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

“How wind turbines are supposed to supply the grid of a heavily-industrialized country is never fully explained, but it doesn't need to be. Wind power is not based on reason, but faith: These aren't generators, they're prayer wheels for New Age iBuddhists." - Tamara, Editor of the View From The Porch blog

Wells, Nevada..A slice of life in our neck of the woods

An Act…to steal land from the states’
As for the BLM… I live in rural NE Nevada – an area whose economy is anchored in ranching and mining.
I sit on the Wells, Nevada planning and zoning committee and also represent Wells on the Elko County Local Emergency Planning Committee (LEPC). Wells has a population of around 1,400.
In the Wells P&Z, once a year we look out within a 30-miles circle surrounding us – called the ‘sphere of influence’ – on how we will impact the area and how it will impact us going into the future.
Economically, the housing bubble came and went without affecting us much here and people wondered when we were ever going to be affected by the economic boom taking place the rest of the country.
That began to change a couple of years ago when gold was discovered in the Pequop Mountain Range 20 miles to our East and various exploratory companies began drilling to find that the mountain was one of the richest deposits of gold ever found in the U.S..
The primary companies doing the exploration were Frontier on the east and AuEx on the west side of the mountain. Frontier made a deal to buy the AuEx and recently sold their holdings to Newmont Gold. Frontier, like Barrack Gold – the largest gold mining corporation in the world – presents itself as a Canadian company.
A few years back I heard someone say in a radio interview that Newmont Gold was owned by the Crown. I emailed him and asked him what his source of that statement was and he said that is what they told him when he took the executive tour.
Newmont and Barrack do the lion’s share of the gold mining in Nevada and own the entirety of the Carlin Gold Trend reserves.
In doing a search on Barrack, I found the corporation went to Canada, and that corporation – like Newmont – was owned by a parent corporation in South America – and that corporation was held by another entity called Crown Holdings
An insight into the crown is provided in this short (3:38) video…
‘World Economic Super Power’

“Contrary to popular belief, the Crown is not the Royal Family or the British Monarch – the Crown is the private City State of London. It has a council of 12 members who rule the corporation under a mayor called the Lord Mayor. The Lord Mayor and his 12-member council serve as proxies or representatives to sit in for 13 of the world’s wealthiest, most powerful banking families…” 
So, the question is:  Why would we allow foreign holdings of our natural gold resources?
Let’s put that on the shelf for a moment.
About the same time as the exploratory gold drilling began, a company called ICI (International Charter Incorporated) approached the City of Wells saying they wanted to rent the city owned airport hanger. The CEO of the company was Oregon State Senator Brian Boquist who said the had a grant for the reforestation of Pinion Pines – which are generally considered to be an invasive nuisance to ranching. ICI is listed as a Private Military Company (a PMC) and Boquist is a Special Forces lieutenant colonel in the United States Army Reserve. It also came out that the land granted to him from BLM would also be used as a private military training facility.
Let put that on the shelf for now also.
Not long after that, Madeline Pickens came into the area saying that she wanted to establish a wild horse sanctuary. She expressed the intention of acquiring a half million acres and now, through land purchase and BLM leases, and she now controls just over a half million acres about 20 miles to the south of Wells.
She says she is not here for the water – even though her husband, T. Boone says he expects to make a billion dollars over the next 20 years on the sale of water – and, as related to me from a local rancher, the Ely water line (sending water to Las Vegas) conveniently ends just south of her land holdings – but I have yet to acquire the map of the pipe location. This area is said to sit atop one of the largest untapped aquifers in the nation – but I’m finding the county aquifer water maps are classified.
Both she and Boquist are in the same basic area and both have expressed the intention of putting in a private air strip.
Putting that on the shelf for now…
This last winter, to the North of us, El Paso gas acquired the permits to run a 40” gas line across Northern Nevada from a gas depot in Wyoming and into Oregon. About the time they were getting started on the construction, LV reporter George Knapp reported that British Petroleum had acquired a half interest in the pipeline – this as their oil platform in the Gulf was melting down.
What is of interest here is not only the (again) foreign ownership, but that extensive oil and gas drilling has been done throughout NE Nevada over the last several years and all seem to have ‘dry well’ caps on them (even though oil can openly be seen on the ground) – and very large sums are being paid to tie up the oil and gas leases.
I talked with a driller working in the area 2 years back who was drilling his last well before retiring. He had located the two largest wells for Arco in Alaska and he told me there is a natural gas deposit south of Winnemucca (North central Nevada where he lives) that would power Northern Nevada for at least the next 200 years.
For some time now I’ve translated ‘federal’ to mean ‘foreign’ – so it’s not surprising to hear you relate that the BLM is a ‘federal’ corporation.
I also strongly believe that the BLM will be the legal arm of the United Nations ‘Agenda 21’ program that has as its mission the abolition of private property except by permission of the Crown.
A slice of life in our neck of the woods – Gary Jacobucci / Wells, Nevada

State and local governments may cut 450,000 jobs in FY2012

 Around 450,000 people who work for U.S. states, counties, cities, towns and villages could get pink slips in fiscal 2012, sharply up from the 300,000 positions shed this year, a report said on Monday.

The number of job cuts will rise mainly because the federal stimulus program is ending while the cost of Medicaid is "spiraling," said the report by UBS Investment Research.

States got billions of extra dollars primarily for education and Medicaid from the stimulus plan. Medicaid is the state-federal health plan for the poor and disabled.

Maury Harris, a UBS economist, on a conference call said the deficits states and municipalities will have to close will climb to $155 billion in fiscal 2012 from about $108 billion in the current fiscal year.

Most states and municipalities begin new fiscal years on July 1.

The deep cuts state and local governments will have to make to balance their books in the next fiscal year should clip about one percentage point from the U.S. gross domestic product -- about 30 basis points more than in the current fiscal year, the report said. "The public sector is holding back growth but it doesn't derail it altogether," Harris said.

But the $2.9 trillion municipal bond market -- so far at least -- has withstood much of the pressure from the recession-weakened finances of states and municipalities.

Thomas McLoughlin, UBS head of municipal research, told reporters that at present only about $9 billion of municipal bonds have defaulted, most of which were small, unrated issues that financed risky projects like developments.

Spooked by headlines about possible defaults, investors in municipal bond funds have sold shares for the past 27 weeks, according to Lipper data.

"I think we are seeing more traditional retail buying in the front end of the curve -- even as people investing in mutual funds were selling," McLoughlin said.

Strong demand for individual securities with short maturities is hitting during a period of exceptionally low supplies. Estimates for issuance this year have fallen to a range of $197 billion to $240 billion, McLoughlin said. That works out to about half of last year's supply of new bonds.

Still, McLoughlin's list of hazards facing the muni market include possible problems states and localities will have finding new letters of credit for variable-rate debt and what he called "rating volatility." Credit agencies are more likely to downgrade credits they have not analyzed for 18 months, for example, than ones they survey more frequently.

Muni prices, which fell last Thursday for the first time since April 12, were unchanged on Monday, leaving yields on top-rated 10-year bonds at 2.64 percent and 30-year yields at 4.31 percent on Municipal Market Data's benchmark triple-A scale.

Hedge fund managers pour assets into farmland as doomsday food scenario approaches

Going back to the land has always been thought of as a thing for hippies, eco-nuts, and doomsday survivalist, but now hedge fund managers are jumping on the bandwagon too.

The New York Observer recently spoke to such a hedge fund manager working on a fund that ranks as approximately the 15th largest farmer in America.

The media first picked up on the land investment pattern in 2008 in the February Times of London piece, "The Hedge Fund Manager Who Bought a Farm," which detailed a British hedge fund manager's attempt to play off the rising prices of grains in order to get a hold of local farmland. It was followed shortly by coverage by the Financial Times that said hedge funds and investment banks were "swapping their Gucci for gumboots".

Today, the increase in the purchase of farmland both in America and abroad is so drastic that in February, Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, warned against the possibilities of a farmland bubble.

A January study commissioned by the Organization for Economic Cooperation and Development estimated the amount of private capital currently committed to farmland and agricultural infrastructure at $14 billion. It also estimated that future investments will "dwarf" what's currently being thrown into land by two to three times and projected the amount of capital potentially entering the sector over the next decade to go beyond $150 billion.

The recent spike in investments of farmland is being driven by fear. The hedge fund manager and others see a doomsday scenario brought on by a dollar crisis, out of control inflation and an uncertain political climate both domestically and globally.

"The CPI supposedly today is something like 1.5 percent. We think the actual rate of inflation is something closer to 6 or 7 percent on an annual basis," said the hedge fund manager. "It's also not about what it's been over the last 10 years; it's about what it's going to be over the next 10 years."

Does he think this is an end of the world situation?

"It really is. I tell my fiancee this from time to time, and I've stopped telling her this, because it's not the most pleasant thought," he said. "We just can't keep living the way we're living. It'll end within our lifetime. We're just going to run out of certain things. We'll just have to learn how to adjust."

With recent news that the World Food Program is running out of food (http://www.upi.com/Top_News/World-N...) and the U.S. may not be far behind (http://www.dailyfinance.com/2010/01...), things are not looking good.

"Sometime in the next few years, we're going to have very serious shortages of food everywhere in the world," said investor Jim Rogers on CNBC. "And prices are going to go through the roof."

The new information is just another reason this may not be a bad time for regular people to start growing their own food and even investing in farmland.

Sen. Wyden Decries “Secret Law” on PATRIOT Act

An amendment offered on May 24 by Sen. Ron Wyden would have challenged the Administration’s reliance on what he called “secret law” and required the Attorney General to explain the legal basis for its intelligence collection activities under the USA PATRIOT Act.  But that and other proposed amendments to the PATRIOT Act have been blocked in the Senate.

“The public will be surprised… when they learn about some of the interpretations of the PATRIOT Act,” Sen. Wyden said, based on his access to classified correspondence between the Justice Department and the Senate Intelligence Committee.

“U.S. Government officials should not secretly reinterpret public laws and statutes in a manner that is inconsistent with the public’s understanding of these laws or describe the execution of these laws in a way that misinforms or misleads the public.”

“We can have honest and legitimate disagreements about exactly how broad intelligence collection authorities ought to be, and members of the public do not expect to know all of the details about how those authorities are used,” Sen. Wyden said. “But I hope each Senator would agree that the law itself should not be kept secret and that the government should always be open and honest with the American people about what the law means.”

But the Senate moved toward cloture on reauthorization of the PATRIOT Act provisions and the Wyden amendment, which was co-sponsored by several Senate colleagues, was not permitted to be offered or to be voted upon.
The House Judiciary Committee issued a report last week on the reauthorization of surveillance provisions in the USA PATRIOT Act, with a lengthy dissent from the minority members of the Committee. See “FISA Sunsets Reauthorization Act of 2011,” House Report 112-79, part 1, May 18, 2011.
In 2008, then-Sen. Russ Feingold chaired a Senate Judiciary Committee hearing on “Secret Law and the Threat to Democratic and Accountable Government.”
Update: On May 26, Senators Wyden, Udall, Merkley, and Feinstein engaged in a colloquy on secret law and noted an agreement with Senator Feinstein to hold hearings on the matter in the Senate Intelligence Committee. Senators Wyden and Udall spoke further on the subject here.

Three Trillion Dollars Later: Charting A Recovery Only Failed Fiscal And Monetary Policy Can Buy

Another indicator of what the US "recovery" looks like come courtesy of the Chicago Fed National Activity Index. As can be seen in the chart below, one can only wonder just what recovery the US would have if it did not spend $3 trillion to kickstart the virtuous (or better make that virtual) economic cycle when it did. And by the looks of facts (and not Tim Geithner spin), the downward inflection point has now arrived. Next up: another $1-1.5 trillion in monetary stimulus, although admittedly in a form that may be slightly different from the LSAPs we have all grown used to love and expect each and every day at 11:00 am EST.

Second Biggest Weekly Drop Ever In Treasurys Held In The Fed's Custodial Account As Foreigners Dump

There was one truly interesting observation in this week's Fed balance sheet update: not that the actual balance sheet hit a new all time record (which it did at $2.779 trillion), or that the Fed added another $24 billion in Treasurys to its balance sheet, or that total reserves hit a new all time record, increasing by $53 billion to $1.59 trillion. No. The biggest surprise was that in the just ended week, Treasury securities held in custodial accounts at the Fed, considered by some the best real-time representation of foreign holdings of US Treasurys considering that the TIC update is not only wildly inaccurate in its monthly update, but is also 3 months delayed, dropped by the largest amount in 4 years. From a total of $2.704 trillion, USTs held in custodial accounts declined by $18.7 billion to $2.685 billion. This is the second largest decline in history, only topped by the $22.1 billion in the week of August 15, 2007 which is the week that followed the great quant crash of 2007 that wiped out, among others, Goldman Alpha. This observation is in stark contrast to the recent record strength of bond issuance, after both the 5 and 7 Years auctions posted record Bid to Cover investor interest.
One explanation is that while foreign investors are aggressively buying up the belly of the curve, they are even more aggressively selling the other parts of the curve, namely both the short (sub 2 Year) and the Long (10-30 Year). Another explanation is that the weekly change in Custodial data is largely noise and has no bearing on total foreign holdings of debt, which however we would largely discount. Another question is whether the large outflow from bonds is a consequences to recent market volatility, or is the basis for one: i.e., will the money be used to purchase stocks, or, if as China is posturing, is this merely capital leaving the US and entering Europe. Lastly, the nearly $20 billion in USDs likely will have to be converted to another FX denomination: should any notably USD weakness be observed in the next several days, this could well be a reason.
A chart of total Custodial Treasury holdings:

And old faithful: the neverending weekly "record" Fed balance sheet chart:

Comin' this summer... $5 gas

The forecast for the summer driving season: Hit the road early. Not to beat the traffic, but to beat the higher gas prices expected in mid-July.
Goldman Sachs' crystal ball is proclaiming that oil will soon soar to $135 a barrel, and likely have service stations jacking up fuel prices to $5 a gallon in New York just like the summer of 2008 that preceded the recession.
Indeed, analysts say Goldman and the other oil trading giant that also has the might to move prices, JPMorgan Chase, have already placed their energy bets for the summer. JPMorgan predicts oil hitting $130 a barrel in the coming weeks.

 

Thought for fuel: Oil prices already are sky high for the Memorial Day holiday, but gas is expected to go even higher later in the summer, banks believe.

 

Despite all the turmoil in the Middle East associated with the Arab Spring rioting, oil has fallen to the $100 level, closing out May with a stunning 12 percent drop.
But before the storm, the calm. There appears to be a backlash by some oil-pit analysts.
"Whoever would buy into these rising prices is just paying homage (to Wall Street firms) and helping the speculative positions," said one oil trading source familiar with energy bets of Wall Street trading desks.
Gas prices, meanwhile, should benefit from the brief respite in oil prices.
"We should be seeing some big declines at the gas pumps after Memorial Day," said energy analyst Peter Beutel of Cameron Hanover.
"Wholesale prices have been dropping, and that could cause some serious revisions downward at the pumps," he said.
"The competition is fierce among the retailers, and whoever lowers his price first gets a big jump on everyone else and a lot of new business."
Pump prices have dropped about 10 cents a gallon this week, while wholesale prices at the Nymex have steadily skidded 50 cents a gallon in the past two weeks.
Those declines came despite upward pressure on wholesale prices here in the past two days due to speculation that Mississippi River flooding could disrupt Gulf Coast refineries.
At the start of the Memorial Day holiday, the national average for gas was $3.80 a gallon.
Tom Kloza, an analyst at Oil Price Information Services, expects gas to fall to between $3.50 and $3.60 between now and the July 4 holiday.
Consumers could use the help.
Economists say households spent an average of $369 on gas during April, or about $168 more than the $201 they spent during April 2009, when gas was averaging around $2.76 a gallon.
Every 50-cent jump in the cost of gasoline takes $70 billion out of the US economy over the course of a year, economists say.
The tourism industry expects a drop in travel because consumers intend to stay closer to home and take more day trips. AAA predicts the typical family will spend $692 on its vacation, down 14 percent from $809 last year.
Meanwhile, demand for gasoline has fallen for eight straight weeks as drivers try to cut back with mixed results.

"Drivers try to do what they can, but they have to go almost all the places they go," says energy researcher David Greene of the Department of Energy Web site fueleconomy.gov. "There's no magic gizmo that will drastically change someone's gasoline use."

And for that reason, as well as global uncertainty, Goldman and JP analysts see a return to high oil and gas prices in the coming months. Without a significant decrease in American demand -- or a sudden desire not to commute or drive to the shore -- $5 a gallon is likely on the horizon.

When Faith In U.S. Dollars And U.S. Debt Is Dead The Game Is Over – And That Day Is Closer Than You May Think

A day is coming when the rest of the world will decide that it no longer has faith in U.S. dollars or in U.S. debt.  When that day arrives, the game will be over.  Traditionally, two of the biggest things that the U.S. economy has had going for it were the U.S. dollar and U.S. Treasuries.  The U.S. dollar has been the default reserve currency of the world for decades.  All over the globe it was seen as a strong, stable currency that was desirable for international trade.  U.S. government debt has long been considered the "safest debt" in the entire world.  Whenever there was a major crisis, investors would flock to U.S. Treasuries because they were considered a rock.  Sadly, all of this is now changing.  Today the rest of the world is losing faith in the U.S. financial system.  In fact, even the United Nations is now warning of the collapse of the dollar.  But if the U.S. dollar and U.S. Treasuries collapse, that will be an absolute nightmare for the U.S. economy.  If the rest of the world does not want our dollars someday, then what are we going to give them in exchange for all of the oil and all of the cheap imported goods they send us?  If the rest of the world does not want our debt someday, then how in the world are we going to be able to continue to consume far, far more wealth than we produce?

The rest of the world is watching the U.S. government run up record-setting budget deficits and they are watching the Federal Reserve print money like there is no tomorrow and they realize that the U.S. financial system is slowly imploding.

As mentioned above, now even the United Nations is warning that the U.S. dollar could collapse.  The following is a brief excerpt from a recent news report put out by Reuters....

The United Nations warned on Wednesday of a possible crisis of confidence in, and even a “collapse” of, the U.S. dollar if its value against other currencies continued to decline.

In a mid-year review of the world economy, the UN economic division said such a development, stemming from the falling value of foreign dollar holdings, would imperil the global financial system.

But it is not just the United Nations that is concerned about the U.S. dollar.
On April 18th, Standard & Poor’s altered its outlook on U.S. government debt from "stable" to "negative" and warned that the U.S. could soon lose its prized AAA rating.
At one time, it would have been unthinkable for Standard & Poor's to do such a thing.
But today it is amazing that it has taken them so long to make such a move.  U.S. government finances are falling apart.
When the credit rating of U.S. government debt starts declining, interest rates will go up.  Just ask the government of Greece how painful that can be.  Today, Greece is paying over 16 percent on 10 year bonds.
The following is what John Williams of Shadow Government Statistics recently had to say about why Standard & Poor's issued such a warning about U.S. government debt....

S&P is noting the U.S. government's long-range fiscal problems. Generally, you'll find that the accounting for unfunded liabilities for Social Security, Medicare and other programs on a net-present-value (NPV) basis indicates total federal debt and obligations of about $75 trillion. That's 15 times the gross domestic product (GDP). The debt and obligations are increasing at a pace of about $5 trillion a year, which is neither sustainable nor containable. If the U.S. was a corporation on a parallel basis, it would be headed into bankruptcy rather quickly.

Look, the rest of the world is not stupid.  They know that the U.S. government is hurtling towards financial disaster.  The appetite among foreigners for U.S. government debt is decreasing rapidly.
In fact, according to Zero Hedge, foreigners are dumping U.S. debt at a very rapid pace right now.
In addition, the cost to insure U.S. debt has risen sharply in recent days.
Right now, the Federal Reserve has been buying up most new U.S. government debt with dollars that it has created out of thin air.  This is a giant Ponzi scheme, and it is a major contributing factor to the decline of faith in the U.S. dollar.
The dollar has fallen by 17 percent compared to other major national currencies since 2009.  What makes that fact even sadder is that all major currencies have been rapidly losing value compared to hard assets over that time period.  The dollar is just sliding faster than almost all of the other global currencies that are constantly losing value as well.
Anyone with half a brain could have seen that this would be the end result of reckless government borrowing, but unfortunately our politicians have been ignoring this problem for decades.
Now a day or reckoning is fast approaching and it is going to be very painful.
The U.S. government has piled up the biggest mountain of debt in the history of the world.  Just consider a few shocking facts about this unprecedented debt....
*If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.
*The U.S. government borrows about 168 million dollars every single hour.
*If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
*It is now being projected that by the year 2021, interest payments on the national debt will amount to $1.1 trillion dollars a year.
In a previous article on The American Dream, I detailed some more absolutely horrifying statistics about U.S. government debt....
#1 If you divide the national debt up equally among all U.S. households, each one owes a staggering $125,475.18.
#2 The federal government has borrowed 29,660 more dollars per household since Barack Obama signed the economic stimulus law two years ago.
#3 During Barack Obama's first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.
#4 In the new budget that the Obama administration has proposed, the U.S. government would spend 3.7 trillion dollars in 2012 and by 2021 the U.S. government would be spending a whopping 5.6 trillion dollars per year.
#5 The U.S. government currently has to borrow approximately 41 cents of every single dollar that it spends.
#6 The total compensation that the federal government workforce earned last year came to a grand total of approximately 447 billion dollars.
#7 The U.S. national debt is currently rising by well over 4 billion dollars every single day.
#8 The U.S. government is borrowing over 2 million more dollars every single minute.
#9 The U.S. national debt is over 14 times larger than it was just 30 years ago.
#10 Unfunded liabilities for entitlement programs such as Social Security and Medicare are estimated to be well over $100 trillion, and nobody in the U.S. government seems to have any idea how we are actually even going to come close to meeting all of those obligations.
#11 If you were alive when Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.  But this year alone the U.S. government is going to go about 1.6 trillion dollars more into debt.
#12 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
So have our politicians learned anything from the mistakes of the past?
No.
The U.S. government continues to spend money on some of the most ridiculous things imaginable.  For example, the Department of Health and Human Services has just announced a brand new $500 million program that will, among other things, seek to solve the problem of 5-year-old children that "can't sit still" in a kindergarten classroom.
Isn't it good to see the government investing our hard-earned tax dollars so wisely?
Of course if our kids weren't being constantly fed foods packed with sugar, high fructose corn syrup and aspartame we wouldn't have to spend 500 million dollars to deal with this problem.
When it comes to government waste, nobody seems to do it any better than the U.S. government.
Our politicians continue to assume that the rest of the world will always want our dollars and our debt, but that is simply not the case.
Over the past couple of years, global leader after global leader has publicly talked about the need for a new world reserve currency.
In fact, globalist institutions such as the IMF and the World Bank have been very busy discussing what the world is going to use as a global reserve currency after the death of the dollar.
The rest of the world is not sitting around waiting to see if the U.S. financial system is going to recover.  They are already making plans for the demise of the dollar.  They are increasingly using other currencies to trade with.  They are becoming more hesitant to buy more of our debt.  They are realizing that the days of U.S. dominance are coming to an end.
So what is that going to mean for us?
It is going to be a complete and total disaster.
Right now, we live far, far beyond our means.  We borrow gigantic piles of money to make up the difference between what we produce and what we consume.  We are absolutely dependent on the fact that the rest of the world will take our dollars in exchange for the things that we need.
The current situation is not sustainable.
It will come to an end.
When it does, our standard of living is going to feel like it has changed overnight.

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

"When it is time to bury your guns, it is actually time to dig them up." ~ Anonymous

Inflation 2011: Honey – They Shrunk Our Paychecks

Do you ever have the feeling that there are holes in your pockets?  These days our money seems to slip through our hands faster than ever.  The Federal Reserve keeps telling us that the rate of inflation in 2011 is "close to zero", and this is causing confusion for many Americans because they are making just as much money as they did in previous years but it doesn't seem to go nearly as far.  So what in the world is going on out there?  Well, sadly, the truth is that we really don't even know what the government considers "inflation" to be anymore.  The way that the U.S. government calculates inflation has changed an astounding 24 times since 1978.  You see, it is always politically beneficial to have a low inflation rate, so recent administrations have been changing the formula constantly in an attempt to look good.  But these days most Americans know something is up.  All they have to do is stop at a gas station, go shopping for food or open up their bills. The reality is that inflation in 2011 is about as bad as we saw back in the 1970s, it is just that the government is much less honest about it now.

Many years ago Kenny Rogers released a song that contained the following lyrics....

You got to know when to hold em, know when to fold em
Know when to walk away and know when to run
You never count your money when you’re sitting at the table
There’ll be time for counting when the dealer’s done
Well, the U.S. middle class has been dealt a losing hand, but in the game of life you just can't fold.
Over the past 3 decades, the average household income for the bottom 80 percent of Americans has been remarkably flat.  In fact, over the past several years we have actually seen median household income decline several times. If you do not know about how the U.S. middle class is being ripped to shreds, just read this article.  Without a doubt, America is getting poorer.
Well, not the top 1 percent, but the vast majority of the rest of us sure are.
Meanwhile, prices have started to rise with a vengeance.
According to an article in the Daily Mail, a Memorial Day cookout will cost you 29 percent more this year than it did last year.
That doesn't sound good.
Will it be 29 percent more expensive again next year?
Perhaps some of us will just have to stop having Memorial Day cookouts because we can't afford them anymore.
The price of gas is also digging into our paychecks big time.
A gallon of gas costs about a dollar more than it did a year ago, but we can't avoid buying gas.  All of us have got to get to work and drive to the store.
Sadly, each time the price of gasoline goes up 50 cents it takes about $70 billion out of the U.S. economy (on a yearly basis).
A recent article in USA Today described the kind of impact these high gas prices are having on average American families....

For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal.
Households spent an average of $369 on gas last month. In April 2009, they spent just $201.

But don't worry, according to Ben Bernanke we barely have any inflation at all in 2011.
Some companies are trying to avoid raising their prices by reducing their package sizes.  A recent article posted on Marketwatch entitled "Inflation diet: same price, less product" explored this phenomenon in detail.  Millions of Americans are going to the supermarket and are finding that many of their favorite products are now 10 or 20 percent smaller and yet they are paying the same price as before.
Another thing that is happening is that product quality is going down.  Have you noticed how things just don't seem to be made the way that they used to?  This is not a coincidence.
According a recent article on CNBC, retailers are skimping on quality as a way to deal with rising costs....

According to Global Hunter Securities Macro and Consumer Strategist Richard Hastings, retailers have been collaborating with their production contractors for about two years. They are trying to push back on the total volume, cost and weight of every unit.
"Along the way, the consumer barely noticed. By now, everybody knows something is wrong," said Hastings. "If we had to put a number on it, it's probably a 7.5% decline in total quality and durability of products compared to a bigger increase in the cost of production per unit made outside of the U.S."

But no matter how hard companies try to hide it, at some point the American people are going to wake up and they are going to realize that they aren't getting as much for their money as they were before.
This is why so many people get upset when the Federal Reserve and the U.S. government devalue our money.  Inflation is a "hidden tax" on every single one of us.  When our dollars don't buy as much stuff, that means that we are all poorer than we were before.
All of this inflation is coming at a time when the economy is really struggling.  Personally, I am seeing all kinds of signals that the economy is really starting to slow down once again.
What is going to make things even worse is all of the government austerity that is going to be implemented over the next couple of years.
Once upon a time, a government job was the safest kind of a job you could have.  Sadly, as a recent Reuters article noted, those days are long gone....

Around 450,000 people who work for U.S. states, counties, cities, towns and villages could get pink slips in fiscal 2012, sharply up from the 300,000 positions shed this year, a report said on Monday.

So should we, as many of our liberal friends insist, tax the rich so that we can pay for all of those government workers?
Well, the truth is that the wealthy are already being taxed into oblivion.  If you doubt this, just read this editorial in The Wall Street Journal: "A 62% Top Tax Rate?"
Most of the "ultra-wealthy" have learned how to avoid most of this taxation by moving their wealth offshore.  In fact, as I have written about previously, it is estimated that a third of all the wealth in the world is now held in "offshore" tax havens.
So why are we seeing so much inflation right now?
Well, I covered that in my previous article entitled "When Faith In U.S. Dollars And U.S. Debt Is Dead The Game Is Over – And That Day Is Closer Than You May Think".
The Federal Reserve and our politicians in Washington D.C. have been very naughty.  They have been systematically destroying the value of our dollars.
Someday when you are using your money as toilet paper because toilet paper is actually much more valuable than dollars are you will wish that the American people had stood up and insisted on a different path.
Don't laugh - during the hyperinflation that the Weimar Republic experienced in the 1920s, German citizens were actually burning stacks of money in their furnaces in order to keep their homes warm.
100 years ago, a U.S. dollar had more than 20 times the purchasing power than it has today.
Sadly, we are now in a terminal phase of dollar devaluation.  It is only going to get worse from here.  Someday we will look back and long for the days of "low inflation" that we had back in 2011.

Gas Tank Destroying family Finances

There's less money this summer for hotel rooms, surfboards and bathing suits. It's all going into the gas tank.
High prices at the pump are putting a squeeze on the family budget as the traditional summer driving season begins. For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal.

Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things.

Jeffrey Wayman of Cape Charles, Va., spent Friday riding his motorcycle to North Carolina's Outer Banks, a day trip with his wife. They decided to eat snacks in a gas station parking lot rather than buy lunch because rising fuel prices have eaten so much into their budget over the past year that they can't ride as frequently as they would like.

"We used to do it a lot more, but not as much now," he said. "You have to cut back when you have a $480 gas bill a month."

Alex Martinez, a senior at Arcadia High School outside Los Angeles, said his family's trips to San Francisco, which they usually take once or more a year, are on hold. As he stopped at a gas station to put $5 of fuel in his car -- not much more than a gallon -- he said the high prices are crimping social life for him and his friends.

"We're always worrying, `How are we going to get home. We've got less than half a gallon left,'" Martinez said. "We definitely can't go out as much, and we can't go as far."
As Memorial Day weekend opens, the nationwide average for a gallon of unleaded is $3.81. Though prices have drifted lower in recent days, analysts expect average price for 2011 to come in higher than the previous record, $3.25 in 2008. A year ago, gas cost $2.76.
The squeeze is happening at a time when most people aren't getting raises, even as the economy recovers.
"These increases are not something consumers can shrug off," says James Hamilton, an economics professor at the University of California, San Diego, who studies gas prices. "It's a key part of the family budget."
The ramifications are far-reaching for an economy still struggling to gain momentum two years into a recovery. Economists say the gas squeeze makes people feel poorer than they actually are.
They're showing it by limiting spending far beyond the gas station. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S. Target said gas prices were hurting sales of clothes.
Every 50-cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year, Hamilton says. That's about one half of one percent of gross domestic product.
The Commerce Department reported Friday that consumer spending rose just 0.1 percent in April, excluding the extra money spent on more expensive gas and food, while wages stayed flat for the second straight month.
Mike Nason, a marketing consultant from Laguna Niguel, Calif., says he's clipping coupons to save money for gas and cutting back wherever else he can. His daughter Chandler, 17, recently settled for a prom dress that cost $170 instead of asking her parents to spend $400 for another that caught her eye.
"In prior years we would have spent more money on the dress, but money has become a big object," he says.
The tourism industry is bracing for an uncertain summer. AAA predicts the typical family will spend $692 on its vacation, down 14 percent from $809 last year. Many of those surveyed said they are planning shorter trips and expect to pinch pennies when they arrive.
AAA estimates 34.9 million Americans will travel 50 miles or more from home this weekend, an increase of about 100,000 from last year. But they will have to do more complicated math to make the summer budget work.
The median household income in the U.S. before taxes is just below $50,000, or about $4,150 per month. The $369 that families spent last month on gas represented 8.9 percent of monthly household income, according to an analysis by Fred Rozell, retail pricing director at Oil Price Information Service. Since 2000, the average is about 5.7 percent. For the year, the figure is 7.9 percent.
Only twice before have Americans spent this much of their income on gas. In 1981, after the last oil crisis, Americans spent 8.8 percent of household income on gas. In July 2008, when oil price spiked, they spent 10.2 percent.
Average hourly earnings, meanwhile, have risen just 1.9 percent in the past year. That's only just enough to keep up with inflation.
The good news is that analysts expect gas to fall to $3.50 a gallon in the coming weeks. In order for household gasoline expenses to return to their historical place in the family budget for the year, gas prices would have to fall by about half and stay that way for the rest of the year.
Demand for gasoline has fallen for eight straight weeks as drivers try to cut back, but higher prices can't keep drivers parked for long. Even with high prices this year, the government expects gasoline demand to grow slightly for the year.
"Drivers try to do what they can, but they have to go almost all the places they go," says David Greene, a researcher at the Center of Transportation Analysis at Oak Ridge National Laboratory and manager of the Department of Energy website fueleconomy.gov. "There's no magic gizmo that will drastically change someone's gasoline use."
Mike Siroub clutched his heart as he described the experience of filling up lately. He owns a Union Oil gas station in Arcadia, Calif., but one of his cars is also a 1975 Oldsmobile.
"Think about it," he said. "If you've got a car with a 30-gallon tank and gas is $4 a gallon and you fill it up, you're out $120."
He says high gas prices will keep him home this weekend. And he runs a gas station for a living. As he greeted a steady stream of customers at his station, he laughed and said, "I have to pay for gas just like everyone else."

Consumer spending, income drop as inflation accelerates

On its face, today’s report from the Bureau of Economic Analysis looks like good news.  It shows personal income rising 0.4% in April, and personal consumption expenditures increasing by the same amount.  However, when the BEA accounts for increased taxes and inflation, the picture looks quite different indeed:

Real DPI decreased less than 0.1 percent in April, in contrast to an increase of less than 0.1 percent in March.  Real PCE increased 0.1 percent in April, the same increase as in March. …
Personal current taxes increased $11.0 billion in April, compared with an increase of $8.3 billion in March.  Disposable personal income (DPI) — personal income less personal current taxes — increased $35.1 billion, or 0.3 percent, in April, compared with an increase of $46.3 billion, or 0.4 percent in March.

Reuters calls the narrow decline in real DPI a “tepid” and modest rise in its report, but notes that inflation has returned — and that means that the second quarter has shown even more weakness in the start than Q1′s 1.8% annualized GDP growth rate:

Consumer spending rose modestly in April, starting the second quarter on a soft note as high gasoline prices continued to squeeze household finances and keep inflation pressures simmering.

They then manage to misreport the real DPI, which is defined by the BEA as “DPI adjusted to remove price changes,” in order to account for inflation:

When adjusted for inflation, spending nudged up 0.1 percent last month after gaining 0.1 percent in March.

No, it went down by “less than 0.1%,” not up.  Inflation on all prices rose 0.3% in April, and in “core” prices by 0.2%.  The overall PCE index has risen 2.2% over the last 12 months, which isn’t a bad rate of inflation if the economy was actually growing significantly.  With a real GDP of 0.6% in Q1 and flatlines in real spending and wages, we’re entering into a mild stagflation cycle, thanks to fuel costs that the recession temporarily kept low.

Two Nicely Saids.................

“All political thinking for years past has been vitiated in the same way. People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome.”
– George Orwell
“ Hindsight is not only clearer than perception-in-the-moment but also unfair to those who actually lived through the moment.”
– Edwin S. Shneidman, Autopsy Of A Suicidal Mind

9 Ways That The World Has Gotten Even Crazier In May

 

In case you haven't noticed, the world has gotten even crazier in May. Just when you think that things can't get any more bizarre, events go to a whole new level. Sadly, millions of Americans seem almost completely oblivious to all of the world-altering things that are going on all around us. I recently got back from doing a bit of traveling, and the reality is that most people out there are so busy living their lives and trying to survive from month to month that they don't really have much time to pay attention to what is going on in the world around them. They are too busy working their tails off to make a living, they are too busy stocking up on groceries and foreign-made goods at the big box retail stores and they are too busy cheering for Scotty on American Idol. Unfortunately, what little information about the rest of the world that most Americans actually take in comes from the mainstream media. Most of the time the mainstream media is very adept at lulling the American people to sleep, but things are starting to get so crazy out there that a growing minority of Americans are starting to sit up and take notice.

When I was away on vacation I kept a bit of an eye on the news, but I had no idea just how crazy things were getting until I returned home. These days more seems to happen in a single week than used to happen in an entire month. The globe has become an incredibly unstable place, and you never know what is going to happen next.

The following are 9 ways that the world has gotten even crazier in May....
#1 What in the world is going on with the weather?  All of a sudden "unprecedented tornadoes" are popping up almost every day now.  Did you see what happened in Joplin, Missouri the other day?  There are very few things that will put sheer terror into you like an F5 tornado will.  If you doubt that, just check out this video.
The National Weather Service says that the Joplin tornado was the 8th worst tornado to ever hit the United States.  At least 122 people were killed and at least 750 people were injured.
Sadly, the Joplin tornado is part of a larger trend.  Many are already calling this a "100 year" tornado season.  It seems like a major tornado outbreak somewhere in the U.S. is a nightly occurence now.  For example, just tonight a huge tornado near Oklahoma City killed a couple of people.
In April, there were approximately 600 tornadoes across the country.  That is the most tornadoes that have ever been recorded in a single month inside the United States.  Usually, we only have about 1,200 tornadoes for the entire year.
There is nothing "normal" about these tornado outbreaks.  Something really weird is happening.
In addition, we have just experienced the worst Mississippi River flood ever.  That flood is also being called something that only happens "once in a hundred years".
Why are such horrible natural disasters striking the United States right now?
Can anyone explain why this is happening?
#2 The globe continues to inch ever closer to World War III.  Just consider a few of the headlines we have seen just this week....
*NATO Warplanes in New Bombing Campaign on Tripoli
*Obama's hidden war: US intensifies drone attacks in Pakistan
*US, Pakistan Near Open War; Chinese Ultimatum Warns Washington Against Attack
*Netanyahu's defiance on deal is 'declaration of war'
Sadly, it appears that the appetite for war is growing.  Many had hoped that Barack Obama would be a peacemaker, but that definitely is not the case.
The United States has been at war for so long that the American people have learned to accept it as a normal part of life.  As long as it is something that happens "over there", most Americans don't really seem too concerned about it.
But in the end, what is unfolding in the Middle East will have dramatic consequences for the United States.  Unfortunately, most Americans have become so "dumbed down" that they simply do not understand what is happening.
#3 The news from Japan just continues to get worse and worse.  Now TEPCO is finally admitting that there were at least partial meltdowns at three of the reactors at Fukushima.  Why we are only finding this out now is anyone's guess.
It has been more than 2 months since the tsunami and officials in Japan still do not have Fukushima under control.  Every single day the complex continues to release massive amounts of radioactive material into the environment and the effects of this disaster will be felt for decades to come.
#4 When all of the crazy new security measures went into airports, we were all assured that scanners and "enhanced pat-downs" would never show up in subway stations, bus stations, sporting events and public schools.
Well, sadly the ridiculous security measures that have been implemented at our airports are spreading.  In fact, if you can believe it, a "certified TSA official" was brought in to oversee student searches at the Santa Fe High School prom last weekend.
When TSA officials start showing up at high school proms that should be a major red flag for all of us.  America is becoming a much different place than it used to be.
Do you enjoy living in a prison grid where we are all being constantly watched, tracked and searched?  If not, you better say something now before it is too late.
#5 The U.S. Supreme Court has upheld an order from a three-judge panel in California that mandates the release of approximately 40,000 inmates from California prisons.
Yes, the prisons are so overcrowded that up to 54 prisoners are using a single toilet, but you can't just release thousands upon thousands of criminals on to the streets of California and expect that there will not be major problems.
California Governor Jerry Brown is proposing a "realignment plan" which would shift tens of thousands of prisoners to county jails, but the California legislature so far has not authorized the hundreds of millions of dollars that it is going to take to implement the plan.
Hopefully something can be done, because releasing more than one out of every four California inmates back on to the streets sure does seem like a bad idea to me.
#6 It is looking more likely than ever that the U.S. debt ceiling may not be raised and that we could actually see the U.S. government default on some debt.  The Democrats and the Republicans are fighting like cats and dogs again and there is such a deadlock right now that this could actually happen.
U.S. Representative Barney Frank certainly does not sound optimistic....

"It may be that we’re going to have to see some failure to raise the debt limit and some temporary hiatus in our ability to pay our bills (for lawmakers to act)."

JPMorgan Chase CEO Jamie Dimon is using language that is even more apocalyptic.  Dimon says that a U.S. debt default would "dwarf Lehman Brothers" and that in the event of a default things will take place "that are not going to be pretty".
#7 The U.S. real estate crash continues to get even worse. This week it was announced that U.S. commercial real estate is now down 47 percent from 2007 and has now reached a post-crash low. The following is how an article by Bloomberg described the latest data....

U.S. commercial property prices fell to a post-recession low in March as sales of financially distressed assets weighed on the market, according to Moody’s Investors Service.
The Moody’s/REAL Commercial Property Price Index dropped 4.2 percent from February and is now 47 percent below the peak of October 2007, Moody’s said in a statement today.

But it is not just commercial real estate that is a giant mess.  New home sales also continue to struggle mightily.
In April, the number of new homes sold in the United States tied the lowest level ever recorded for that month.
These latest statistics just underscore the reality that the U.S. housing crash if very far from over.  As I have written about previously, the real estate crisis is absolutely crippling the economy and instead of signs of hope arising, things seem to be getting even worse.  For example, during the first quarter of 2011, home values declined at the fastest rate since late 2008.
So when in the world are things going to finally start turning around?
#8 Most Americans don't realize it, but Europe is closer to a financial meltdown than it ever has been before. Greece is either going to get another bailout or it is going to default.  If you do not understand the kind of chaos this would set off on world financial markets, just read this editorial.
The Greek debt crisis continues to get worse.  At this point, the yield on 10-year Greek bonds has now reached an astounding 16.76%.
But it is not just Greece that is in trouble.  All over Europe there are nations that are on the verge of financial collapse.  In Spain, nearly half of those between the ages of 18 and 25 are unemployed and the economic protests there have reached a frightening level.
Everyone hoped that a bailout or two would be enough to make the European debt crisis go away.  It has now become obvious that is not going to happen.
A financial meltdown in Europe is happening.  The only question is how it is going to play out.
#9 Over the past couple weeks, one of the most talked about people in the world has been Harold Camping.  I have avoided writing about him because there are at least a billion issues that are more important than what Harold Camping is saying.
But this is what the mainstream media loves to do.  They love to find a Christian with a crackpot theory and splash him all over the front page.
Camping has a very limited following and the vast majority of Christians think he is totally and completely wrong.
However, the mainstream media loves to talk about people like Camping because it is a tremendous opportunity for them to mock Christians and Christianity.
Look, anyone that put any stock in any of Camping's predictions is seriously deceived.  In case you didn't know, Camping predicted the date of the rapture before.  On September 6th, 1994, hundreds of Camping's followers gathered at an auditorium in Alameda, California waiting for the rapture.
So now Camping has been wrong two times.
Now Camping is saying that Judgment Day is going to be on October 21st and he says that he has figured out why he was wrong about May 21st.
If you believe that, I have a bridge to sell you.
If you are a Christian, then you know that there are dozens of prophecies that still need to be fulfilled before "the end of the world".  What Camping is proposing is literally impossible according to the Bible.
Of course the mainstream media knows this, but they have no problem turning Camping into a household name while ignoring the thousands upon thousands of Christians around the world that are doing really great things.
But this is the crazy world we live in.  We are all talking about Harold Camping because the big media companies decided that was the way it was going to be.
It is time that all of us wake up and start thinking for ourselves.
Our world is becoming crazier by the minute and the mainstream media is certainly not helping things.  In times like these, it is going to be absolutely vital for all of us to engage our critical thinking skills and to not just blindly accept anything that someone else is trying to tell us.

Happy Memorial Day Weekend Sound Of Cannons Readers!!!

OK, it's Memorial Day Weekend!  The unofficial start to summer and the wind-down of the stock market begins.  "Sell in May and go away!"  Hee Hee, we'd like to go to Argentina and set up shop, but Sound Of cannons LLC doesn't pull in that kind of money.

In all seriousness, please travel safely as there are a lot of assholes behind the wheel on weekends like this.  Pack enough emergency provisions in case a bad situation pops up; the people of Missouri can explain that better than we can.

Enjoy good food, good BBQ and good music if it's on your agenda.  Say some prayers for the soldiers overseas and all the good people looking for work, they need your good thoughts.  Pray also for the freedom-minded leaders of our country and the freedom activists that need our support - the noose is tightening in Obama's America and we need them to be strong.

Devote some thought to the politics of the day and the issues at hand.  Offer some insight to the idiots who vote Democrat and teach them the error of their ways.
Attend the Memorial Day parades and cheer for the heroes.

And please, please - hug your kids and tell them you love them.  If your parents (or even grandparents) are still around tell them you love and respect them too.  Family is all you'll have at the end of your days; and they're pretty much all that matter.

The Fed Does It Again: $80 Billion Secretive “Bank Subsidy” Program Uncovered, Providing Bank Loans At 0.01% Interest

The Fed does it again. Following consistent allegations that the Federal Reserve operates in an opaque world, whose each and every action has only had a purpose of serving its Wall Street masters, led to repeated lawsuits which went so far as to get the Chairsatan to promise he would be more transparent, Bloomberg’s Bob Ivry breaks news that between March and December 2008 the Fed operated a previously undisclosed lending program, whose terms were nothing short of a subsidy to banks. Says Ivry: “The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.” 0.01% interest is also known by one other name: “outright subsidy.” It doesn’t get any freer than that: 0.01% interest on one month cash. Just how close to a complete implosion was the financial system if 0.5% interest seemed too high? Not surprisingly, this program was widely used: “Credit Suisse Group AG, Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public…Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent. “  Yes, that Goldman Sachs. The same one that perjured itself when it said before the FCIC that it only used de minimis emergency borrowings. Just how many more top secret taxpayer subsidies will emerge were being used by the Fed to keep the kleptocratic status quo in charge?

From Buisnessweek:

“This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”
Congress overlooked ST OMO when lawmakers required the central bank to publish its emergency lending data last year under the Dodd-Frank law.
“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.
Records of the 2008 lending, released in March under court orders, show how the central bank adapted an existing tool for adjusting the U.S. money supply into an emergency source of cash. Zurich-based Credit Suisse borrowed as much as $45 billion, according to bar graphs that appear on 27 of 29,000 pages the central bank provided to media organizations that sued the Fed Board of Governors for public disclosure.
New York-based Goldman Sachs’s borrowing peaked at about $30 billion, the records show, as did the program’s loans to RBS, based in Edinburgh. Deutsche Bank AG, Barclays Plc and UBS AG each borrowed at least $15 billion, according to the graphs, which reflect deals made by 12 of the 20 eligible banks during the last four months of 2008.

And even now, we don’t know how much these individual subsidies were:

The records don’t provide exact loan amounts for each bank. Smith, the New York Fed spokesman, would not disclose those details. Amounts cited in this article are estimates based on the graphs.

The usual excuse is used: the purpose of the program was to prevent the Ice-6ing of shadow markets

One effect of the program was to spur trading in mortgage- backed securities, said Lou Crandall, chief U.S. economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a research company specializing in Fed operations. The 20 banks — previously designated as primary dealers to trade government securities directly with the New York Fed — posted mortgage securities guaranteed by government-sponsored enterprises such as Fannie Mae or Freddie Mac in exchange for the Fed’s cash.
ST OMO aimed to thaw a frozen short-term funding market and not necessarily to aid individual banks, Crandall said. Still, primary dealers earned spreads by using the program to help customers, such as hedge funds, finance their mortgage securities, he said.

One name stands out: Goldman Sachs.

The New York Fed conducted 44 ST OMO auctions, from March through December 2008, according to its website. Banks bid the interest rate they were willing to pay for the loans, which had terms of 28 days. That was an expansion of longstanding open- market operations, which offered cash for up to two weeks.

Outstanding ST OMO loans from April 2008 to January 2009 stayed at $80 billion. The average loan amount during that time was $19.4 billion, more than three times the average for the 7 1/2 years prior, according to New York Fed data. By comparison, borrowing from the Fed’s discount window, its main lending program for banks since 1914, peaked at $113.7 billion in October 2008, Fed data show.

Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent.

More on Goldman:

As its ST OMO loans peaked in December 2008, Goldman Sachs’s borrowing from other Fed facilities topped out at $43.5 billion, the 15th highest peak of all banks assisted by the Fed, according to data compiled by Bloomberg. That month, the bank’s Fixed Income, Currencies and Commodities trading unit lost $320 million, according to a May 6, 2009, regulatory filing.

The source of the data: a FOIA lawsuit, just because the plebs knowing where billions of their money goes is not really in the best interests of the lords.

The bar charts were included in the Fed’s court-ordered March 31 disclosure under the Freedom of Information Act. The release was mandated after the U.S. Supreme Court rejected an industry group’s attempt to block it

So there it is again: a secret bailout program used to “rape” the peasantry by the entitled kleptocrats, which nobody thought would be exposed, and would allow those in control to lie blatantly to Congress. But have no fear: the wheels of justice are turning: instead of having those who rape millions under house arrest, we get the spectacle of those who allegedly rape one. The former, after all, are just a statistic.

And how long before the peasantry just snaps from the barage of endless lies?

A Look at the Recent Rout in Silver and Oil Prices and what it Means for Commodity Prices

A fascinating special report by Reuters this week tracks the fortunes of oil and silver over the last few days and reads more like a novel of Wall Street trading than Reuters’ usual analytical style. Not that the report is sensationalist; more that the price falls it reports are sensational and, by most observers, unexpected.

Crude oil prices plummeted on in early May after months of steadily rising prices. Graph source: stocktrader.com
As the author Joshua Schneyer of the Reuters article explains, never before had crude oil prices fallen so steeply during the course of one day. At one point on Thursday, May 5, prices were off nearly $13/barrel, and since then prices have fluctuated, but continued to fall. Nor was oil alone: silver has experienced an even more precipitous fall, 20 percent during the week and 30 percent to date — the largest one-day price drop since 1980.
So what prompted the rout in prices? That’s were the fun in the Reuters article comes in — no one is sure. The major market makers and hedge funds seem as bemused as analysts and investors. Certainly George Soros’ reported selling of silver positions no doubt had an impact on that narrow market. Goldman Sachs may have contributed to the sentiment by advising clients in late April to pare back oil positions, correctly predicting a $20 fall in prices. Mostly likely a combination of negative factors — prominent commodity bulls turning bearish, some weak economic data, cheap money from the US Federal Reserve ending by July, a lessening of political risk — conspired to create a sense of “let’s take profits now.” A proportion, perhaps as much as 20 percent, of the oil price was down to perceptions of political risk, although global oil demand is strong, OPEC has been saying for months there is enough oil to go round, and oil stocks have been high, supporting their position. Sarah Emerson at Energy Security Analysts is quoted as putting it rather succinctly: “We’ve been in a world thinking there’s more risk, more risk, more risk. People this week stopped and said, maybe there’s less risk.”
But while these factors may have initiated the sale, the speed and depth of the sell-off, it appears to have a lot to do with computer programs designed to readjust positions to price movements. High-frequency, computer-initiated trading and algorithmic trading accounts for about half of all volume in oil markets. As prices fall, complex programs adjust positions if trigger points are hit. Exchange data shows that the total number of open positions in the oil market rose during the day when the exact opposite would be expected in a typical sell-off. Normally, panicky funds selling oil en masse would cause total “open interest” numbers to shrink, as exiting investors closed out contracts. But some machines, following the market trend, may have gone further, by dumping long positions and quickly amassing sizable short positions instead.
Nor was the oil price the only one affected: metal and other commodity prices also came off. The Reuters Jefferies CRB index, which follows 19 major commodities, was on its way to a 9 percent weekly drop, the biggest since 2008. This Reuters graph illustrates the degree to which the one-year long-term trend line has been “violated” by May’s drop; the question now: is this a turn of direction or a temporary adjustment?

Source: Reuters
Most feel it is a short-term lull and will last through the summer, that the longer-term fundamentals for emerging markets and western world growth remain positive, and that as a result, commodities have only one way to go. But like all classic tales, the events of this month have shown that just as we think we know the plot there is a new twist around the corner to keep us guessing what’s going to happen next.

World Bank Predicts the Demise of the US Dollar by 2025

This week, the World Bank published a report predicting the demise of the US dollar as the major reserve currency by 2025. The transition will be driven by emerging market growth rates of 4.7% a year, compared to only 2.3% for developed countries. Six countries, Brazil, China, India, Indonesia, Russia, and South Korea, will account for half of the world economy by then.
The greenback will be replaced by a multi-currency system made up of the dollar, the euro, and the Chinese renminbi. The evolution will be driven by a sharp rise in third party international trade, direct investment, and mergers and acquisitions. Global multinationals based in the developed world will play a diminishing role on the world stage.

While I agree with the report’s growth assumptions, its conclusions are a mile off. It assumes that Chinese growth continues at its blistering, double digit rates. It won’t. I see Chinese growth peaking out in five years, when its population pyramid starts to invert as a result of the “one child” policy. It also assumes that the Chinese float the renminbi, which they have been so far been loath to do. The rudiments of a domestic Chinese bond market have yet to develop.

As for the Euro, it would not exactly be my first choice for a reserve currency these days. It might not even exist in 15 years, at least in its current form.

Reports like this have been spewing forth from international agencies for at least the last four decades, and I immediately file them in the wastebasket where they belong. By the time the dollar really loses its reserve status, my main concerns in life will be what flavor the Ensure is that day, and whether my Depend’s are getting changed on time.