shouldn’t everyone get a cut?
Shouldn’t the voters of this great nation have their misery eased and their pain soothed? And should those voters not be eternally grateful for the wise and caring stewardship of their elected officials, gently but firmly steering the cash spigot their way?
Bailouts for fat cats? Boooo! Bailouts for all the voters of the land? Hooray! That’s why this thing is going to get bigger, not smaller. (And bigger, and bigger, and bigger...)
Maybe the government will wind up making money on the Paulson deal, as some (like Warren Buffett) now argue. But in the long run, does it really make a difference? In terms of the grand sweeping cycles, we know how these movies all end.
Tytler saw it coming. So did Walt Kelly, the creator of Pogo, who wrote, “We have met the enemy and he is us.”
Buffett to the Rescue?
But anyway, back to the topic at hand... When this whole thing gets written up in the history books, Warren Buffett will have a noted role in the drama.
The “Oracle of Omaha” has built an image of folksy credibility over the years. It’s a neat trick, really. The richest man in the world (give or take a few billion, according to official tallies) has managed to portray himself as a sort of “everyman.”
And so when Buffett told Congress to “WAKE UP!” in a telephone interview with CNBC on Thursday, Wall Street breathed a sigh of relief.
The details are a little complex, so here is my quick and dirty take on what happened:
Buffett puts together a fantastically, amazingly great deal for a piece of Goldman Sachs... a deal that is set to earn Berkshire billions in profit at near zero risk. (Barry Ritholtz has a great take on this.)
The risk on the Goldman deal was zero, or close to zero, because Buffett likely got a federal guarantee that Goldman would not be allowed to fail. That was Buffett’s reward for stepping up, knowing he could lend stability with his mere presence.
Treasury Secretary Hank Paulson (who used to run Goldman Sachs and put this whole thing together) then pulled Buffett aside and said something like “OK, Warren. You’re going to make out like a bandit here... How about you help out Ben (Bernanke) and me a little, too? If you could get Congress to put up or shut up, that would be swell.”
Buffett says “OK, Hank. I’m your man,” and agrees to be interviewed on CNBC... where he states loudly and clearly that the bailout deal must get done, that Paulson is a good man doing a necessary thing, and that we will face “economic Pearl Harbor” if Congress doesn’t approve the whole shebang pronto. (You can read the transcript for yourself.)
So the Oracle of Omaha locks in another killer deal (the kind that only he could pull off)... burnishes his image as the wise man who keeps his head while others lose theirs all around him... maintains his folksy “aw shucks” style by voicing his belief that Republicans and Democrats will “do the right thing”... and gets credit for helping save the system to boot.
Neat trick, huh? No wonder the markets rallied...
And by the way, for those of you who might be wondering (or assuming): I’m no Buffett hater. I think the guy is brilliant. For anyone who wants to learn more about him, I highly recommend The Making of an American Capitalist by Roger Lowenstein. It’s a great story.
But the fact that Buffett is a brilliant investor and a first-rate mind doesn’t change the fact that he’s deep in the game... and that he’s happy to exploit every edge he can get. It’s that old Chicago motto: Ubi Est Mea (Where’s Mine?)

A Lot of Levers Left to Pull
It wasn’t just Buffett who got a great deal in the Goldman quid pro quo. Paulson did, too. Having the smartest investor in the world in your corner is always a nice thing. On the subject of “who will be the next Treasury Secretary,” Buffett had this to say:
… if I were running things, Republican or Democrat, I would ask Hank to stay on. I mean, you don't get talent like that very often in any administrative job. And the guy pays an enormous price to do it. He's probably sleeping three or four hours a night. He knows the market. He's got the interests of the country at heart. So I think if I were either Barack Obama or John McCain and found myself in the White House in January, I would go down there and say, 'Hank, do me a favor, stick around another year.'
“Hammerin’ Hank” will never again get an endorsement quite like that one.
So what does this mean to you and me? I think it’s a good reminder of how powerful the system still is, even now, after all that’s happened.
They’ve got “a lot of levers left to pull,” as a friend of mine likes to say.
Central banks all around the world have trillions in cash reserves... Uncle Sam has a printing press that chugs out the world’s reserve currency at the touch of a button... and there are plenty of influential “super investors” like Buffett out there, not to mention deep-pocketed sovereign wealth funds, which are willing to step up to the plate when asked.
This is why I think we’re headed up -- maybe way, way up -- in the short to intermediate term. I don’t take a Pollyanna view of how all this will play out long term. I just think we’ve gotten a taste of how good these guys are, and how well they play the game.
For what it’s worth, Marc Faber (aka “Dr. Doom”) agrees... sort of.
In a Q&A session with reporters in Hong Kong, Faber said the $700 billion rescue plan won’t be enough. He thinks homeowners should be bailed out, too... that this whole mess will take longer than six months to a year to solve... and that the S&P could rally as much as 14% on news of a bailout plan being finalized. That’s a pretty big pop.
Faber then thinks things will get ugly again sometime in 2009. (He could well be right on that. We’ll see...)

Bonners Take On The Bailout

TOO BIG TO BAIL

by Bill Bonner
“Bankruptcy of Neo-Capitalism,” shouted a headline in Wednesday’s Paris press. Scarcely since Hitler blew his brains out has the type been bigger or the contentment broader.
Almost everyone everywhere is enjoying the show. Each headline brings more laughs. The financial markets give people neither what they expect nor what they want, but what they deserve. What a treat to see people getting it – good and hard.
Near to home, that galling “millionaire next door” – many will take pleasure in seeing his portfolio of stocks marked down. “Stocks for the long run,” he used to say, smugly; the silly old coot will be dead before his stocks come back! He’ll have to work until he drops dead, just like the rest of us.
On Wall Street, the masters of the universe – who had the pay slips to prove it! – are now getting blown up by their own debt bombs. The top five firms on Wall Street were thought to be “too big to fail.” But Bear Stearns has been blown to smithereens. Lehman is exploding into small pieces. Merrill ducked and missed the blast. Then, the last big capitalist desperadoes – J.P. Morgan and Goldman – waved the white flag. They petitioned the government to allow them to become regulated, deposit taking banks!
And George Bush will leave behind the biggest nationalization program in history. Surely, that’s worth a snide chuckle. The takeover of Fannie and Freddie alone leaves half the country living in what are effectively, government-subsidized housing projects. Meanwhile, the coordinated takeover of Wall Street, put together by his apparatchiks, left even the hardened lefties at France’s Liberation in shock and awe: “This enormous statist intervention...is the work of the most ideological and extremist administration that the US has ever had.”
How heartwarming to see that the meddlers and world-improvers get a second wind. It’s like driving around in a ’33 Lincoln...or throwing rocks at the gendarmes in ’68. The old, gray Bolshies feel young again! Impetuous! Brainless!
And every capitalist is behind the bail out program too. All over the world, markets are out – state-sponsored meddling is in. Free market principles are fine – until prices start going down!
And there’s the breathtaking chutzpah of it! After proposing a $700 billion program, in which the government buys up Wall Street’s mistakes – otherwise known as “cash for trash” – Henry Paulson says he had no choice: “We did this to protect the taxpayer,” said the former Goldman chief.
Even Russia got into the act. New to counterfeit capitalism, it’s getting the hang of it fast, pledging $20 billion in the fight to keep stock prices from falling to what they are really worth.
Then, not be left behind in general hysterical absurdity, SEC honcho Christopher Cox announced a list of 799 financial stocks on which shorting is banned until Oct. 2nd. In Britain, the FSA’s ban on shorting financial shares lasts until Jan 16. But Pakistan gets the King Canute Memorial Prize; by law in that benighted land, stocks can’t go below their August 27th close.
And what a bunch of numbskulls – Greenspan, Paulson and Bernanke! Every word they’ve said so far has been financial poison. “Greenspan relaxed about house prices...” reported the Financial Times in 2005. “Most negatives in housing are probably behind us...” said the same sage in October 2006. “We believe the effect of the troubles in the subprime sector...will be likely limited...” said Bernanke in March 2007. It’s “not a serious problem...I think it’s going to be largely contained,” added Paulson in April 2007.
But these are the same numbskulls who now say they are saving capitalism from itself. Ah, there’s the rub...amid all this giddy merriment is a serious threat. The feds have bailed out the bankers, the insurers, the mortgage lenders, and half of Wall Street. But who will bail out the feds?
Since 1971, the world’s money system rests on the dollar. And the dollar rests on nothing but faith, hope and the kindness of strangers. And while the full faith and credit of the United States of America is elastic, it can snap.
Last week, the price of gold popped up $120 in two days. Then, on Monday, it added another $43. Oil gushed up 44% in the space of barely a week. Investors felt the geyser of liquidity coming from Washington and beat a retreat from the dollar.
For the last 15 years, the U.S. money supply has grown about twice as fast as GDP. Federal government liabilities, meanwhile, have grown three times as fast. As a result, the USA now has more financial obligations than assets. It is, effectively, broke. Nevertheless, the debit side of its ledgers grow heavier and heavier. This year’s US government deficit will add about half a trillion. The US trade deficit is about $700 billion. The U.S. bailout plan will probably cost at least $1 trillion more.
Where will the government get that kind of money? There are only two possibilities – one honest and depressing, the other corrupt and alarming. Whether it borrows the money, or prints it up, the world enjoys no net increase in financial resources. Borrowing takes resources from projects that might have been worthwhile and diverts them to the losers. Interest rates rise, as a consequence of the extra borrowing; higher rates generally worsen the economic picture. And while the U.S. borrows, long term, at almost 5%, it lends at barely 2%. It’s like a bank that has gotten its business model badly mixed up. The more it borrows and lends, the faster it goes broke.
If, on the other hand, it merely prints the money – or if it creates it “out of thin air,” to use Lord Keynes’ handy phrase – the results are even worse. Inflating the money supply with new currency, a la Argentina or Zimbabwe, wipes out debts. But it destroys faith in the dollar and brings down the whole world’s money system.
Sooner or later, this is just what will probably happen. Not because capitalism doesn’t work – but because it does. Capitalism is doing just what it should do – it is separating fools from their money. But the fools vote. After a big bubble, there are more fools than sages...and, in the United States of America, more debtors than creditors. Sooner or later, Americans will realize that they are better off destroying their own money than preserving it...and that they would prefer to stiff their creditors rather than pay their bills. That is when deflation will gives way to inflation...and the world’s post-’71 dollar-based money system comes to an end.

Precious Metals On The Rise

The War on Terror Meets the War on Risk
Why are precious metals moving upwards? After all, the market smashed them down all summer as the dollar strengthened. The short answer is that right now gold and silver are the only decent game in town.
Yes, there are a few other asset and income plays as well in the market. After all, there’s still an economy to run out there. There are 303 million Americans, and 6.2 billion other people in this world, who want to eat every day. But much of the stock market is a crapshoot. If you love pain, then the broad stock market is the place for you. While gold and silver represent the flight to safety and quality.

The U.K. Telegraph put it nicely: “As investors scrambled to make sense of last week’s events, already one conclusion was all but irrefutable — the U.S. dollar will have to take another major fall. The dollar rally that began in July and pushed the pound’s value against the greenback significantly lower has come to an abrupt end as markets face up to the fact that the currency will have to absorb the effects of a sudden shocking increase in America’s budget deficit.”
So we see lots of bad news for the dollar. But when you own gold, it’s your asset. With a specific gravity of 19.3, gold is dense, non-reactive and otherwise immutable. Gold is nobody’s liability. As one of my old professors at Harvard used to say, “That’s physics.”
Gloomy News from Wall Street
Speaking of physics, I’ve looked east of the sun and west of the moon. I can’t see much good news for the U.S. dollar on any horizon. Really, what’s gloomier than the news from Wall Street? The investment model of the modern era (borrow short, lend long, pay big bonuses) is dying before our eyes. “And it’s about time,” some might say. But it’s happening on our watch. So we had better suit up in battle-rattle.
Wall Street’s losses are in the range of hundreds of billions, maybe trillions. Which prompts me to inquire, where are Bonnie and Clyde when you need them? At least the Barrow couple knew who they were and what they did for a living. To their credit, on their last foray the dynamic duet had the guts to shoot it out with the cops and go out in tragic style.
But now the modern bank robbers are talking about how they should get big bonuses for all the good work they put in right until things blew up. Really, I’m serious. Lehman Brothers wants to pay $2.5 billion in bonuses to 10,000 employees. That’s an average of $250,000 per person. (Except I think the office runners and secretaries will get less than $250K and a select few will rake in a lot more.) What has anyone there done to deserve $250,000? Did I miss the news about somebody at Lehman discovering a cure for cancer? It’s all just so… Baby Boomer.
At the end of the day — and the clock is ticking fast — it’s too bad that the wrong people are going to get paid. And bonuses? Oh, if only I could be a bankruptcy judge for just one hour.
The War on Risk
Do you recall the $700 billion of borrowed money that the U.S. paid over the past seven years to fight the War on Terror? Well now, with the stroke of a pen the U.S. taxpayers will pay another $700 billion (and probably more) for the “War on Risk” in the next year or so.
War on risk? It seems that way to me. Let’s back up. In the past few years — seven or so, coincidentally — a lot of people gambled and lost. People bought houses they couldn’t afford. Brokers arranged the loans. Bankers lent the money. Other bankers bundled-up the mortgages and sold them as “asset-backed securities.” Rating agencies sprinkled their holy water on the transaction. Insurance companies insured everything against default and loss.
A lot of people were making a darn good living for a while. But it was all a farce based on cheap credit and an abiding faith in a “something-for-nothing” way of life. And it’s too bad that a lot of people bought — as the saying goes — “as much house as they could afford.” Except they couldn’t afford it.

So now the whole mess is falling apart. And in true Baby Boomer fashion, the key perps on Wall Street want to change the rules and stick the house with the bill. That is, the White House and the House of Representatives, and your household as well.
The advertised number of $700 billion for the Wall Street bailout is just the posted price — the “loss leader” to get the American people into the store, so to speak. But get set for a bad case of sticker shock as events unfold. A group of business reporters at Bloomberg tallied up the raw numbers and came up with their own number of $1.8 trillion.
$700 billion? $1.8 trillion? When the numbers are that big, does it even matter? It’s the inflation-adjusted equivalent of fighting World War II again. Except who is the enemy?
Whatever the final tally may be, it cannot be good for the U.S. dollar. So buy gold and silver. If you can’t acquire the metal in the form of coins or bars, then buy precious metal stocks of companies with ore in the ground.

Head of Homeland Security admits Real ID card will not deter terrorists. So why have it?

DHS Secretary Admits Real ID Fraud-->
Friday, September 19, 2008, 5:08 pm, by BeatTheChip

The excuse given by the proponents of Real ID - America's first national ID card and its accompanying non-secure national database of personal information - was that it would prevent terrorists from entering the country. Now, in an August 13th speech at the University of Southern California, the Secretary of Homeland Security, Michael Chertoff says well ... it's really not going to do that.
by Buddy Logan - RestoreTheRepublic.com
James Sensenbrenner (R-WI), the instigator of the bill back in 2005 stated the following reason for tracking and maintaining data on each and every American citizen: "The goal of the Real ID Act is straightforward: it seeks to prevent another 9/11-type attack by disrupting terrorist travel."
Experts in the electronic security field said implementation of the act would only increase identity theft and would do little to prevent terrorists from entering and motivating within our borders.
Bruce Schneider, internationally renowned security technologist, said "All the 9/11 terrorists had photo IDs. Some of the IDs were real. Some were fake. Some were real IDs in fake names, bought from a crooked DMV employee in Virginia for $1,000 each." He goes on to say, "Harder-to-forge IDs only help marginally, because the problem is not making sure the ID is valid. Our goal is to somehow identify the few bad guys scattered in the sea of good guys. In an ideal world, what we'd want is some kind of ID that denotes intention. We'd want all terrorists to carry a card that says "evildoer" and everyone else to carry a card that said 'honest person who won't try to hijack or blow up anything.' Then, security would be easy."
These points were strongly argued against by Sensenbrenner, DHS and other proponents of the Real ID act. Now, three years later, the Secretary of Homeland Security himself admits the card will really do little to prevent terrorists from entering the country.
In a speech before the University of Southern California National Center for Risk and Economic Analysis of Terrorism Events, Chertoff stated “The first thing we do, using again traditional 20th Century methods, is we try to make it harder to counterfeit a card and this is a pretty good approach if you're going to use a card-based identifying method by itself. We've put chips in passports. We've created pass cards. We've put bar codes in. We've embedded certain kinds of holograms, all of which are designed to make it more difficult for people to fabricate these cards, and we've required higher standards through things like our Western Hemisphere Travel Initiative which governs what people need to show when they cross a land border or our Transportation Worker Identity Card or even the Real ID Initiative to strengthen the security of our driver's licenses.
"But while this has done something to deal with the issue of forgery and counterfeiting, it's certainly not a complete solution because time and again, I certainly have seen intelligence that tells me that sophisticated criminals and sophisticated terrorists spend a great deal of time learning to fabricate and forge even these improved cards. The net effect of this may be that it's going to be harder for people on campus here to get a drink when they're under 21, but unfortunately it's not going to be that much harder for the most sophisticated dangerous people to counterfeit an identity card.”
Now that Real ID has begun to be implemented in most states, is the DHS secretary beginning to pave the road toward bio-chipping?
This information, brought to my attention by our Pennsylvania State Coordinator, Jim Compton, is strong evidence of a hidden agenda regarding Real ID.
Make sure your state legislators understand these points. If the Real ID card is not going to prevent terrorists from entering the country, then why are we accumulating a national database of U.S. citizens, and why is the Real ID card being touted to the stockholders of manufacturer L1 Identity Solutions, as soon to be used for identity in a whole range of commercial applications?
Read the full speech given by DHS Secretary Michael Chertoff.

US: Army brigade assigned to Iraq for controlling resistance of local population now is being deployed in the United States to quell riots and rebelli

Brigade homeland tours start Oct. 1
3rd Infantry’s 1st BCT trains for a new dwell-time mission. Helping ‘people at home’ may become a permanent part of the active Army
By Gina Cavallaro - Staff writerPosted : Monday Sep 8, 2008 6:15:06 EDT

The 3rd Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq patrolling in full battle rattle, helping restore essential services and escorting supply convoys.
Now they’re training for the same mission — with a twist — at home.
Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.
It is not the first time an active-duty unit has been tapped to help at home. In August 2005, for example, when Hurricane Katrina unleashed hell in Mississippi and Louisiana, several active-duty units were pulled from various posts and mobilized to those areas.
But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.
After 1st BCT finishes its dwell-time mission, expectations are that another, as yet unnamed, active-duty brigade will take over and that the mission will be a permanent one.
“Right now, the response force requirement will be an enduring mission. How the [Defense Department] chooses to source that and whether or not they continue to assign them to NorthCom, that could change in the future,” said Army Col. Louis Vogler, chief of NorthCom future operations. “Now, the plan is to assign a force every year.”
The command is at Peterson Air Force Base in Colorado Springs, Colo., but the soldiers with 1st BCT, who returned in April after 15 months in Iraq, will operate out of their home post at Fort Stewart, Ga., where they’ll be able to go to school, spend time with their families and train for their new homeland mission as well as the counterinsurgency mission in the war zones.
Stop-loss will not be in effect, so soldiers will be able to leave the Army or move to new assignments during the mission, and the operational tempo will be variable.
Don’t look for any extra time off, though. The at-home mission does not take the place of scheduled combat-zone deployments and will take place during the so-called dwell time a unit gets to reset and regenerate after a deployment.
The 1st of the 3rd is still scheduled to deploy to either Iraq or Afghanistan in early 2010, which means the soldiers will have been home a minimum of 20 months by the time they ship out.
In the meantime, they’ll learn new skills, use some of the ones they acquired in the war zone and more than likely will not be shot at while doing any of it.
They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.
Training for homeland scenarios has already begun at Fort Stewart and includes specialty tasks such as knowing how to use the “jaws of life” to extract a person from a mangled vehicle; extra medical training for a CBRNE incident; and working with U.S. Forestry Service experts on how to go in with chainsaws and cut and clear trees to clear a road or area.
The 1st BCT’s soldiers also will learn how to use “the first ever nonlethal package that the Army has fielded,” 1st BCT commander Col. Roger Cloutier said, referring to crowd and traffic control equipment and nonlethal weapons designed to subdue unruly or dangerous individuals without killing them.
“It’s a new modular package of nonlethal capabilities that they’re fielding. They’ve been using pieces of it in Iraq, but this is the first time that these modules were consolidated and this package fielded, and because of this mission we’re undertaking we were the first to get it.”
The package includes equipment to stand up a hasty road block; spike strips for slowing, stopping or controlling traffic; shields and batons; and, beanbag bullets.
“I was the first guy in the brigade to get Tasered,” said Cloutier, describing the experience as “your worst muscle cramp ever — times 10 throughout your whole body.
“I’m not a small guy, I weigh 230 pounds ... it put me on my knees in seconds.”
The brigade will not change its name, but the force will be known for the next year as a CBRNE Consequence Management Response Force, or CCMRF (pronounced “sea-smurf”).
“I can’t think of a more noble mission than this,” said Cloutier, who took command in July. “We’ve been all over the world during this time of conflict, but now our mission is to take care of citizens at home ... and depending on where an event occurred, you’re going home to take care of your home town, your loved ones.”
While soldiers’ combat training is applicable, he said, some nuances don’t apply.
“If we go in, we’re going in to help American citizens on American soil, to save lives, provide critical life support, help clear debris, restore normalcy and support whatever local agencies need us to do, so it’s kind of a different role,” said Cloutier, who, as the division operations officer on the last rotation, learned of the homeland mission a few months ago while they were still in Iraq.
Some brigade elements will be on call around the clock, during which time they’ll do their regular marksmanship, gunnery and other deployment training. That’s because the unit will continue to train and reset for the next deployment, even as it serves in its CCMRF mission.
Should personnel be needed at an earthquake in California, for example, all or part of the brigade could be scrambled there, depending on the extent of the need and the specialties involved.
Other branches included
The active Army’s new dwell-time mission is part of a NorthCom and DOD response package.
Active-duty soldiers will be part of a force that includes elements from other military branches and dedicated National Guard Weapons of Mass Destruction-Civil Support Teams.
A final mission rehearsal exercise is scheduled for mid-September at Fort Stewart and will be run by Joint Task Force Civil Support, a unit based out of Fort Monroe, Va., that will coordinate and evaluate the interservice event.
In addition to 1st BCT, other Army units will take part in the two-week training exercise, including elements of the 1st Medical Brigade out of Fort Hood, Texas, and the 82nd Combat Aviation Brigade from Fort Bragg, N.C.
There also will be Air Force engineer and medical units, the Marine Corps Chemical, Biological Initial Reaction Force, a Navy weather team and members of the Defense Logistics Agency and the Defense Threat Reduction Agency.
One of the things Vogler said they’ll be looking at is communications capabilities between the services.
“It is a concern, and we’re trying to check that and one of the ways we do that is by having these sorts of exercises. Leading up to this, we are going to rehearse and set up some of the communications systems to make sure we have interoperability,” he said.
“I don’t know what America’s overall plan is — I just know that 24 hours a day, seven days a week, there are soldiers, sailors, airmen and Marines that are standing by to come and help if they’re called,” Cloutier said. “It makes me feel good as an American to know that my country has dedicated a force to come in and help the people at home.”

US: Senate boosts budget for laser weapons for combat and to control crowds.

Gee, it's almost like they're planning for a large civiliam control effort...........maybe brought about by a manufactured Depression?(Ed~SOC)

Senate Boosts Funding for Laser Weapons
By Walter PincusMonday, September 22, 2008; A13
The Senate has embraced last year's Defense Science Board conclusion that directed-energy weapons -- such as high-, medium- and low-power lasers -- hold great potential and should be developed as soon as possible.
In the fiscal 2009 defense authorization bill, which was approved Wednesday, the Senate included additional funds for laser programs and a provision requiring Defense Secretary Robert M. Gates to accelerate work that would make directed-energy weapons operational in the near future.
Low-power lasers known as "dazzlers" are being used in Iraq, mounted on M-4 rifles, "to warn or temporarily incapacitate individuals," according to the Defense Science Board's report. Army, Special Forces and more recently Marine units are using them to warn or deter drivers approaching checkpoints and to "defuse potential escalation of force incidents," according to the report.
Marines were given approval to use a green laser whose beam can temporarily reduce a person's vision when aimed from a distance of 1,000 yards, according to the report. These "laser optical incapacitation devices" were being procured on a case-by-case basis.
Laser use remains controversial because a protocol of the Geneva Conventions bans their use in combat when they are designed to cause permanent blindness.
Two years ago, when the lasers were introduced in Iraq, Army Lt. Col. Barry Venable, a Pentagon spokesman, said the devices were legal. "They don't blind people," he told reporters. "It's like shining a big light in your eyes," he said, adding that he did not know how long the "optical incapacitation" lasted.
The Senate Armed Services Committee, in its report on the fiscal 2009 authorization bill, asked about the progress of lasers. "Years of investment have not resulted in any current operational high-energy laser capability," the committee noted in its report.
The science board said tactical laser systems could be developed for broader use because they "enable precision ground attack to minimize collateral damage in urban conflicts." The report suggested, for example, that "future gunships could provide extended precision lethality and sensing."
The board also proposed using lasers to protect against rockets, artillery, mortars and unmanned airborne vehicles by blasting them out of the sky. Last month, the Army awarded Boeing $36 million to continue development of a high-energy laser mounted on a truck that could hit overhead targets. But deployment is not expected until 2016, even if all goes well.
The Senate committee was critical of the "airborne laser" program, a first-generation missile defense system. It held back $30 million from next year's budget and said funds for a second version would not be authorized until the first shoot-down test from a 747 aircraft is conducted at the end of 2009. More information is needed to determine whether the system "could eventually provide a militarily useful, operationally effective and affordable missile defense capability," the panel's report said.
Past Defense Science Board studies have had impact. A 2004 report recommended a "Manhattan Project" approach to take "available and emerging technologies . . . to identify objects or people of interest from surveillance data and to verify a specific individual's identification." It suggested that "biometrics, tags, object recognition and identification tokens" be harnessed with sensors and databases "to overcome the shortcomings of conventional intelligence, surveillance, and reconnaissance systems."
Tags allow distant tracking or detection. Some tags are active, emitting radio waves that can be collected. Others are passive, including chemicals that give off a color when hit by an infrared beam. The board said these "represent a very important area for research and technology development."
Four years later, Washington Post Assistant Managing Editor Bob Woodward, discussing his new book, "The War Within," on CBS's "60 Minutes," attributed part of the success of the troop buildup in Iraq to "secret operational capabilities that have been developed by the military to locate, target and kill leaders of al-Qaeda in Iraq, insurgent leaders, renegade militia leaders. That is one of the true breakthroughs."
A recent congressional report said Special Forces in Iraq are using newly developed "sophisticated capabilities to identify, find, track, and kill or capture high-value individuals."

Ron Paul Has Warned Us Time & Time Again.............

Letter from Ron Paul: Time is Running Out
Wednesday, 24 September 2008

Dear Friends,
Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike.
The events of the past week are no exception.

The bailout package that is about to be rammed down Congress' throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder. Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It's bailing out the financiers, the banks, the Wall Streeters."
That describes the current bailout package to a T. And we're being told it's unavoidable.
The claim that the market caused all this is so staggeringly foolish that only politicians and the media could pretend to believe it. But that has become the conventional wisdom, with the desired result that those responsible for the credit bubble and its predictable consequences - predictable, that is, to those who understand sound, Austrian economics - are being let off the hook. The Federal Reserve System is actually positioning itself as the savior, rather than the culprit, in this mess!
• The Treasury Secretary is authorized to purchase up to $700 billion in mortgage-related assets at any one time. That means $700 billion is only the very beginning of what will hit us.
• Financial institutions are "designated as financial agents of the Government." This is the New Deal to end all New Deals.
• Then there's this: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Translation: the Secretary can buy up whatever junk debt he wants to, burden the American people with it, and be subject to no one in the process.
There goes your country.
Even some so-called free-market economists are calling all this "sadly necessary." Sad, yes. Necessary? Don't make me laugh.
Our one-party system is complicit in yet another crime against the American people. The two major party candidates for president themselves initially indicated their strong support for bailouts of this kind - another example of the big choice we're supposedly presented with this November: yes or yes. Now, with a backlash brewing, they're not quite sure what their views are. A sad display, really.
Although the present bailout package is almost certainly not the end of the political atrocities we'll witness in connection with the crisis, time is short. Congress may vote as soon as tomorrow. With a Rasmussen poll finding support for the bailout at an anemic seven percent, some members of Congress are afraid to vote for it. Call them! Let them hear from you! Tell them you will never vote for anyone who supports this atrocity.
The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are about to be looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care?
When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media?
Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.
In liberty,
Ron Paul

Hey, remember When We Made Fun Of Chinese Banks?

China banks told to halt lending to US banks-SCMP
Wed Sep 24, 2008 9:52pm EDT
BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.
The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.
"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.

Chuck Baldwin (Constitution Party) Has The Right Idea For The Bailout

NO AMNESTY FOR WALL STREET


By Chuck Baldwin

September 26, 2008
At the time of this writing, the U.S. House and Senate are poised to pass a $700 billion bailout to Wall Street. At the behest of President George W. Bush, the U.S. taxpayers are going to be on the hook for what can only be referred to as the biggest fraud in U.S. history.
Virtually our entire financial system is based on an illusion. We spend more than we earn, we consume more than we produce, we borrow more than we save, and we cling to the fantasy that this can go on forever. The glue that holds this crumbling scheme together is a fiat currency known as the Federal Reserve Note, which was created out of thin air by an international banking cartel called the Federal Reserve.
According to Congressman Ron Paul, in the last three years, the Federal Reserve has created over $4 trillion in new money. The result of all this "money-out-of-thin-air" fraud is never-ending inflation. And the more prices rise, the more the dollar collapses. Folks, this is not sustainable.
Already, Bear Stearns was awarded a $29 billion bailout, followed quickly by the bailout of Freddie and Fannie that will cost the taxpayers up to $200 billion. Then the Fed announced the bailout of AIG to the tune of $85 billion. Mind you, AIG is an enormous global entity with assets totaling more than $1.1 trillion. Moreover, the Feds agreed to pump $180 billion into global money markets. And the Treasury Department promised $50 billion to insure the holdings of money market mutual funds for a year. Now, taxpayers are being asked to provide $700 billion to Wall Street. (I hope readers are aware that, not only will American banks be bailed out, but foreign banks will also be bailed out. Then again, at least half of the Federal Reserve is comprised of foreign banks, anyway.) In other words, the Federal Reserve is preparing to spend upwards of $1 trillion or more. Remember again, this is fiat money, meaning it is money printed out of thin air.
All of this began when the U.S. Congress abrogated its responsibility to maintain sound money principles on behalf of the American people (as required by the Constitution) and created the Federal Reserve. This took place in 1913. The President was Woodrow Wilson. (I strongly encourage readers to buy G. Edward Griffin's book, The Creature from Jekyll Island.) Since then, the U.S. economy has suffered through one Great Depression and several recessions--all of which have been orchestrated by this international banking cartel. Now, we are facing total economic collapse.
But don't worry: the international bankers will lose nothing--not even their bonuses. They will maintain their mansions, yachts, private jets, and Swiss bank accounts. No matter how bad it gets on Main Street, the banksters on Wall Street will still have the best of it--President Bush and the Congress will make sure of that. This is one thing Republicans and Democrats can agree on.
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America's founders were rightfully skeptical of granting too much power to bankers. Thomas Jefferson said, "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."
Jefferson also believed that "banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
Daniel Webster warned, "Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money."
Webster also said, "We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no, Sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors, and a ruined people."
Our first and greatest President George Washington said, "Paper money has had the effect in your State [Rhode Island] that it ever will have, to ruin commerce--oppress the honest, and open the door to every species of fraud and injustice."
If George W. Bush, John McCain, or Barack Obama had any honesty and integrity, they would approach the current banking malady in much the same way that President Andrew Jackson did. In discussing the Bank Renewal bill with a delegation of bankers in 1832, Jackson said, "Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out."

What President Andrew Jackson said to the bankers in 1832 is exactly what an American President should say to these criminal international bankers today. But what George Bush, John McCain, and Barack Obama want to do is provide amnesty for the international bankers, just as they want to provide amnesty for illegal aliens. I say, No amnesty for Wall Street, and no amnesty for illegal aliens, either. Instead of sending these banksters on extended vacations to the Bahamas with millions of taxpayer dollars in their pockets, we should be sending them straight to jail!

The only way to fix this economic mess that the international bankers have created is to return America to sound money principles, as prescribed in the U.S. Constitution. This means dismantling the Federal Reserve and the Internal Revenue Service, overturning the 16th Amendment and the personal income tax, and returning the American monetary system to hard assets: gold and silver. Anything short of this will only delay and worsen the inevitable collapse that has already begun.

Maybe The Germans Will Be Right About One Thing......

U.S. will lose financial superpower status: Germany
Thu Sep 25, 2008 6:08am EDT
By Noah Barkin
BERLIN (Reuters) - Germany blamed the United States on Thursday for spawning the global financial crisis with a blind drive for higher profits and said it would now have to accept greater market regulation and a loss of its financial superpower status.
In some of the toughest language since the crisis worsened earlier this month, German Finance Minister Peer Steinbrueck told parliament the financial turmoil would leave "deep marks" but was primarily an American problem.
"The world will never be as it was before the crisis," Steinbrueck, a deputy leader of the center-left Social Democrats, told the Bundestag lower house.
"The United States will lose its superpower status in the world financial system. The world financial system will become more multi-polar."
Steinbrueck, whose efforts to secure greater transparency on hedge funds during Germany's G8 presidency last year collapsed amid objections from Washington and London, attacked what he called an Anglo-Saxon drive for double-digit profits and massive bonuses for bankers and company executives.
"Investment bankers and politicians in New York, Washington and London were not willing to give these up," he said.
He proposed eight measures to address the crisis, including an international ban on "purely speculative" short-selling and an increase in capital requirements for banks in order to offset credit risks.
The collapse of U.S. investment bank Lehman Brothers and financial woes of other financial institutions like insurer AIG have prompted the U.S. government to propose a $700 billion rescue package for the country's financial sector.
AMERICAN PROBLEM
Steinbrueck welcomed U.S. efforts to stem the crisis but said it was neither necessary nor wise for Germany to replicate the U.S. plan for its own institutions, which are under pressure but do not face the same risks as their U.S. counterparts.
The German Bundesbank said earlier this week that the financial market turbulence would hit the earnings of Germany's big commercial lenders, its publicly-owned Landesbanks and its cooperative banks.
Tighter credit in the wake of the crisis could also constrain household consumption and corporate investment, increasing the likelihood the German economy will fall into recession this year.
But Steinbrueck said German regulator Bafin believed German banks could cope with losses and ensure the safety of private savings, calling the turmoil primarily an American problem.
"The financial crisis is above all an American problem. The other G7 financial ministers in continental Europe share this opinion," he said.
"This system, which is to a large degree insufficiently regulated, is now collapsing -- with far-reaching consequences for the U.S. financial market and considerable contagion effects for the rest of the world," Steinbrueck added.
He advocated stronger, internationally coordinated regulation, saying the crisis showed that national action was not enough.
"The International Monetary Fund should become the controlling authority for the application of worldwide financial market standards," he said.

Nicely Said.............

"Each person killed by Uncle Sam's terrible swift sword has had family and friends, and they are not happy. Decade after decade, the federal government's enemies have accumulated, and today they surely number in the hundreds of millions." -Richard Maybury

Mogambo Rants

Cower Before the Great and Powerful Paulson
"My God! This is beyond belief! The Secretary of the Treasury will be above the law! My God! I was going to wax loudly indignant, as should all thinking people, when Mr. Sorkin eclipsed me…"
by The Mogambo Guru
I gotta admit that I am getting Really, Really, Really Freaked Out (RRFO) here lately, and I spend too, too, too much time whining and crying about it. As a result, I desperately seek the solace of gold, silver, oil and large-caliber guns while safely ensconced in the Big, Beautiful Mogambo Bunker (BBMB).
In fact, it was while I was in there that I learned that the new Leading, Coincident and Lagging Indicators came out, and it was just more bad news; the Leading Indicator (economic activity a year from now) was down, the Coincident Indicator (economic conditions right now) was down, while the Lagging Indicator (burdens and inflation) was up! Yikes! Stagflation, the worst of all worlds!
Perhaps this is why Andrew Ross Sorkin of the New York Times is as chilled as the rest of us by the fact that "the Treasury secretary - whoever that may be in a few months - will be…vested with perhaps the most incredible powers ever bestowed on one person over the economic and financial life of the nation", as the Troubled Asset Relief Program, popularly known as TARP, gives Mr. Paulson a massive $700 billion bailout that Mr. Sorkin says shows "the lack of transparency and oversight that got our financial system in trouble in the first place", and which actually "seems written directly into the proposed bill."
He says to look at the original draft of the bill, as first presented to Congress, and you will see such unbelievable horrors as "The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this act without regard to any other provision of law regarding public contracts", and that "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
My God! This is beyond belief! The Secretary of the Treasury will be above the law! My God! I was going to wax loudly indignant, as should all thinking people, when Mr. Sorkin eclipsed me by characterizing it as "Treasury Secretary Henry M. Paulson Jr.'s $700 billion proposal to bail out Wall Street is both the biggest rescue and the most amazing power grab in the history of the American economy."
Naturally, this precipitated the now-delayed Mogambo Loud Harangue Of Outrage (MLHOO), wherein I paraded down Central Avenue wearing the cutest little ballerina tutu and tiara, shouting through a bullhorn "Meet and greet your doom, you miserable lowlife bastards! $700 billion of new taxpayer money at the total discretion of the same corrupt idiots who got us into this damn mess is just for openers! It will get worse and worse, and you should buy gold, silver and oil right now, because the dollar is freaking toast because the brains of the people running the show are likewise burned to a crisp, probably by rays from the Russian Mafia and the CIA, or aliens from outer space!"
Well, I did not get all that far along on my heroic Paul Revere mission to inform the populace at every Middlesex village and farm that "The red ink is coming! The red ink is coming!", as was I was soon apprehended, as one should expect from the ubiquitous police state that has become the American economy.
Like I said; I was already really, really, really getting freaked out when I got an email from Junior Mogambo Ranger (JMR) John H., who made sure that I got the startling news reported in the New York Times that "With little notice, regulators at four agencies that oversee the nation's banks and savings associations proposed a significant change in accounting rules to bolster banks and encourage widespread industry consolidation by making them more attractive to prospective purchasers."
Being naturally curious, suspicious, and paranoid, we ask ourselves "How to do this?" The answer is: By doing more of the same! Hahaha! Too much! The article goes on, without any evidence of deliberate sarcasm or irony, "The regulators and the Bush administration have decided to resort to further loosening of the accounting rules to try to get the industry through problems that some experts have attributed in large part to years of deregulation." Hahaha! Deregulate to solve the problems caused by deregulation! Hahahaha!
And what "accounting rules" are they suspending? "The action by the four banking agencies provides more favorable accounting treatment of so-called goodwill, an intangible asset that reflects the difference between the market value and selling price of a bank."
In short, a good name and a swell reputation of a company is its goodwill, and is reflected as a premium built into the valuation of the company. Adam Levitin at Credit Slips admits that "Goodwill is a very problematic asset - it doesn't have much (if any) liquidation value and can't be sold by itself."
So what is it, exactly, that these "regulators" are going to do with goodwill? "Under the proposal issued this week, the regulators would permit buyers of banks and thrifts to count some of the goodwill toward meeting their regulatory capital requirements."
Initially staggered at the unfathomable corruption involved in letting "reputation replace money" as capital reserves against deposits, I soon felt that maybe I had made a mistake in laughing, as this new concept is actually a wonderful invention! I love this!
No longer will I even be required to put real IOUs in the employee pension fund when I dip into it to satisfy my need for a little extra cash, and instead my reputation as a good guy is, alone, now enough to cover the debt! I love this!
I'm surprised I haven't heard of it before this, as The Times notes "we've been here before - in the S&L crisis, when the Federal Home Loan Bank Board (now OTS) permitted thrifts to count goodwill toward regulatory capital. The results weren't pretty, as counting goodwill toward capital masked institutional insolvency and permitted thrifts to get even more leveraged relative to real assets." Hahaha!
So it is the same old wheeze: The government used reputation-as-money as a smokescreen to let the S&Ls get into worse trouble!
I look into your eyes. You look into my eyes. We both look at gold and silver. We both know what the other is thinking.
P.S. In a previous edition of the Mogambo Guru newsletter (mott "Each issue more stupid and worse than the last!"), I made a series of mistakes concerning Jon Nadler of Kitco.com, the first of which is that I misspelled his name as "John", which I was hoping was the result of my computer's spell-checker "correcting" the name "Jon" into "John", but I now see that that ain't what happened.
And then I discovered that you can't cover it up by taking "Jon" out of the computer's internal spell-checker dictionary so that it WILL change "Jon" to "John", either! Damn! Why is everything always against me? It's not fair!
The second mistake is that there seems to be some mix-up between what Mr. Nadler actually said versus what he was quoting Mark Hulbert as actually having said. My Official Mogambo Plea (OMP) is, of course, "Not guilty, your Honor!", and I blame everything on…(looking around the courtroom for a victim)…Greg, my editor.
Unofficially, and this is just between you and me, I am sure that it was a confluence of my own problems, starting in 2nd grade when we first learned that little Mogambo "Does not read with comprehension" (which is just for openers, and the tally finally ends with "Does not get along well with others", even though I maintain that I would have gotten along with them if they weren't such morons, but they were, so to hell with them!).
Now, combine that natural incompetence, suspected brain damage and a pathological lazy-yet-superficial attitude about everything that does not involve food, sex or new ways to hit a golf ball 300 yards right up the middle, with the sheer tonnage of medications I am taking these days, two of which specifically warn "may cause confusion", which is, unfortunately, only one of the entire freaking constellation of side effects stemming from each of them, and all of them interacting with one another, including emergent multiple personalities and hearing voices that demand "Burn! Burn everything!", but when I go back to the doctor and say, "Hey, man! You gotta do something about all these pills making me dizzy, tired, achy and spaced out! I think I can see through time, for God's sake!" he gives me another prescription for another pill that will mask the symptoms. Damn!
Anyway, my apologies to Jon Nadler for the confusion, my apologies to anybody who actually thought I have a clue about what I am yammering about, but I will strongly insist on my First Amendment rights under the Constitution, and thus I stand proudly and say "Not Guilty! It was Greg! Greg did it!"

Bush and the Bailout Bandits

We don't believe W's ascription to free enterprise
Posted: September 26, 20081:00 am Eastern
By Ilana Mercer
"If this threat is permitted to fully and suddenly emerge, all actions, all words and all recriminations would come too late. Trusting in the sanity and restraint of Saddam Hussein is not a strategy, and it is not an option."
That was Bush on Jan. 28, 2003.
Cut to Bush of Sept. 24, 2008: "The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold."
In 2003, Bush and Cheney cowed a cowardly Congress into authorizing war against Iraq. Congress's vote was a mere formality.
In 2008, Bush (minus the manic grin) and King Henry (Paulson) are hectoring the same creeps into authorizing $700 billion of taxpayer funds for firms who've funded bad mortgages.
The latest calamity, like the first, is, as I write, being rammed through at breakneck speed before the November elections.

Unmentioned by the bumbling Bush is that the U.S. Treasury is broke. Bernanke will likely monetize the debt, which means minting money in the basement. In the process, the dollar will further devalue, and the national debt will be driven above 70 percent of gross domestic product!
All the same, the teletwits insist that borrowing or forging funny money in order to buy, for a pretty price, assets whose value the market has pegged at zero will be a boon to taxpayers. But in the unlikely event that money is made, it'll flow not to the taxpayer, but into the insatiable maw of the feds.
Bush lobbed his financial WMD first by nationalizing the heavily socialized Fannie Mae and Freddie Mac, another formality. The administration then handed $85 billion to AIG. Mercifully, the moribund Lehman Brothers was allowed to expire, marking the largest bankruptcy in U.S. history, but not before an attempt was made at resuscitating Bear Stearns.
Ludwig von Mises, the greatest economist ever, was never wrong: The road to socializing the means of production is paved with interventionism.
Buried in Bush's blather was a tacit acknowledgment that government's deep infiltration of the mortgage and homeownership markets encouraged a laissez faire attitude toward lending and borrowing.
Obama "thinks" – my tongue is firmly in my cheek here – that the crisis is due to too little government meddling. McCain doesn't think. The natural laws of economics consistently show that State subsidies and subventions are what enervate markets.
"Because [Fannie and Freddie] were chartered by Congress," confessed Bush, "many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."
Fannie and Freddie's "charter" partners Bush exonerated.
Moreover, nowhere did Bush come clean about the continual expansion of credit by the central and commercial banks. Loose monetary policy has caused interest rates to fall below the natural market rate, and has precipitated an artificial stimulation of economic activity reflected in the colossal malinvestment and misallocation of resources witnessed in the housing market.
Consider another pesky piece of the puzzle: This government – and previous administrations – has eliminated the risks of mortgage lending. The sub-prime fiasco, in a nutshell, is a consequence of extending credit to the un-creditworthy, chief of whom are minorities. "The Diversity Recession" is how VDARE.com commentator Steve Sailer has aptly dubbed the mortgage misadventure.
You had the Federal Housing Administration colluding with the U.S. Department of Housing and Urban Development to provide taxpayer-subsidized home loans to illegal immigrants, no questions asked.
You had the 1974 Equal Credit Opportunity Act, the 1975 Home Mortgage Disclosure Act, and the U.S. Fair Housing Act – all arrows in the quiver of the federal government and the Department of Justice, aimed at forcing banks to throw good money after bad by lending it to those with low credit ranking. Mainly minorities.
Under the guise of remedying (alleged endemic) root-and-branch racism, the State has legislatively removed the risks of mortgage lending, thus precipitating the housing bubble.
Bush's ownership society, built as it was on quicksand, has metamorphosed into the bailout society.
"I'm a strong believer in free enterprise," declared Dubya the dirigiste, "so my natural instinct is to oppose government intervention."
Don't believe him; oppose him.
If he favored markets, he'd let them work. And that means, as the only congressman with any economic acumen has counseled, not propping them up, and allowing the liquidation of bad debt and worthless, illiquid assets at prices set by the market, not manufactured by government.
Above all, a crisis that was created by cheap credit must be corrected by less of the same.
How does a bankrupt person become solvent? He ceases to borrow and spend, pays down what he owes and lives within his means. But Bush and the bailout bandits (here I include Obama and McCain, who're down with destroying the economy too) would like you to believe such eternal verities do not apply in macroeconomics.
Bush's idea of a correction is thus to "free banks to resume the flow of credit to American families and businesses." In the man's own crazed words!
Those who buy the Bush bailout are – to use the incomparable Paul Gottfried's coinage – "at least as dumb as turkeys, the mouths of which have to be shut when it rains, lest they swallow too much water and drown."
An unlovely snapshot of candidates Obama and McCain.

US Mint Running Out Of Coins..........AGAIN!

Ladies and gentlemen, if this is not a telling 'sing-of-the-times' then I do not know what is. (Ed.~SOC)

US Mint suspends sale of 24-karat gold coins

Sep 26 02:57 PM US/EasternBy MARTIN CRUTSINGERAP Economics Writer
WASHINGTON (AP) - The U.S. Mint is temporarily halting sales of its popular American Buffalo 24-karat gold coins because it can't keep up with soaring demand as investors seek the safety of gold amid economic turbulence.
Mint spokesman Michael White said Friday that the sales were being suspended because demand for the coins, which were first introduced in 2006, has exceeded supply and the Mint's inventory of the coins has been depleted.
The Mint had to temporarily suspend sales of its American Eagle one-ounce gold coins on Aug. 15 and then later that month announced sales of the American Eagle coins would resume under an allocation program to designated dealers.
White said the Mint expected to soon start distributing available Buffalo gold coins through a similar allocation program.
Through Thursday, the day the Mint suspended sales of the American Buffalo, the Mint had sold 164,000 of the coins this year, up 54 percent from the same period a year ago.
"People are scared. Gold has become a safe haven," said Michael Maroney, a vice president of sales at gold dealer Monex Precious Metals in Newport Beach, Calif.
Maroney said that demand for the one-ounce American Eagle coins was "through the roof." He said Monex still had American Buffalos available Friday because the company had recently stocked up on them.
With the financial crisis gripping markets in recent weeks, investors have rushed to safe havens such as gold and Treasury securities. Demand for three-month Treasury bills last week pushed their yields down sharply to levels not seen in decades.
Investment advisers, however, caution that the volatility often seen in gold prices could make investments in this area more of a risky decision if gold prices suddenly begin to fall sharply.
As the financial crisis unfolded in the past few weeks, American Gold Exchange Inc. saw demand for coins go up about 50 percent, according to Bill Musgrave, a vice president of the Austin, Texas-based gold dealer.
The Mint introduced the American Buffalo gold coin, the country's first 24-karat gold coin, in 2006. Congress authorized production of the coin in an effort to capture a portion of the global market for pure gold coins, competing with such coins as the Canadian Maple Leaf.
___

Nicely Said.....................

"Unnecessary laws are not good laws, but traps for money." -Thomas Hobbes

Great Essay From Bill Bonner

The Dumbest Man in America

By Bill Bonner
Where did he go wrong? The question probably crossed his mind…perhaps even when he mounted the scaffold on January 21, 1793. The Bourbons had been the most successful family in Europe. They had ruled Europe’s biggest and richest country since Henry IV. And now they were on thrones all over Europe. But in the language of the City, Louis 16th blew himself up. He was supposed to be an absolute monarch. Ah…there was the dynamite! He believed it.
He had surrounded the Parliament with troops and turned the country against him. And now, he had absolutely no control over anything. Not even the power to save his own skin.
“Sire, you have committed something worse than a crime; you have committed an error…” Talleyrand might have told him. Poor Louis! He already had the bag over his head. And the blade at his neck. He must have felt like the dumbest man in France.
Dick Fuld must have felt pretty dumb too. His firm had survived the Civil War, the Railroad Bankruptcies of the late 19th century, the Bankers’ Panic of 1907, the Crash of ’29, the Great Depression, WWII, the Cold War; Lehman Bros. had outlasted spats, prohibition and disco music. But it couldn’t keep its head through the biggest financial boom in history.
John Edwards, recently claimed the title of the “dumbest man in America,” when the press got wind that he was two-timing his wife and running for president at the same time. But Edwards has more competition every day. By Monday of this week, Fuld had completely destroyed Lehman Bros. In January of 2007, the financial industry put a value on the firm – a company it knew well – of $48 billion. This week, the bid went to zero. And then, on Wednesday, came more disquieting news: the world’s largest insurance company, AIG, was failing. Martin Sullivan had run it into the ground, said the analysts. Now, it needed an $85 billion bailout.
There was no one there to bail out Louis when he needed it. France was not too big to fail; it was too big to bail out. And everything had been going so well! When Jacques Turgot was Controller-General, he was getting rid of the internal customs barriers, lifting price controls, abolishing the trade guilds and the corvee (the system of forced labor used to build roads). The political system was being reformed too – evolving towards a parliamentary democracy.
But along came those plucky Americans to stir up trouble. They sucked France into war with Britain. France supplied money, materiel and troops – landing 5,000 soldiers in Rhode Island and ultimately winning the war by blockading Lord Cornwallis at Yorktown.
“The first shot will drive the state to bankruptcy,” Turgot warned the king. He was right. By 1786, the French were in desperate straits, with half the population of Paris unemployed and a national debt equal to 80% of GDP. The French were counting on the Americans to begin repaying their $7 million in loans, but the United States was broke too. And soon, French credit was so bad, the king could no longer borrow from the moneylenders in Amsterdam nor even from his own creditors in Paris. Having borrowed too much, Louis no longer had any room to maneuver. All he could do was to march up the scaffold steps like a real monarch…
And now the heads roll on Wall Street. James Cayne at Bear Stearns. Stanley O’Neal at Merrill Lynch. Charles Prince of Citigroup. But who’s the dumbest? Surely Dan Mudd and Dick Syron at Fannie and Freddie are still in the running. Even with the deck stacked in their favor, they couldn’t stay in the game. And let’s not forget the rescuers – Ben Bernanke and Hank Paulson. They’ve practically nationalized not only America’s mortgage industry…but, taking an 80% stake in AIG, the insurance industry too! Where does the money come from?
It’s borrowed too – hundreds of billions worth. Surely, there’s a guillotine waiting for them somewhere.
The last 15 years have been too kind to finance. Wall Street and the City are essentially debt mongers; and in the boom, nobody didn’t want to borrow. Financial profits soared. Since 1980 the profits of the U.S. financial sector as a portion of GDP have gone up 200%.
Industry owners and managers could have taken their money off the table and retired to Greenwich. But on the back of this outsize success grew a monstrous hump of self-delusion; the masters of the universe began to believe their own grotesque guff. The financial markets were perfect, said the academics. All-knowing and all-seeing, they wouldn’t make a mistake. And the chiefs at the big financial firm must have thought they supped with the gods themselves; they had the paychecks to prove it.
Of course, some Wall Street bosses were more cunning than others. In selling itself to Bank of America, for example, Merrill Lynch dodges the scaffold; but it becomes a ward of the state, almost like Fannie and Freddie before they were kidnapped outright. Bank of America has easy access to Fed funds; Merrill figures it might need more money too.
The old regime on Wall Street was dominated by just five large investment companies. But the more they talked their own books, they more they came to think it was true – they were all too big, too smart and too rich to fail. Not only did they package and sell explosive packages of debt; they put the stuff in their own vaults too. Now, Lehman, Bear, and Merrill have blown themselves up. Only two more to go.
[Joel’s Note: During the ’29 crash, the Dow Jones Industrial Average almost halved in value, plummeting from near 380 points at the beginning of September to below 200 in just a few harrowing months. That epic crash, let us not forget, was survived by Lehman Bros. As we now know, the nation’s fourth largest investment bank was not so deft at avoiding the blade this time.
Then AIG, formerly the world’s 18th largest company and founded in 1919 also bit the dust. On would rightly feel inclined to ask what kind of crisis are we in for if these guys can’t hold it together?
Nobody knows precisely how savage today’s market tumult will be, nor how many billions of shareholder dollars will be wiped out in the process. Could we see a repeat the magnitude of 1929, in which the Dow would fall to approximately 6,000 before Christmas? Could it be, as few dare to predict, even worse than that?
Perhaps saddling Joe Taxpayer with hundreds of billions in bailouts will calm the markets for a while. But will they turn bad debts good? And will the masses stand for it if the bailout fails? They’ve already banned short selling for financials (Australia banned it across the board!) and poured as yet unearned money into the emergency slush fund…what if it doesn’t work? What then for the once mighty greenback?
One gets the feeling a few more heads will be marching up the scaffolding before long.
If there were ever a time to protect your money, NOW is it. We’ve been singing gold’s praises at the ultimate catastrophe-hedge in these pages for a while now, but for many, knowing where exactly to start is a little daunting. Do you go for the GLD ETF? How about shares in mining companies? What about options or futures contracts? Or is it best to simply stuff coins under your pillows?

Politicians Of the Worst Kind............

The worst kind of politician is the cooperative kind, for they are the kind that tends to do things.
This morning we woke to one of those headlines you just dread. Right there, on the front page of the New York Times, "Breakthrough Reached in Negotiations on Bailout."
Beneath the headline, the accompanying photograph showed a group of Washington clowns patting each other on the back and brandishing grins not unlike those a cat might wear, having just devoured a mouse.
"We have made great progress toward a deal, which will work and be effective in the marketplace," announced Treasury Secretary Henry M. Paulson Jr.
That's the same Hank Paulson who, just this past July assured us that "It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."
It's also the same man who, while lecturing Chinese officials in March of last year said, "The reality of the situation is that an open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention..."
But Mr. Paulson is a cunning cat, and cunning cats must be prepared to abandon the spine of their resolve at a moment's notice. After all, one doesn't climb the political ladder by sticking to one's guns. Our chameleon must employ compromise, bipartisanship sacrifice and, above all, he must brandish an eager willingness to renounce his convictions.
This is nothing new, of course. This creature of political whimsy was born out of real demand for his dubious character traits. When confronted with a choice between choosing a person of unwavering, if sometimes painfully honest conviction, and one who is wont to promise anything, regardless of whether or not it is viable, feasible or even mathematically possible, most voters will opt for the latter.
Americans, for example, had a chance this year to cast a vote for their own personal responsibility. All they had to do was pay attention to the only man vying for the nation's top job who wanted to talk about economics, who advocated a return to the gold standard and who drew his non-interventionalist platform (in both finance and foreign policy) straight from the constitution. But when it came down to the big dance, American's fell for the platitudes and promises of a slick young black man and a decrepit old white man. The physician from Texas was left out in the rain, alongside the catnip.
And now that the charade is careening along to its next and greatest climax thus far, the voice of reason has been muffled under the noise of the media's election cheerleading. We wondered what Ron Paul had to say about the government's bailout.
"This is Wall Street in big trouble and sucking in Main Street...and dumping all the bills on Main Street," the libertarian reasoned on CNN's Late Edition over the weekend. "You can't solve the problem of inflation, which is the creation of money and credit out of thin air, by [creating] more money and credit out of thin air...
"What they're doing now, they're propping up a failed system so the agony lasts longer. They're doing exactly what we did in the Depression."

IT’S THE DERIVATIVES, STUPID!

WHY FANNIE, FREDDIE AND AIG ALL HAD TO BE BAILED OUT
Ellen Brown

“I can calculate the movement of the stars, but not the madness of men.”– Sir Isaac Newton, after losing a fortune in the South Sea bubble
Something extraordinary is going on with these government bailouts. In March 2008, the Federal Reserve extended a $55 billion loan to JPMorgan to “rescue” investment bank Bear Stearns from bankruptcy, a highly controversial move that tested the limits of the Federal Reserve Act. On September 7, 2008, the U.S. government seized private mortgage giants Fannie Mae and Freddie Mac and imposed a conservatorship, a form of bankruptcy; but rather than let the bankruptcy court sort out the assets among the claimants, the Treasury extended an unlimited credit line to the insolvent corporations and said it would exercise its authority to buy their stock, effectively nationalizing them. Now the Federal Reserve has announced that it is giving an $85 billion loan to American International Group (AIG), the world’s largest insurance company, in exchange for a nearly 80% stake in the insurer . . . .
The Fed is buying an insurance company? Where exactly is that covered in the Federal Reserve Act? The Associated Press calls it a “government takeover,” but this is not your ordinary “nationalization” like the purchase of Fannie/Freddie stock by the U.S. Treasury. The Federal Reserve has the power to print the national money supply, but it is not actually a part of the U.S. government. It is a private banking corporation owned by a consortium of private banks. The banking industry just bought the world’s largest insurance company, and they used federal money to do it. Yahoo Finance reported on September 17:
“The Treasury is setting up a temporary financing program at the Fed’s request. The program will auction Treasury bills to raise cash for the Fed’s use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.”
Treasury bills are the I.O.U.s of the federal government. We the taxpayers are on the hook for the Fed’s “enhanced liquidity facilities,” meaning the loans it has been making to everyone in sight, bank or non-bank, exercising obscure provisions in the Federal Reserve Act that may or may not say they can do it. What’s going on here? Why not let the free market work? Bankruptcy courts know how to sort out assets and reorganize companies so they can operate again. Why the extraordinary measures for Fannie, Freddie and AIG?
The answer may have less to do with saving the insurance business, the housing market, or the Chinese investors clamoring for a bailout than with the greatest Ponzi scheme in history, one that is holding up the entire private global banking system. What had to be saved at all costs was not housing or the dollar but the financial derivatives industry; and the precipice from which it had to be saved was an “event of default” that could have collapsed a quadrillion dollar derivatives bubble, a collapse that could take the entire global banking system down with it.
The Anatomy of a Bubble
Until recently, most people had never even heard of derivatives; but in terms of money traded, these investments represent the biggest financial market in the world. Derivatives are financial instruments that have no intrinsic value but derive their value from something else. Basically, they are just bets. You can “hedge your bet” that something you own will go up by placing a side bet that it will go down. “Hedge funds” hedge bets in the derivatives market. Bets can be placed on anything, from the price of tea in China to the movements of specific markets.
“The point everyone misses,” wrote economist Robert Chapman a decade ago, “is that buying derivatives is not investing. It is gambling, insurance and high stakes bookmaking. Derivatives create nothing.”1 They not only create nothing, but they serve to enrich non-producers at the expense of the people who do create real goods and services. In congressional hearings in the early 1990s, derivatives trading was challenged as being an illegal form of gambling. But the practice was legitimized by Fed Chairman Alan Greenspan, who not only lent legal and regulatory support to the trade but actively promoted derivatives as a way to improve “risk management.” Partly, this was to boost the flagging profits of the banks; and at the larger banks and dealers, it worked. But the cost was an increase in risk to the financial system as a whole.2
Since then, derivative trades have grown exponentially, until now they are larger than the entire global economy. The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars.3 How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want. They can bet money they don’t have, and that is where the huge increase in risk comes in.
Credit default swaps (CDS) are the most widely traded form of credit derivative. CDS are bets between two parties on whether or not a company will default on its bonds. In a typical default swap, the “protection buyer” gets a large payoff from the “protection seller” if the company defaults within a certain period of time, while the “protection seller” collects periodic payments from the “protection buyer” for assuming the risk of default. CDS thus resemble insurance policies, but there is no requirement to actually hold any asset or suffer any loss, so CDS are widely used just to increase profits by gambling on market changes. In one blogger’s example, a hedge fund could sit back and collect $320,000 a year in premiums just for selling “protection” on a risky BBB junk bond. The premiums are “free” money – free until the bond actually goes into default, when the hedge fund could be on the hook for $100 million in claims.
And there’s the catch: what if the hedge fund doesn’t have the $100 million? The fund’s corporate shell or limited partnership is put into bankruptcy; but both parties are claiming the derivative as an asset on their books, which they now have to write down. Players who have “hedged their bets” by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.
The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme. The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives “weapons of financial mass destruction.” It is also why the banking system cannot let a major derivatives player go down, and it is the banking system that calls the shots. The Federal Reserve is literally owned by a conglomerate of banks; and Hank Paulson, who heads the U.S. Treasury, entered that position through the revolving door of investment bank Goldman Sachs, where he was formerly CEO.
The Best Game in Town
In an article on FinancialSense.com on September 9, Daniel Amerman maintains that the government’s takeover of Fannie Mae and Freddie Mac was not actually a bailout of the mortgage giants. It was a bailout of the financial derivatives industry, which was faced with a $1.4 trillion “event of default” that could have bankrupted Wall Street and much of the rest of the financial world. To explain the enormous risk involved, Amerman posits a scenario in which the mortgage giants are not bailed out by the government. When they default on the $5 trillion in bonds and mortgage-backed securities they own or guarantee, settlements are immediately triggered on $1.4 trillion in credit default swaps entered into by major financial firms, which have promised to make good on Fannie/Freddie defaulted bonds in return for very lucrative fee income and multi-million dollar bonuses. The value of the vulnerable bonds plummets by 70%, causing $1 trillion (70% of $1.4 trillion) to be due to the “protection buyers.” This is more money, however, than the already-strapped financial institutions have to spare. The CDS sellers are highly leveraged themselves, which means they depend on huge day-to-day lines of credit just to stay afloat. When their creditors see the trillion dollar hit coming, they pull their financing, leaving the strapped institutions with massive portfolios of illiquid assets. The dreaded cascade of cross-defaults begins, until nearly every major investment bank and commercial bank is unable to meet its obligations. This triggers another massive round of CDS events, going to $10 trillion, then $20 trillion. The financial centers become insolvent, the markets have to be shut down, and when they open months later, the stock market has been crushed. The federal government and the financiers pulling its strings naturally feel compelled to step in to prevent such a disaster, even though this rewards the profligate speculators at the expense of the Fannie/Freddie shareholders who will get wiped out. Amerman concludes:
“[I]t’s the best game in town. Take a huge amount of risk, be paid exceedingly well for it and if you screw up -- you have absolute proof that the government will come in and bail you out at the expense of the rest of the population (who did not share in your profits in the first place).”4
Desperate Measures for Desperate Times
It was the best game in town until September 14, when Treasury Secretary Paulson, Fed Chairman Ben Bernanke, and New York Fed Head Tim Geithner closed the bailout window to Lehman Brothers, a 158-year-old Wall Street investment firm and major derivatives player. Why? “There is no political will for a federal bailout,” said Geithner. Bailing out Fannie and Freddie had created a furor of protest, and the taxpayers could not afford to underwrite the whole quadrillion dollar derivatives bubble. The line had to be drawn somewhere, and this was apparently it.
Or was the Fed just saving its ammunition for AIG? Recent downgrades in AIG’s ratings meant that the counterparties to its massive derivatives contracts could force it to come up with $10.5 billion in additional capital reserves immediately or file for bankruptcy. Treasury Secretary Paulson resisted advancing taxpayer money; but on Monday, September 15, stock trading was ugly, with the S & P 500 registering the largest one-day percent drop since September 11, 2001. Alan Kohler wrote in the Australian Business Spectator:
“[I]t’s unlikely to be a slow-motion train wreck this time. With Lehman in liquidation, and Washington Mutual and AIG on the brink, the credit market would likely shut down entirely and interbank lending would cease.”5
Kohler quoted the September 14 newsletter of Professor Nouriel Roubini, who has a popular website called Global EconoMonitor. Roubini warned:
“What we are facing now is the beginning of the unravelling and collapse of the entire shadow financial system, a system of institutions (broker dealers, hedge funds, private equity funds, SIVs, conduits, etc.) that look like banks (as they borrow short, are highly leveraged and lend and invest long and in illiquid ways) and thus are highly vulnerable to bank-like runs; but unlike banks they are not properly regulated and supervised, they don’t have access to deposit insurance and don’t have access to the lender of last resort support of the central bank.”
The risk posed to the system was evidently too great. On September 16, while Barclay’s Bank was offering to buy the banking divisions of Lehman Brothers, the Federal Reserve agreed to bail out AIG in return for 80% of its stock. Why the Federal Reserve instead of the U.S. Treasury? Perhaps because the Treasury would take too much heat for putting yet more taxpayer money on the line. The Federal Reserve could do it quietly through its “Open Market Operations,” the ruse by which it “monetizes” government debt, turning Treasury bills (government I.O.U.s) into dollars. The taxpayers would still have to pick up the tab, but the Federal Reserve would not have to get approval from Congress first.
Time for a 21st Century New Deal?
Another hole has been plugged in a very leaky boat, keeping it afloat another day; but how long can these stopgap measures be sustained? Professor Roubini maintains:
“The step by step, ad hoc and non-holistic approach of Fed and Treasury to crisis management has been a failure. . . . [P]lugging and filling one hole at [a] time is useless when the entire system of levies is collapsing in the perfect financial storm of the century. A much more radical, holistic and systemic approach to crisis management is now necessary.”6
We may soon hear that “the credit market is frozen” – that there is no money to keep homeowners in their homes, workers gainfully employed, or infrastructure maintained. But this is not true. The underlying source of all money is government credit – our own public credit. We don’t need to borrow it from the Chinese or the Saudis or private banks. The government can issue its own credit – the “full faith and credit of the United States.” That was the model followed by the Pennsylvania colonists in the eighteenth century, and it worked brilliantly well. Before the provincial government came up with this plan, the Pennsylvania economy was languishing. There was little gold to conduct trade, and the British bankers were charging 8% interest to borrow what was available. The government solved the credit problem by issuing and lending its own paper scrip. A publicly-owned bank lent the money to farmers at 5% interest. The money was returned to the government, preventing inflation; and the interest paid the government’s expenses, replacing taxes. During the period the system was in place, the economy flourished, prices remained stable, and the Pennsylvania colonists paid no taxes at all. (For more on this, see E. Brown, “Sustainable Energy Development: How Costs Can Be Cut in Half,” webofdebt.com/articles, November 5, 2007.)
Today’s credit crisis is very similar to that facing Herbert Hoover and Franklin Roosevelt in the 1930s. In 1932, President Hoover set up the Reconstruction Finance Corporation (RFC) as a federally-owned bank that would bail out commercial banks by extending loans to them, much as the privately-owned Federal Reserve is doing today. But like today, Hoover’s ploy failed. The banks did not need more loans; they were already drowning in debt. They needed customers with money to spend and invest. President Roosevelt used Hoover’s new government-owned lending facility to extend loans where they were needed most – for housing, agriculture and industry. Many new federal agencies were set up and funded by the RFC, including the HOLC (Home Owners Loan Corporation) and Fannie Mae (the Federal National Mortgage Association, which was then a government-owned agency). In the 1940s, the RFC went into overdrive funding the infrastructure necessary for the U.S. to participate in World War II, setting the country up with the infrastructure it needed to become the world’s industrial leader after the war.
The RFC was a government-owned bank that sidestepped the privately-owned Federal Reserve; but unlike the Pennsylvania provincial government, which originated the money it lent, the RFC had to borrow the money first. The RFC was funded by issuing government bonds and relending the proceeds. Then as now, new money entered the money supply chiefly in the form of private bank loans. In a “fractional reserve” banking system, banks are allowed to lend their “reserves” many times over, effectively multiplying the amount of money in circulation. Today a system of public banks might be set up on the model of the RFC to fund productive endeavors – industry, agriculture, housing, energy -- but we could go a step further than the RFC and give the new public banks the power to create credit themselves, just as the Pennsylvania government did and as private banks do now. At the rate banks are going into FDIC receivership, the federal government will soon own a string of banks, which it might as well put to productive use. Establishing a new RFC might be an easier move politically than trying to nationalize the Federal Reserve, but that is what should properly, logically be done. If we the taxpayers are putting up the money for the Fed to own the world’s largest insurance company, we should own the Fed.
Proposals for reforming the banking system are not even on the radar screen of Prime Time politics today; but the current system is collapsing at train-wreck speed, and the “change” called for in Washington may soon be taking a direction undreamt of a few years ago. We need to stop funding the culprits who brought us this debacle at our expense. We need a public banking system that makes a cost-effective credit mechanism available for homeowners, manufacturing, renewable energy, and infrastructure; and the first step to making it cost-effective is to strip out the swarms of gamblers, fraudsters and profiteers now gaming the system.

Uncharted & Dangerous Waters

In a Single Week, America Sails into Uncharted Moral Territory

If you were lucky enough to make it through last week without any major losses, then I congratulate you.
Last week was a street fight in the markets, and I personally know plenty of traders who came out bloodied and bruised. Thanks to the active participation of central banks and the U.S. Treasury, it's now almost impossible to find your footing and stick to an investment strategy without being broadsided.
So instead of analyzing this unpredictable marketplace or trying to read Paulson's mind, we're going to review a week that will no doubt go down in history. In so doing, we'll develop a better understanding of the moral implications of the past week's events.
Week in Review: One for the History Books
If you have money on the line right now, then you know it's been a less-than-pleasant week of trading. We had one of the largest point losses in Dow history followed by a 200-point gain in the very next session. There have been more swings than you could find on the neighborhood playground. But there's also been a steady - if not growing - sense of worry.
At the heart of it all, there has been an equally steady stream of intervention hoping to relieve such concerns.
If you didn't have a chance to keep up with how things played out from day to day, let me do a quick and dirty recap:
Sunday: The Federal Reserve pumped a bunch of money into the system, increased how much it will provide in lending facilities and further liberalized the collateral it will accept in exchange for loans.
Monday: Lehman Brothers declared bankruptcy. Bank of America took control of Merrill Lynch. And AIG's fate hung in the balance.
Tuesday: The Federal Reserve denied the markets a much anticipated interest rate cut. Instead, it followed with a two-year, US$85 billion loan to bailout AIG.
Wednesday: The Treasury announced a finance program where it would auction off Treasuries, separate from what it already offers. The proceeds will go to the Federal Reserve to use for "initiatives."
Thursday: Central banks around the globe decided to join the party. They declared efforts to pump nearly US$250 billion into the global system to avert a financial train wreck.
Friday: We learned of a new initiative, spearheaded by Treasury Secretary Henry Paulson, to put together US$800 billion in a new-fangled institution and US$400 billion more at the FDIC. The money will be used to take crappy assets off troubled balance sheets and grease up money markets.
Sunday: We heard some of the nuts and bolts of Paulson's plan as he ran the talk-show circuit, and we waved goodbye to the Independent Investment Bank. That's right, Morgan Stanley and Goldman Sachs will play a pivotal role as "Bank Holding Companies" in Paulson's new plan.
Prior to this week, steps taken to stabilize the market were considered ineffective. By the looks of it, though, this week's actions tell me these guys don't want to fail in their efforts to restore order...again. But the condition of credit markets is far from cured.
Plus, there's another issue that the Fed and Treasury might have to wrestle with down the road...
Moral Hazard: Don't Worry, We're Too Big to Fail
"We cannot protect all risk in the market, and we should not do it at the risk of the taxpayer." — Richard Shelby, Alabama Senator
"Moral Hazard" is a pair of buzz words circling lunch tables, office cubicles and board rooms around the world. Why? Simply because the Fed and Treasury are taking matters into their own hands, trying to put an end to the losses wreaking havoc on the global financial system.
And in doing so, our government could be seen as endorsing the reckless lending that led us to this disaster in the first place.
However, what scares me most about these interventions is that some could create a humongous burden on the taxpayer.
The two-year US$85, billion loan from the Fed to AIG this week is an attempt to provide a controlled environment to deal with the pain, spare the financial system from the effects of extreme counterparty risk, protect the real economy and keep the bill off the taxpayer.
So what if the burden of this financial mess doesn't end up in the taxpayers' lap? Could there still be moral hazard?
Good question.
Because what kind of precedent are they setting? These are banks and institutions that took on toxic derivatives and securitized debt. They fattened up when times were good, but come crying for help now that the going has gotten tough. How many more will follow expecting the same treatment?
Perhaps this is the real issue.

Because It's Patriotic To Let the Government Steal From You

Biden links tax on wealthy to patriotism
September 19, 2008
Democratic vice presidential candidate Joe Biden acknowledged yesterday the wealthy would pay more taxes if he and Barack Obama are in the White House, but he put an interesting spin on it.
"It's time to be patriotic . . . time to jump in, time to be part of the deal, time to help get America out of the rut," Biden said on ABC's "Good Morning America."
Republican John McCain pounced on the remark. "Raising taxes in a tough economy isn't patriotic," he said in Cedar Rapids, Iowa. "It's not a badge of honor. It's just dumb policy."
Trying to find the right tone on the Wall Street crisis, McCain also went for the tried and true in a new TV ad yesterday: Warn voters that his Democratic opponent is a tax-and-spend liberal. The ad warns of huge spending increases, pork-barrel projects, and "painful taxes." "Can your family afford that?" the announcer concludes.
Obama's proposals, however, would lower the tax bill for the vast majority of taxpayers, and by letting President Bush's tax cuts lapse would raise income taxes on those earning $250,000 or more a year.

Nicely Said....................

"There are just two rules of governance in a free society: Mind your own business. Keep your hands to yourself." -P.J. O'Rourke

We Now Live in a Dictatorship

Three men now control virtually every aspect of your financial life. Find out how to defend yourself from them!

by Adam Lass
The greatest coup ever attempted is almost complete.
Forget about the sitting U.S. president. Every time he spoke, last week, he was greeted by resounding boos from the only audience that votes 24 hours a day, five days a week: the global stock market.
Forget about those two guys running for president, too. By the time either can take the oath of office, the office itself will be little more than a sinecure.
Forget about the heads of state in Europe and Asia, for that matter. Nothing they have had to say has mattered a bit (and that includes that KGB upstart in Russia).

The world’s various legislatures, including the U.S. Congress? Impotent.
The central banks of Europe? China? Japan? Sidelined.
The entire world economy now jumps at the beck and call of three men: Henry Paulson, Ben Bernanke and Timothy Geithner.
They may have official titles like “U.S. Treasury secretary,” “chairman of the Federal Reserve,” and president of the Federal Reserve Bank of New York”… but you probably should get used to the idea of addressing them as “The Great Triumvirate.”
For years now, Washington has systematically destroyed the value of the dollar.
This campaign of destruction led directly to the real estate bubble, its demise and the ensuing mortgage crisis.
The entire time, these three men have quietly assured the public that all was well, that no precipitous actions were needed to be taken to forestall the troubles that were bearing down on us like a 300-car coal train barreling down Thunder Mountain.
One can only imagine what their private conversations were like. However, Paulson has been quoted as saying that he only took the job at Treasury to prepare for the inevitable crisis that was coming. Curiously enough, the trading house where he worked for 34 years bet heavily against mortgage derivatives when everyone else was wading in neck deep.
Bernanke’s entire career has been devoted to the study of Depression economics. And Geithner is a master of international currency manipulation who has served under Henry Kissinger, Robert Rubin, Lawrence Summers, not to mention stints in the International Monetary Fund and the Group of Thirty, a private club of international financiers currently helmed by Paul Volcker.
And now that the crisis is upon us, now that virtually every Wall Street house except Paulson’s own Goldman Sachs has gone under or been bought up, now that the rot in our dollar has spread to all our global competitors, now that all other official and semi-official organizations that could lay claim to any power are defunct or paralyzed, these three have stepped up and literally bought up our country.
And they did it entirely with your blessing… and your money. Because right now, you’ll pay them anything to pry your foot loose from their bear trap.
For weeks now, these three have decided who will get billions from the magical Federal piggy bank. And who will be gutted on the trading room floor.
Bear Stearns? You get sold to our friends. Lehman Brothers? Sorry, champ, but you are road kill. AIG? We get 80% of your assets, and you get to pretend like you still run your company.
So far, these three have doled out half a trillion dollars one way or another. But not a nickel of it was free. No, no, as the terms come to light, these negotiations begin to resemble something out of a popular organized crime romance.
You know all those billion-dollar “short-term loans” the Fed has been making to every bank in the country? Each and every borrower has put up matching collateral in the form of junk mortgage bonds.
Technically speaking, since these bonds cannot be valued, the Federal Reserve is required is required to value them at zero. Zed. Zippo.
The fact that they have not done so does not mean that they never will. Indeed, these three gentlemen are now in the position of instantly bankrupting virtually any and every bank in the country.
Don’t tow the new line? You’re dead meat.
You say the FDIC will cover the banks? It ran out of money back when Indymac went under. Right now, it has roughly 10 times more debt than assets. And 15-20 more banks are slated to go under at any moment.
In fact, as I sit to write this, the FDIC is begging for more funds. Want to guess who they have to go through to get it? That’s right: Treasury Secretary Paulson.

The tactic of lending billions in cash against assets that can be revalued at a whim has proven so effective, Emperors Paulson Bernanke and Geithner are now proposing to extend it to virtually every major Wall Street investor via their new “Department of Bad Debt.”
Think the Princes of the New World Order care a fig about your house, your job or your retirement fund? Think again: You are now, have always been and will always be a pawn in their grand scheme.
Every aspect of your life is on the line now. Not just your stock portfolio, but your bank accounts, your credit cards, the heat and lights in your house, even the value of the dollars in your wallet. They have put it all on the line to pull off this mad coup.
You simply must protect yourself if you have any hope of surviving. An immediate step would be to buy shares of PowerShares’ US Bearish Dollar Index (UDN:AMEX). Beyond that, Justice and I are working up a detailed defense plan.
This is no time to quibble about dollars and cents when so much more is on the line. So we will make this summit available for free to any and all who perceive the depths of this crisis.

Bailout Nation

Bailout Nation: Five Things to Know About What Happens Next

by Justice Litle, Editorial

For the next few weeks and months, I will be thinking hard -- even harder than usual -- about the best places to trade and invest. We’ll keep a keen eye on what’s risky and what’s safe... what’s wise and what’s foolish in this “brave new world” that has suddenly been thrust upon us.
For now, while the dust is still swirling, I want to hit you with five key things that came to mind over the weekend. Think of them as a first effort, an opening salvo to help you understand the mess we’re in.
Without further ado, here’s a quick tour of the five things you should know...
1) The bailout is one of staggeringly massive proportions.
As I write to you in the wee hours of Monday morning, prior to my transatlantic flight, the number being bandied about for the size of the bailout is $700 billion. Keep in mind, too, that this is an opening number. It doesn’t necessarily include relief for upside-down homeowners, strapped consumers, foreign banks or many other potential “extras” that could be added to the tally.
And yet, all by itself, $700 billion is a breathtaking number. How breathtaking, you ask?
$700 billion is more than four times the cost of the Savings & Loan bailout in the late ‘80s and early ‘90s.
As Dan Herszenhorn of the New York Times points out, $700 billion is “more than $2,000 for every man, woman child in the United States.”
The bailout is roughly equal to what has been spent (so far) on the Iraq war, and more than a year’s annual budget for the Pentagon.
What’s worse, the terms of the bailout give the Fed and Treasury unprecedented power. In a single stroke, America has trashed its reputation as a bastion of free-market principles... possibly beyond repair.
It is so bad, in fact, that the finance minister of Italy is making fun of us.
“Greenspan was considered a master,” Italian moneyman Giulio Tremonti says. “Now we must ask ourselves whether he is not, after bin Laden, the man who hurt America the most. … It is clear that what is happening is a disease. It is not the failure of a bank, but the failure of a system.”
2) You will still be able to go short.
A lot of questions have been swirling around the shorting ban proposed by multiple countries.
The UK has banned shorting until January. Australia has banned shorting entirely. The SEC in the U.S. has temporarily banned shorting on nearly 800 financial stocks. Other countries are getting in the act, too.
This knee-jerk reaction to the crisis is utterly stupid and pig-headed. But rather than go on a rant and risk missing my plane, here’s what you need to know: You will still be able to go short via the use of options.
In America at least, many stocks are still shortable outright. And even for those on the “banned list,” they haven’t outlawed the purchase of put options -- option contracts that allow an investor to profit when a stock goes down. So don’t worry about that aspect of things. In spite of the ferocious rally we saw late last week, versatility will still be a virtue in this market. You’ll still be able to go short.
3) Global growth is still the place to be (as opposed to U.S. exposure).
If you thought last week’s rally in the Dow and the S&P was impressive, you didn’t catch an eyeful of what happened in emerging markets.
It was the biggest move in 20 years for many markets, with Russia and Brazil leading the way. While the Dow booked gains in the neighborhood of 3%, a number of other indexes (like Brazil’s Bovespa) picked up triple that.
The long and short of it is, global growth is still the place to be. The U.S. still has to deal with a belt-tightening consumer, even if the beleaguered and battered banks have now gotten a free pass from Uncle Sam... But with coordinated central bank efforts and new cash flooding into markets all over the globe, it’s much more likely to be “back in the pool” global growth stocks.
We’ve seen evidence of this, too, in Safe Haven Investor, the newsletter I recently took over as editor. On Monday I recommended a high-quality South American growth stock with a fat dividend yield. That pick is up more than 10% from our buy price in less than 10 days.
4) Savers will be punished.
The sad fact is, this bailout is all about saving borrowers from themselves and punishing risk takers in the process. If you were leveraged up to the eyeballs and loaded to the gills with debt, then the Paulson-Bernanke plan is a godsend... like a helicopter coming to pull you off the roof of your house as the floodwaters sucked at your ankles.
But if you actually avoided this whole mess by shunning excess risk and keeping a good amount of cash in the bank, then guess what -- it’s upstanding citizens like you who get to pay for the whole thing. The money to make the bailout happen will ultimately come from one place: the pockets of the American taxpayer.
Some will say it’s not necessarily a given that the taxpayers will lose money on this bailout deal... that it’s possible everything works out and that the $700 billion doesn’t go up in smoke. Maybe we’ll get our money back, or at least a portion of it.
But the people who say that are also the ones who never thought we would get here in the first place. And it’s hard to see the difference, in principle, between a Bear Stearns or a Lehman Brothers assuring me I’ll get my money back vs. Uncle Sam doing the same thing. Shouldn’t it be up to you and me to decide who we write checks to?
As the dollar craters in the coming months, and the cost of living rises, savers will continue to be punished. Money in a mattress is decidedly no good at this juncture. Cash is most definitely NOT king, in the sense that paper money just gets more and more worthless when the printing press is chugging away like there’s no tomorrow. That’s what it’s doing now.

5) Invest or go broke.
“Invest or go broke” might be a harsh way to put things, but these are harsh times in more ways than one.
By pledging to crank up the printing press and bail out everyone in sight, Paulson and Bernanke have ginned up a paper tornado of sorts. Think of the crazy action we saw last week, with the markets down hundreds of points and then flying sky-high on news of the bailout.
There is an old saying, “In a tornado even the turkeys will fly” -- meaning even lousy stocks will go up in the right market conditions. Right now we could be headed into a scenario where everything but the kitchen sink catches a bid, with paper asset inflation swamping all other conditions.
This is a very dangerous environment to be in for holders of cash and money market funds. Costs of living go through the roof, too, and the meager returns on interest bearing accounts can’t keep pace. This is the type of environment Marc Faber talked about when he said (paraphrase) “Sure the Dow can go to 20,000... But if that happens, gold will go to $6,000.”
When the turkeys are flying and paper asset inflation is roaring, you almost have to be in the game -- and invested in the right things -- just to keep the inflation monster from eating everything you own.
That’s all for now.

Guru Goes Head-Hunting

FINANCIAL HEAD LOPPINGS

by The Mogambo Guru
Now that aggregate government spending is approximately half of all spending in the country, the major point of all the recent losses is the effect that Florida, like many states, is discovering to its horror that tax revenues are falling as the economy spirals down and down.
The governments are reacting as you would expect, initiating all kinds of tiny spending cuts, massive stealth tax hikes, freezing of new hiring, new borrowings (which has now reached 7% of annual tax revenue in Florida), and the raiding of trust funds to "plug" budget gaps, which only get worse and worse now that the predictable economic catastrophe of boom-turning-to-bust has, at long last, started.
The St. Petersburg Times reports that Amy Baker, the chief economist for Florida's government, has discovered "a projected $3.5 billion hole in the state's budget" and has now "sounded a series of alarm bells" that have "added a new term to Florida's fiscal lexicon: a 'structural imbalance', the gap between the growth in the state's revenues and its larger ongoing expenses", which is, of course, wonderful news for those of us who desperately yearn for yet another term that means "A government spending more than it receives in the quest to give everyone a perpetual free lunch."
But you will be glad to know that Florida, like many states, is determined not to let that happen, as the whole problem is immediately rendered insignificant when, as Ms. Baker is later quoted as saying, "The budget's going to grow, independent of any revenue constraints."
At this, I laughed in a tentative, nervous way - "Hahaha" - at the prospect of Ms. Baker finding a way to let the state's budget grow forever, regardless of how much money comes in. Again, her words echoed in my brain; "The budget's going to grow, independent of any revenue constraints." I feel a cold chill.
Desperate for comic relief, I turn to the September 10 article in the Wall Street Journal titled "Budget Deficit Likely Doubled for Fiscal '08", mostly because I thought we WERE in fiscal 2008 already! Anyway, the new fiscal year begins on October 1, less than a month away, and the Congressional Budget Office's new calculation of the "budget deficit" is a terrible, and yet a laughable, $407 billion.
Another reason that I am amused by the Journal article is that with all the talk of a budget deficit, and previous budget deficits, and how calculating it is such a difficulty, blah blah blah…not once does the article mention the size of the damned budget that produced the deficit! Not once! Therefore, I laugh "Hahaha!" to indicate comic bemusement tinged with horror.
I assume, as I always assume since I am such a paranoid, suspicious and very creepy little weirdo that correctly sees government as "goons with badges and guns who are all out to get me", that the Journal is a co-conspirator with the government in down-playing anything that might upset anyone, such as revealing the gut-wrenching fact that the federal budget is now more than a staggering $3 trillion dollars, which is a hefty $10,000 for every man, woman and child in the country, and it's equivalent to $30,000 being spent by everybody who has a non-government job!
Later on, we learn that the 2007 budget deficit is reported as being $161 billion, which makes me laugh again in derision and scorn, "Hahaha!" as my initial reaction, of course, was to loudly heap scorn and ridicule on the Congressional Budget Office, because I happen to know that the national debt is $9,669.9 billion, whereas last year at this time it was $9,006.0, meaning that in the last 12 months, the national debt increased $663 billion.
So, for the Congressional Budget Office to bring up the totally irrelevant 2007 fiscal budget deficit of $161 billion makes me yell, "Off with his head! Off with his head!" with every bit of imperious Red Queen arrogance I can muster.
But the point is not that I look ridiculous dressed up as the Red Queen from Alice in Wonderland, or that everybody is lying their heads off about the government's spending deficits and ignoring the government's intellectual deficits, but that all of this deficit spending means that more money has to be created, which will create more inflation in prices, which means more money must be created, which means more inflation in prices, around and around, which is why everyone should be buying gold and silver, but nobody is, making themselves look ridiculous, and then they turn around and say that I look ridiculous in my wig and crown!
Ha! I say, "Off with their heads, severed with a golden sword!", which is so deliciously ironic that they should plotz from it, and even if they don't, I can get my revenge by getting stinking rich by buying gold and silver at these lows, courtesy of them not driving the prices up by buying them, too.
I hope revenge is as sweet as they say it is! Whee!

While We Struggle At Home, Down South Is Getting Funny Again........

"Latin America has suddenly become very interesting. There are intersecting issues - domestic and geopolitical. There is a general way to state this. In times of crisis between great powers, local issues get energized by the international conflict. The changes in Russian-American relations reverberate in corners of the world that have been neglected since the Cold War. There are a lot of shifts taking place everywhere, and we have mentioned them all in previous Guidances. Let's focus on Latin America this week. That is not a place that has been really exciting geopolitically in the past, but it is getting there now.
"1. Bolivia nearing the boiling point: Bolivia is in a near civil war, with regional powers - particularly Brazil - looking on uneasily. The United States is confronting Evo Morales, the radical president of Bolivia. It is a very traditional confrontation, with a Latin American radical challenging the United States. New powers like Brazil are in the mix, and Russia could use the crisis to give the United States other headaches. We need to watch both internal and global implications.
"2. Venezuela and Russia: The Venezuelans and the Russians are getting close. The military implications are trivial at this point, but having a potential patron energizes Venezuela in new ways and gives it confidence. We need to watch the effect on foreign companies in Venezuela and long-term collaboration.
"3. Colombian guerrillas: The Revolutionary Armed Forces of Colombia (FARC) had ties to Cuba and the Soviets in the old days. Those FARC leaders who are still alive and not in nursing homes still have active contacts. The Russians could really jerk the American chain in Colombia - and depending on how the United States acts in the former Soviet Union, the Russians will do just that. We need to watch the FARC now and see if it reaches out to the Russians.
"4. Nicaragua: Nicaragua - dormant since the 1980s - has its old President Daniel Ortega and its old rhetoric back, and it is backing Russia in Georgia to the hilt. We need to watch Nicaragua and the rest of Central America, especially El Salvador, to see if this is going anywhere.
"5. Mexico's cartels: The cartels in Mexico are fighting the government and each other. If Ukraine is invited into NATO, the Russians would love to give payback in Mexico. The Russians used to have close ties to the Mexican left, and Russian organized criminal groups are currently involved in criminal activities such as prostitution and human smuggling in Mexico. And certainly, through the Cubans, the Russians know their way around Latin American drug traffickers.
"Instability in Mexico would be an interesting strategy for Russia - not that Mexico needs much help there. But the smuggling routes could carry all sorts of goodies into the United States.
"6. Cuba: Cuba remains the mystery. Havana is oddly quiet. Are there discussions going on with the United States? There should be, as far as the United States is concerned, but with an election coming, such talks are hard to set up. The Cubans don't seem to want to play the Nicaraguan game. One scenario is that after the election, the Bush administration could move to normalize relations with Cuba and take the heat. The administration's ratings will not matter and cannot go any lower. There is no evidence this will happen; it is just a theory.
"7. Russia's behavior in Latin America: In general we need to see whether the Russians start renewing old friendships on the Latin American left, with intellectuals and ambitious colonels and majors.
"Watch Argentina, Chile and Brazil. They are the big targets always."

Nicely Said...............

"The history of free men is never really written by chance but by choice - their choice." -Dwight D. Eisenhower

Ron Always Says It Best

Ron Paul Blasts “Secret Government” Running Economy
Congressman warns middle class in danger of being wiped out, says Congress is oblivious and Fed has no clue
Thursday, Sept 18, 2008
Congressman Ron Paul has issued a stinging address concerning the financial crisis in which he outlines how the current economic problems, created via malinvestment and shift to a debt based economy, are now being mismanaged by private interests in secret.
What’s more he says he is not sure the Federal Reserve has any idea what to do next and that the Congress is totally oblivious to the whole sorry state of affairs - a cocktail of elements he warns puts the middle class of America in serious jeopardy.
“Today we had a lot of financial fireworks in the markets, a lot of things are going on, and I think we are in the middle of something very big.” the Congressman stated.
Speaking on the recent collapse and government bailout of several big financial institutions he warned:
“We’re talking about big bucks, we’re not talking about hundreds of millions or even hundreds of billions, we’re talking about trillions of dollars, the obligation is immeasurable.”
“The interesting thing is that they (the financial institutions) don’t come to the Congress, I mean the Federal Reserve buys them out, they own it. We as tax payers now own Fannie Mae and Freddie Mac and know one knows how much that will cost. They don’t come to the Congress, we don’t have appropriations, it’s done by secret government, private individuals behind the scenes maneuvering and manipulating and trying to patch things up. While in the meantime, I’m sure there’s a few people making a couple of bucks out of this whole thing.”

The Congressman highlighted how an economy structured on debt and credit and a financial system based on interventionism and self serving moral hazard has led to gross devaluation of the dollar and ultimately lies at the root of the current financial meltdown.
“Our problems come first of all from the Federal Reserve. It is a monopoly and it controls interest rates artificially low, causes people to make mistakes, that’s the basic source. But then on top of that in the Housing market we had the community reinvestment act which told investors that they had to loan to risky borrowers, and that was a risky complication. HUD contributes to this, FDIC contributes, it’s called moral hazard, everything that we have done over here creates moral hazard, that is we assure people or assume that we will take care of everybody, just go out and create the risk, it is the opposite of the market place.” Paul stated.
“You can’t create money like we’re doing in order to support the dollar, because ultimately it hurts the dollar and everything we do in Washington today whether its on the appropriations side, whether it’s what the Fed is doing, buying up America, it’s all putting pressure on the dollar. One of these days we’re just going to have to wake up and say that we need to liquidate debt. This is malinvestment.” he urged.
The Congressman then slammed those who have blamed the crisis on failures of the free market:
“And then they have people come along and say ’see, this is the failure of capitalism’, this has nothing to do with capitalism, this is something that started off as interventionism and us being too involved in the economy for the benefit of special interests. But now it is being socialized out in the open.”
“The end of this comes when people reject the dollar and I think we’re getting awfully close to this.” Paul stated echoing comments from leading investors such as Jim Rogers, who predicted Monday that the dollar would soon lose its world reserve status.
“When you see the movement in the markets that we have today, you know that there are serious problems out there and Congress basically are oblivious, they have no idea what’s going on.” Paul continued.
“As a matter of fact I’m not even sure the Federal Reserve has any idea what to do about this. They’ve been manipulating and maneuvering for their own benefit over the years but eventually the market wins out.”
The Congressman’s comments were echoed today by reports indicating that the Congress cannot agree on any form of action and is likely to simply adjourn and “get out of the way”.
Senate Majority Leader Harry Reid told reporters that “no one knows what to do”.
In a stark warning, Ron Paul stressed that the longer the value of the dollar is allowed to depreciate, the greater the risk becomes for the majority of Americans:
“The reason this is so important is that if you care about people in a humanitarian sense, what you want to do is protect the value of the money. Just think of the third world nations when they have total run away inflation, the middle class gets wiped out. And what we are seeing today is the middle class being jeopardized by this type of system that we have, unlimited spending, unlimited debt, unlimited creation of new credit.”
“So it’s time that we wake up… The answers are in the free market, sound money and our Constitution.” Paul concluded.

The Smoke And Mirrors Of Our Financial Markets

Free market capitalism: A 'peek behind the curtain'
Posted Sep 15th 2008
"It is a popular myth that financial markets are based on principles of capitalism," observes Ron Rowland in his All Star Investor newsletter, adding, "but the opposite is closer to the truth."
Assessing what he calls the Federal Reserve's moves to "buy Wall Street," he offers a straight-forward overview of the current situation and a "peek behind the curtain" of free markets and Wall Street.
"Banks, brokers and insurance companies are assisted and protected by a wide variety of governmental mechanisms.
"Wall Street propagates the myth of 'free markets' because it serves to obscure the truth, which is that their profits are earned at the expense of those with less sophisticated and well-funded Washington lobbying operations. You are now getting a peek behind the curtain.
"Yes, it is true that Lehman Brothers (NYSE: LEH) was denied government assistance and is being allowed to fail. In fact, Lehman is now serving as a kind of scapegoat that allows those in power to appear firm in their resolve not to put taxpayers at risk.
"If it were more than mere appearance this would be good news, given that taxpayers have already taken on plenty of risk with Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). The reality, however, is that the bailouts are continuing through other, less obvious means.
"On Sunday the Federal Reserve announced a number of modifications to its lending policies. Two changes are particularly disturbing.
"First, the Fed will now allow investment banks to post equities as collateral in the Primary Dealer Credit Facility.
"Now the purpose of collateral is to give the lender something to hold which is of known and reasonably stable value. Equities do not fit that definition. Ben Bernanke knows this full well but obviously doesn't care.
"The second Fed action is more alarming: banks are now allowed to use depositor's money to fund the operations of their non-bank affiliates.
"Your savings account is being used to prop up the trading operations of your bank's parent company, which not coincidentally is the source of the huge losses the industry has racked up this year.
"And what happens when that deposit money goes up in smoke? Ah, yes, FDIC steps in and protects depositors. And who protects FDIC? Good question. Look in the mirror and you'll see the answer.
"Yet we are told that taxpayers aren't bailing out anyone. This action is arguably illegal, but at this point the Fed clearly is not concerned with what is legal or not. It is now a law unto itself.
"In a related development, Merrill Lynch (NYSE: MER) is being taken out by Bank of America (NYSE: BAC) at what appears to be a bargain price. Had BAC waited a day or two they might have got a much better deal, but we suspect this merger was forced on both firms by the powers-that-be.
"Merrill Lynch exemplifies the small investor, and its failure - more than most firms - could have sparked widespread panic. Hence the hastily-arranged shotgun wedding.
"More ominously, insurance giant American International Group (NYSE: AIG) is in dire need of capital and the traditional sources have slammed the door shut. There are rumors this morning that Warren Buffett might come to the rescue; if true, we suspect Buffett will drive a hard bargain.
"A collapse of AIG presents a systemic threat in a way that Lehman, Merrill and even Bear Stearns did not. It is a very dangerous situation. Given turbulent market conditions, we will avoid making any new investments for now and hold on to our cash allocation, which is roughly 54%."

Nicely Said...............

"Labour was the first price, the original purchase - money that was paid for all things. It was not by gold or by silver, but by labour, that all wealth of the world was originally purchased." -Adam Smith

The US Constitution: It Was A Great Idea, Now Sullied

How Our Constitution Has "Evolved" Over the Last 221 Years
Two hundred and twenty-one years ago today, thirty-nine brave men signed the Constitution of the United States of America and changed the course of history.
Conventions in each state later ratified this newly signed Constitution in the name of "the people," but only after a national debate called for a new Bill of Rights, which was later adopted as the first Ten Amendments. The Bill of Rights sets out our basic rights as citizens and the limits of government power over us.
From that point on, the Constitution provided the blueprint for our government's organization. The document defines the three main branches of the government: the legislative branch comprised of Congress, an executive branch led by the President, and a judicial branch headed by the Supreme Court.
In addition to the organization of these branches, the Constitution outlines each branch's powers. It also reserves numerous rights to the individual States and to the people, thereby establishing the federal system of government.
Yet, if you have ever watched Jay Leno's "Man on the Street" TV interviews, on questions regarding the Constitution and American history, far too many Americans are ignorant of both.
But Constitution Day is a time for us to review and consider the legacy of the Founding Fathers of America, to better understand the Constitution, and to promote good citizenship in new generations of Americans.
One of the most important protections for individuals in the Bill of Rights is contained in the Fourth Amendment.
Amendment IV guards against unreasonable official searches, arrests, and seizures of property without a specific warrant based on a "probable cause" to believe a crime has been committed. Up until the adoption of the PATRIOT Act in 2001, only a judge or official magistrate could issue such search warrants.
It is therefore highly ironic that a few days before Constitution Day, the Federal Bureau of Investigation, announced new rules governing FBI agents which, in my opinion as an attorney, effectively abolishes the Fourth Amendment.
The new rules will do away with Amendment IV's requirement of probable cause. The new rules will allow the FBI's more than 12,000 agents to conduct physical surveillance, solicit informants and interview friends of suspects without the approval of a bureau supervisor and certainly without a judge's approval or even a search warrant.
And this new investigative power will allow FBI agents to pursue leads not just on national security or foreign intelligence as in the past, but will allow them to even go after ordinary criminal cases.
For more than two centuries, scores of U.S. Supreme Court cases have defined the constitutional rights embodied in the Fourth Amendment.
The truth is that the government really doesn't need these greatly expanded police powers. It already has authority to prosecute anyone it has probable cause to believe has committed, or is planning to commit, a crime. In my opinion, while destroying our liberty and privacy, these broad police powers have not measurably increased our national security or safety.
Perhaps the Justice Department and the FBI should be forced to observe Constitution Day by reading that once sacred document. Or maybe Congress should repeal the Amendment and allow general writs of assistance to be issued by the latest King George.
I wonder how many Americans would even care?

Foreigners Pull Out Of American Markets

Foreign buyers exited the market for U.S. dollar-denominated debt and securities when the credit crisis surfaced in August of 2007. And their return since is proving to be somewhat tentative, as revealed in the latest U.S. Treasury report on capital flows. In July 2008, foreigners once again fled the scene, and were net sellers in U.S. capital markets to the tune of $25.6 billion. The stability of U.S. credit markets relies on foreigners recycling their trade surpluses back into the U.S. economy by purchasing dollar-denominated IOUs. As large financial institutions continue to tumble, and the Fed turns on the printing press in an attempt to limit the damage, the flight to safety will mean a flight from the dollar and further trouble for U.S. markets.The financial storm we’ve been forecasting is now hanging over Wall Street, and diversification into foreign markets, an excellent way to achieve protection from currency risk, should be part of every investor’s strategy.

Money Out The Window..........

Federal bank insurance fund dwindling
By MARCY GORDON, AP Business WriterTue Sep 16, 7:49 PM ET
Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.
The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.
Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.
Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.
Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.
"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.
Treasury Secretary Henry Paulson said Monday that the country's commercial banking system "is safe and sound" and that "the American people can be very, very confident about their accounts in our banking system." FDIC officials also have said 98 percent of U.S. banks still meet regulators' standards for adequate capital.
But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.
The fund, which is marking its 75th anniversary this year with a "Face Your Finances" campaign, is at $45.2 billion — the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.
FDIC Chairman Sheila Bair has not ruled out the possibility of going to the Treasury for a short-term loan at some point. But she has said she does not expect the FDIC to take the more drastic action of using a separate $30 billion credit line with Treasury — something that has never been done.
The FDIC's fund is currently below the minimum set by Congress in a 2006 law. The failure of IndyMac Bank in July cost $8.9 billion.
Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. That plan is likely to be approved by the FDIC board, which consists of her, Comptroller of the Currency John Dugan, Thrift Supervision Director John Reich and two other officials.
Bair also is considering a system in which banks with riskier portfolios would be charged higher premiums, raising the possibility those costs could be passed on to consumers.
A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets.
By comparison, WaMu and its subsidiaries had assets of $309.73 billion as of June 30 and IndyMac had $32 billion when it shut down.
Arthur Murton, director of the FDIC's insurance and research division, said that when large institutions have failed in recent years, the hit to the fund has been about 5 to 10 percent of the company's assets.
Standard & Poor's Ratings Service late Monday cut its counterparty credit rating on WaMu to junk, action that followed downgrades by both Moody's and Fitch last week. Concern about the Seattle-based thrift, which has significant exposure to risky mortgage securities and other assets, has grown in recent weeks, and the company's stock price has plummeted.
WaMu responded Monday by saying that it did not expect the S&P downgrade to have a material impact on its borrowings, collateral or margin requirements. The bank said its capital at the end of the third quarter on Sept. 30 is expected to be "significantly above" required levels and that its outlook for expected credit losses is unchanged.
Some analyst estimates put the cost of a WaMu failure to the FDIC at more than $20 billion, but other experts say it is very difficult to predict. Unknown, for example, is the amount of advances that institutions may have taken from one of the regional banks in the Federal Home Loan Bank system. Banks and thrifts have significantly increased their requests for advances, or loans, from the 12 regional home loan banks since the mortgage crisis began last year.
These amounts aren't publicly disclosed but must be repaid if a bank or thrift fails, notes Karen Shaw Petrou, managing partner of Federal Financial Analytics.
If the FDIC doesn't have enough cash to cover the initial costs of a bank or thrift failure, one option would be short-term loans from the Treasury. That last happened in 1991-92, during the last part of the savings and loan crisis, when the FDIC borrowed $15.1 billion from the Treasury and repaid it with interest about a year later.
Based on projections of possible scenarios of bank failures, "between the (insurance) fund that we have now and our ability to draw on the resources of the industry ... we do have the resources" needed, Murton said Tuesday.
Though short-term borrowing from Treasury for working capital may be possible, he said, tapping the long-term credit line is unlikely.
But Whalen said the Federal Reserve, the Treasury and Congress should "immediately devise" and announce a plan to backstop the FDIC with up to $500 billion in borrowing authority to meet cash needs for closing or selling failed banks.
"While the FDIC already has a credit line in place and this figure may seem excessive — and hopefully it is — the idea here is to overshoot the actual number to reinforce public confidence," Whalen wrote in a note to clients. "Simply having Treasury Secretary Hank Paulson or Ben Bernanke making hopeful statements is inadequate. Like it says in the movies: 'Show us the money.'"
Before Congress passed the law overhauling deposit insurance in 2006, about 90 percent of all insured banks and thrifts — considered to have adequate capital and to be well managed — paid no premiums to the FDIC. Today, all of them do.
There were 117 banks and thrifts considered to be in trouble in the second quarter, the highest level since 2003, according to FDIC data released last month. The agency doesn't disclose the names of institutions on its internal list of troubled banks. On average, 13 percent of banks that make the list fail. Total assets of troubled banks tripled in the second quarter to $78 billion, and $32 billion of that coming from IndyMac Bank.
Last month, Bair called those results "pretty dismal," but said they were not surprising given the housing slump, a worsening economy, and disruptions in financial and credit markets. "More banks will come on the (troubled) list as credit problems worsen," he said. "Assets of problem institutions also will continue to rise."

Republicans criticize plan for leaving 88% of offshore oil off-limits

Senate Takes Up Offshore Oil Drilling After House Passes Bill
Wednesday, September 17, 2008

WASHINGTON — Offshore oil drilling, which has dominated energy debates in the U.S. presidential campaign, is now coming to the Senate.
The House late Tuesday approved on a 236-189 vote legislation that would open waters 50 miles (80 kilometers) off the Pacific and Atlantic coasts to oil and natural gas development -- if the adjacent states agree to go along.
The legislation now goes to the Senate, where Democratic leaders are expected to mold it to their liking in the next few days.
So far, the Senate has indicated it has no intention of going as far as the House in expanding offshore oil and gas drilling beyond the western Gulf of Mexico, where energy companies have been pumping oil and gas for decades.
At least two proposals being crafted in the Senate would allow drilling in some areas along the southern Atlantic from Virginia to Georgia. But the Pacific and remainder of the Atlantic seaboard would not be affected.
Senate Majority Leader Harry Reid, a Democratic, also has said he would make way for a vote on a broader Republican drilling proposal that would allow states to opt for offshore exploration from New England to the Pacific Northwest and share in the royalties that are collected.
Congress has renewed bans on drilling off the Atlantic and Pacific coasts and the eastern Gulf of Mexico off Florida annually for the past 26 years.
But expanded offshore drilling has become a mantra of Republican energy policy that has been felt in both presidential and congressional campaigns, even though lifting the drilling ban would have little if any impact on gasoline prices or produce any more oil for years.
Republican presidential nominee John McCain vowed at the recently concluded Republican convention to push for new offshore oil and natural gas drilling as delegates chanted "drill, baby, drill." His Democratic rival, Barack Obama, also has said he supports more drilling as part of a broader energy package.
But in the Senate the issue of drilling remains divisive.
No matter what the proposal, it is expected to face a filibuster and no one has yet to predict with certainty that any drilling bill will garner the 60 votes needed to overcome such a roadblock.
The drilling measure passed late Tuesday in a largely party-line vote by the House is unlikely to survive the Senate.
President George W. Bush, who has called for ending the offshore drilling bans, signaled he would veto the legislation if it reached his desk, arguing that it would stifle offshore oil development instead of increasing it.
House Speaker Nancy Pelosi, a Democratic, called the bill "a new direction in energy policy ... that will end our dependence on foreign oil" by shifting federal subsidies from promoting the oil industry to spurring development of alternative energy sources and energy efficiency.
The House measure would allow drilling in waters 50 miles (80 kilometers) from shore almost everywhere from New England to Washington state as long as a state agrees to go along with energy development off its coast. Beyond 100 miles (160 kilometers), no state approval would be required. The drilling ban would remain in the eastern Gulf of Mexico.
But Republicans called the drilling measure a ruse to provide political cover to Democrats feeling pressure to support more drilling at a time of high gasoline prices.
"How much new drilling do we get out of this bill? It's zero. Just zero," declared House Republican leader John Boehner of Ohio. "It's a hoax on the American people. This is intended for one reason ... so the Democrats can say we voted on energy."
The bill would not share royalties from energy production with the adjacent states, which Republicans said would keep states from accepting any new drilling off their beaches. Republicans also cited Interior Department estimates that 88 percent of the 18 billion barrels of oil believed to be in waters now under drilling bans would remain off-limits because they are within the 50-mile (80-kilometer) protective coastal buffer.
The House-passed bill calls for rolling back nearly $18 billion in tax breaks over 10 years for the five largest oil companies and using the revenue for tax incentives to help commercialize alternative energy such as solar, wind and biomass, and programs that foster energy efficiency.
The bill also would require the president to make available oil from the government's Strategic Petroleum Reserve. Pelosi said such a move is needed to drive down gasoline prices, although oil prices have dropped dramatically in recent weeks and many energy experts believe gasoline prices will fall as well after refineries recover from Hurricane Ike.
Democrats added a provision at the last minute that makes it a federal crime for oil companies with federal leases to provide gifts to government employees, a response to a recent sex and drug scandal involving the federal office that oversees the offshore oil royalty program and energy company employees.
The House bill also would:
--Provide tax credits for wind and solar energy industries, the development of cellulose ethanol and other biofuels.
--Require utilities nationwide to generate 15 percent of their electricity from solar, wind or other alternative energy sources.
--Give tax breaks for new energy efficiency programs, including the use of improved building codes, and for companies that promote their employees' use of bicycles for commuting.

This Bumper Sticker Is On Our Gas-Guzzling SUV

Obama Waffles ~ 'nuff said..................

House Democrats rally chairmen to explore Bush's culpability, Future Regulations

Pelosi orders wide Wall Street probe

House Speaker Nancy Pelosi has ordered a broad, swift investigation of Wall Street and will demand testimony from Bush administration officials and captains of finance, congressional officials said.House Democrats plan to aggressively look at the administration’s role in the meltdown over the weekend and to explore further regulation and government structures that would be taken up under the new president.
And the trouble could run even deeper than has been clear so far — and get more expensive for the U.S. government. The Associated Press reports that the fund established to insure bank deposits is dwindling, with the taxpayer as the lender of last resort. "The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said," The AP reported.The hearings ordered by Pelosi will take place over the next few weeks, the officials said. Treasury Secretary Henry Paulson, who regularly appears on Capitol Hill, will be called to testify as part of the investigation.As the main event, Rep. Henry Waxman (D-Calif.), chairman of the House oversight committee, wrote to Richard Fuld, chief executive of the imploded Lehman Brothers, to ask him to appear on Capitol Hill on Sept. 25.“The hearing will examine the regulatory mistakes and financial excesses that led to yesterday's bankruptcy filing by Lehman Brothers,” Waxman wrote. “The committee will also explore the impacts of the Lehman bankruptcy on financial markets and the United States economy.”

Separately, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, plans a forward-looking hearing with economists on Wednesday to “begin a conversation about where we go with the capital markets,” a House aide said.Frank plans “oversight of what happened this weekend with the Treasury and Federal Reserve,” and will look at “how bad the capital markets are, and what may be needed.”“The markets are not self-correcting,” the aide said. “If they continue to not self-correct over the next several months, is there a federal response? There might be more federal intervention that’s needed. We’ll proceed cautiously, and that would be next year."Both chairmen are acting at the direction of Pelosi, who told them to figure out what happened and demonstrate that they are on top of the situation, the officials said.Pelosi said Tuesday on MSNBC that she expects a “restructuring” of the mortgage giants Fannie Mae and Freddie Mac “in the next Congress with a new president.”“Are they quasi-governmental organizations, are they quasi-nongovernmental organizations? Should they just be share hold private institutions?” she said. “We have to examine that. And I've asked the chairmen — Chairman Frank and the Chairman Waxman, the chairman of our Oversight and Reform Committee, to take a look at both of those.”

Ron Paul On Americans In Georgia

Paul: US in Georgia for pipeline
Press TVThursday, Sept 11, 2008
US Congressman Ron Paul says the United States is in Georgia not for democracy but to protect an oil pipeline bypassing Russia.
“We are not for democracy there - we are there to protect a pipeline. And that is tragic for me,” he said.
The remarks came as the US Senate Committee on Armed Services held a hearing to cast Moscow as an aggressor in the 5-day conflict in the Caucasus region but a rift among the members hampered decision making.

Another US congressman has accused Georgia of triggering the conflict despite the Bush administration’s taking side with Tbilisi.
“The recent fighting in Georgia and its breakaway region was started by Georgia. The Georgians broke the truce, not the Russians! And no talk of provocation can change that fact,” said Congressman Dana Rohrabacher.
Senator Hillary Clinton who attended the session said: “Rather than seeking to isolate them - which I think is not a smart proposal - we should be more strategic. We have to answer for ourselves: Did we embolden the Georgians in any way? Did we send mixed signals to the Russians?”
“For many months my colleagues and Secretary Rice had been telling the Georgians clearly and unequivocally that any military action initiated by them would be a mistake and would lead to a disaster,” Undersecretary of Defense Eric Edelman said during the hearing.
The US is backing the operation of the Baku-Tbilisi-Ceyhan pipeline which pumps crude oil from the Caspian Sea to the Mediterranean via Georgia and without reliance on Russia.

You Know It's Serious When They Halt Stock Trading

Russia Gives Banks Cash, Halts Stock Trading to Head Off Crisis
Wednesday, September 17, 2008
Sept. 17 (Bloomberg) — Russia halted stock trading for a second day, poured $44 billion into its three largest banks and relaxed restrictions on lenders to stem the worst financial crisis since the nation defaulted a decade ago.
The central bank slashed reserve requirements for banks, freeing up as much as $12 billion, and the Finance Ministry allowed OAO Sberbank, VTB Group and OAO Gazprombank to borrow the $44 billion for three months. The benchmark Micex index plunged as much as 10 percent, bringing its three-day decline to 25 percent.
Russia’s markets are facing the biggest test since the government defaulted on domestic debt in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation’s stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman Brothers Holdings Inc. and American International Group Inc. prompted a flight from emerging markets.
“I will tell my clients today to continue to abstain from buying Russian assets” until economic problems are solved, said Zina Psiola, who manages a $1 billion Russian equities fund at Clariden Leu AG in Zurich.

The cost of lending has soared to a record, with the MosPrime overnight rate reaching 11.1 percent today, deterring speculative bets in equities. Russian stocks have lost more than $425 billion in value since reaching an all-time high May 17.
The Moscow-based brokerage KIT Finance said it’s in talks with investors to sell a stake after failing to meet some financial obligations related to repurchase agreements.
`Heightened Risk’
“Heightened counterparty risk means that the only place to raise cash is the equity market,” said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. “Every time the market opens we have selling to meet margin calls, which triggers stop-losses, more margin calls and redemptions.”

Bank Sector Looking Rough

Bleak outlook for banks
By Michael Hewson
Wednesday 17 Sep 2008

In an article written on 27th August I pondered whether there would be more bad news from the banking sector and the likelihood of the industry remaining under pressure. It appears that my fears were well founded.

The wheels continue to come off and I can’t really say that it has come as a surprise. Lehman has filed for Chapter 11 bankruptcy, while Merrill Lynch has been bought by Bank of America and AIG is currently seeking emergency funding – if they fail they could well be next.

Bank shares will continue to have limited upside until the full extent of this crisis becomes apparent. There was never really any possibility that US treasury Secretary Henry Paulson would extend the help given to Fannie Mae and Freddie Mac to Lehman and this resulted in any possible interested parties in walking away from a deal. The problem now is to establish the number of banks exposed to Lehman. The Federal Reserve is expected to try and help banks exposed to Lehman’s by using a wider range of collateral to borrow funds. However, I can’t help thinking that this could be akin to sticking a band aid on a shrapnel wound.

It’s difficult to estimate what impact Lehman’s failure, or that of any other bank, will have on future write-downs. This in turn will make the remaining banks more reluctant to lend to each other less more of their number go the same way as Lehman, which will serve to tighten up the credit markets even further.

Due to the complexity of the financial instruments involved it will be a very long time before anyone can hazard a guess as to the likely cost of all this with respect to the remaining banks and their indebtedness towards each other. It could well be that we will see more banks fail over the coming months. Former Fed chief Alan Greenspan certainly seems to think so, and I believe we should be very concerned at the exposure of some of our own financial institutions and hope that they have been a little more prudent than their American counterparts. Certainly judging by the share price declines over the past couple of days in RBS and HBOS the market is very nervous about their balance sheet exposure.

The wider impact on the UK economy cannot be underestimated with the resulting job losses that will ensue both here in London and overseas from the fall-out from these events. The CBI is already predicting 2 million unemployed by the end of 2009 and inflation is continuing to edge towards 5%. Food prices alone rose a record 14.5% and energy prices have risen on average over 20% over the past 12 months! If inflation continues to hold at these levels it is highly unlikely that the Bank of England will be able to ease monetary policy at all this year, even if it wanted to in order to alleviate some of the pain.

For the time-being with respect to banking stocks I still think it is a question of watch this space – there is probably more bad news to come.

Like A Falling House Of Cards.....Economy Is Crumbling

The End of the Blue Chip Economy
Wednesday, September 17, 2008
AIG, the quintessential blue-chip, one of the 30 companies that compose the Dow Jones Industrial Average, a company that in 2000 boasted a market capitalization of $217 billion, making it the largest financial institution in the world, is teetering on the brink of collapse. Worth just $7 billion today, the future of what was until recently the world’s largest insurance company is hanging by a thread—that thread being the willingness of Wall Street institutions like Goldman Sachs and Morgan Stanley, themselves facing credit issues, to come up with $75 billion in rescue loans.
It used to be that investors who were worried about financial markets, or who didn’t like to take big risks, would put their money in what were called “blue chips”—companies that were deemed conservative, safe investments that could weather any storm. They had names like AT&T, General Motors, Ford, Boeing…and AIG.
Well, AT&T is a shadow of its former self, GM and Ford are both being talked of as dead men walking by analysts, Boeing is on life-support, or, since it is being propped up by its military contracts, more appropriately death support, and AIG, well, it’s already got one foot in the grave.
There really are no blue chips any more. The largest companies in the world, as Enron showed, can vanish overnight in a puff of smoke. Look at Lehman Brothers. Here today, then, poof, gone tomorrow.

In AIG’s case, if the insurance giant goes under, it may take a lot with it.
An article today in the Australian daily The Australian (Rupert Murdoch’s NewsCorp flagship and hardly a Marxian rag) put it this way:
Should the US Federal Reserve fail in last-ditch efforts to secure breathing space for AIG, then sub-prime’s cascading woes will have slowly smashed financial markets into worse shape than the legendary market meltdown of 1987.
And, from there, governments and banking regulators alike will have to ponder the previously unthinkable: are we on the way to a place comparable with 1929?
So what are anxious investors to do? Clearly there are no safe harbors in the stock market, which could as easily drop 40 percent or 70 percent tomorrow as rise 3 percent. Bonds don’t look much better. They may be more stable than equities, but not if the company that issues them goes bust. Then they are worthless scraps of paper, no better than the share certificates for Fannie Mae that are now being used to line cat litter boxes. The ratings agencies, like Standard&Poors and Moody’s, while exercising their usual timidity about downgrading a major corporate entity, have belatedly knocked AIG’s credit rating down two notches today, which is their way of hinting that if you are an AIG bondholder, you have a significantly greater chance of losing your shirt.
Nor is it just investors who have to fear. Individuals who have tried to protect their families by purchasing life insurance policies, or who have sought to establish a secure retirement income by buying annuities from AIG, need to worry about whether the company will be around to make the payments when they or their beneficiaries need them. Sure, the states, which are responsible in the US for regulating the insurance industries, for the most part have established reserve funds to backstop insurance carriers, but like the FDIC which insures bank deposits up to only $100,000, these funds generally only back the first $100,000 of insurance or annuity coverage as a “cash surrender” value, or $300,000 as a benefit payout. But those state guaranty funds were designed to protect people from failures of fly-by-night insurance operations. They are woefully underfunded for companies on the scale of AIG.
AIG is such a giant in the insurance business that as one corporate treasurer told The Australian:
“If AIG collapses, then the world doesn’t have insurance.”
The New York Times, commenting on fears among ordinary people that their insurance or their annuities may not be there when needed, quoted one insurance adviser, Glenn Daily, who said a client who was an AIG policy holder was borrowing the maximum against his life policy, planning to park that money somewhere to see if the AIG crisis blows over. But he added darkly, “If everyone does this, the company could be driven out of business.”
Actually, it’s worse than that. As Michael Lewitt, a Florida-based money manager, wrote today in an opinionarticle in today’s New York Times, AIG is a key player in the $60 trillion (yes that’s trillion with a “T”!) credit swap default market, a huge, international and wholly unregulated field in which hedge funds play, and whose collapse would make the 1929 Great Crash look like a minor fender-bender.
So that’s what it’s coming down to. There are no Blue Chip refuges from the rolling disaster that is the US economy today. And there are no easy rescues—indeed according to one theory Treasury Secretary Henry Paulson let Lehman Brothers go bust because he knew he needed what funds the Treasury has left to try to keep AIG alive. It’s all a fragile, interconnected house of cards, propped up by a residual faith among ordinary investors who, at least so far, still think it has some kind of inherent structure to it. As card after card gets pulled out of that rickety stack—first Bear Stearns, then IndyMac Bank, then Fanny Mae and Freddie Mac, then Lehman Brothers, now perhaps AIG and Washington Mutual, a large savings institution that is on a death watch—at some point those investors and now insurance clients, too, may all decide to take their money and go home, and the whole thing will come crashing down.
The good news is that, if the US economy collapses, the Pashtun farmer in northeastern Pakistan, the Iraqi shopkeeper in Fallujah, the Iranian worker in Tehran, and the peasant in Venezuela, will no longer have to worry about being bombed or having their children mowed down by a US helicopter gunship. The US would no longer have the funds to pay for such foreign wars. And because a collapse of the US consumer economy would also drag the rest of the world into a prolonged global slump, perhaps reminiscent of the 1930s, we might actually see a significant enough drop in carbon emissions from idled cars, factories and power plants that the global warming catastrophe that is threatening us all will be significantly delayed, giving humanity time to come up with a serious long-term response.

Russian Bear Growling Again.......

Russia is determined to bring NATO’s expansion eastward to a halt
Wednesday, Sept 17, 2008
NATO’s metamorphosis from Cold War Euro-policeman into the unabashed global military arm of the United States over the past 18 years has left a trail of debris from the Balkans to Afghanistan that will take decades to clear. It is a flagrant violation of the agreement James Baker III made with Soviet president Mikhail Gorbachev that the US would not extend the borders of NATO eastwards in return for Moscow allowing a united Germany to be a member of NATO.
Russia was still in disarray and in no position to protest when the Eastern European countries and the Baltics joined, but as this policy of expansion turned into a blatant encirclement of Russia and a conquest of the Middle East, a furious, now self-confident Russia has finally drawn the line, at least in its immediate neighbourhood, with Georgia and Ukraine the last straws.
In a provocative analogy, Russian President Dmitri Medvedev called Georgia’s 8 August attack on Ossetia Russia’s 9/11, and said Russia would react the same even if Georgia is accepted as a prospective member of NATO. He announced to the Russian Information Agency 31 August “Five Points of Russian foreign policy” already dubbed the Medvedev Doctrine, as a response to what we might call the Bush I/ Clinton / Bush II Doctrine, i.e., the dismemberment of the USSR / Russia to ensure a US-dominated unipolar world. They include:
a commitment to the principles of international law,
a statement that “the world should be multipolar,”
the wish to have peaceful friendly relations with all nations,
the intent to protect its citizens “wherever they may be,” and
the decisive fifth point: “as is the case of other countries, there are regions in which Russia has privileged interests. These regions are home to countries with which we share special historical relations and are bound together as friends and good neighbours. We will pay particular attention to our work in these regions and build friendly ties with these countries, our close neighbours.”
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The crisis in Georgia will be seen by future historians as the beginning of the end for the grandiose plans of the US to bring its version of a New World Order in Eurasia to fruition, if not “Russia’s 9/11.” Instead of a seemingly inexorable march towards the Volga and the dismantling of the Russian Federation — recall this was Hitler’s goal — we are now witnessing war preparations at full tilt across the globe, with little Georgia as the catalyst.
The spider’s web of intrigue surrounding Georgia is thick indeed. It even reaches as far as Iran , which Israel appeared to be preparing to attack using nearby Georgian bases as a launching pad. This plan has been thwarted for the moment, though Iran proceeded last week with its war games to test its defences in anticipation of a US/Israeli attack from farther afield.
As Georgia welcomes a permanent US military presence to help restore its battered army, Russia is expanding its military presence at Tajikstan’s Gissar Airport. As the US positions missiles in Russia’s neighbours, Poland and the Czech Republic, Russia is preparing to hold joint naval drills with US neighbour Venezuela (10-14 November) and station long-range anti-submarine patrol aircraft there “temporarily.”
The Russian navy has resumed its (or rather its predecessor’s) presence in different regions of the world’s oceans. A naval task force from Russia’s Northern Fleet conducted a two-month tour of duty in the Mediterranean Sea and North Atlantic from December 2007 to February 2008.
Russia’s Foreign Ministry spokesman Andrei Nesterenko insisted that Russia’s decision to send its armed forces to Venezuela was made before Russia’s war with Georgia. “This deployment had been planned in advance, and it’s unrelated to the current political situation and the developments in the Caucasus.” But the announcement was made just a week after Prime Minister Vladimir Putin warned that Russia would mount an unspecified response to recent US aid shipments to Georgia.
Thankfully, the war is still at the level of hot air. “Go ahead and squeal, Yankees,” Venezuelan President Hugo Chavez said in a national broadcast in which he announced the exercises. The US mocked the announcement. State Department spokesman Sean McCormack poked fun at Russia’s navy, expressing surprise that “they found a few ships that can make it that far.” Just in case Venezuela is too far from US shores for the outmoded Russian vessels, Russia has signaled it is keen to restore military and intelligence ties with Cuba. There are rumours it is seeking a naval base in Vietnam.
Not to be left out of the increasingly complex maritime equation, in June the US Navy announced it was reestablishing the Fourth Fleet, disbanded in 1950, which would direct naval operations in the Caribbean and Latin America. It is also negotiating with Georgia and Turkey to establish a naval base at the Georgian port of Poti. One of the responsibilities of US Special Forces in the region is to ensure the security of an oil pipeline passing through Georgia.
As US “aid” flows to the Black Sea in US warships, Russian military hardware flows to the Caribbean, as Venezuela recently bought 24 Russian Sukhoi fighter jets, as well as submarines and missiles. Chavez has said that he would allow Venezuela to be a strategic base for Russian bombers should it be required. “In Venezuela they will always have a green light, they will be welcome, because Russia is an ally of Venezuela,” said Chavez. He proceeded to expel the US ambassador last week until after the November presidential elections.
Sergei Markov, a United Russia Duma member, sees this as posturing rather than the prelude to setting up a permanent base in the Americas. “We need bases on the territory of Iran and Syria where our strategic interests lie.” While it indeed looks like Russia will re-establish a permanent presence in the Mediterranean using a Soviet-era base in Tartus, Syria, this talk of bases in Iran is a new development. It is rumoured that Russia may set up bases there and supply Tehran with the cutting edge S-300 missile system to help protect its nuclear facilities from airstrikes.
But apart from Venezuela, the main posturing is going on in Tbilisi, where President Mikhail Saakashvili insisted the West would help his country regain control of South Ossetia and Abkhazia, the separatist regions of Georgia recognised as independent nations by Russia and a trickle of other countries, including Nicaragua and Belarus. “Our territorial integrity will be restored, I am more convinced of this than ever,” Saakashvili said in a televised appearance. “This will not be an easy process, but now this is a process between an irate Russia and the rest of the world.”
The hot air and military strutting by this collection of antagonists is beginning to look like the calm before the storm. If it is true that US military were part of the invasion of South Ossetia, if only as advisors, this could mean that Russian soldiers might have been killed by Americans, something that never happened even during the height of the Cold War. During the Cold War, “the sides were very careful of each other. They were careful not to come too close,” said Alexander Pikayev. “The risk of direct military clashes is much higher. This situation is much riskier than the Cold War.” Both US presidential candidates are talking tough, and vice presidential hopeful Sarah Palin said, “We will not repeat a Cold War,” presumably meaning she preferred a hot one.
In such a hair-trigger atmosphere, Ukraine and Georgia can kiss any dream of joining the ersatz Western “defence” alliance do svidania.
Nevertheless, last week Vice President Dick Cheney toured ex-Soviet countries the US considers threatened by Russia, including Ukraine, Georgia and Azerbaijan, promising Georgia $1 billion (where do these nice round sums come from?), vowing the US will continue to back the country’s NATO application and saying that Moscow’s intervention “cast grave doubt on Russia’s intentions and on its reliability as an international partner.” In Ukraine, he spoke of the “threat of tyranny, economic blackmail and military invasion or intimidation” from Russia. That is an interesting slant on the Medvedev Doctrine. The reader can easily conjure up appropriate words that Medvedev might use to describe the Bush I/ Clinton/ Bush II Doctrine.
Ukraine is now embroiled in a mud-slinging match, with the collapse of the coalition government 3 September, when President Viktor Yushchenko withdrew his support over the refusal of Prime Minister Yulia Tymoshenko to back the president in his support for Georgia and condemnation of Russia. Yushchenko accused Tymoshenko of “treason and political corruption,” over her failure to back a pro-US stand, and of seeking Moscow’s support of her likely presidential bid. Ukraine’s pro-Russian former prime minister, Viktor Yanukovich, who heads the Party of Regions, did not rule out the possibility of forming a parliamentary majority with the Yulia Tymoshenko bloc. Such a move would remove from the discussion the entire issue of a Ukrainian application to join NATO. Tymoshenko could well pull off a metaphorical coup by campaigning in the upcoming presidential elections on a sober platform of peace with Russia, which would very likely hand her the presidency with the support of the large Russian population of Ukraine as well as astute Ukrainians.
Another such scandal is brewing in Georgia itself, with the arrest of former President Zviad Gamsakhurdia’s son Tsotne as a Russian spy smack in the middle of Cheney’s visit to Georgia. He was charged in late 2007 with an attempted coup and links with Russian security services after opposition protests against Saakashvili. The voices of sensible Georgians, fed up with President Mikheil Saakashvili’s reckless chauvinism, are clearly being cut in the bud, as he consolidates a very nasty dictatorship backed by the Americans and Israelis. Of course, all Western media coverage of Georgia slavishly supports this loose cannon, but Medvedev’s description of him as “a political corpse” probably is closer to the truth.
It is hard not to sympathise with the Russians. The Black Sea, once the domain of the Soviet navy, now is the home of three NATO members — Turkey, Bulgaria and Romania — and two applicants, Georgia and Ukraine. If the two applicants join the alliance, Russia’s Black Sea coastline would be surrounded by NATO. The volatile Caucasus would then be the playground of the US.
“Now it looks like there is a certain red line that exists in the heads of Russian leadership and they are willing to do anything to stop it from being crossed,” said Nikolai Petrov, at the Carnegie Endowment for International Peace. “And this red line is Ukraine and Georgia joining NATO.”
Russia’s success in thwarting the Georgian attempt to wrest back Ossetia has shown its resolution. Russian warships have been sent to the coast of nearby Abkhazia. In the relatively close proximity in which the Russian and American ships operate there and elsewhere in the Black Sea , one misunderstanding could create an international incident. “We remember very well the Tonkin Gulf incident” in which untrue reports of North Vietnamese ships firing on US ships started the Vietnam War, said Markov. This was seconded by Republican California Congressman Dana Rohrabacher in a sharp criticism of US support for the Georgian attack.
Aleksandr Dugin, whose ideas about America’s weakening geopolitical standing are popular with many Russian leaders, said Russia was challenging US dominance and that confrontation may be unavoidable. Russia’s move into Georgia was “an irreversible decision that will mean in the future a serious, profound, irreversible confrontation with the United States. The stakes are so high that Moscow has placed all its chips on the table.”
It is not surprising that the Shanghai Cooperation Organisation, which includes Russia, China and the former Soviet Asian republics Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan , are supporting Moscow for “assisting peace and cooperation in this region.” Nor that Armenia and Belarus also support Russia, and the non-Yushchenko forces in the Ukraine are backing away from the flirtation with NATO. It is clear now that the US has insufficient power to cope with the occupations of Iraq and Afghanistan. Both were to have been an essential part of a US policy to militarily control Eurasian rivals, especially Russia and China.
If the Russians hold firm, and it is worth remembering their spectacular defeat of the Nazis at Stalingrad in this regard, this crisis will defuse with or without fireworks, US hawks will find their feathers clipped, and the world will adjust to a “post-America” multilateral sanity.
The tide has already turned. The latter-day Dr Strangelove was pointedly ignored on his cheerleading tour of countries supposedly threatened by Russia, except by his pal Saakashvili, and the European Union disregarded the US veepee’s bluster, hammering out an agreement with Russia to replace Russian troops with EU observers in undisputed Georgian territory by 1 October.
The bottom line here is a very mundane one: the EU is Russia’s neighbour and dependent on it for gas, whether her politicians like it or not. It is one thing for the US to wage wars far from its shores, as it is doing in Afghanistan and Iraq, or to play war games in other people’s backyards, as it is doing in Poland and Georgia, but it is quite another thing to expect a war-weary Europe to sign up and prepare to freeze in the dark.

It's Like They Want WWIII

Russia threatens to seize swathe of Arctic
Miriam ElderLondon TelegraphWednesday, September 17, 2008
President Dmitry Medvedev said that Russia should unilaterally claim part of the Arctic, stepping up the race for the disputed energy-rich region.
“We must finalise and adopt a federal law on the southern border of Russia’s Arctic zone,” Mr Medvedev told a meeting of the Security Council, in remarks carried by Interfax news agency.
“This is our responsibility, and simply our direct duty, to our descendents,” he said. “We must surely, and for the long-term future, secure Russia’s interests in the Arctic.”

Global warming has stepped up the fight for the disputed Arctic, believed to be laden with vast reserves of oil and gas. Russia has pitted itself against Canada, Denmark, Norway and the United States to fight for a greater part of the region, arguing that most of it is Russian territory since an underwater ridge links Siberia to the North Pole’s seabed.
Last August, a Russian mini-submarine carrying politicians and scientists plunged to the depths of the Arctic and claimed to plant a Russian flag to mark Moscow’s stake in the territory.
Footage of the alleged planting was widely broadcast on Russian television – but later turned out to be images taken from the Hollywood blockbuster Titanic.
Under international law, each of the five countries that lay claim to the Arctic own a 320-kilometre zone that extends north from their shores. That arrangement is up for UN review in May next year.
Vladimir Putin, now Russia’s prime minister, has said global warming is good for Russia – melting its vast icy territories to reveal previously inaccessible oil and gas reserves.

The Mighty Soros Will Be Dancing On Your Financial Grave

Soros Compares Mishandling Of Current Crisis To Great Depression
Billionaire investor slams Paulson, says we’re heading into a financial storm
Wednesday, September 17, 2008
Billionaire investor George Soros has slammed US Treasury Secretary Hank Paulson for behaving in the same manner as bankers in the 1930’s and mishandling a financial crisis that threatens a repeat of the Great Depression.
Soros told BBC Newsnight that the world was merely at the beginning of a financial storm and warned, “We mustn’t allow the financial system to collapse as it did in the 1930s.”
Referring to Hank Paulson, the US Treasury Secretary, Soros stated, “The way Paulson is handling the situation is reminiscent of the way the bankers handled it in the 1930s.”
He added: “The financial system has gone overboard and the financial engineering has grown to big, it takes up too big a share in the world’s resources.”

“Now it is shrinking. When it becomes regulated it will be less profitable than the last 25 years.”
Soros, a former member of the Board of Directors of the Council on Foreign Relations, is ranked by Forbes as the 99th richest person in the world with a net worth of around $9 billion.
Ironically, Soros made his name by reaping the dividends of another financial meltdown when he “broke the Bank of England” by short-selling the pound sterling before the currency dropped out of the European Exchange Rate Mechanism in 1992, landing Soros a profit of around $1.1 billion.

In 2006, the highest court in France upheld a conviction that Soros had practiced insider trading when he bought shares in French bank Société Générale after discovering that the bank was on the verge of a takeover.
Soros has repeatedly predicted fiscal armageddon, writing three books about a “superbubble” that is on the verge of collapse.
In response to those accusing him of crying wolf in an effort to panic financial markets and benefit from the fallout, Soros stated, “I have a record of crying wolf…. I did it first in The Alchemy of Finance (in 1987), then in The Crisis of Global Capitalism (in 1998) and now in this book (2008’s The New Paradigm for Financial Markets). So it’s three books predicting disaster. (After) the boy cried wolf three times . . . the wolf really came.”
Respondents to a Daily Mail article about Soros’ comments accused the financier of engaging in wanton hypocrisy.
“I don’t know why on Earth they interview Soros since he has been proven again and again to deliberately spread financial rumour for his own exploitation and gain,” wrote one, “Soros became a multi multi billionaire precisely through manipulating markets like this - if this man says that we are heading for a 1930’s style crash you can guarantee he already has plans to profit from it.”

Gold Has Huge One-Day Uptick

Gold Soars Most Since 1999, Silver Surges on Demand for Haven
By Pham-Duy Nguyen
Sept. 17 (Bloomberg) -- Gold surged the most in nine years as investors sought the safety of precious metals on concern that the credit crisis will deepen, leading more financial institutions to fail. Silver soared the most since 1979.
Equities tumbled after the Federal Reserve took over the biggest U.S. insurer. The cost of borrowing dollars for three months jumped the most since 1999 as banks hoarded cash. Central banks in the Phillipines and Venezuela said they may buy gold. In March, the metal reached a record as the government steered JPMorgan Chase & Co. to buy Bear Stearns Cos.
``People are worried about money being safe in a bank,'' said Ron Goodis, the futures trading director at Equidex Brokerage Inc. in Closter, New Jersey. ``With paper assets in question, gold represents the textbook storehouse of value.''
Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce on the Comex division of the New York Mercantile Exchange. The dollar increase was a record for a most-active contract, and the percentage gain was the biggest since Sept. 28, 1999. The metal reached the all-time high $1,033.90 on March 17.
Silver futures for December delivery rose $1.158, or 11 percent, to $11.675 an ounce, the biggest gain since Dec. 31, 1979.
Gold is up 1.5 percent this year, while silver still is down 22 percent.
Gold for immediate delivery surged $84.67, or 11 percent, to $864.42 at 4:42 p.m. New York time. Spot silver was up 15 percent to $12.
The dollar fell 1.2 percent against a weighted basket of the euro, yen and four other major currencies.
Financial `Catastrophe'
``When you're perhaps facing a catastrophe in the U.S. financial market, investors are thinking: `Screw it. I'm jumping back into the old faithful,''' said Joel Crane, a metals strategist at Deutsche Bank AG in New York. ``Gold's relative value is cheap compared with the dollar.''
About $2.8 trillion of market value was erased from global stocks this week as Lehman Brothers Holdings Inc. filed for bankruptcy, Bank of America Corp. purchased Merrill Lynch & Co. for $50 billion, and the U.S. government took control of American International Group Inc. in an $85 billion takeover to prevent the biggest financial collapse ever.
Russia halted stock trading for a second day and poured $44 billion into its three biggest banks in a bid to halt the worst financial crisis in a decade.
``You're sorting out, by process of elimination, that gold is the asset you'd rather own,'' said Greg Orrell, who manages the OCM Mutual Fund at Orrell Capital Management Inc. in Livermore, California. ``It's the currency you'd prefer.''
Rates Plunge
U.S. Treasury three-month bill rates dropped to the lowest since at least 1954. Investors pushed the rate as low as 0.0304 percent.
``It's not even worth it to keep money in the bank,'' said John Licata, the chief investment strategist at Blue Phoenix Inc. in New York. ``Gold is going to be the beneficiary of a global move toward a safe haven.''
Reserve Primary Fund, the oldest U.S. money-market fund, yesterday became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman.
``That's systemically scary,'' said Frank McGhee, the head dealer of Integrated Brokerage Services LLC in Chicago. ``Unless you put gold in your backyard, you have to trust your money to an institution.''
Gold's gains accelerated after prices topped $800, analysts said.
``There are going to be more banks that will fail,'' said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. ``This is the time when people want to buy gold.''
London-based researcher GFMS Ltd. said gold may rise to $950 by the end of the year as central banks and mining companies hold back sales and investors buy the metal as a haven against falling equities.
Mortgage Meltdown
Since the second quarter of 2007, banks worldwide have posted $517.7 billion in losses and writedowns related to investments in subprime mortgages. The Fed has also engineered $200 billion in takeovers for Fannie Mae and Freddie Mac, the biggest providers of financing for U.S. homes.
The world's central banks, already the biggest holders of gold, may look to the metal as an alternative reserve asset to the dollar, said Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia. Until today, Gartman had been bearish in his outlook for gold.
Venezuela said today it may buy 15 metric tons of gold a year to develop investment products, including coins. At a conference in London, Maria Ramona Gertrudes Santiago, the managing director of the treasury at the Phillipines Central Bank, called gold a ``perfect hedge.''
Sales of gold by European central banks may total 365 metric tons in the year through Sept. 26, below the cap of 500 tons, the World Gold Council said yesterday. That would mark the lowest amount since the banks agreed to sell the metal in 1999.

Economist Fires A Real Warning Shot

Nobel Prize Winning Economist: Crisis As Bad As Great Depression Or Worse
Former chief economist for the world bank says “you have to be in fantasy land to say that everything is fine”
Wednesday, Sept 17, 2008
Two time Nobel-prize winner and former chief economist of the World Bank, Joseph Stiglitz has warned that the current financial crisis will continue for at least another eighteen months and in many ways represents a worse situation than the one faced by Americans during the great depression of the 1930s.
“You can paper things over for a while but eventually you have to face reality.” Stiglitz told the nationally syndicated Alex Jones show yesterday.
“This is clearly the most serious problem since the great depression and in some ways worse in terms of the financial institutions.” Stiglitz commented, referring to the fact that lenders are unwilling to take risks to finance each other because they no longer have complete access to their own undertakings let alone those of other institutions.
“The reason, in part, is that while some of the same problems that occurred during the great depression and have occurred since, such as excessive leverage, pyramid schemes, bubbles, have happened before, the so called innovation of Wall Street, the financial innovations, that were supposed to manage risk, created a kind of non transparency that is now so great that no one knows exactly the magnitude of the risk they face.”

“It is particularly bad because our financial institutions are based on trust, you put the money in the bank and you trust that you can get your money out, so trust is absolutely essential for the functioning of our financial markets and the functioning of our economy.” he continued.
“The problem is that much of the news on what is going on in the financial markets comes from those who are making money out of the financial markets. So if you were one of the people involved with Lehman Brothers or AIG, you’re going to be talking up the economy. The head of Lehman Brothers was quoted last April as saying we have turned the corner, the economy is on the uptick. And the same thing goes for the president

Sorry Folks {SOC Original!} Financial Collapse Edition (9/17/08)

I need to apologize to my regular readers about my lack of postings lately. I've been dealing with this earth-shaking financial collapse by devoting time and eenergy to my own finances.

This may be it folks. I hear the snorting of War Horses and the 4 Riders may be saddling up.

Short-term:

1. Stock up on some canned goods and fill your freezer with quality foodstuffs. I'm being serious here. You'll kick yourself if there's a temporary supply hiccup that causes runs at the grocery stores. Don't deplete your savings in doing so, just enough to last 3-to-4 weeks if there is a temporary break in supplies.

2. Pay your bills. Desperate companies may look to repossessions to even their balance sheets. Pay your bills on tiome and eliminate debts whenever possible.

3. It goes without saying, don't acquire any new items that need financing or regular payments. It's not worth it in these uncertain times. Deal with the old car, old TV or home electronics. Don't make any new credit purchases.

4. Take a few steps down. Get your cel-phone bill lower, you don't need that many minutes anyways. Put the teens on limits with their minutes. Consider going to the next lower tier for your cable TV. Cut back on magazine subscriptions, read'em at the library.

5. Utilize free services like the town library and playgrounds for the kids.

6. Start making plans for next spring's garden; whether you like gardening or not. It'll be a necessity and it will take a dent out of your escalating grocery bills. Some type of fruit tree will grow wherever you live. Look into it.

7. If available (brace yourself) look into a part-time job to add supplementation to your salary. Use it to offset gas and grocery bills. Even better, save a certain amount and use it to invest in some income-producing investment vehicles. The key is to have a goal as to what you'll use the money for and then stick to it.

8. Pray, worship or meditate. Keep your loved ones close and keep track of your good neighbors. You'll need to pull together if things get as rough as I think they will. Whatever religious, neighborhood or ethnic community you ascribe to - be available and care for eachother. The government will not be there for you.

9. Start educating yourselves now on Depressions and Economic downturns. People have lived through these before, and they'll live through them again.

There's Money In Dirt

“There’s a growing shortage of quality topsoil around the world. Quality soil is loose, clumpy, filled with air pockets and teeming with life. It's a complex microecosystem all its own. On average, the planet has little more than 3 feet of topsoil spread over its surface.
“The problem is that we're losing it faster than we can replace it. We lose topsoil to development, erosion and desertification. In the U.S., the National Academy of Sciences says we're losing it 10 times faster than it's being replaced. The U.N. says that on a global basis, the rate of loss is 10-100 times faster than that of replacement.
“And replacing it isn't easy. It grows back an inch or two over hundreds of years. Fertile soil -- good dirt -- may become more important to land values than oil or minerals in the ground.”

Caustic Comment About Freddie & Fannie CEO's

“Everyone seems to be surprised that Dan Mudd and Richard Syron are walking away with millions. I thought every adult knew the adage that it pays to be an insider. What would be the point of being an insider if you didn't fleece the general public? This might not be capitalism at its best, but it is surely human nature at its most typical.”

Commodity Price Dump

The real reason commodities are tumbling

JOHN HEINZL
Globe and Mail Update

September 10, 2008 at 6:00 AM EDT
To hear Donald Coxe tell it, the commodity selloff ripping through Canada's stock market is no accident. It is the result of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury.
Mr. Coxe is no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America. He also happens to have lost about 10 per cent of his personal wealth in the commodity rout, which came at the worst possible time for his Coxe Commodity Strategy Fund that started trading in June.
“This has done more damage to my personal wealth than anything in the last 20 years,” he said in an interview yesterday. But he has too much respect for how the U.S. authorities engineered the collapse in commodities – a move he said was necessary to shore up the global financial system – to be bitter.
“My attitude is, goddamn it, they're good … it was brilliant.”
To understand why commodities are plunging now – the S&P/TSX plummeted another 488 points yesterday – you have to go back to mid-July, when the U.S. Federal Reserve and Treasury first announced steps to support mortgage giants Fannie Mae and Freddie Mac.
The move, which ultimately led to the Treasury taking control of Fannie and Freddie this week, touched off a chain-reaction of market events that culminated with the wrenching decline in commodities.
According to Mr. Coxe, the Fed's ultimate goal was to trigger a rally in financial stocks, which would, in theory, help banks hammered by the credit crisis raise fresh capital and repair their balance sheets. To accomplish this, the decision to support Fannie and Freddie was deliberately announced on a Sunday, which had the effect of maximizing the reaction from thinly traded financial stocks on overseas markets.
Because many hedge funds were using massive leverage to short financials and go long on commodities, when North American markets opened and banks initially rallied, the funds were forced to cover their short positions.
At the same time, the U.S. dollar was rallying because the risk of holding Fannie and Freddie paper had diminished. The rising dollar, in turn, made commodities less attractive, giving funds that were already scrambling to cover their financial shorts another reason to dump oil, grains and other commodities.
The losses were swift and dramatic. On the Friday before the July 11 announcement, crude oil closed at $145.18 a barrel. Over the following five days, it plunged 11 per cent. “Leverage was being unwound dramatically,” Mr. Coxe said on a conference call last week. “We had a true panic.”
As oil and other commodities were tumbling, fears about the slowing global economy were mounting, giving resources another push downhill. This was also in keeping with the Fed's wishes, because lower commodity prices would help quell fears about inflation.
Mr. Coxe has no proof that the Fed and Treasury acted in concert to boost financials and sink commodities. He is basing his assertions on conversations with hedge fund managers and on years of watching financial markets. “There's no doubt whatever in my mind” about what happened, he says.
The future is less certain, however. Now that Freddie and Fannie have been nationalized, the credit crisis is still very much alive and financial stocks are looking as shaky as ever. As for commodities, once the current storm passes, Mr. Coxe is confident they will recover.

Crooked Government Officials...So What's New?

Also catching headlines in the oil patch today -- and you’ll NEVER believe this -- the government officials who handle energy royalties in the U.S. have been accused of corruption . Gasp!
The media is shocked to learn this morning that at least 13 members of the government’s Minerals Management Service are accused of accepting gifts from major energy companies, including vacations, dinners, drugs and sex. Frankly, we’re shocked that’s all they were caught doing.
“It's open season, on the idea of leasing and energy development on federal lands. There's a clique out there -- the usual suspects -- that is looking for any reason to derail the energy development process for fossil fuels. What better way to do this than to highlight how the ‘process is broken.’ OK, a few people are crooked... so that means we can't do what the energy developers want to do, right? Screw that ‘Drill, drill, drill’ stuff, eh?”

Germany, Spain, Britain..............Going Down!

Germany, Spain and Britain will all fall into recession this year, says the latest from the European Commission, the economic data arm of the EU. We brought you the commission’s gloomy eurozone growth forecast yesterday. Today, the details are looking even more dramatic:
According to EU statistics, Germany experienced two consecutive quarters of economic contraction between April and September, a technical recession. Outside the EU’s commission, we see similar indicators. For example, the Ifo Institute announced today that German consumer sentiment has fallen to a five-year low.
Similarly, the EU forecasts Spain and Britain will experience at least 0.1% “negative growth” in the last two quarters of this year. They might be right… in national measurements of GDP, Spain, Britain, and France all missed growth estimates in the second quarter.

Russian Stock Market Hitting Skids......

The Russian stock market is looking so desperate the government is considering using sovereign wealth fund money to prop up investors. Russia’s energy intense market has gotten slammed since oil’s big summer pullback. Coupled with a globally unpopular war in Georgia, a quick look at the RTS Index says it all… money is racing for the exits in Mother Russia.
The RTS Index fell 7% on Tuesday, as commodities retreated, global markets declined and credit conditions in Russia worsened. “President” Medvedev responded by pumping $10 billion in the market to improve liquidity, the biggest such cash injection in over a year. Russian investors returned that favor by selling the market down another 5% yesterday.
So this morning, Finance Minister Alexei Kudrin said he is mulling “a proposal to place pension fund money and national wealth fund money on the domestic market.”
Using SWF profits to prop up domestic equities? It’s a brave new world.

What Has Changed Since That Fateful Day?

Seven Years After 9-11

What to say, on this seventh anniversary, about the events of September 11, 2001 - "9-11" as it is now universally known?
In "On Nov. 4, Remember 9/11," an op-ed writer for The New York Times reasoned: "The most important thing the next president must do is prevent terrorist groups from executing a nuclear attack in America."
But this begs the question: Is that really the "most important" thing a new president must do? And if so - by that limited measure - hasn't George W. Bush been a highly successful president?
Yes, you could argue that. After all, most rational human beings want to feel safe and secure. And obviously the politicians agree, considering the billions of tax dollars spent on "homeland" security and associated efforts.
But are we too willing to purchase that illusive security no matter what it costs in lost personal freedom and liberties?
Have Politicians Really Learned Anything from Our Mistakes?
The inimitable Oscar Wilde wrote: "Experience is the name everyone gives to their mistakes."
As we observe the anniversary of 9-11 - especially in this election year - Americans have every reason to question whether their would-be "leaders" have really learned anything from those thousands of needless deaths and the events of ensuing years.
Yet in the PATRIOT Act and with unconstitutional secret surveillance, detention, and torture of terrorism suspects, we have sacrificed the very principles that we claimed to be defending.
Remembering that Fateful Day
I was one of those millions of horrified Americans watching television when United Airlines flight 175 crashed into the South Tower of the World Trade Center at 9:02:59 a.m. I too watched in horror as cameras trained on the two towers after the earlier plane crash.
In my mind's eye, I can still see the TV screen with a small black dot moving, right to left, inexorably towards the World Trade Center. I can still see that giant fireball bursting like water from all sides of the second silver tower.
"My God!" my internal voice said, prompted by the instant mass obliteration of so many innocent human lives. The worst was confirmed within minutes by yet another plane smashing into the Pentagon.
After my own sensations of horror, disbelief, anger, and sorrow for the victims, my friend and former House colleague, U.S. Rep. Ron Paul of Texas, expressed my troubled thoughts:
"Times of tragedy and war naturally bring out strong emotions... Sometimes people are only too anxious to sacrifice their constitutional liberties during a crisis, hoping to gain some measure of security. Yet nothing would please terrorists more than if we willingly gave up our cherished liberties because of their actions."
Sad to say, Ron Paul's prediction has come to pass in too many ways.
At the time I noted that "...readers know my view that freedom in the United States has eroded for decades, most assuredly in the area of financial privacy. Having served in Congress I know how panicky politicians react in times of crisis; witness the many liberties we have lost under the false banner of the failed war on drugs."
Some Proper Perspective
Consider some stark numbers. Excluding the 19 hijackers, a confirmed 2,973 people died and about 20 others remain listed as missing as a result of all the 9-11 attacks.
Without denigrating the memories of those souls who died on 9/11, it is worth remembering that in all the many wars America has fought, (including our own bloody Civil War), 1,090,200 have died. Add the 4,150 Americans who have died in Iraq as well as many thousands of Iraqis. That doesn't even count for how many died recently in Afghanistan.
Consider Gen. Robert E. Lee's first invasion of the North, at Antietam Creek in my home state of Maryland. In one day alone, Sept. 17, 1862, more than 23,000 men were killed, wounded, or went missing.
Yes, we all live under the constant threat of terrorism. But because of 9-11 and even with a continuing threat, Americans should never sacrifice the liberties that so many have fought and died for.
Unanswered Question
If you observe how many have been sacrificed for America down through the centuries, it only accentuates the meaning and importance of the greater cause they died for. They died before their time, their promise unrealized, in our country's service.
Those who died on 9-11 were innocent victims of yet another war. It was a religious jihad that some fanatic Muslims saw as the means to impose their twisted view on the entire world.
But the real legacy of September 11, 2001 will be determined by how Americans, as a free people, continue to react to this great provocation. This truly was, and continues to be, America's moment of truth. Whether we pass or fail this crucial test is yet to be determined.
Failure is what we should truly fear.

Nicely Said................

"Uncle Sam not only wants you; he wants your email and your phone calls, and he wants a blank check on your bank account." -Harry Browne

Yup, America Is An Economic Mess

"I'll tell you how it works," said a taxi driver. "You're lucky you live overseas, cause this country is a mess..."
We had been taking a snooze in the back seat. Then, we noticed a jerky movement in the car. When we opened our eyes, we found the cab had drifted to the middle of the road. On the long drive from Charlottesville, VA, to Dulles Airport, our driver was falling asleep.
In attempt to revive him before it was too late, we made conversation.
"I'll give you just one little thing I know from personal experience," the cabbie went on, "I had a call to pick a woman up here in Charlottesville.
She's a Medicare customer. Do you know about that? Well, she had lost her car and she had come up here to the hospital. And then she was ready to go home. But she didn't have a car. And I guess she didn't have anyone to pick her up. She called a cab.
"So I drove her home...all the way down to North Carolina! The fare was $1,100 - which is a lot for a taxicab. But then, she didn't have to pay it. She just signed one of these vouchers. (He showed us a simple white
form...) And then I turned it into the government. So you see, you paid $1,100 to drive her down to North Carolina in a cab!"
The feds have dozens, maybe hundreds, of these absurd programs. When the sun shines, they grow like kudzu. Rain falls upon them like Miracle-Gro.
Fannie and Freddie, between them, have assets of $5.4 trillion and debt of
$1.7 trillion. No one knows how much it will cost to keep them in business, but it is bound to be a big number. And the federal deficit is already as big as it has ever been - and growing. Where will the feds get the additional money to support U.S. housing?
We all know where - they have to borrow it. And now another question: We saw what happened when individuals borrowed too much; all of a sudden lenders didn't want to extend them any further credit. Even Wall Street giants - such as Bear Stearns...and now, Lehman Bros. - can go bust if they borrow too much or speculate too wildly.
Can the U.S. government go bust too? Well...there is that printing press... The federal government can't go broke, technically, because it can pay off its debts with money it prints up, just for the occasion. But in the event, the dollar itself would collapse in value. Foreign lenders would cease to extend credit. And then, the only choices open to the United States would be to cut back...or to print up even more money.
We're a long way from the end of this show...but this takeover of Mae and Mac is a big step toward the final curtain. There are other land mines along the way...read about them in the free Financial Survival Library.

*** Our old friend, Michel, is writing a history of the United States.
"Does the U.S. Constitution authorize the federal government to finance mortgage loans?" he asks.
He might have asked a broader question: is there anything that the U.S.
government cannot do? It can arrest people, put them in jail, and torture them - without even charging them with a crime. It can regulate any business. It can takeover any asset. It can tax and spend - as much as it can get away with.
"At the end of 1817," Michel continues, "Congress passed a law authorizing the federal government to finance several canal routes, to which no one took exception. Monroe, who had just been elected for 1818, supported the law. But President Madison, 'Father of the Constitution,' decided that the law was contrary to the Constitution (or that an amendment was needed) so he vetoed it.
"My goal in this book is to show how, contrary to the intentions of the founding fathers, the Constitution has been interpreted, and twisted, in order to permit the federal government to do all it wanted to do, and that the doctrine of limited government, with powers exhaustively enumerated, has been undermined thanks to the use of two unfortunate expressions in the Constitution - 'necessary and proper,' and 'general welfare,' from which flows the statist doctrine of 'implied powers.'
"It began with Hamilton (and a few texts of Madison in the 'Federalist Papers'), who defended the interests of New England merchants, parenthetically, and it was developed by chief justice John Marshall who, although a Virginian, worked for 34 years at the Supreme Court to make it a very effective weapon against constitutional liberties (subject to some nuances).
"I continue my research, but I think it's all there...that all the arguments for or against 'implied powers' were furnished during the period 1790-1800."

Tax Planning With Your Investments

HOW TO LEGALLY STIFF-ARM THE IRS
by Alex Green
"Be wary of strong drink. It can make you shoot at tax collectors - and miss."
- Robert Heinlein
Arthur Godfrey once said, "I'm proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money."
If you are an investor - paying taxes not just on your income but on dividends, interest and capital gains, as well - you could probably be just as proud for a whole lot less than that.
Fortunately, there is a simple way for investors to keep their annual tax bite to an absolute minimum - and legally stiff-arm the IRS.
You simply need to "tax-manage" your investments.
For example, mutual funds are required by law to distribute over 90% of their realized gains each year. You can get hit with a big tax bill even if you haven't sold a share.
How? Inside the fund, the manager may be buying and selling like mad, turning over the entire portfolio in less than a year. While this doesn't necessarily hurt his annual bonus, it can have a dramatic effect on your real-world returns. After all, you may owe taxes on all those short- and long-term capital gains, even if you haven't sold a single share.
Lipper, a global leader in fund information and analytical tools, recently published a study, Taxes in the Mutual Fund Industry - 2007: Assessing the Impact of Taxes on Shareholder Returns.
It found that taxable mutual fund investors surrendered at least $23.8 billion to Uncle Sam in 2006, just for buying and holding their funds!
Taxes gobbled up 15% of the gross return of the average U.S. diversified equity fund. And the tax hit was even worse for the average U.S. taxable bond fund. Here 38% of the gross return was lost to taxes, nearly double the cost of operating expenses and loads combined.
If anything, this study may have actually understated the tax costs. Why?
Because it included the 2000-2002 bear market in stocks, so tax-loss carry-forwards (and favorable changes in the tax code) actually mitigated the tax burden.
If you are voluntarily surrendering thousands of dollars to the IRS each year, you may feel like your investment portfolio is on a slow boat to China. Fortunately, you can tax-manage your portfolio to increase your real-world returns.
It's not difficult. Here's what you need to know...
Your annual tax liabilities will depend on both your tax bracket and how much of your portfolio is held outside of qualified retirement plans. I'm going to run through a few different scenarios, allowing you to easily adopt the strategy that is closest to your own personal situation.
Let's start with the easiest scenario. If all your long-term money is in a tax-advantaged account like an IRA, Keogh, 401(k), 403 (b), private pension plan or annuity, you can stop sweating.
You're safe from the taxman until you begin making withdrawals. So if all your long-term money is in a qualified retirement plan, you're already home free.
But, if you're like most investors, your personal situation is probably a little more complex. You likely have liquid assets both inside and outside of retirement accounts. In that case, you will need to tax manage your investment portfolio.
The first order of business is to place the right investments in the right accounts for maximum after-tax returns. You'll need to put your most tax-inefficient holdings into your tax-deferred accounts and the remaining holdings in your taxable accounts.
For example, real estate investment trusts (REITs) are highly tax-inefficient. Most of your return will come in the form of dividends and these are taxable at your income tax rate, not the 15% rate for corporate dividends.
Another tax-inefficient asset is high-yield bonds. Here the majority of the return comes from interest income - and all of it is taxable. A junk bond fund will typically make capital gains distributions from time to time, as well. So you want to place these in your tax-deferred account, if possible.
Also highly tax-inefficient are inflation-protected securities (TIPS). The semi-annual interest payments on TIPS are taxable, the same as other Treasury securities. However, investors are also taxed on inflation adjustments to the principal, a situation that is commonly described as taxing "phantom income." For these reasons, you should also hold your inflation-adjusted Treasuries in your tax-deferred account.
High-grade corporate bonds and ordinary Treasuries pay taxable income, too. They, too, should be held in your tax-deferred account.
On the other hand, individual stocks are highly tax-efficient. You control when you decide to take profits, so you can control your tax liability.
And long-term capital gains are taxed at a maximum rate of 15%, regardless of your tax bracket. (Although Mr. Obama wants to change that.)
Stock index funds are fairly tax-efficient, with one exception:
small-caps. If a small company is successful and keeps growing, it will reach the point where it is no longer a small-cap stock. At that point it will eventually be removed from the small-cap index. When a small-cap index fund sells a small-cap that has become a mid-cap, it will generate a realized capital gain. That gain, of course, will be distributed to shareholders.
So be careful where you place the assets you own.
Money managers and financial planners often talk about the importance of asset allocation. Tax-managing your portfolio is what I call your asset "location" strategy. It's simply a matter of owning your least tax-efficient assets inside your retirement account and your most tax-efficient ones outside them.
Don't think for a minute that this isn't worth the trouble. Effective tax-management of your portfolio is critical - and can dramatically increase your real-world returns.
If you're not doing everything possible to minimize your investment costs and taxes, you're operating at a serious disadvantage.
As investment legend John Templeton famously said, "There is only one investment objective: maximum total return after taxes."
As a financial writer, I write and speak about this topic all the time.
Occasionally, this strategy provokes anxiety from some do-gooders who see tax-management strategies as some sort of abdication of civic responsibilities.
Nothing could be further from the truth. As a law-abiding U.S. citizen, you need to pay the taxes you are obligated to pay...and not one penny more. As Judge Learned Hand, who served for years as Chief Judge of the U.S. Court of Appeals for the Second Circuit, famously wrote:
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the Treasury. There is not even a patriotic duty to increase one's taxes. Over and over again, the courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, and all do right, for nobody owes any public duty to pay more than the law demands."
Amen, Judge.
As Vanguard founder John Bogle has said, "Fads come and go and styles of investing come and go. The only things that go on forever are costs and taxes."
In short, taxes matter...a lot. Take the basic steps I've outlined here to tax-manage your portfolio and you're assured of higher real-world, after-tax returns.

Mourn For The Loss Of Liberty On 9/11

9/11 Anniversay..........Mourn For The Lost Souls, Mourn For Freedom

We Need To Be Ever Vigilant Against The Forces Against Freedom Which Assail Us From Within And Outside Our Lands...........

"We've Let the Wise Men Lead The Way Too Long..............."

Don't wait Until Tomorrow

Pretty Inspirational, don't you think???

NWO: New Times, New Accomplishments

Global Realignment: How Bush inspired a New World Order
Sept 9, 2008
The series of unfortunate and costly decisions made during the two terms of the Bush administration, combined with economic decline at home, might devastate the US’s world standing much sooner than most analysts predict.
What was difficult to foresee was that the weakening of US global dominance, spurred by erratic and unwise foreign policy under Bush, would reignite the Cold War, to a degree, over a largely distant and seemingly ethnically-based conflict — that of Georgia and Russia. Who could have predicted a possible association between Baghdad, Kabul and Tbilisi?
But to date, the decline of US global power to the advent of the Bush administration, or even the horrific events of 11 September 2001, is not exactly accurate. The rapid collapse of the Soviet Union and the unravelling of the Warsaw Pact — especially as former members of that pact hurried to joined NATO in later years — empowered a new breed of US elite who boasted of the economic viability and moral supremacy of US-styled “Capitalism and Democracy.” But a unipolar world presented the US leadership with an immense, if not an insurmountable task.

While 9/11 and a gung-ho president presented a convenient opportunity to reassert US global dominance, action was taken the moment the Soviet Union collapsed. Such efforts, however, were not accentuated until 1997, with the establishment of the Project for the New American Century (PNAC), a think tank from which many neoconservative policy advisors operated. Their aim was “to promote American global leadership . . . [which] is both good for America and good for the world.” William Kristol and Robert Kagan, PNAC founders, were inspired by the Reaganite policy of “strength and moral clarity.” But that supposedly inspiring model was justified on the basis of the Cold War, which no longer existed. Fashioning an enemy was a time-sensitive and essential task to justify the repositioning of US power to reclaim domains that were left vacant with the disappearance of the bipolar international system, which existed since World War II.
Even the PNAC’s more recent report, Rebuilding America’s Defences: Strategies, Forces, and Resources For a New Century, published in 2000, appeared of little relevance and urgency. It expressed the “belief that America should seek to preserve and extend its position of global leadership by maintaining the pre-eminence of US military forces.” The report would have been another neglected document were it not for the “terrorist” attacks of 9/11, which turned it into a doctrine defining US foreign policies for nearly a decade.
The wars and occupation of Afghanistan and Iraq were aimed at strengthening the US hand in protecting its interests and managing its international affairs. Afghanistan’s position was strategic in warding off the growth of the rising powers of Asia — aside from its military and strategic value, it was hoped to become a major energy supply route — while Iraq was to provide a permanent US military presence to guard its oil interests in the whole region and to ensure Israeli supremacy over its weaker, but rebellious Arab foes.
The plan worked well for a few weeks following the declaration of “Mission Accomplished” in Iraq. Since then, the US has learned that managing world affairs with a decidedly military approach is a recipe for disaster. Faced with foreign occupation, Iraqis fought back, creating a nightmare scenario and promising US defeat in their country. The US’s original plan to exploit the country’s fractious ethnic and religious groupings also backfired, as shifting alliances made it impossible for the US to single out a permanent enemy or a long-term ally. In Afghanistan, the picture is even more bleak as the country’s unforgivable geography, the corruption of US local allies, resurgence of the Taliban, and the US-led coalition’s brutal response to the Taliban’s emboldened ascension, has rendered Afghanistan a lost cause by any reasonable military standard.
But the trigger-happy mentality that has governed US foreign policy during the Bush years is no longer dominant and has been since challenged by a more sensible, dialogue-based foreign policy approach, as championed, reluctantly, by Democratic presidential nominee Barack Obama. The change of heart is not entirely moralistic, however, but largely pragmatic. According to a survey conducted jointly by Foreign Policy magazine and the Centre for a New American Security, published 19 February 2008, 88 percent of present and former US military officers believe that the demands of the Iraq war alone have “stretched the US military dangerously thin.” Although not “broken,” 80 percent believe it is “unreasonable to expect the US military to wage another major war successfully at present,” as reported by CNN. Such estimation is not too different from similar assessments provided by top US military commanders, most of who found their way to early retirement for similar reasons.
The new military limitations faced by the US in the Middle East have also resulted in the weakening of US political sway and standing. More, its regional allies have also suffered one blow after another: Israel in Lebanon, Georgia in South Ossetia, US allies in Venezuela and other South American countries, etc. Indeed, it is a matter of time before a challenger to US global hegemony arises and tests US resolve under new circumstances. While growing US involvement in Eurasia and its missile defence shield was considered part and parcel of the neocon plan for “rebuilding America’s defences,” it was considered by Russia a threat to its national security.
The Georgian invasion of South Ossetia represented a golden opportunity for Moscow to send an unmistakable message to Washington. By crushing the US-Israeli trained Georgian army, Russia declared itself a contender to unchallenged US global dominance, which had lasted for nearly two decades. Countries such as Iran and Syria are quickly warming up to the new Russia, as the latter seeks to rebuild its own alliances and defences.
The nature and the direction of the US-Russian confrontation are yet to be determined with any reasonable preciseness. Internal and external factors for Russia itself (corruption, the oligarchs, and its ability to court a stable alliance) will all prove consequential in the current confrontation. What is clear, however, is that the upcoming US president will find himself face-to-face with a drastically altered world order, one that is defined by military pandemonium, national and global economic decline, and the rise of new powers, all vying to fill a widening, chaotic power vacuum, provided courtesy of the Bush administration.

Peter-The-Great In Venezuela; Can You Say "Missles Of October?"

Russian nuclear-capable aircraft, battle cruiser head for Venezuela

Wednesday, September 10, 2008
Russian foreign ministry spokesman Andrei Nesterenko’s announcement in Moscow provided sketchy details of the coming Russian deployment at a Venezuela airport and the joint naval war games with Hugo Chavez’s navy in the Caribbean. Caracas announced that four Russian ships with almost 1,000 sailors aboard would join its navy for maneuvers on November 10-14.
DEBKAfile’s military sources itemize its composition:
The nuclear-capable maritime reconnaissance/anti-submarine warfare turboprop TU-142 (NATO coded Bear F, or Bear J), which can fly 6,500 km, i.e. from Venezuela to the US coast will be temporarily based at a Venezuelan airport.
This move will further strain US-Russian relations.

Nesterenko played down the presence of the TU-142 in his statement that a smallish Russian flotilla would be holding naval training exercises off Venezuela in November. Our sources inferred that the warplanes would land in October, arriving before the flotilla, which will be bigger and more formidable than the Russian and Venezuelan spokesmen indicated.
According to DEBKAfile’s military sources, it will consist of six to eight vessels, led by the Kirov Class (Type 1144.2) Peter the Great nuclear-powered heavy missile cruiser, one of the largest warships in the world, which is designed to guard the rest of the group against submarine and air attack.
It is armed with the Granit (NATO designated SS-N-19 Shipwreck) long range, anti-ship missile system, consisting of 20 missiles. If the lead missile is intercepted, one of the others moves into the lead role.
Peter the Great is also equipped with 40 S-300F air defense missiles.
Other ships in the Russian flotilla are the Admiral Chabanenko , the Russian navy’s most advanced guided missile anti-submarine battleship, and the guided nuclear missile cruiser Pyotr Velikiy . They will be escorted by five smaller warships and a fuel vessel.

9/11 Still Haunts Us

Majority of people surveyed in 17 different countries have doubts about official story
Wednesday, September 10, 2008
A new global poll conducted across 17 countries has found that less than half of those surveyed believe Al-Qaeda was behind the 9/11 attacks, with a full 15 per cent believing that the terrorist outrage was directly perpetrated by the U.S. government.
On the eve of the 7th anniversary of 9/11, the poll underscores how a majority of people still do not buy the official story, despite numerous attempts to reinforce the explanation that 19 hijackers at the behest of Osama bin Laden were the culprits behind the plot.
“The survey of 16,063 people in 17 nations found majorities in only nine countries believe al Qaeda was behind the attacks on New York and Washington that killed about 3,000 people in 2001,” reports Reuters.

Overall, 46 per cent of those surveyed believed the attacks were carried out by Al-Qaeda, 25 per cent do not know who carried out the attacks, 15 per cent state the U.S. government was behind the attacks, 7 per cent blame Israel and a further 7 per cent blame other perpetrators.
The poll, conducted by WorldPublicOpinion.org, reveals that people in Mexico lay the blame on the U.S. government (30 per cent) in numbers just 3 per cent less than Al-Qaeda (33 per cent).
The figures represent a blow to debunkers who have attempted to argue that skepticism towards the official 9/11 story is a radical fringe belief. In reality, the majority of people believe an explanation other than the official story or at least have doubts about the official version.

“In Europe, al Qaeda was cited by 56 percent of Britons and Italians, 63 percent of French and 64 percent of Germans. The U.S. government was to blame, according to 23 percent of Germans and 15 percent of Italians,” according to the report.
“Israel was behind the attacks, said 43 percent of people in Egypt, 31 percent in Jordan and 19 percent in the Palestinian Territories. The U.S. government was blamed by 36 percent of Turks and 27 percent of Palestinians.”
Skepticism towards the official 9/11 story is even more intense in the United States.
An October 2006 CBS/New York Times poll found that a mere 16% of Americans thought the U.S. government was telling the truth about 9/11. A further 53% thought the White House was “hiding something” and 28% said they were “mostly lying”.
That’s 81% who do not trust the official version of events and 16% who do - with a further 3% in the “don’t know” category.

Obama or McCain:Doesn't Matter, They Both Want To Increase Our Taxes

To win the presidential race, it takes energy
By Paul Davidson and Barbara Hagenbaugh, USA TODAY
Record-high prices for gasoline, heating and electricity and growing concern about global warming have pushed energy issues to the forefront of the 2008 presidential campaign.
Not since the gas lines of the 1970s has energy loomed so large as it does in the race between Republican John McCain and Democrat Barack Obama, says Kenneth Medlock, an energy expert at Rice University. And it's an issue that is unlikely to fade between now and November.
CANDIDATES' POSITIONS ON: Oil drilling Electricity Global warming Price relief Cars Renewable energy
While the candidates agree on a few energy-policy issues, such as not drilling for oil in the Arctic National Wildlife Refuge, they are far apart on others. McCain, for instance, is more supportive of offshore drilling and strongly favors nuclear power. Obama envisions a bigger role for government in the nation's energy future, seeking to invest billions in new technology while mandating stronger fuel-efficiency and alternative-energy standards. McCain wants to rely more heavily on existing laws and market forces.
Both candidates are far more willing than President Bush to tackle global warming by imposing new fees on greenhouse gas emissions.
Consumers, who are reeling from high energy costs, will be watching to see how any action might hit their wallets.
"The prices are completely outrageous," says Amanda Browning, 31, of Detroit. Browning, a single mom who is at home taking care of her two children and 87-year-old grandfather, says it's not just about cost. She's concerned about energy's impact on the environment and the USA's reliance on foreign oil.
No matter who wins, there is likely to be far more action on energy policy than in the past few presidencies as high prices and concerns about global warming push the issue to the top of many lawmakers' to-do lists, says Greg Valliere, chief political strategist at the Stanford Financial Group.
"Something is certain to happen next year," Valliere says.
OIL DRILLING Next
Both candidates have softened their positions
High energy prices have forced both candidates to soften their positions on oil-drilling restrictions, but they continue to disagree on the key issue of drilling offshore.
Obama says oil companies need to focus on drilling in areas already leased to the oil and gas companies and supports more drilling within areas, such as in parts of the Gulf of Mexico, where exploration and production is already permitted.
Obama says he is open to a bipartisan proposal in the Senate that would lift the moratorium on drilling in a small portion of the 1.76 billion-acre Outer Continental Shelf, the sloping undersea region between the continent and the deep ocean around the USA, if the move came in conjunction with aggressive commitments to new clean energy technologies and efficiency. Obama argues that drilling in the area is not an answer to reduce prices in the short-term or to promote long-term energy independence.
McCain advocates a complete lifting of the ban on drilling in the Outer Continental Shelf.
Congress imposed a moratorium on drilling in new offshore areas in 1981. It is hard to know how big an impact drilling in the OCS would have on energy costs, says Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. It's unknown how much oil and natural gas is there, how accessible it is or how easy it would be to hook up to pipelines, he says.
Neither candidate supports opening up Alaska's Arctic National Wildlife Refuge to drilling.
ELECTRICITY Next
McCain wants to build 45 nuclear power plants
McCain is far more bullish than Obama on conventional electricity generation, especially nuclear power, as a way to meet soaring energy needs. McCain wants to build 45 nuclear plants which emit none of the greenhouse gases that cause global warming by 2030. That's ambitious. Until recently, no company had filed an application for a reactor since the 1979 Three Mile Island meltdown.
"We are at a national security exposure due to imported oil, and (McCain) would love to see nuclear power as part of the climate approach," says McCain senior adviser Douglas Holtz-Eakin.
Some experts are skeptical.
"It's not going to happen," says Robert Kaufmann, director of the school of public and international affairs at Boston University. He says it's simply too tough to get permits to build nuclear reactors, largely due to safety and waste-storage concerns.
McCain also favors big subsidies to help the nuclear industry a