Sound Of Cannons

You Can't Fool Mother Nature For Long: The Substitution of Debt for Productivity

2012-01-26T22:39:00.002-05:00

The "big story" of the U.S. economy is that we have substituted expansion of debt for meaningful increases in productivity.
For the past 30 years, the U.S. economy has become increasingly dependent on explosive debt expansion for its "growth" rather than on meaningful rises in meaningful productivity. Growth is in quotes because growth based on secular increases in productivity--that is, the same investment of labor and capital produces goods and services of greater value--is qualitatively different from "growth" based on a pyramiding of debt.
Real growth based on rising productivity is sustainable, "growth" based on ever-greater expansions of debt is not.

What has kept the Status Quo from falling off the debt cliff over the past four years is the substitution of exploding Federal/public debt for no-longer-rising private debt. If Federal borrowing were to return to 2006 levels, the economy would immediately experience a severe contraction.

We can understand this reaction as that of a debt junkie economy suddenly deprived of massive infusions of fresh credit.
This substitution of public debt for private debt is simply an attempt to fool Mother Nature. The justification of the Status Quo for impoverishing future generations is the massive expansion of Federal debt is needed to "kick start" the economy, i.e. "get us through a rough patch."
After four years of kick-starting and muddling through rough patches, the economy has yet to recover benchmarks set in 2007, much less grown. Meanwhile, the kick-starting added $6 trillion in visible public debt and trillions more in off-balance sheet obligations and backstops.
Substituting debt for productivity is also an attempt to fool Mother Nature. Here's how the substitutiion works: when productivity is flat, then "growth" can be created by leveraging the economy's surplus into greater amounts of debt, which can then be squandered on mal-investments and consumption to foster an illusion of "growth."
Note that I use the phrase "meaningful productivity." If a highrise tower is built in the middle of nowhere and sits empty, the construction and related costs (inspections, transport of goods, utilities, etc.) are added to the gross domestic product (GDP) as "growth," even though the empty building is not adding any real value to the economy.
The same can be said of millions of unneeded medical tests, millions of doses of medications that don't work as advertised, etc.--all the costs of sickcare that rarely add productive value to the economy but which are all added to the GDP as "growth."
If you leverage $100 per month in surplus capital in a household into a $100,000 home equity loan that is squandered on luxury cruises, a new kitchen, boats and dining out, then that explosion of spending boosts "growth" like a shot of cocaine.
But then what happens when the borrowed money has all been spent? What happens when the borrower defaults? The underlying assets--the boat, home, etc.--can all be auctioned off, but a massive loss remains to be swallowed by the lender.
Needless to say, the bankrupt borrower will be unable to borrow another $100,000 any time soon, even if interest rates are lowered to near-zero.
That's what happens when you try to fool Mother Nature by substituting debt expansion for increases in meaningful productivity. Eventually the surplus that is being leveraged into debt reaches the point where it cannot leverage any more debt, and the over-leveraged borrower defaults at the first financial bump.
An economy that is dependent on constant massive increases in debt to fund its "growth" is not sustainable. In a very real sense, the U.S. has been fooling Mother Nature for 30 years. Now we've overleveraged the nation's shrinking pool of surplus capital and assets, and the last rabbit has been pulled from the magician's hat. Mother Nature (i.e. reality in the form of a transparent, marked to market balance sheet) is about to take her revenge on all those who reckoned she could be fooled forever by ever-expanding debt.

Eleven ‘Stunning Revelations’ From a Confidential Economics Memo to Obama

2012-01-26T22:36:00.002-05:00

Columnist Ryan Lizza’s in-depth New Yorker article (“The Obama Memos”) is an in-depth examination of the Obama administration’s handling of the U.S. economy. But unlike most op-eds, his column involves more than just speculation and conjecture. Lizza uses a 2008 “sensitive and confidential” memo written by the economist Larry Summers as one of the article’s chief resources.
For those unfamiliar with the memo’s author, Larry Summers is the former Director of the United States National Economic Council for President Obama. And although he resigned from this position in November 2010, as the White House’s chief economist he “played a leading role in crafting the administration’s interventions in the economy,” according to the Wall Street Journal.
Summers’ influence being understood, this 57-page memo helps explain why certain economic strategies and initiatives have been adopted, and in many cases maintained, by the Obama administration. But it does a little more than that: the memo also sheds some light on why the administration has failed to revive the economy.
Summers’ memo is “striking for two reasons,” writes Dean Baker of The Guardian. “First, it…showed the economic projections that the administration was looking at when it drafted its stimulus package. These projections proved to be hugely overly optimistic.”
Many critics would agree.
Baker continues:

The other striking part of this memo is the concern with “bond market vigilantes”. The memo discusses the need to focus on the medium-term deficit with the idea of reaching deficit targets by 2014. The highest deficit target listed in the memo for this year was 3.5% of GDP. The memo also includes calculations with a deficit target of 2.5% of GDP, and a balanced budget.

The deficit for the fiscal year that ended last October was 8.5% of GDP. Depending on how the payroll tax debate, the extension of unemployment benefits and a few other issues get resolved, the deficit is not likely to be very much lower in 2012.
This means that getting from a 2012 deficit near 8.0% of GDP to even the 3.5% target for 2014 would require some very serious budget cuts in an economy that will still be suffering from massive unemployment. The difference between a budget deficit of 8.0% of GDP and 3.5% of GDP is equal to almost $700bn annually.

So what does this mean?

Larry Summers and Barack Obama.

“In short, the Obama administration made plans that were quite obviously based on a far too rosy view of the economy,” Baker concludes. “While this favorable assessment was the prevailing view at the end of 2008, what is inexplicable is why the administration never appears to have strayed from its original path – even when it became clear that the economy was doing far worse than projected.”
Just how poorly did Summers and the Obama administration “fail to grasp” the seriousness of America’s economic situation?
For an answer to this question, one can turn to James Pethokoukis of The American, the online magazine for the American Enterprise Institute.
The following are the most “stunning revelations” about what the Obama economic team was thinking as the financial crisis was blowing up (as compiled by Pethokoukis, with quotes from the 2008 memo itself):

1. The stimulus was about implementing the Obama agenda.
The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary. … The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.
2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them).
Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run.
3. Obamanomics was pricier than advertised.
Your campaign proposals add about $100 billion per year to the deficit largely because rescoring indicates that some of your revenue raisers do not raise as much as the campaign assumed and some of your proposals cost more than the campaign assumed. … Treasury estimates that repealing the tax cuts above $250,000 would raise about $40 billion less than the campaign assumed. … The health plan is about $10 billion more costly than the campaign estimated and the health savings are about $25 billion lower than the campaign estimated.
4. Even Washington can only spend so much money so fast.
Constructing a package of this size, or even in the $500 billion range, is a major challenge. While the most effective stimulus is government investment, it is difficult to identify feasible spending projects on the scale that is needed to stabilize the macroeconomy. Moreover, there is a tension between the need to spend the money quickly and the desire to spend the money wisely. To get the package to the requisite size, and also to address other problems, we recommend combining it with substantial state fiscal relief and tax cuts for individuals and businesses.
5. Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic.
As noted above, it is not possible to spend out much more than $225 billion in the next two years with high-priority investments and protections for the most vulnerable. This total, however, falls well short of what economists believe is needed for the economy, both in total and especially in 2009. As a result, to achieve our macroeconomic objectives—minimally the 2.5 million job goal—will require other sources of stimulus including state fiscal relief, tax cuts for individuals, or tax cuts for businesses.
6. Team Obama wanted to use courts to force massive mortgage principal writedowns.
The next step in the housing plan is responsible bankruptcy reform along the lines of the Durbin bill you cosponsored. This would allow bankruptcy courts to write down the principal of primary residences to the current market value. We recommend announcing this reform to begin immediately following the close of the enhanced Hope for Homeowners period.
7. Team Obama thought a stimulus plan of more than $1 trillion would spook financial markets and send interest rates climbing.
To accomplish a more significant reduction in the output gap would require stimulus of well over $1 trillion based on purely mechanical assumptions—which would likely not accomplish the goal because of the impact it would have on markets.
8. Greg Mankiw, economic adviser to Mitt Romney, was dubious about the stimulus.
Greg Mankiw is the only economist we have consulted with who refused to name a number and was generally skeptical about stimulus.
9. But the Fed was a stimulus enabler.
Senior Federal Reserve officials appear to be of the view that a plan that well exceeds $600 billion would be desirable.
10. IPAB was there at the very beginning.
There are two possibilities for making tough decisions on the long-run budget, which could be done either separately or together: creating an executive-branch “health board” (which focuses on one part of the issue) and a Congressionally chartered commission (which could focus more broadly).
11. The financial crisis wasn’t just Wall Street’s fault.
A significant cause of the current crisis lies in the failure of regulators to exercise vigorously the authority they already have.

Perhaps more unsettling than Pethokoukis’ list is the fact that the Obama administration has done very little to update any of these ideas. It’s as if Summers set the tone in 2008, and the Obama administration never looked back.
Now, considering that there‘s a growing consensus that the president’s understanding of the U.S. economic crisis has been naïve (if not willfully ignorant), is it any surprise that he is receiving so much criticism? Take, for example, many of the conservative-to-moderate commentators who, despite having once possessed “a surprising degree of hope and good cheer” for his presidency, have denounced President Barack Obama as an abject failure:
In 2009, the president was a dinner guest in the home of conservative commentator George Will, according to Lizza. By 2011, Mr. Will had declared President Obama a “floundering naïf” and someone advancing “Lenin-Socialism.”
In 2009, Fox News commentator Charles Krauthammer wrote that Obama could be “a president with the political intelligence of a Bill Clinton harnessed to the steely self-discipline of a Vladimir Putin” who would “bestride the political stage as largely as did Reagan.” By 2011, Mr. Krauthammer had written the president off as “sanctimonious, demagogic, self-righteous, and arrogant.”
In 2009, the economist Larry Kudlow claimed that the president loved “to deal with both sides of the issue,” when it came to business and the economy and that he “revels in the back and forth. And he wants to keep the dialogue going with conservatives,” according to Lizza. By 2010, Mr. Kudlow had accused President Obama of presiding over a government of “crony capitalism at its worst.”
In 2009, while commenting on the violence set off by Iran’s rigged elections, the supposed “Reaganite” Peggy Noonan gushed “Mr. Obama was restrained, balanced and helpful in the crucial first days, keeping the government out of it.” By 2011, Miss Noonan declared the president “a loser.”
Given the fact that the Summers memo only confirms what several of these critics had already feared (i.e. that the Obama economic team has been utterly incompetent), perhaps these “over-the-top” criticisms aren’t that far off the mark.

Dollar Guaranteed To............

2012-01-26T22:19:00.000-05:00

For years, it was an unwritten rule. As of yesterday, it’s official policy: The dollars in your wallet are destined to lose at least 18% of their purchasing power during the next 10 years.

Lost in the noise of countless Federal Reserve announcements yesterday was a formal target of 2% annual inflation.

Actually, it’s worse than 18% over 10 years. For the Fed’s favored measure of inflation is not the heavily gamed consumer price index — CPI — or the even-more-gamed “core” CPI that assumes your cost of living isn’t really affected by food and energy.

After all, CPI is currently running 3.0% year over year. Whoops, too high. Core CPI is 2.2%. Still too high.

The Fed prefers something called “core personal consumption expenditures.”

That number is currently running 1.7%.

Voila! Applying the logic only central bankers are capable of divining, there’s not enough inflation!

That’s the real take-away from the flurry of Fed declarations. Seen in that light, the announcement that the fed funds rate would remain near zero through “late 2014” is almost superfluous.

Financial repression? Old news. Even The New York Times is onto that game now, its Fed story describing “the transformation of a policy that began as shock therapy in the winter of 2008 into a six-year campaign to increase spending by rewarding borrowers and punishing savers.”

Still, lest you think the Fed is suddenly acquiring a preference for “transparency,” some matters of policy remain sotto voce: “A weak U.S. dollar, despite its consequences, remains an unstated goal of both the Fed and Treasury Department,” says our Dan Amoss, who took the bullet watching Ben Bernanke’s news conference yesterday while Addison and a small group of us carried on with our editorial retreat in Miami.

Indeed, says Dan, “We will continue to see a global race to devalue currencies and ease government debt burdens. The Fed will not stand idly by as the Europeans, Chinese and Japanese print copious money and weaken their currencies.

“All of these central banks are going down a path from which they cannot return. They are monetizing government debts, and will continue to do so, with sad semantic arguments that they their money printing operations are not really monetizing government debts. The financial market consequences of selling assets from central bank balance sheets and shrinking money supplies are too scary for central bankers to consider.”

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

2012-01-26T22:17:00.001-05:00

"The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding, go out to meet it.” - Thucydides

11 things Obama didn’t tell you about tax fairness last night

2012-01-26T22:14:00.000-05:00

President Barack Obama talked a lot about taxes and fairness in his State of the Union speech last night. Like this bit:

But in return, we need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes. … We don’t begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. …Tax reform should follow the Buffett rule: If you make more than a million dollars a year, you should not pay less than 30 percent in taxes.

Are wealthier Americans really not paying their fair share? Here are some numbers on income inequality:
1. The top 1 percent pay 36.7 percent of federal income taxes and earn 16.9 percent of adjusted gross income (as of 2009).
2. The top 0.1 percent pay 17.1 percent of taxes and earn 7.8 percent of adjusted gross income.
3. The average income tax rate for the top 1 percent is 24 percent. The bottom 50 percent? Just 1.85 percent.
4. The bottom 50 percent pay just 2.3 percent of income taxes.
5. Buffett chose to leave most of his fortune to the Bill & Melinda Gates Foundation, avoiding a 55 percent estate tax.
6. Buffett actually pays 50 percent tax since capital gains and dividends taxes are a double tax on corporate income.
7. Taking half of yearly income from every person making between $1M and $10M would only decrease the nation’s debt by 1 percent.
8. Taking every dollar from everyone making more than $10M per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent.
9. IRS will give out roughly $110 billion in “refundable” tax credits this year to households that pay no income taxes.
10. If taxable income in the 35 percent bracket were taxed at 49 percent, federal income tax revenues would be just $78B higher (Tax Policy Center).
11. To get the deficit to 2 percent by 2020 using Obama’s budget baseline, it would take a 91 percent top rate by taxing just the rich.

Spending other people's money

2012-01-26T22:12:00.000-05:00

Politicians like promising voters goodies that allegedly are paid for by others -- preferably by others whose wealth voters feel is undeserved (such as the "1 percent"). Even better for politicians, though, is promising voters goodies that cost nothing!
Who doesn't want goodies that are free?
The problem, of course, is that almost nothing worthwhile is truly free.
So how can politicians promise free goodies? Economists influenced by John Maynard Keynes often write as if they've uncorked the secret: government borrowing from fellow citizens.

Here's their argument: If Uncle Sam borrows to pay for, say, an extra $1 trillion of stimulus spending, this spending is free to the country as a whole if the debt is owed only to Americans. True, Uncle Sam must raise taxes tomorrow to pay this debt, but the debt payments will be made to Americans. Americans will be taxed an extra $1 trillion plus interest, but every cent of these higher tax collections from Americans will be paid to Americans. The money stays here. America, as a whole, pays nothing for today's stimulus spending!

In econ-speak, internally held debt is no burden on the economy.
At first glance, this argument appears sound. But look again.
Suppose the stimulus funds are spent to build roads. We might all agree that the roads are worth every cent spent to build them. But just because something is worthwhile doesn't mean it's costless.
Real resources are used up in building the roads. The millions of hours of labor, fuel to power the construction equipment, concrete, asphalt, steel and other building materials, the land that is now paved over with highways and boulevards -- all are resources that could have been used to produce other things of value. The satisfaction that people would have gotten from those things that instead could have been produced -- but in fact aren't produced -- are the cost of building these roads.
Those foregone goods and services don't become "unforegone" simply because Uncle Sam borrows the funds used to build the roads from Americans.
My George Mason University colleague James Buchanan won the 1986 Nobel Prize in economics in part for his work explaining why it's mistaken to conclude that internally held debt imposes no (or only minuscule) burdens on the economy.
Buchanan reasoned that the burden of the debt isn't borne by the lenders: They lend voluntarily in hopes of receiving an attractive return. Had they not loaned to the government, they would have used their money in other ways, likely as loans to private investors.
Nor is the burden of the debt borne by today's taxpayers. It's precisely to avoid raising taxes today -- to avoid burdening today's taxpayers -- that government borrows.
The burden of the debt falls just where common sense tells us it falls: on the people whose taxes are raised to pay it. Those people are taxpayers in the future. And again, that the bondholders are also Americans does nothing to "unforego" the goods and services sacrificed to build the roads.
Of course, if today's taxpayers save and pass on enough money to their kids so that their kids can use these savings to pay off the debt, then today's generation would relieve tomorrow's generation of the debt's burden. But today's generation is unlikely to be so kind. Again, government debt is incurred today for the very purpose of enabling today's taxpayers to "free-ride" on future taxpayers.
And such "free-riding" means that government today will likely overspend.

38. Identifying Different Psychopaths

2012-01-26T00:31:00.000-05:00

Worth noting...........

USS Enterprise False Flag!!

2012-01-26T00:21:00.000-05:00

“Remember the Maine!”, was the cry back in 1898 from William Randolph Heart’s New York Journal – a forerunner the modern Murdoch press. Then, some 274 men lost their lives as a result of the explosion which sunk the USS Maine in Havana Harbor. Hearst even told a story of how the enemy had planted a torpedo beneath the Maine and detonated it from shore. The only problem was – it never happened. Nonetheless, the event used as the popular pretext for the United State’s entry into the Spanish-American War, and ultimately, the acquisition of Cuba itself by the US. This was now the modern blueprint for using propaganda in conjunction with, what is accepted by many historians, a type of false-flag event.
Some 70 years later, on June 8, 1967, during the Six-Day War, a similar event took place off the coast of Egypt. It could well have been, “Remember the Liberty!”, following an event which saw 34 US men killed and 170 wounded when the USS Liberty was attacked by both the Israeli Air Force and Israeli Navy torpedo boats. History now reveals that Israel’s slaughter of the USS Liberty crew was designed as a false flag event, but luckily Russia intervened at the last minute before Israel could sink the decorated American ship. Had it worked, it could have been used to drag the US and her allies into a new regional, or even a third world war - with who knows what consequences.

If a conflict is to ignite in the Persian Gulf in 2012, it is highly likely that the US or Israel will use the false flag option. Two reasons support this. Firstly, Iran lacks a motive to want to engage in a suicidal first strike against the axis powers – a move which would no doubt cost them thousands of innocent lives and billions in infrastructure. Frankly, it’s safe to say that it’s not at all in the Iranian national interest to start such a conflict. History does show however, that the US and Israel can – and will, employ the technique of the false flag attack, where they would engineer an incident and then blame it on the Iranians. By all accounts, this is also how the US was able to fake their way into the costly and bloody Vietnam War, via the infamous Gulf of Tonkin Incident.
Recent weeks have seen a massive build-up of naval assets in the Persian Gulf by both the US and the British. The irony of surface naval power in the 21st century is that it is only good for one thing, and that is the ‘projection of force’. In fact, Naval Power ceased to be a major factor geopolitical power-play since the dawn of the 20th century, when it was usurped by Air Power.
As Great Britain learned in the Falklands War back in 1982, even a single French Exocet missile can sink a battleship, or aircraft carrier. Iran has more than this capability, so for all practical purposes, any American ships in the region are nothing more than bait – large, slow sitting targets. Which begs the obvious question: why would the US be sending its soon-to-be decommissioned, rusty chess piece – the 50 year old nuclear-powered USS Enterprise carrier into the line of fire in the Persian Gulf? A very large and expendable, floating museum, and one which, interestingly enough with its six on board nuclear reactors… would probably cost a fortune to dispose of.
If other sides are drawn in to a conflict, most experts agree that it has the danger of escalating into a WWIII situation, and both sides would surely be losers in such a scenario, not to mention the global economy.
However, we have the ideal set of conditions for a New Cold War to emerge in the early 21st Century – one where the Western Axis powers of the US, Europe, Israel and GCC countries sit on one side, and with Iran, Syria, Pakistan, China, and perhaps Russia sitting on the opposite side. This New Cold War will be more about the projection of power and securing sub-regional dominance in terms of economics – natural gas, mineral and trade relationships, as well as petroleum – than it will about the political ideologies that seemed to dominate the previous 20th Century Cold War.
On the surface, this latest spat between the US and Iran looks like a step closer to war, but on closer examination however, the present conditions are not at all ideal for a preemptive strike against Iran by the US, or Israel. Why? In a time when fuel consumption is down worldwide, and oil supplies are high, oil prices are defying economics and maintaining strength above $100 per barrel. It’s also worth noting that defense contracts – particularly in the GCC countries – are way up, meaning there is still much money to be made from this current crisis – on both sides, including Iran.
Still though, we must keep our eyes open for that false flag from the west.

Shock Docs: Total Federalization of Police Under New Homeland Security Mission

2012-01-26T00:19:00.000-05:00

A new white paper presented to the House Permanent Select Committee on Intelligence carves out an ‘evolving mission’ for Homeland Security that moves away from fighting terrorism and towards growing a vast domestic intelligence apparatus that would expand integration with local/state agencies and private-public partnerships already underway via regional fusion centers.

Crafted by the Aspen Institute Homeland Security Group, co-chaired by former DHS chief Michael Chertoff and composed of a who’s who of national security figures, the report outlines a total mission creep, as the title “Homeland Security and Intelligence: Next Steps in Evolving the Mission” implies.

Significantly, it puts on paper and into the Congressional record a proposed transition from outwardly dealing with the threats posed by terrorism towards intelligence gathering “focused on more specific homeward-focused areas.” That is, the homegrown, domestic threats we’ve heard so much about from Big Sis already.
In short, it confirms the intentions of key insiders– including former NSA/CIA head Michael Hayden, former Rep. Jane Harmon, former Secretary of State Madeline Albright, 9/11 Commissioners Philip Zelikow and Richard Ben-Viniste, former National Security Advisor Samuel Berger and others– to flesh out a plan we have already seen developing from an outside perspective– namely, to build a domestic Stasi-like force to takeover, monitor and control the population.
Moreover, the media has reported on this changed mission– towards the full spectrum domination of the people under a patently-fascist framework– with the same calm as the weekly weather forecast.
LOCALIZED INTELLIGENCE: HIRING POLICE & BOWING TO PRIVATE INTERESTS
Achieving this new aim includes co-opting local law enforcement and other regional agencies.
“As the threat grows more localized,” the report reads, “the federal government’s need to train, and even staff, local agencies, such as major city police departments, will grow.”
That’s right, the feds want to oversee the hiring of your local police.
Fusion Centers, now spread across the nation, have already infected police agencies and local governments with a federalization takeover mentality. A Dec. 2010 Aspen Homeland Security Group report, quoting the Superintendent of the New Orleans Police Department, recommends that “every mayor and governor of a major city in the country should have to attend a DHS-sponsored emergency management course where various scenarios – like hurricanes, levy breaks, and explosions – are exercised.”
But directing local police departments, mayors and governors is only the beginning. Indeed, the Aspen group envisions the ‘foundation for a separate DHS intelligence mission’ by building upon ‘decentralized’ partnerships with the private sector as well.
Homeland Security Should Re-Orient Its Mission, Aspen Panel Says
The bloated umbrella agency aims to lean on its ties with the hospitality (hotel), security and transportation industries, among others, as well. Already, Homeland Security conducts background checks on many security guards working with ‘critical infrastructure,’ and clearly, it aims to expand the use of quasi-government groups like InfraGard and other private snitch networks. Ultimately, all employment would be subject to federal background checks and security clearances.
Private interests should even shape Homeland Security priorities, according to the report: “different private sectors in the United States, from the hospitality industry to transportation, should drive requirements for DHS.”
ABANDONING THE FIGHT AGAINST TERRORISM
As unbelievable as it sounds, DHS says other agencies can handle the all-encompassing threat of terrorism that was used to justify the super-agency’s own existence and powers.
Abandoning specific focus on tracking terrorist cells and organizations, DHS instead plans to shift into broad coverage of border protection, integrating travel data, cyber defense, critical infrastructure protection and other areas.

“There are enough agencies pursuing the terrorist adversary to allow DHS to build a new analytic foundation that emphasizes data, analytic questions, and customer groups that are not the focus for other agencies,” the report states.

And funding should be cut from terrorism-focused areas:

“Analysis that helps private-sector partners better understand how to mitigate threats to infrastructure, for example, should win more resourcing than a focus on all-source analysis of general threats, such as work on assessing the perpetrators of attacks. Conversely, all-source analysis of terrorist groups and general terrorist trends should remain the domain of other intelligence agencies.”

Instead, the “national security experts” who’ve brought us naked body scanners, checkpoints on highways, streets, airports, bus & train stations, and who have projected the homegrown terror threat into the theaters of private hotels, shopping malls and sports stadiums, are again expanding the bureaucratic growth of tyranny by infiltrating areas traditionally spared from federal intrusion.
A promotional article at the Homeland Security News Wire blog highlights the shift: “With a slew of intelligence agencies with similar missions safeguarding the United States, the report posits that DHS should avoid competing with other agencies and overlapping responsibilities, instead focusing on its areas of core strengths – analysis and the dissemination of critical intelligence to local law enforcement agency, the private sector, and critical infrastructure operators.”
“THE NEW, GROWING WORLD OF HOMELAND SECURITY INTELLIGENCE”
Further the Aspen report recommends “an entirely new enterprise,” stating that “DHS might consider the development of a homeland security training institute.” It hails the security-complex workforce that has been fostered by Homeland Security in the decade since 9/11, now seeking to influence and train its future recruits as well.
The report verifies previous information suggesting that DHS wants to comb the American homeland with private security contractors, trained and overseen by Homeland Security– a giant army of enforcers and snitches, brainwashed by propaganda scaremongering about terrorism, who could respond to crime as a whole with an atmosphere of universal preemptive suspicion that targets anyone who appears out of place.
“Working with state/local/private sector partners to draw their intelligence capabilities into a national picture” is a stated aim of this redirection of Homeland Security’s core mission. Installing and training individual members of these partner groups- from local police departments to the eyes and ears it would tap in the security, transportation and infrastructure industries- would facilitate the kind of over-arching homeland security infrastructure the document aims to construct over society.
DOMESTIC EXTREMISM: TARGETING AMERICAN SOCIETY
Doing so would put greater emphasis on the kind of politically-slanted domestic profiling (read: “intelligence product“) that has already drawn criticism and forced the agency to disavow one of its own reports, which targeted ‘right-wing extremism’:

The numerous federal and other officials familiar with the matter Homeland Security Today interviewed frankly said the April 7, 2009 DHS report that generated so much outrage, Right-wing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment, was the most “poorly constructed” analytical “product in DHS history,” and that numerous reports dealing with rightwing extremists have in fact been produced by DHS since it disavowed that one report.

The Department of Homeland Security was sold to public on a wave of fear in the wake of the 9/11 attacks, under the promise of keeping America safe from terrorism. Instead, the Homeland Stasi agency is solidifying its role as a secret police over the United States. Not only have local police agencies been instructed that non-violent protesters, returning veterans and supporters of third party candidates are potential domestic terrorists, but Federal Protective Service (FPS) agents- dispatched with Homeland Security oversight- have been caught arresting photographers and spying on dissenters (in this case during an Occupy Wall Street protest in Portland).
Recent Homeland Security-related documents have already revealed that the American people have been designated as an enemy under emergency plans and that the feds are contracting and activating FEMA relocation centers for use during a crisis or catastrophe.
MISSION CREEP: HANDING OVER UNACCOUNTABLE POWER
Sadly, this warped mission creep is nothing new to the United States’ intelligence agencies.
Former President Harry Truman lamented the CIA’s extreme power grab some 16 years after he signed the bill ushering it– and the entire national security infrastructure– into existence. One month after the JFK assassination in 1963, he stated:

“For some time I have been disturbed by the way the CIA has been diverted from its original assignment. It has become an operational and at times a policy-making arm of the government… I never had any thought that when I set up the CIA that it would be injected into peacetime cloak and dagger operations.”

Behind the scenes, it was former CIA director Allen Dulles, along with a number of fellow travelers, who crafted the CIA’s transformation under a limited, intelligence gathering mandate into the unaccountable monster it became. During a decade as head of the CIA, Dulles utilized the Jackson-Correa white paper he helped write to usher in black ops and other operational aspects never intended to be, from assassinations, to coups, to revolutions, and more (see Col. Fletcher Prouty’s The Secret Team). Suddenly, the CIA was operating from the shadows, a virtual government-within-government, with no clear path towards reigning in its power.
Will the already-controversial Department of Homeland Security be allowed, too, to creep so far into our lives that we can never look back?

24 Facts That Show How Ridiculously Unfair Our Economy Is For Americans Under The Age Of 30

2012-01-26T00:14:00.000-05:00

If you are an American under the age of 30, you have probably figured out by now that the entire economic system is stacked against you. The way that our economy is structured today is ridiculously unfair to younger Americans. First, we endlessly push our young people to go to our ridiculously expensive colleges and universities where the pile up enormous amounts of debt. Then they get out into the real world where they find that only a handful of really good jobs are available for the vast army of college graduates entering the workforce. Sadly, most of the jobs that our young people are working these days do not pay enough to be able to support a family or buy a decent home. Meanwhile, our politicians are busy mortgaging their future. Our young people are expected to support a Social Security system that will not be there when they get older, and every single day more than 2 billion dollars is added to a debt that will hang around the necks of younger Americans and their children for the rest of their lives. If you stop and think about all of this for too long, your head might just explode with anger. Well, not literally, but you get the point. The truth is that this is going to be the first generation in U.S. history that is going to do significantly worse than their parents, and that is a terrible shame.

Are you not convinced that things are really bad for younger Americans?

Do you think that they should just shut up and quit whining about things?

Well, keep reading. You just might change your mind by the time this article is over.

The following are 24 facts that show how ridiculously unfair our economy is for Americans under the age of 30 that will make your head explode....

#1 U.S. households led by someone 65 years of age or older are 47 times wealthier than U.S. households led by someone 35 years of age or younger.

#2 Today, only about 55 percent of all Americans between the ages of 16 and 29 have a job.

#3 Back in the year 2000, more than 50 percent of all Americans teens had a job. This past summer, only 29.6% of all American teens had a job.

#4 Since the year 2000, incomes for U.S. households led by someone between the ages of 25 and 34 have fallen by about 12 percent after you adjust for inflation.
#5 It is absolutely ridiculous how much it costs to get a college education in America today. After adjusting for inflation, U.S. college students are now borrowing about twice as much money as they did a decade ago.
#6 Average yearly tuition at private colleges and universities in the United States is now up to $27,293. That figure has increased by 29% in just the past five years.
#7 Back in 1952, a full year of tuition at Harvard was only $600. Today, it is $35,568.
#8 The cost of college textbooks has tripled over the past decade.
#9 In 2010, the average college graduate had accumulated approximately $25,000 in student loan debt by graduation day.
#10 At some point this year, total student loan debt in the United States will surpass the 1 trillion dollar mark for the first time ever.
#11 The total amount of student loan debt in the United States now exceeds the total amount of credit card debt in the United States.
#12 Our economy is not producing nearly enough jobs for our college graduates. The percentage of mail carriers with a college degree is now 4 times higher than it was back in 1970.
#13 One-third of all college graduates end up taking jobs that don't even require college degrees.
#14 In the United States today, there are more than 100,000 janitors that have college degrees.
#15 In the United States today, 317,000 waiters and waitresses have college degrees.
#16 Right now, there are 5.9 million Americans between the ages of 25 and 34 that are living with their parents. According to recent Census data, men are almost twice as likely to live with their parents as women are.
#17 At this point, there are more than 3.5 million Americans that are behind on their mortgage payments. Young people that were offered "teaser rates" on their first homes before the housing collapse represent a large proportion of these mortgages.
CNN recently featured the story of 29-year-old Ginny Gant....

I followed "the plan" to achieve the American dream and now I feel like I'm caught in a stagnant nightmare.
My husband now works for the Navy as a civilian and I am a high school teacher. We bought our two-bedroom townhouse nearly at the peak of the housing boom for $196,500. We're underwater on our mortgage with a high interest rate. I'm looking at having to stick with this house for eight, nine, 10 years.
I really would like to have two or three children, but I just don't think it's feasible to have that many children in this house. It's too small to have a family and it's not what I envisioned for myself when I followed the rules.

#18 The total value of household real estate in the U.S. has declined from $22.7 trillion in 2006 to $16.2 trillion today. As noted above, large numbers of young Americans bought homes in the years leading up to the housing crash, and they lost a ton of wealth when home values plummeted.
#19 We are facing a retirement crisis that is absolutely unprecedented in U.S. history. Right now, more than 10,000 Baby Boomers are turning 65 every single day. Young Americans are expected to pay for their Social Security benefits, but Social Security will not be there when Americans under the age of 30 get older.
#20 Young Americans get arrested at a far higher rate than older Americans do. Amazingly, 30% of all Americans get arrested by the time they reach the age of 23. Once you spend time in prison, getting a good job becomes much tougher.
#21 Approximately one out of every five Americans under the age of 30 is currently living in poverty.
#22 In 2010, 42 percent of all single mothers in the United States were on food stamps. A very large percentage of those single mothers are under the age of 30.
#23 According to one recent survey, only 14 percent of all Americans that are 28 or 29 years old are optimistic about their financial futures.
#24 The U.S. government is stealing about 150 million dollars from our children and our grandchildren every single hour. Younger Americans will have to bear the burden of this debt far longer than older Americans will.
So what do you think about the plight of Americans that are under the age of 30?

Nicely Said.....

2012-01-26T00:09:00.001-05:00

"Expecting the world to treat you fairly because you are a good person is a little like expecting the bull not to attack you because you are a vegetarian." - Dennis Wholey

Sell Treasuries, buy gold

2012-01-26T00:08:00.000-05:00

With weak economic growth and disappointing private investment returns for the foreseeable future, highly regarded Wall Street financial analyst Charles K. Ortel of Newport Value Partners, LLC, offers a number of recommendations to investors, including liquidating long-dated U.S. Treasuries and increasing holdings of physical gold and other precious metals to as much as one-third the total value of a portfolio.
Ortel warns that unacceptably high levels of government debt plus a global surplus of cheap labor will continue to depress economic activity in the developed world, including the United States and the European Union.
He concludes that the U.S. and EU are likely to see an increase in economic rioting, especially as the unraveling of the eurozone gains speed and tensions between young workers and retired seniors intensifies.
Governments increasingly face fiscal insolvency as the elaborate social welfare states are required by law to provide an extensive and growing range of government-funded entitlement benefits to various political constituencies, regardless of the economic burden paying such benefit levels puts on taxpayers.
Avoid investing in fiat money securities
Ortel is concerned that “quantitative easing” programs in which the central banks engage in buying billions or trillions of dollars of government debt result in an artificial lifting of the values of securities.
Stock indices such as the Dow Jones Industrial Average, for example, are kept artificially high by the massive infusions of liquidity central banks such as the Federal Reserve pour into purchasing U.S. Treasuries and other debt issued by the federal government.
“Decisions by central banks to reduce benchmark risk-free government bond yields have certainly propped up quoted prices for securities,” he writes.
“But other government decisions and difficult-to-reverse, long-time demographic trends constrain fundamental growth in demand per household within Gray Zone nations [i.e., developed nations with aging economies], where economic activity remains concentrated for the moment.”
He argues that government policies worldwide have significantly destroyed financial wealth since 1999, a trend he expects to continue.
“A weaker U.S. dollar, higher interest rates and price inflation will likely continue to reduce the value of fiat-denominated investments,” Ortel cautions.
“We believe that investors should take steps to reposition their liquid portfolios immediately to protect against further destruction, to consider taking advantage of expected declines in the value of certain securities and to profit from heightened volatility.”
Investment recommendations
Specifically, Ortel urges investors to consider the following general investment strategy:

Liquidate portfolio positions in: (1) long-dated U.S. Treasuries and other sovereign debt; (2) any fixed income obligations of highly leveraged companies; and (3) equity in financial companies and industrial companies that do not own precious metals, natural resources, or strategic minerals.
Deploy proceeds in short-dated holdings of more responsibly run currencies such as the Norwegian krone, the Canadian dollar, the Swiss franc and the Singaporean dollar.
Increase holdings of physical gold and other precious metals to as much as one-third the value of an investor’s total portfolio.
Employ “short” investment strategies for special situations: (1) purchase credit default swaps (paying careful attention to counter-party and contractual risks) on sovereign debt, including U.S. Treasury obligations; and (2) take positions on overleveraged financial and industrial companies whose cash flows will be significantly and adversely affected by rising nominal interest rates.
Purchase securities in underleveraged companies that have legally enforceable interests in scarce commodities such as precious metals, natural resources and strategic minerals.
Consider allocating capital to professional investors who are equipped to trade volatility.

“Traditional, ‘long-only’ investors have been playing in the surf for too long, in our view,” Ortel concludes.
“Busy chasing profits calculated in nominal terms, most investors have failed to discern their ‘real’ after-tax wealth is being dissipated in a treacherous, unregulated global market that encourages devaluation of paper money.”

The Great Economic Storm: We Are Living In The Greatest Debt Bubble The World Has Ever Seen

2012-01-26T00:05:00.000-05:00

If you increased your credit card spending by a couple thousand dollars per month would your lifestyle improve? Of course it would. By going into large amounts of debt, it is possible to live a lifestyle that you can’t really afford, at least for a while. But if you keep racking up huge amounts of credit card debt every single month, eventually it gets to a point where it is extremely difficult to even keep up with the minimum monthly payments and the credit card companies will not lend you any more money. Well, on a larger scale it is the same thing with government debt. Right now, the U.S. government is spending more than a trillion dollars more than it takes in every year. Even if the U.S. government spends all of that money on incredibly stupid stuff, it still gets into the pockets of ordinary Americans. In turn, those ordinary Americans use that money to pay the mortgage, buy food, shop at the mall, etc. All of this borrowing and spending by the U.S. government has created a “false prosperity” bubble that is not real. It may feel real to you right now, but it is unsustainable by definition. If the U.S. government suddenly started spending only the money that it actually brought in every year, our economy would be doomed and all of this “false prosperity” would rapidly disappear. But if the U.S. government continues to rack up debt at this pace we are doomed as well. In fact, every dollar that gets borrowed makes our eventual collapse ever worse. We are heading down the exact same road that Greece has gone. Eventually the rest of the world is not going to lend us gigantic mountains of super cheap money anymore. When the flow of cheap money stops, it can be extremely painful. Anyone that has ever seen the interest rates on their credit cards go above 20 percent knows how this feels. If we had addressed these problems as a nation a decade or two ago, perhaps we could have found a solution. But now there is no way out under our current financial system and a devastating economic collapse is on the horizon no matter what we do.

If there was a Hollywood movie where some crooks successfully stole 150 million dollars, what would you think of those crooks?

Would you have admiration for them?

Would you be disgusted with them?

Would you feel like your intelligence was insulted because nobody could ever steal 150 million dollars and get away with it?

Well, right now the federal government is stealing approximately 150 million dollars from our children and our grandchildren every single hour.

That’s right – the U.S. government is borrowing an astounding 150 million dollars an hour that our children and our grandchildren will be expected to deal with.

It is a theft so vast that it is almost unimaginable.

So what should be done?

A lot of people out there think that our problems would be solved if the government would just quit borrowing so much money.

Well, it is just not that simple.

Look at Greece. They were forced by the EU and the IMF to dramatically reduce government spending. But when Greece reduced government spending, that caused the economy to shrink rapidly and it caused tax receipts to go down more than expected. So Greek budget deficits were even larger than anticipated and so Greece was forced to cut spending even more. But that created even more economic problems.

A recent article by John Mauldin described the nightmarish effect that this cycle has had on Greece….

And as Greece began shake and bake its way to “austerity,” the very act of cutting deficits pushed the country into recession, which lowered tax revenues and increased expenses, putting the elusive goal of a balanced budget even further off. We should quickly note that this is not just a Greek problem. Spain’s “draconian” cuts have meant that its 6% deficit target for the year has this week been raised to a more likely 8%, making it harder to get back to even.
For country after country, this is the Endgame. It is the end of the Debt Supercycle. Debt has grown to the size that it cannot be sustained. The market will not lend any more money on terms that can be afforded, and any efforts to cut spending and raise taxes will result in an even worse economy, in various degrees of recession, with falling revenues and rising costs.

This is what happens when a country that has been spending far beyond its means is forced to dramatically cut back.

Those that are convinced that balancing the federal budget in the United States will be relatively painless should take a close look at what is happening in Greece.

As I have written about previously, the Greek economy has been plunged into a 21st century “Great Depression”. In Greece, 20 percent of all retail stores have already shut down, the unemployment rate for those under the age of 24 is sitting at 39 percent, and one third of the entire nation is living in poverty.

And this is only just the beginning for Greece.

Things are going to get even worse.

Unfortunately, many believe that the United States is destined to experience far worse pain than Greece is currently experiencing.

For example, Peter Schiff insists that the United States is in worse financial shape than Europe at this point. Just check out this video….

Anyone that attempts to downplay the U.S. debt problem is making a serious mistake. Yes, we are still able to borrow trillions of dollars for next to nothing, but that is going to come to an end.

Remember all of those “suckers” that signed up for mortgages at “teaser rates” that later got jacked up dramatically?

Of course you do.

So what happened to them?

When the rates went up many of them ended up losing everything.

Well, we have gotten ourselves into the exact same kind of a position. All of this cheap money has enabled us to live very nicely for now, but when the cheap money ends the nightmare will begin.

Right now, our debt is growing much, much faster than our economy is. Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.

What would your household finances look like if your total debt grew by 61 percent next year but your income only grew by 4 percent?

When I was a little boy, the U.S. national debt was considered to be a huge national crisis. Politicians from both major political parties were promising that they would fix things.

But what has happened since then?

Well, when Ronald Reagan took office the U.S. national debt was less than 1 trillion dollars. Today, the U.S. national debt is over 15.2 trillion dollars.

During 2011, the federal government went into more debt than the U.S. government accumulated from the time that George Washington became president to the time that Ronald Reagan became president.

That may be hard to believe, but it is true.

During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.

That is utter insanity, and yet most Americans have become convinced that this is “normal” and that there is nothing to worry about.

It is hard to grasp how much money a trillion dollars is.

If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

That is how much money a trillion dollars is.

And things look even worse when you look at the balance sheet of the U.S. government.

The U.S. government has total assets of 2.7 trillion dollars and has total liabilities of 17.5 trillion dollars. Those liabilities do not even count 4.7 trillion dollars of intragovernmental debt that is currently outstanding.

But it is not just the federal government that has been living a fantasy.

The chart posted below shows the growth of total debt in America over the past several decades. Consumers, businesses and government officials have been on a debt binge that is absolutely unprecedented….

The scary thing is that even with all of this borrowed money, our economy is still in the dumps.

So what in the world is it going to look like when the debt bubble totally bursts?

Even with all of this “borrowed prosperity”, anger at the government is rapidly growing. A recent Gallup poll found that “satisfaction with government” in the United States is now at an all-time record low of 29 percent.

So how angry will the American people be when all of this “borrowed prosperity” disappears?

When this whole thing comes tumbling down, a lot of people are going to blame our problems on “capitalism”.

In fact, it is already happening. Just check out what the founder of the World Economic Forum is saying….

“We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations,” said Klaus Schwab, host and founder of the annual World Economic Forum.
“Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.
“We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual,” the 73-year-old said, adding that “capitalism in its current form, has no place in the world around us.”

But capitalism is not the problem. Capitalism has produced the greatest eras of prosperity that the world has ever seen.

No, the real problem is our debt-based financial system that is managed and run by the central banks of the world.

You see, debt-based central banking is not capitalism. But way too many people equate the two.

A lot of people cannot even imagine this, but theoretically you could have capitalism without any debt whatsoever.

But what we have today is a financial system that has debt as the very foundation. And such a system is inevitably going to fail someday.

As I have written about so many times before, the Federal Reserve is at the very heart of our economic problems here in the United States.

The Federal Reserve was designed to be a perpetual debt machine. And it has performed that task very well. The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created.

So yes, even though things seem somewhat “stable” for the moment, there are all kinds of reasons to be concerned about the viability of our economy and our financial system in the years ahead.

The other day, I was quoted in a Reuters article about our coming economic problems….

“Most people have a gut feeling that something has gone terribly wrong, but that doesn’t mean that they understand what is happening,” he said. “A lot of Americans sense that a massive economic storm is coming and they want to be prepared for it.”

Of course the Reuters reporter did not even bother to spell my name correctly, but at least he got the quote right.

A great economic storm is coming.

Don’t let this false prosperity and this “calm before the storm” fool you.

We are living in the greatest debt bubble the world has ever seen, and no matter how it plays out there is going to be a massive amount of pain.

You might want to get yourself and your family prepared for that

Robert Kiyosaki & Chris Waltzek - January 18, 2011

2012-01-26T00:03:00.000-05:00

It's been awhile since we ran anything from the "Rich Dad, Poor Dad" guy. Overall we like Robert, if only for his optimism and drive. Listen to what he says, it's relevant.

Confiscation Through Inflation

2012-01-26T00:01:00.000-05:00

Worth a viewing............

Is Europe Throwing Us Into A 1930s Moment?

2012-01-25T23:58:00.002-05:00

The market has been watching Europe (NYSEArca:VGK), particularly the fact that (as of this writing) a deal still hasn’t been struck between the Greek government, the Troika (the ECB, IMF, and euro-zone leaders), and private holders of Greek debt (bankers, hedge funds, and sovereign wealth funds).

In order for Greece to avoid a default on €14.4 billion, which comes due on March 20, these groups must agree to reduce the value of Greece’s debt. Basically, they are negotiating to see how much money lenders will lose — in other words, accept a massive “haircut.”

Negotiations have been ongoing for a while, and a deal is expected to be reached. But the original agreement was supposed to have been struck months ago. So it’s interesting to see why this is taking so long.

The reason is because the Troika wants to get Greece’s debt/GDP ratio down to a manageable 120 percent from the current 200 percent. The problem is that every time they look at the Greek economy, they see that it’s slowing.

Consequently they have to re-do the growth forecasts, which then requires more of a haircut on the bonds to reach the 120 percent target debt/GDP ratio.

Think of it this way: Suppose you go to buy a house, and the bank wants to make sure that the mortgage isn’t more than 120 percent of your annual income. Let’s say you make $100k a year. The bank would be willing to loan you up to $120k. But, if your income decreases to $80k, the bank will only loan you $96k.

“It is about avoiding a 1930s moment … a moment, ultimately, leading to a downward spiral that could engulf the entire world.” — Christine Lagarde, chief of the IMF

The point of this is that every time the parties think they have an agreement, the private bondholders are told they need to take a bigger loss. Originally they were told it would be 50 percent, now the figure is 70 – 80 percent, so they’re taking a hard line approach.

In all likelihood, the negotiations will get done and a deal struck. But given the slowing of the Greek economy due to austerity the Greek government will have to impose to receive a bailout, the probability of the deal having to be re-negotiated at some point is high.

Longer-term Problem

Looking further down the road, the question comes up: How are the PIIGS countries supposed to pay back all this bailout money, when they are simultaneously being forced to implement austerity measures that will slow their economies, and in return tax receipts?

The answer isn’t at all clear. But it is a stark reminder that this whole European crisis is one that will take years to figure out — something to keep in mind the next time we get a furious rally in the European markets (NYSEArca:IEV), like we’ve seen lately.

Remember that in the short term, the market focuses on the rate of change in a trend, not the direction (i.e. are things getting worse than they were last week), not “are they getting better?” The rate of change in the euro zone is positive, and markets are reacting accordingly, but fixing the problems will take years.

So when the talking heads start saying the situation is fixed, you might consider the ProShares Ultra Short Euro ETF (NYSEArca:EUO) and Ultra Short MSCI Europe ETF (NYSEArca:EPV).

Both could potentially profit from overly short-term optimistic traders. Just keep in mind, though, that these are leveraged ETFs, and as such are good trading vehicles, but not meant to be buy-and-hold investments.

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

2012-01-25T23:56:00.000-05:00

"It is natural for man to indulge in the illusions of hope. We are apt to shut our eyes against a painful truth, and listen to the song of that siren till she transforms us into beasts...For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth, to know the worst, and to provide for it." - Patrick Henry

The Fed's Men Behind the Curtain

2012-01-25T22:29:00.000-05:00

The debate about the Fed is under way, and thank goodness. But as with many policy debates, there really shouldn't be a debate at all. That's because, if you think about it, the idea of central banking makes no sense.
We don't have a government-created central repository that plans and manages shoe distribution. The market takes care of that. We don't have one for cabbage, keyboards or curtains. Somehow, we get books, clothes, tree-cutting services and everything else we need and want without a central planning agency that manages the quantity available, fixes the prices of the products and bails out the firms when they overextend themselves.
Why should money and banking be any different? Money is a commodity. Banking is a business. They both originated in the market, not the state. They should have been left that way, so that the quality of the product could be subject to market discipline. In a market economy, things work themselves out. There is supply and there is demand. Entrepreneurs take notice of profit opportunities and jump in to pull the two together.
This is how the world works for us. This is how it has always worked. This is how we get our software, coffee, sheet music and beef. It's how we get our cars, the parts that keep them running and the gas that fuels them.
The world is man-made in every respect, and the hands that made it productive, efficient, dynamic and socially beneficial operated within the market matrix. The simple relationships of learning, exchanging and competing gave rise to a glorious system that manages to sustain a global population of 7 billion people.
The Fed is a nonmarket institution, much like public housing and the space shuttle. It is a Dark Age creation that still exists for no apparent reason. By Dark Age, I mean, of course, the world before 1995, when the Web -- meaning all information -- became accessible to the world. Before that, the world remained mostly in the dark, when government controlled the information we could access and private truth had to be shared through paper sent through the government mail system.
During the Dark Age, only geniuses like Ludwig von Mises and F.A. Hayek knew that the Fed was a hoax. Most everyone else imagined that the people at the Fed were doing magical, wonderful things inside hallowed walls so that the economy would be stable and grow. Its board of governors was populated by people who knew the economic future and held the power to steer it in a way that benefited everyone.
Thanks to the digital age, we now have access to what really goes on. In the last 12 months alone, we've been inundated by reports of what actually goes on at the Fed. In 2006, according to released transcripts of its board meetings, its wise men were busy reassuring themselves that absolutely nothing was fundamentally wrong with real estate and that all other economic structures were humming along beautifully.
It is fascinating to read those candid transcripts. Far from being an open forum for discussion, Greenspan and Bernanke preside with all power to determine results, practically daring any of their subordinates to disagree with the consensus they arrive at beforehand. The Fed economist sometimes pops up his head to say that all is not well, but it's like a game of Whac-A-Mole: He gets the hammer on the head every time.
It's the worst case of bad corporate management you can find on record. It makes Dilbert's world look like a paragon of management success. There is no openness, no truthfulness. If the chairman makes a joke, you must laugh. If the chairman says all is well, you must agree. If the chairman says he knows the future, you must be in awe of his insight. All dissent must be coached within a puffy framework that raises only a slight and probably irrelevant concern, and it is still likely to be punished.
Then there is the problem that it is not entirely clear, even to the people in the room: what precisely they can do about anything. They know what they are doing is important and want to believe that they have tremendous power. But here's the problem...The Fed really has only one significant power: to create the conditions intended to encourage a change in the supply of money and credit.
That's a huge power, but it is not a precise one. The money supply is a lot like an unruly child. Lots of times, the kid will obey you. Sometimes, and unpredictably, it will not. It depends on the mood, the context, the prevailing temperament, the rewards and punishments. And even when the kid obeys, the results are not always what you intend. The council of parents can meet and plan all day, but in the end, the kid has a mind of its own.
Two notable examples follow. In the early 1930s, the Fed was desperate to expand the money supply as a matter of both policy and practice. There was no intention to let the supply collapse, as Murray Rothbard has shown. The problem was that the Fed had to depend on the banking system to make it happen through the loan markets. But the system was broke, and it never happened.
The same thing happened again from 2008 and forward. The Fed did everything possible to manufacture a far-reaching monetary inflation, but failed to make it profitable for the banking system to cooperate. Contrary to the Fed's wishes, it never fully materialized. Their efforts only ended up subsidizing failure and preventing a much-needed and deep market correction.
The sheer power of the Fed was in full display in 2008, and all the public records indicate what it was used for. The Fed provided liquidity for its friends. They said that they did it all for the nation, but it is unclear that the nation got anything at all from the deal. What is clear is that its friends survived and thrived, whereas many institutions should have gone belly up, as the capitalist system would dictate. That's the essence of its power and the core of what the Fed does.
This is nothing new at all. It's just that it is now on full display for all the world to see. And this is one reason that the Fed is now under fire as never before. The digital age has pulled back the curtain. Instead of the mighty Oz, we find a few people pulling levers with smoke and mirrors.
Before 1989, the world was strewn with such central planning agencies. They were all over Eastern Europe and the old empire called the Soviet Union. Then one day, the whole thing melted away and the absurdity and arrogance of the central planners were revealed to the world. The Fed is no different in structure from these institutions. The whole thing is based on a lie that it takes government power to have a good monetary system.
In what sense is it good? The depreciation of the dollar since 1913 has been catastrophic for prosperity. The dollar is now worth less than a nickel. Savings have been expropriated. The Fed's interest rate policy has negated any real advantage of saving money. Business cycles have become national, international and extended, rather than local and short-lived as they were in the 19th century. The moral hazard that the Fed has built into the system is that financial systems no longer take proper account of risk.
In the digital age, the opportunity costs of the money monopoly have been huge. We might have had a competitive money system emerge by now. It could have been based on gold, silver or any other commodity. But the market has not been allowed to work. The Fed, working with the government that created and sustains it, has cracked down hard on every attempt by the market to make something better than the Fed-managed dollar. People now languish in jail for the crime of trying to restore money and banking back to the market.
What is the worst cost of the Fed? It has made the federal government, no matter how big it gets, beyond failure. This is the ultimate moral hazard. It has puffed up the leviathan state beyond anything that should ever exist in the world. It's not taxes that have done this. It is the Fed. In this way, it has made itself the ultimate enemy of freedom itself. And as goes freedom, so goes human rights.
The whole catastrophe is no longer possible to ignore. Ron Paul has made it a political issue. Newt Gingrich has jumped on the bandwagon to scrap the Fed. The former CEO of BB&T gave an interview in which he said, "As long as the Fed exists, Congress can effectively print money. And it doesn't matter whether they are Democrats or Republicans, they would rather print money than tax people. They want to spend because that effectively buys votes, and they don't want to tax people because that loses votes."
The problem of ending the Fed is not a technical one. It is not much of an intellectual one, either. It takes only a few minutes to figure out that the whole thing is rooted in myth. The problem of ending the Fed is entirely political. The government is dependent on its powers. So yes, it makes some sense that the political class and its friends -- let's call them the 1%, for short -- think the Fed should exist. The rest of us should know better by now.

Choices????????

2012-01-25T22:25:00.001-05:00

What Is War Good For?

2012-01-24T22:38:00.002-05:00

David Henderson appeared on John Stossel’s show on the Fox Business channel January 19, 2012. He debated regular Fox contributor Colonel David Hunt on “war, Ron Paul’s foreign policy views, Israel, 9/11, and Iran.” Watch the clip:

Government Employees Have Unpaid Taxes

2012-01-24T22:35:00.000-05:00

“Congressional staffers owed about $10.6 million in unpaid taxes in 2010, a slight increase from the previous year and a growing slice of the roughly $1 billion owed by federal and postal workers nationwide.” (Washington Post)

Government employees don’t pay taxes; they consume them.

A Bucketful Of "Nicely Saids"..........................

2012-01-24T22:32:00.001-05:00

Every decent man is ashamed of the government he lives under.– H. L. Mencken
If liberty means anything at all, it means the right to tell people what they
do not want to hear.– George Orwell
Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats.– H. L. Mencken
What’s “just” has been debated for centuries, but let me offer you my definition of social justice: I keep what I earn and you keep what you earn. Do you disagree? Well then, tell me how much of what I earn “belongs” to you — and why?– Walter Williams
Politicians never accuse you of ‘greed’ for wanting other people’s money—only for wanting to keep your own money.– Joseph Sobran

Are George Soros, The IMF And The World Bank Purposely Trying To Scare The Living Daylights Out Of Us?

2012-01-24T22:28:00.003-05:00

Over the past couple of weeks, George Soros, the IMF and the World Bank have all issued incredibly chilling warnings about the possibility of an impending economic collapse. Considering the power and the influence that Soros, the IMF and the World Bank all have over the global financial system, this is very alarming. So are they purposely trying to scare the living daylights out of us? Soros is even warning of riots in the streets of America. Unfortunately, way too often top global leaders say something in public because they want to "push" events in a certain direction. Do George Soros and officials at the IMF and World Bank hope to prevent a worldwide financial collapse by making these statements, or are other agendas at work? We may never know. But one thing is for sure - many of the top financial officials in the world are using language that is downright "apocalyptic", and that is not a good sign for the rest of 2012.

Right now, George Soros is saying things that he has never said before. Just check out what George Soros recently told Newsweek....

“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

Later on in that same article, Soros is quoted as saying that we could soon see the U.S. government using "strong-arm tactics" to crack down on rioting in the streets of major U.S. cities....

As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”

It almost sounds like George Soros is anticipating the same kind of a breakdown of society that many survivalists and preppers are getting ready for.
So how bad are things going to get?
Well, George Soros is publicly warning that the coming financial crisis could end up being even worse than 2008. Just check out the following quotes from him that appeared in a recent Businessweek article....

Billionaire investor George Soros said Europe’s sovereign-debt woes are “more serious” than the financial crisis of 2008 and that the world faces the prospect of a “vicious circle” of deflation.
“We have a more dangerous situation now than in 2008,” Soros, 81, said in response to a question at an event in the southern Indian city of Bangalore today. “The crisis in Europe is more serious than the crash of 2008.”

But George Soros is not the only one issuing these kinds of warnings.
Once again, the head of the IMF, Christine Lagarde, has made a speech in which she openly warned that we are heading for a repeat of the "1930s".
She told an audience in Berlin on Monday that the globe is facing "a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand".
During the speech she called for a trillion more dollars to support financially troubled governments, and she made the following statement....

"It is not about saving any one country or region. It is about saving the world from a downward economic spiral."

As I wrote about the other day, the World Bank has also been using apocalyptic language about the global financial situation. In a shocking new report, the World Bank revised GDP growth estimates for 2012 downward very sharply, it warned that Europe could be facing financial collapse at any time, and it instructed the rest of the world to "prepare for the worst."
The lead author of the report, Andrew Burns, said that the "importance of contingency planning cannot be stressed enough" and that if there is a major financial crisis in Europe the entire globe will be deeply affected....

"An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09."

So should we be alarmed that George Soros, the IMF and the World Bank are all proclaiming that a financial nightmare could be just around the corner?
Of course we should be.
Whether their motives are pure or not, they are telling the truth about the global financial situation in this case. As I have written about so frequently, there are a whole host of signs that indicate that we could be on the verge of a major global recession.
A lot of folks in the investment world are warning that hard times are about to hit us as well. For example, the following is what legendary investor Joseph Granville recently told Bloomberg Television....

Joseph Granville, whose “sell everything” call in 1981 sparked a decline in U.S. stocks, said the Dow Jones Industrial Average (INDU) will drop toward 8,000 this year because of waning momentum and volume.
“Volume precedes prices,” Granville, 88, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri for about 50 years, said in an interview on “Street Smart” on Bloomberg Television. “You are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected.”

Considering all of the warnings out there, it only seems prudent to prepare for the worst.
But unfortunately, a lot of people are just going to leave their holdings sitting out there like a dead duck, and they are going to be absolutely devastated by the coming financial tsunami.
Those that believe that the United States can somehow escape the coming financial storm don't really know what they are talking about.
In fact, there was very troubling news for the U.S. dollar just the other day. It was announced that India will start paying for its oil from Iran in a currency other than U.S. dollars.
But this is just another sign that the rest of the world is starting to reject the U.S. dollar. For decades, the U.S. dollar has been the reserve currency of the world and this has given us a tremendous advantage. Unfortunately for us, that is now changing.
U.S. newspapers are not talking about what is going on, but mainstream newspapers in Europe are. Right now, some of the biggest countries in the world are working on plans to quit using U.S. dollars for the buying and selling of oil.
The following comes from a recent article in The Independent....

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

This is a very big deal, and if this gets pulled off it is going to have devastating consequences for the U.S. dollar and for the U.S. economy.
But of course when it comes to troubles for the U.S. financial system, there are a whole host of issues that could be talked about.
An environment for a "perfect storm" is developing, and most Americans have absolutely no idea what is about to happen.
Fortunately, there are some researchers out there that are working hard to sound the alarm bells. For example, the following quote comes from a recent interview with Gerald Celente....

I believe that we have to watch out for something along the lines of an economic martial law. The European system is in collapse. The financial system in the United States is just as tenuous, if not more, and I believe they will not admit there will be a financial crash but rather they will use a geo-political issue to get the people in a state of fear and hysteria whereby they'll then call a bank holiday or devaluation of the currency, or a hyperinflation of the currency, and blame it on somebody else.

It would be wise to listen to what experts such as Gerald Celente are saying.

Now is the time to take stock of where you are at and to make plans for the coming year.

Just because things have "always" been a certain way does not mean that they will continue to be that way.

Just because certain things have "always" worked in the past does not mean that they will continue to work in the future.

Our world is experiencing fundamental changes. It is changing at a faster pace than we have ever seen before. The way that we all live our lives five or ten years from now will be vastly different from how we live our lives today.

This will be a very challenging time to be alive, but it is also going to be a very exciting time to be alive.

So what do all of you think is going to happen in 2012?

Please feel free to leave a comment with your thoughts below....

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The Global Elite Are Hiding 18 Trillion Dollars In Offshore Banks

2012-01-24T22:27:00.002-05:00

In recent days, the fact that Mitt Romney has millions of dollars parked down in the Cayman Islands has made headlines all over the world. But when it comes to offshore banking, what Mitt Romney is doing is small potatoes. The truth is that the global elite are hiding an almost unbelievable amount of money in offshore banks. According to shocking research done by the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks. And that figure does not even count any money being held in Switzerland. That is a staggering amount of money. Keep in mind that U.S. GDP in 2010 was only 14.58 trillion dollars. So why do the global elite go to such trouble to hide their money in offshore banks? Well, there are two main reasons. One is privacy and the other is low taxation. Privacy is a big issue for those that are involved in illegal enterprises such as drug running, but the biggest reason why people move money into offshore banks is in order to avoid taxes. Some set up bank accounts in foreign nations because they want to legally minimize their taxes and others set up bank accounts in foreign nations because they want to illegally avoid taxes. You would be absolutely amazed at what some large corporations and wealthy individuals do to get out of paying taxes. Unfortunately, the vast majority of the rest of us don't have the resources or the knowledge to play these games, so we get taxed into oblivion.

So why do they call it "offshore banking"?

Well, the term originally developed because the banks on the Channel Islands were "offshore" from the United Kingdom. Most "offshore banks" are still located on islands today. The Cayman Islands, Bermuda, the Bahamas, and the Isle of Man are examples of this. Other "offshore banking centers" such as Monaco are actually not "offshore" at all, but the term applies to them anyway.
Traditionally, these offshore banking centers have been very attractive to both criminals and to the global elite because they would not tell anyone (including governments) about the money that anyone had parked there.
These days some governments (particularly the U.S. government) are trying to change this, but we certainly will not see the end of offshore banking any time soon.
The amount of money that goes through these offshore banks is absolutely astounding.
It has been estimated that 80 percent of all international banking transactions take place through these offshore banks. $1.4 trillion is being held in offshore banks in the Cayman Islands alone.
One article in the Guardian estimated that a third of all the wealth on the entire globe is being held in offshore banks, and others believe that as much as half of all the capital in the world flows through offshore banks at some point.
Obviously, all of this tax avoidance means that governments around the world are missing out on a whole lot of money.
It has been estimated that the U.S. government is missing out on $100 billion a year because of these offshore banks. Others would put that figure significantly higher.
Avoiding taxes is a game that the global elite have mastered. They are playing a whole different ballgame than you and I are. They don't just sit there like idiots and get blasted with taxes. Instead, they hire the best experts and they employ every trick in the book to hold on to as much money as they possibly can.
These days, taking advantage of offshore tax havens is not that complicated to do. The following is from a recent Politico article....

A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.

If it is legal, perhaps more of us should look into this.
After all, if playing these kinds of games is good enough for Mitt Romney, then why isn't it good enough for all the rest of us?
During a campaign stop recently, Romney said the following....

"I can tell you we follow the tax laws"

I certainly believe him when he says that. But it is what he said next that is troubling....

"And if there's an opportunity to save taxes, we like anybody else in this country will follow that opportunity."

I certainly believe him when he says that too.
ABC News recently revealed that Bain Capital has established an astounding 138 different offshore funds in the Cayman Islands.
Something has got to work pretty well to want to do it 138 times.
But Bain Capital was also very busy over in other offshore banking centers as well.
One of the largest shell companies that Bain set up down in the Caribbean was called Sankaty High Yield Asset Investors Ltd. It did not have an office in Bermuda and it had no staff in Bermuda. But it helped clients of Bain Capital avoid a whole lot of taxes.
The following comes from a 2007 Los Angeles Times article....

In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital's Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans.
Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer's office in downtown Hamilton, capital of the British island territory.
"It's just a mail drop, essentially," said Marc B. Wolpow, who worked with Romney for nine years at Bain Capital and who set up Sankaty Ltd. in October 1997 without ever visiting Bermuda. "There's no one doing any work down there other than lawyers."

The amount of money being funneled through Sankaty today is absolutely stunning....

Today, Bain Capital manages $60 billion in assets, according to a spokesman. The total includes $23 billion in Sankaty debt and credit funds. Half a dozen Sankaty affiliates now are active in Bermuda, corporate registry records show.
The Sankaty debt hedge funds are organized as partnerships in Delaware that produce taxable business income by investing in fixed-income bonds and other debt instruments. Under tax law, even tax-exempt U.S. institutions may face a 35% tax if they invest directly in such hedge funds. By investing instead through a Bermuda corporation, the taxes are legally blocked, experts say.

Of course all of this is perfectly legal.
So nobody gets into trouble for any of this.
By keeping money offshore, even those managing these kinds of funds can avoid being taxed.
Victor Fleischer, a tax professor at the University of Colorado Law School, recently explained how this works....

"The idea behind some of the Cayman Island strategies was that the income that the fund managers receive for managing the money would be kept offshore in the Cayman Island — and the chief benefit is that you can defer when you recognize that income until a later date and you can reinvest the money from the Cayman islands and none of those reinvested funds get taxed until you bring them back either"

So was Romney doing this?
We may never know unless he shows us his tax returns.
What we do know is that Romney has millions of dollars of his own personal wealth invested in offshore tax havens.
The following comes from ABC News....

In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.

But Romney does not just have money invested down in the Cayman Islands. Apparently his money is invested in a whole host of offshore tax havens.
The following quote comes from a Reuters article....

Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.

So is there anything wrong with this?
Well, it depends on how you define "wrong".
What Romney is doing is perfectly legal.
But it also stinks. Washington lawyer Jack Blum recently told ABC News the following about Romney's finances....

"His personal finances are a poster child of what's wrong with the American tax system"

So now we may have a few hints as to why Romney may not want to release his old tax returns.
But as noted above, what Romney is doing is just small potatoes compared to what the ultra-wealthy do.
The U.S. Congress has been trying to clamp down on offshore banking, but the ultra-wealthy are always two or three steps ahead of them.
The ultra-wealthy will go to just about any extreme in order to avoid paying taxes.
In fact, the Washington Post has reported that an increasing number of wealthy individuals are actually deciding to renounce their citizenship rather than face the wrath of the IRS.
The ultra-wealthy aren't really concerned that much with national citizenship anyway. If they want to influence an election, they can have far more influence by donating a few million bucks to a "Super PAC" than they can by casting the few votes that they have.
In a previous article, I described how the ultra-wealthy use offshore banks as a "shadow banking system" that plays by rules that most people don't even know exist....

It is a shadow banking system that most Americans don't know anything about. Most Americans don't have the resources to be able to set up shell companies in half a dozen different countries so that they can "filter" their profits. Most Americans don't know a thing about complicated tax avoidance plans that tax lawyers use such as the "Double Irish" and the "Dutch Sandwich". Most Americans would have no idea how to eventually have most of the money that they make end up in Bermuda so that it can avoid taxes.

Most among the global elite simply do not care that U.S. debt is climbing into the stratosphere. All they care about is keeping as much of their own money in their pockets as they possibly can.

Of course there are always exceptions to this rule. Warren Buffett recently wrote a check to the U.S. Treasury for a little more than $49,000 to help pay off the national debt.

But considering the fact that the U.S. national debt is increasing by more than 100 million dollars an hour, that didn't exactly do much to help.

Our system is deeply broken and the global elite are getting away with bloody murder. Over the decades, they have carefully crafted the rules so that as much wealth as possible is funneled into their pockets, and they have carefully crafted the rules so that as much wealth as possible stays in their pockets.

Of course if we got rid of the personal income tax and the corporate income tax entirely and replaced them with a completely new system we could get rid of all of this game playing once and for all.

But what do you think the odds are of that happening?

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America After Dark: Desperate Meth Heads, Rampant Human Trafficking And Millions Of Criminal Predators Searching For A New Victim

2012-01-24T22:25:00.002-05:00

When the sun goes down every night, America becomes a very frightening place. There are communities all over the country where drug dealing, human trafficking and gang violence have gotten so out of control that authorities don't really know what to do about it. In America tonight, thousands of meth heads will break into homes as they desperately search for enough money for another hit. In America tonight, thousands of children will be sold for sex at truck stops and on street corners. In America tonight, millions of criminal predators will be searching for a new victim. From the top levels of the federal government all the way down to the most depraved criminals on the street, America is rotting. Once upon a time our tremendous affluence masked the moral decay that was happening in this nation, but now that the economy is falling apart the damage to the fabric of our society is being revealed. We have become a nation of addicts, junkies, thrill seekers and predators. When we finally see the U.S. economy fully collapse, millions of desperate, angry and depraved monsters will take out their sick frustrations on all the rest of us.

It isn't talked a lot about anymore, but the meth epidemic in America is getting worse. According to PBS, there are approximately 1.4 million meth users in America. Meth is unbelievable addictive and it can absolutely destroy your life. If you doubt this, just check out these before and after pictures.

Sadly, there are indications that meth use is on the rise once again. According to the DEA, meth seizures increased from 2,839 in 2007 to 6,168 in 2010.
When you take meth, it can literally make you crazy. The following is from a recent USA Today article....

A mother in Bakersfield, California, was sentenced Tuesday for stabbing her newborn while in a meth rage. An Oklahoma woman drowned her baby in a washing machine in November. A New Mexico woman claiming to be God stabbed her son with a screwdriver last month, saying, "God wants him dead."

Large numbers of meth addicts turn into thieves when they run out of money. Often, they will steal just about anything they can in order to get money for their next hit. Some things that meth addicts have stolen recently include agricultural plumbing, copper wiring and lawn sprinklers.
And making meth can be extremely dangerous as well. U.S. hospitals are filled with thousands and thousands of uninsured burn patients that were horribly burned while trying to make "shake and bake" meth.
The following comes from a recent Daily Mail article....

It is filling hospitals with thousands of uninsured burn patients requiring millions of dollars in advanced treatment - a burden so costly that it is contributing to the closure of some burns units.
So-called 'shake-and-bake' meth is produced by combining raw, unstable ingredients in a two-litre bottle.
But if the person mixing the noxious brew makes the slightest error, such as removing the cap too soon or accidentally perforating the plastic, the concoction can explode, searing flesh and causing permanent disfigurement, blindness or even death.
A survey of key hospitals in America's most-active meth states showed that up to a third of patients in some burns units were hurt while making meth, and most were uninsured.

But of course meth is just one of the highly addictive drugs that are plaguing our youth. There are many other nightmarish drugs that could also be discussed. Nearly every community in America is dealing with some sort of a drug problem, and despite the "war on drugs" this crisis just seems to keep getting worse every single year.
Perhaps even more alarming is the rise of human trafficking in America.
When I was going through school, I was taught that slavery had been abolished in the United States.
But that was a lie.
Right now, thousands upon thousands of Americans are living as slaves. Most of them are sex slaves. As you read this, there are women all over America that are literally chained to beds in dark rooms where men pay their "owners" to have sex with them.
The following stats about human trafficking come from a recent Detroit Free Press article....

• Human trafficking is a $32-billion industry worldwide.
• Up to 2 million people are trafficked worldwide every year. Of those, 15,000-18,000 are in the U.S.
• Eight in 10 human trafficking cases involve the sex industry; the others involve labor trafficking.
• In 2010, 2,515 human trafficking cases were under investigation in the U.S.
• Eighty-three percent of victims in confirmed sex trafficking cases in the U.S. in 2010 were American citizens

Many Americans would be absolutely horrified to learn what goes on behind closed doors in America.
All over the nation tonight, vicious monsters will be selling or "renting" young children to other vicious monsters for sex.
The following story of one human trafficking victim comes from a recent Fox News article....

Today, Keisha Head is a wife and mother of three. But more than decade ago, she was the victim of a notorious human trafficker.
At 16-years old, Head says she was being sold on the streets of Atlanta for sex.
“I did not know that a normal, average man who was a preacher, who was a lawyer, who was a senator - could turn into this monster,” Head said. “That is the scariest moment when you are amongst people who claim to be normal yet they purchase you and they turn into these monsters. They rape you. They beat you. And then act as if they're normal. These are not your normal pedophiles.”

When you push morality out of the schools and out of public life, this is the kind of thing that starts happening.
Thousands upon thousands of other women "work for themselves" on the streets of America. Some are willing to let strangers have sex with them for next to nothing.
For example, one woman in Los Angeles was recently arrested for approaching customers at one McDonald's and offering sexual favors in exchange for Chicken McNuggets.
A lot of really weird stuff happens in America after dark.
As the economy has crumbled, thieves all over the country have become increasingly bold and increasingly desperate.
The following are just a few recent examples....
*In Fresno, California the damage caused by thieves stealing copper wire from city street lights is costing the city approximately $50,000 a month. So far, about 2,500 street lights have been stripped of their wiring.
*In northern Alabama, one group of crooks has been using a forklift to pull entire ATM machines out of the ground.
*A while back, a team of ambitious thieves in Pennsylvania actually stole an entire 50 foot long bridge.
Other crimes are committed by members of the government. In Chicago, the bodies of poor people that don't have enough money to bury themselves are being treated with absolutely no respect at all by government officials. Just check out what Cook County Sheriff Tom Dart says that he found....

"Babies are buried 10, 15 to a box. They're buried in there with animal remains. They're buried in there with arms and legs from body parts they found during the course of the year. It is not anything that our county or society should ever sit there and say is acceptable"

Can you imagine that?
What kind of a monster would do such a thing?
Of course I could go on for ages about the sick corruption of our government officials, but that will have to be left for another day.
For now, I want to focus on another rising problem in our society. As I wrote about the other day, the FBI says that there are now 1.4 million gang members living inside the United States. That number has risen by an astounding 40 percent since 2009.
Nearly every major U.S. city has areas that are essentially "owned" by gangs. Some of these gangs are the size of small armies. For example, it is estimated that the Latin Kings have 18,000 members in the city of Chicago alone.
When civil unrest erupts in America, these organized groups of criminal predators will have a field day. Even now, law enforcement authorities in many areas of the country are having an incredibly difficult time trying to contain them.
As things fall apart all around us, an increasing number of Americans are coming to the realization that they are not going to be able to depend on someone else to defend themselves and their families.
Perhaps that is why the American people stocked up on firearms at an astounding rate during 2011.
In some areas of the country, a firefight can potentially erupt just about at any time. The following is from an article that was recently posted on standwitharizona.com....

Barbed wire fencing doesn’t keep illegal aliens off the property anymore. One Starr County, TX rancher doesn’t have time to worry about the illegals these days. He now worries about the smugglers protecting their loads.
“I don’t think they would have any conscience of taking someone’s life,” the rancher says.
He saw that will to kill firsthand. A smuggler shot at him on his own land.
“One round was fired at me, and it missed my head by about two feet,” says the rancher.
He says there’s only way to react.
“Fire all the rounds you have, reload, and do it again,” says the rancher.

We don't do ourselves any favors by pretending that America is going to somehow turn around and become the safe, friendly place that it used to be.

There are millions of criminal predators in this country today that have little or no conscience. They don't care about you, your spouse or your children. All they care about is feeding their addictions.

In the months and years to come, the economy is going to get worse. As it does, all of those predators are going to become even more desperate.

Desperate people do desperate things.

America is going to become a very frightening place. But instead of curling up into a ball and crying about it, the better response is to be strong and courageous and to get prepared the best that you can.

Soros Warns of Violent Riots In America, Financial Collapse, Government Clampdown: “SURVIVAL IS THE MOST IMPORTANT THING”

2012-01-24T22:22:00.002-05:00

From time to time we get a peek inside the mind of a true insider. George Soros knows a thing or two about destabilization and far from equilibrium situations. He’s been on the giving and receiving ends of both. From surviving the Nazi occupation of Hungary during World War II, to single handily crashing the currencies of entire nations, the experience he brings to the table should not be ignored.
With his deep connections in economic and political circles, if there’s anyone who knows what’s coming next, it’s Soros.
In his book The Crash of 2008 and What It Means Soros warned that no matter what governments did, there was no way out of the trap in which the world – namely The United States – finds itself:

“So what does the end of an era really mean? I contend that it means the end of a long period of relative stability based on the United States as the dominant power and the dollar as the main international reserve currency. I foresee a period of political and financial instability, hopefully to be followed by the emergence of a new world order.”

Nearly four years on, the crisis, according to Soros, is now very much teetering on the edge of the instability he forecast in his book:

Via The Daily Beast:
For the first time in his 60-year career, Soros, now 81, admits he is not sure what to do. “It’s very hard to know how you can be right, given the damage that was done during the boom years,” Soros says. He won’t discuss his portfolio, lest anyone think he’s talking things down to make a buck.
…
Has the great short seller gone soft? Well, yes. Sitting in his 33rd-floor corner office high above Seventh Avenue in New York, preparing for his trip to Davos, he is more concerned with surviving than staying rich. “At times like these, survival is the most important thing,” he says, peering through his owlish glasses and brushing wisps of gray hair off his forehead. He doesn’t just mean it’s time to protect your assets. He means it’s time to stave off disaster. As he sees it, the world faces one of the most dangerous periods of modern history—a period of “evil.”
Europe is confronting a descent into chaos and conflict. In America he predicts riots on the streets that will lead to a brutal clampdown that will dramatically curtail civil liberties. The global economic system could even collapse altogether.
…
“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”
…
Soros draws on his past to argue that the global economic crisis is as significant, and unpredictable, as the end of communism. “The collapse of the Soviet system was a pretty extraordinary event, and we are currently experiencing something similar in the developed world, without fully realizing what’s happening.”
…
As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”

One of the leading financial minds and policy influencers in the world has just outlined the best and worst case outcomes for this crisis, and both of them are disastrous.
We cannot stress enough to our readers that, despite the many criticisms, Mr. Soros knows what he’s talking about. He is connected to all of the major players on all levels – economic, financial, political – you name it.
He has gone so far as to suggest that the consequences for America are a complete breakdown in law and order, riots in the streets, financial collapse, and a repressive government response.
Even the best and the brightest don’t know what to do, other than to duck and cover.
It’s coming, and it can’t be stopped.

HEY! Sound Of Cannons Just Hit the 6K Post Mark!!

2012-01-24T22:19:00.000-05:00

SAince 2007, we've striven to provide interesting reading to whoever may come across this site. We've grown in our consistency and even shown up on some search engines. We're holding high level meetings (even Ralph, our irrascable associate editor is invited) to decide on directions and steps to take to make this blog a bigger and better resource. In the meantime, we thank you, loyal readers, for your time and attention and occaisional comments. Spread the word if you like what you see and drop us an email to tell us what you don't like. Unlike our current POTUS, we're not going to scold you to do better or work harder. Just give us some fedback on what you'd like to seee on this 4+ year old "work-in-progress!"

Fannie & Freddie Would Need Another $100 Billion From Taxpayers For Obama’s Proposed Mortgage Writedown

2012-01-24T22:11:00.000-05:00

Fannie Mae and Freddie Mac have already cost US taxpayers over $200 billion. If Obama gets his way on mortgage writedowns, the GSEs estimate it would take another $100 billion.

Since such estimates are always overly-optimistic by a factor of 3 to 10, I estimate the cost to taxpayers would be $300 billion minimum.

Please consider Fannie, Freddie writedowns too costly: regulator

The regulator for Fannie Mae and Freddie Mac told lawmakers that forcing the two mortgage firms to write down loan principal would require more than $100 billion in fresh taxpayer funds.
In a letter sent on Friday to the Republican and Democratic leaders of a House of Representatives government oversight panel, the Federal Housing Finance Agency explained why it has long opposed principal reductions for borrowers who owe more than their homes are worth.
It said it had determined that such reductions would be more costly for the two firms than allowing those troubled borrowers to default.
“Principal reduction never serves the long-term interest of the taxpayer when compared to foreclosure,” FHFA’s acting director, Edward DeMarco, wrote in the letter to lawmakers dated January 20.

About 22 percent of U.S. homes have negative equity totaling about $750 billion, according to CoreLogic.
“Given that any money spent on this endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” DeMarco said in the letter.
Another barrier to principal writedowns, aside from pushing losses at the two firms even further, DeMarco said, was the costs associated with new technology and training to servicers that would be needed to launch a program that offers principal forgiveness.
The Federal Reserve, in a white paper to Congress earlier this month, said write-downs “had the potential to decrease the probability of default” and “improve migration between labor markets.”
However, the Fed stopped short of endorsing such an initiative and noted concern that writing down loan balances would create a moral hazard — the concept that rescue efforts breed further behavior that exacerbates the existing problem — and could prompt other borrowers to stop making timely loan payments.
Calculating the Maximum Cost
At least we know an approximate maximum cap. Negative equity totals $750 billion. Add in cost on implementing the program, graft, fraud, etc. and the cap (right now) is a conservative $760 billion or so. Factor in declining property values and a conservative cap is $800 billion or so.
Obama Seeks Vote-Buying Opportunity
Notice the ridiculous comment by the Fed: write-downs “had the potential to decrease the probability of default“. Of course they do.
Write off the entire loan and there would be no chance of default. That does not mean it’s a smart thing to do. Unless of course you are President Obama seeking to buy votes in November.
Addendum
Greg Fielding of the Bay Area Real Estate Trends blog writes …
What’s interesting in the letter is that they promote principal reduction as costing $100 billion, but the “potential” savings of mods and forbearance is only a few percent. And the data they use has no assumptions for an increase in the overall number of foreclosures as negative equity grows. This whole thing smells of incompetence and corruption.
Mish says … Exactly!
Not to mention vote buying and I am quite sure back-door bailouts of banks as well (who will be permitted to sell “assets” to Fannie and Freddie in advance).

Buffett Puts Loose Change Where His Government-Kissing Mouth Is

2012-01-24T21:39:00.002-05:00

Enthusiastic tax shill Warren Buffett has put his money where his mouth is.
He's ponied up $49,000 to help pay down the national debt. He's simultaneously matching voluntary contributions already made by Rep. Scott Rigell of Virginia.
Yes, $49,000 to Mr. Buffett is the equivalent of 49 pennies to the rest of us (Mr. Buffett is a billionaire and most Americans are thousand-aires or hundred-aires at best, so this is actually pretty accurate).
Buffett had issued a challenge in Time Magazine recently in which he promised to match voluntary contributions for reduction of national debt made by all Republican members of Congress an impressive three for one.
The image below is of the actual letter from Warren to Scott.

Buffet claims that rich folks and politicians competing to see who could donate the most to the feds is a form of competition the American people would applaud?

A competition to see who can throw the most of their money down the grand canyon of federal government deficits? That's worse than watching reality tv and finding out which sap can make the biggest ass of himself in front of millions of viewers.

And what sort of example is this setting? What is the message? That if any of us have any extra cash lying around you ought to send it to the government? The same government which already takes around 40% of your nominal income off the top? We suppose if wrapping foreign aggression and subjugation to a police state in patriotism works, then making this sort of inanity seem patriotic will work, too.

We know there are those who defend taxes no matter what. We hear these people on the radio, see them on political talk shows and read their words in print (mostly in the New York Times). A few of them regularly read this letter and send us notes to stop whining about paying our "fair share".

Of course our own decidedly Austrian stance feeds our love or the agora, the market place, as the best use of all funds, including those funds we can no longer use because the government took them under pain of imprisonment and death...

We maintain in our free market zeal that all needs would be met and all goods and services improved upon via the free market far, far better than they could by taxation and central planning.

(We also call upon history to lighten our burden of proof. The more centralized the economy, the poorer and less sustainable it has been. The freest economy the world had ever seen has become poorer and poorer the more centralized it's become.)

Many would even agree. To a point. Except for things like infrastructure, national defense, public safety and security. And education. And medical services. And retirement income.

Ah, see. That list can keep growing. But let's pretend that most of us can agree on just infrastructure and national defense (the things that even many libertarians would let the feds handle). Do we really buy that the federal government needs nearly half of most of our incomes in order to maintain infrastructure and an army?

Most of us normally don't question how much of our money disappears down the federal maw. Because it generally does no good. We accept that what we supposedly get in return – highways and not going to jail – makes those taxes money well stolen.

But what happens when the cry comes to give even more of our earnings voluntarily? Might not a few us wonder why the enormous chunk we've already been forced to part with proved to be not enough? Just what is happening to all that money? Why are the central government's debt equal to the amount of money the private sector upon which it relies generates every year...while that private sector has already been handing over nearly half its income to the selfsame central government?

We'd warn Mr. Buffett that therein lies the danger in encouraging "voluntary" contributions. People might be willing to let the government take as much as the government decrees it legally can...

They may be willing to lie to themselves about how that legally stolen money is being used...because if they don't pay it, they will surely lose their property and freedom. So they wrap themselves in a comfortable fable in order to blunt the psychological trauma. In this respect they are like the prison punk who after each episode of forced buggery tells himself that his rapist cellmate really actually loves him.

But suggest that what the government needs is the voluntary offering of as much more as possible...and then people might start wondering what they're getting for their money. After all, in every other area of their lives when they voluntarily hand over their money, they get something in return, something that they value more than the money they just handed over.

It could be a cup of coffee, a sandwich, the use of a space for living or to conduct business, a car, a piano, or a laptop, repair of an existing item or building of a new one, performance of a song, and so on. But there was something that the money-giver wanted more than a given amount of money he had on hand. Thus the voluntary exchange was made.

Heck, it could even be an act of charity like the one Warren is trying to encourage among rich people and Republican Congresspersons. But even then the voluntary contributor commits a charitable act, he gets something he values more highly than the money he parts with: the sense of having helped someone far less fortunate than himself. It's the same reason he would give to a relative or other loved one in need. And – this is very important -- we assumed that he'd want the money to be used responsibly, and not enable the recipient to remain eternally dependent.

Note that Mr. Buffett has sheltered the bulk of his billions in a charitable foundation, sheltered from federal tax. Even Mr. Buffett feels that this sort of charity is a better way to give the vast majority of his money away. Else he would have taken those billions out of the foundation and handed it over to the Treasury. He could have added this to any amount he'd match from Republicans who met his challenge.

But it's not like the federal government is some hard luck case who deserves our sympathy and help. If it were a person, the federal government would be the guy in a natty suit, who comes to your store every few weeks to collect "protection" money from you. He would then use that protection money to keep his favorite prostitutes well fed and happy and to make turf war on the other guys running protection rackets.

Further, this shameless gangster would also be hopelessly indebted because of an impressive gambling habit! Never mind that the protection racket he's running is a scam at gunpoint...He's simply a horrible credit risk!

So here is the message:

"Help our government stop having to be in constant debt for its worldwide military presence (among other outright destructive redistributions). Give them more than they already demand from you."

That's right, citizen. Forget buying patriotic war bonds. In times like these, lending the government your savings isn't enough. You ought to give the money and never ask for it back. We'll start by asking the rich.

[Ed. Note: It's laughable to think that Buffett's voluntary contribution would "pay off" any federal debt...it might pay three seconds of the interest on a portion of the $15.2 trillion national debt...A proverbial blink of an eye.
It will take his accountant longer to write the check than it will take the government to spend it.
Aside from the moral hazards we discuss in this issue, Buffett's charitable streak probably doesn't extend pass our borders to the East. Alas, the Chinese are likely far less willing to voluntarily contribute to the U.S. Treasury more than they already have.
And some day they will say, "no more soup for you!" Then the game is up. Over.
See, the Chinese don't need to sell our bonds to create untold havoc on our financial system. They just need to stop buying our bonds...or even the threat of not buying our bonds...that's how fragile and dependent our economic system and government is on things we can no longer control.
We have spent almost a decade studying and writing about these ideas and have come up with a scenario that is getting a lot of attention from our readers. But be warned, you will likely greet our ideas with a healthy dose of skepticism. Which from our experience tells us that we are onto something big.
You can see for yourself here.]
Granted, Mr. Buffett is only asking this sacrifice of those who actually have significant amounts of money left to spare. We suppose it's assumed that "the rich" have tons of money that they're not putting to good use, even after gold-plating their billion-dollar mansions. So why not throw it at the debts the government has run up?

Further he's issued his challenge to Congressional politicians, people who draw paychecks from the government credit card.

But there are plenty of "progressive" thinking people who applaud the example Mr. Buffett is supposedly setting. Entire Web sites are devoted to garnering support for a Buffett-inspired increase in taxes on "the wealthy".

We'd recommend all income earners who aren't already at Mr. Buffett's level of wealth to be very wary of this. The federal income tax itself started as a tiny burden on only the richest in the U.S. Within a century it grew to consume nearly half the income of the middle class as well. The truly wealthy, meanwhile, managed to find ways to shelter most of their money from the income tax after setting the initial example and bearing the initial burden.

Mr. Buffett even uses this point to make his own...that the situation must be re-addressed so that they wealthy are once again paying their "fair share". We note with dismay that the first attempt to soak the rich via the IRS resulted, over time, in those of us making anything above subsistence wages having to fork over half our earnings to the feds.

Not that we think anything particularly sinister is at work here. Though we do find it less than coincidental that this $49,000 show of support comes the day after a popular uprising against wholesale federal-corporate control of the Internet.

Maybe Mr. Buffett really is a paid shill, but we suspect that he's more likely simply an enthusiastic one. He believes. For all his financial and investing acumen, Mr. Buffett rests his economic understanding on some faulty foundations. Like we said, he believes. He honestly believes that money generated privately ought to be then funneled through the central planners to find its best use.

Those who get excited about Mr. Buffett's suggestions and find inspiration in his example also imagine that the federal government would do a better job with the money...that the federal debt as it stands is just a matter of bad luck and not the inevitable result of economic law (As sure as gravity causes objects with mass to be attracted to each other, money stolen by elected officials at gunpoint will allocate resources worse than private interests working under pressure of profit and loss).

You can't really argue with someone who would say these things. Well, you could, but you'd be wasting your time and theirs. It's like the old joke. Don't try to teach a pig to sing. It wastes your time and annoys the pig.
It's not a matter of facts for the facts support liberty and free markets if you want to abolish poverty and raise standards of living across the world. It's a matter of philosophy. Just as it is hard to argue about the nuances of evolutionary biology to a fundamentalist holding his holy text, it is equally hard to talk to a true believer in central planning about why the nuances of human freedom and free markets to improve everything...and why they shouldn't so enthusiastically hand the central planners their money.

Ron Who? And other stuff.....

2012-01-23T23:47:00.002-05:00

Ron Who?

While the phenomenon of Ron Paul's invisibility has been commented on by a number of individuals, including myself, I feel compelled to comment once again based on the experience I had earlier this week.

It happened on Wednesday morning while uncharacteristically turning on the television news in the hopes of distracting myself from the drudgery of pedaling away on my stationary bike. Normally, I just listen to loud music, but for whatever reason, this week I decided to watch the news and so turned on CBS.

The lead story was all about Newt Gingrich's apparent surge in South Carolina, but also about Rick Perry and Rick Santorum and their continued battle for the nomination. At one point, the newscaster went so far as to show the four candidates on the screen as he discussed their positioning for votes in South Carolina. Yet, even though he is running third, the news program didn't even mention Ron Paul!

In the perfect hindsight afforded by the passage of the last couple of days, we now know that the grips of Santorum and Perry were so weak - single-digit territory - that they both subsequently dropped out of the running.

So now that leaves just Mitt Romney and Newt Gingrich.

Oh, and that other guy, you know Ron whatever-his-name-is.

Anyone who thinks that the game in this degraded democracy isn't rigged, isn't paying attention.

About Those Jobs...

The politicians make a great show of concerning themselves with the levels of unemployment. And so they bluster about the need for this new program or that new program - in fact, about any new idea except for the one that will actually be effective. Namely, stop the meddling.

This week, there have been some interesting developments that merely confirm the government's intentions are to continue doing exactly the opposite of what they should be doing.

For starters, we had the news that President Obama announced his administration was going to block the Keystone XL pipeline, blaming the decision on the Republicans and foisting responsibility for the call onto the back of Hillary Clinton's State Department.

Of course, the story has received quite a bit of coverage, so I won't repeat it here. However, I will share with you a Reuter's column by John Kemp titled "Keystone symbolizes what is wrong with US policy." As he points out, despite an existing network of pipelines from Canada, the initial permit application for Keystone XL was filed in 2008 - and yet here we are, going on four years later, and the president is complaining about the "rushed and arbitrary deadline" imposed by the Republicans as part of the latest round of budget theatrics.

The actual fact of the matter is that the United States is becoming increasingly unfriendly toward businesses that actually produce anything tangible, despite our politicians constantly carping about the evil capitalists sending American jobs overseas.

On that front, there's a great series that Bloomberg has just kicked off, titled "America's Dirty War Against Manufacturing," on why US manufacturing is expatriating itself. Here's a relevant quote:

Those industries left the U.S. in search not of cheaper workers, but of more supportive governments. If the U.S. lost manufacturing due to high wages (or unions, labor laws, regulation - the other commonly cited villains), how do you explain the manufacturing success of Germany and Japan? Germany, the world's pre-eminent high-end manufacturing economy, has higher wages, stronger unions and stricter labor laws than the U.S. Japan, too, is a high-wage competitor, yet Toyota Motor Corp. still makes 60 percent of its vehicles there. General Motors Co. makes only about 30 percent in North America.

So if wages aren't to blame, what is?

Policy. But is U.S. government policy really hostile to manufacturing?

Sadly, yes.

While the government may make life hard for the manufacturing sector, it positively detests the extractive industries - the Keystone XL pipeline being just one of many recent examples. This week, for instance, the outlook for new mineral exploration and mining in the geological treasure chest state of Nevada was cast into doubt by new regulations related to protecting the habitat of the sage grouse.

So you'll know what one looks like, in case your travels have not taken you to the remote and generally inhospitable back country where Nevada mining goes on, and thus to where sage grouse apparently roost, I was able to find a photograph to share with you.

Now, personally I have nothing against the sage grouse, or any other bird, for that matter. I am simply trying to make the point that if you are trying to attract capital investment, create jobs and reduce dependence on foreign producers of the tangibles our economy relies on, surprising businesses with ever more regulations is not helpful.

But the story my friend Porter Stansberry sent along this morning takes the cake - it is a proposal to establish a "Reasonable Profits Board" whose sole purpose will be to control how much companies in the oil and gas business will be able to earn going forward.

A relevant quote from the article...

The Democrats, worried about higher gas prices, want to set up a board that would apply a "windfall profit tax" as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit.

The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding "a reasonable profit." It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress.

The bill would also seem to exclude industry representatives from the board, as it says members "shall have no financial interests in any of the businesses for which reasonable profits are determined by the Board."

Dan Ferris, the editor of Stansberry's Extreme Value newsletter, was on the same e-mail string and on reading the article wrote back the following note, which I thought worth sharing.

So... just to recap, then...

Selling gasoline is a crap, low (if any) margin business. If you don't attach a convenience store to it, you make nothing. Refining gasoline has a margin between something like 1% and negative infinity, except every now and then when it almost looks like it's not another crappy business.

And Congress says they make too much money. If they could guarantee a reasonable profit, they'd be subsidizing it, not taxing it.

People who lend out your deposits (ten times over) and forbid Walmart from entering their business because Walmart's model would only benefit customers, not cronies, aren't making too much money.

People who get money from the government to keep the price of sugar double the global price aren't making too much money.

People who get money from government to grow corn so they can do the most expensive possible thing with it - turn it into ethanol - aren't making too much money.

Al Gore's carbon credit trading operation isn't making too much money.

College professors who don't teach, who drink fine wine, live in Tudor McMansions and drive Volvos while writing papers on the oppression of women in the workforce aren't making too much money.

But people who sell gasoline... one of the skinniest margins on Earth... a product without which life as we know it comes to a grinding halt... they're making too much money.

This is what you get when you vote, people trying to make good sound bites for ignoramuses who vote, as if the political process had all the depth and meaning of a Disney movie trailer. "Coming soon: Hope, Change and Reasonable Profits!"

And, finally, to put this all in perspective, the following is a quote that Reason magazine ran from Eric Schmidt of Google.

Q: You recently testified before Congress in an antitrust hearing about Google. What are your reflections on the experience? Were the leaders there asking the right questions?

Eric Schmidt: So we get hauled in front of the Congress for developing a product that's free, that serves a billion people. Okay? I mean, I don't know how to say it any clearer. I mean, it's fine. It's their job. But it's not like we raised prices. We could lower prices from free to... lower than free? You see what I'm saying?

I've said it before, I'll say it again here - if you want to fix the economy, stop government meddling!

The Debt Supercycle Reaches Its Final Chapter

2012-01-23T23:42:00.000-05:00

"By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens."

~John Maynard Keynes

This year will mark my 32^nd year in the business. I began my career in 1980 after spending several years in corporate life, which I did not find to my liking. I had too much of an independent streak and eventually came to the realization that I'd be much better off starting my own business. When I entered the financial world interest rates were beginning to peak, as the long upward climb in inflation was coming to an end under the leadership of Paul Volker at the Fed. It is hard to believe today that interest rates on treasuries were as high as 15.7%. The yields on money market funds were over 18%. Inflation rates were over 14%, with oil prices at $40 a barrel. Gold and silver would eventually peak at $850 and $50 an ounce, respectively.

Where the Debt Supercycle Begins

I spent my first decade in the business as a broker before transforming my business to a fee-based money management firm. All I sold in the 1980’s was fixed income. Who wanted to invest in stocks when you could get double digit returns in guaranteed deposits at a bank or by investing in government debt? I still remember one of my first trades—a 10-year treasury note paying a 15% interest rate.
What I did not realize at the time was the U.S., and the western world in general, was about to embark on what we now refer to as the “Debt Supercycle”—a theory articulated by the investment strategists at Bank Credit Analyst out of Canada. The Debt Supercycle is a description of the long-term decline in U.S. balance sheet liquidity and the rise in indebtedness during the WWII period. Economic expansions in the post WWII world were associated with the buildup in debt as western governments introduced automatic stabilizers through entitlements such as unemployment benefits, Social Security, Medicare, and deposit insurance at financial institutions. During the early stages of debt buildup, government policies were successful in preventing the frequent depressions that plagued the pre-WWII economy. Western economies would experience periodic corrections during recessions, but these recessions did not reverse the long-term trend of debt buildup that continued to grow with each successive decade.
These trends would lead to growing illiquidity making our financial markets more fragile and susceptible to the threat of a deflationary event like we experienced recently in the great credit crisis of 2008-2009. These periodic recessions were fought by governments with more deficit spending and credit creation. Thus, the bigger balance sheet excesses became, the more painful the eventual corrective process would be. The financial stakes became higher in each new economic cycle, putting ever-increasing pressure on governments to reflate demand, by whatever means were available.
According to the Bank Credit Analyst the Debt Supercycle reached an important inflection point in the recent economic meltdown of 2008-2009. Authorities reached the limit of their ability to get consumers to take on more credit. The result is that it forced governments to leverage up instead. This is where we are today as authorities spend, borrow and print money to fight off the deflationary impact of private sector deleveraging. Welcome to the final chapter of the Debt Supercycle—a period of trillion dollar deficits that are being monetized by trillion dollar expansions of central bank balance sheets, otherwise known as money printing. Once fiscal policy is pushed to the limits of sustainability, the Debt Supercycle will come to a violent end. This is exactly what is happening to Europe now.
A graphic depiction of this Debt Supercycle can be seen below. As of this writing, outstanding U.S. federal debt is close to $15.3 trillion dollars. For the first time in my lifetime US federal debt now exceeds U.S. GDP. In personal terms each U.S. citizen now owes $180,559.¹

Source: Bloomberg

Our politicians have been acting irresponsibly, paying only lip service to the nation’s rapidly growing debt burden. It has been argued that our debt is not as bad as it appears and we have plenty of options and time to resolve this issue. Some argue for higher taxes, others for dramatic spending cuts. The truth is that neither will work alone. There aren’t enough taxpayers to pay the bill, even if we raise tax rates to 100% on the rich. Spending cuts will also not solve our problems unless we eliminate all forms of entitlements and drastically reduce the size of our military. In the end, our only option will be to pursue a combination of tax increases, entitlement and spending reductions, and a steady dose of inflation. This is the policy we pursued after WWII and it is now the official policy of the U.S. government, a term referred to as financial repression.
"I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments."

~Friedrich August von Hayek

I would like to address the unusual phenomenon of the Debt Supercycle and why it has gone on for well over three decades without a major crisis until recently. Politicians, and the Keynesian economists who support them, have long argued that debt imbalances don’t matter. What matters is the economy’s ability to grow and it is government's job to make sure it grows through whatever means necessary. On the surface this argument seems plausible. The two graphs below illustrate the popularity of this view.

Source: Bloomberg

From 1978 to today, the U.S was able to grow its total debt from $719 billion to $56 trillion, an annualized growth rate of 13.7%.² While U.S. debt was growing during this period of time the interest rate paid on that debt steadily declined. This confounded experts who would have predicted higher rates of inflation and certainly higher rates of interest. This can be explained. At the end of the 1970’s inflation rates were hovering over 14%, bond yields on U.S. treasuries had risen to over 15%. The US. Government had been financing its growing deficits by urging the Fed to monetize its debt by printing money to buy U.S. treasuries. This is what led to the rising inflation rates during the 1970’s. This philosophy came to an end with President Carter’s appointment of Paul Volcker to head up the Federal Reserve.

From Printing Presses to the Bond Market

Volcker and other central bankers convinced their respective governments that they could tame the inflation monster by financing deficits through the bond market rather than the current practice of monetizing (printing money to pay off) the debt. Stung by a wave of rising inflation, governments turned to their central banks for advice. The advice given had three components: one, raise short-term interest rates in order to restrain bank borrowing by individuals and businesses; two, cut government borrowing; and three, use the bond market to finance budget deficits by selling bonds to domestic and overseas investors.
It was argued, and rightly so, that when a government taps the bond market it is drawing from the existing stock of savings—no new money is created. Large institutions such as insurance companies, pension funds, mutual funds, and individual investors would supply the necessary capital to finance government deficits. The inducement to supply this capital was high real interest rates, an interest rate that was well above the inflation rate. It worked. The migration of credit expansion from within the monetary sector to outside it was the single biggest reason why OECD government inflation fell below five percent throughout the 80’s, 90’s, and the 2000’s. As shown in the graphs above, it led to rising debt levels and falling interest rates.
Another process that occurred during this period that facilitated government debt financing was the revolution that was occurring in the capital markets. Peter Warburton described this process in his seminal work “Debt and Delusion,” from which I now quote:

The capital markets' revolution of the late 1980’s and the 1990’s was facilitated by several parallel developments, of which five stand out. First, the incapacity of the banks, due to non-performing loans; second, the adoption of liberal credit policies by governments; third, the displacement of discretionary consumer borrowing by obligatory government borrowing (to finance budget deficits); fourth, the concentration of management of private wealth in the hands of large funds; and fifth, the increased use and acceptance of financial derivatives….
If this powerful shift from traditional bank borrowing towards the capital markets in North America and Western Europe had not taken place, it is most probable that there would have been a much longer period of recession and consolidation in the aftermath of the late 1980’s property bust….
Deprived of the easy option of selling bonds to investment funds and individuals, the government would probably have resorted to greater monetization of their borrowing….
If this traditional course of action had been followed, then there is little doubt that inflationary fires would have been rekindled in the western economies during the 1990’s by pressing additional liquidity (cash and bank deposits) into the hands of consumers and firms, the demand for goods, services and assets would have increased relative to their available supplies. After a couple of years or so, the outcome of excessive money creation would have been a resurgence of consumer price inflation, following the pattern of the 1970’s and early 1980’s.

This process worked for an extended period of time with occasional hiccups and financial failures: the bankruptcy of Orange County, the Mexican peso crisis in late 1994, the collapse of Barings Bank in 1995, the Asian currency crisis in 1997, and the Russian debt default and the bankruptcy of Long Term Capital Management in 1998.

The Rise of Derivatives

Overtime, a new pattern was beginning to emerge by the 1990’s and continues on to this day: an increasing frequency of rogue waves or black swan events.³ With the increasing role of large financial institutions as intermediaries within the financial system a large important part of capital transfers were being done in secret through the derivatives market. Transactions between investment banks and mega funds such as hedge funds were increasingly being transacted in secret in the OTC derivatives market far from the public gaze.
Derivatives were the ultimate leverage tool used by hedge funds and the proprietary trading desks of large banks in gearing up the financial system. The use of derivatives enabled these financial entities the ability to gain control of a larger asset portfolio with a smaller commitment of capital. Derivatives in effect gave artificial support to both the bond and equity markets. It also facilitated the massive leveraging of the financial system with debt-to-asset ratios rising from 12-1 to 40-1 by the time of the 2008 financial crisis. Most importantly, the synthetic support given the bond and equity markets by these leveraged instruments were critically dependent on the downward progression of interest rates and the shape of the yield curve. A small tremor in the structure of interest rates would undermine the profitability of these leveraged trades leading to forced selling in the bond, equity, and commodity markets, which explains much of what happened during 2007-2009.

Risk On/Risk Off and the "Paranormal" Market

The fact remains that our financial system still remains highly leveraged. As Bill Gross recently wrote in his 2012 investment outlook, “most developed economies have not, in fact, delevered since 2008…credit as a whole remains resilient or at least static because of a multitude of quantitative easings (QE) in the U.S., U.K., and Japan...and now Euroland countries.”⁴
Because interest rates are now zero bound, according to Gross, it raises the possibility of a fat left-tailed possibility of unforeseen delevering or the fat right-tailed possibility of central bank inflationary expansion. The result is we face a number of years in the future where economies will exhibit different aspects of the New Normal which Gross describes as “Sub,” ”Ab,” or “Paranormal" (to be explained below).⁵
The global financial system is still leveraging up. However, this time it is governments that are doing the leveraging. Today, sovereign debt is being issued in copious quantities. The vast majority of this debt is being used to finance non-productive consumption. All of the world’s major governments are spending and living well beyond their means leaving central banks to return once again towards aggressive debt monetization to desperately ensure interest rates remain subdued and the financial system abundantly liquid. As Grant Williams explained with the following image below, "currently the central banks of the top three developed world entities: the Eurozone, the US and Japan have balance sheets that amount to roughly $8 trillion...What does this mean? It means that nearly $8 trillion in world economic growth is artificial and exists only courtesy of central bank intervention...It also means that central banks will never unwind their 'assets'...It also means that in this age of ongoing consumer and corporate deleveraging, central banks will have no choice but to continue monetizing."

Source: Grant Williams, "Things That Make You Go Hmmm..."

This creates an unstable dynamic whereby market participants focus their attention on divining opaque and unpredictabie moves by "the powers that be" rather than the real and economic value of various assets. This anticipation by highly leveraged financial players of policy reflation is what underpins the highly speculative nature of our current global marketplace. When reflationary policies are delayed or not forthcoming, the markets deleverage and go into “risk off” mode. This drives the dollar higher and treasury yields lower. When the monetary bazookas are unleashed the “risk on” trade is executed and stocks and commodities rise universally. This “risk on/risk off “ trade is now part of the new Paranormal that Gross describes in his 2012 investment outlook.

When Markets Rebel

The question as to which fat tail risk (left or right) the markets experience boils down to a game of confidence that governments and their respective central banks are playing with the bond markets. The risk to government is that because of zero bound interest rates, governments have been financing a good portion of their debt short-term. The rate of interest is low which helps to reduce deficits. The danger is that since a good majority of debt is short-term it will have to be rolled over. As long as confidence is maintained debt will continue to roll over at existing low interest rates. The real danger is when the markets lose confidence in policymakers. That is, if the markets rebel and demand higher rates of return. It is a rise in interest rates which now directly threatens the solvency of many governments. Record debt levels are not a burden to government as long as interest rates remain low. It is when confidence is lost and rates rise that the solvency issue comes into question. This is the nightmare scenario that keeps central bankers up at night; a warning Sidney Homer wrote in his “A History of Interest Rates”:

Many besides the government have been encouraged to borrow at short who in an earlier age would have borrowed at long term just to be sure the funds would be available if needed. The dangers of this procedure became sadly evident in the 1970’s, when certain borrowers, such as Penn Central and New York City, suddenly found the refunding market closed to them.⁶

Summary

We now live in a new era of uncertainty—Pimco’s new “paranormal,” if you will. Our financial system continues to leverage up as governments replace the private sector in gearing up their balance sheets. Central banks are now embarked on a policy of reflation, monetizing a major portion of rising government deficits. The ECB’s balance sheet expanded by $947B (euro 727B), or 36% last year, to a record $3.5T. The Fed expanded its balance sheet by $513B to $2.92T, an increase of 21%.
We are now at a state where the sovereign bond market has grown to become the largest financial bubble in history; a bubble that could succumb to three potential market shocks. The first type of shock would come from a spike in commodity prices triggered by additional rounds of quantitative easing. It could be as simple as an "act of God" such as an earthquake, tsunami, or the failure of an important agricultural crop. The bond market would react in fear that higher commodity prices would be absorbed in the price of goods and services via loose monetary policy.
A second shock could be triggered as a result of political instability and loss of confidence in government policy. An example is what is occurring right now in Europe regarding an attempt toward a fiscal union or the debt ceiling debate in the U.S. The bond market would view negatively a failure by governments to rein in spending and control their deficits.
The third shock would emanate from a potential default or restructuring of a sovereign debt that would lead to a domino effect in the banking system. A large international bank or group of banks might not be able to meet their obligations which would lead to a rise in fear of uninsurable losses among the banks or their counterparties.
As the bond market continues to expand through sovereign debt expansion and central bank monetization, it is moving further away from reality as a result of speculative activity. This makes sovereign debt extremely sensitive to any unanticipated event. The probability of another black swan or rogue wave is beginning to multiply; from a failed bond auction, to larger than expected deficits, to political rancor over spending cuts. Sovereign debt can no longer be looked upon as a risk free asset. For the reasons cited above I continue to avoid U.S. treasury debt as the rates of return bear no resemblance to reality or are commensurate with the risk they entail. Caveat emptor!

Inflation? Oh Yeah!

2012-01-23T23:36:00.000-05:00

More QE (printing money to buy Treasury debt) is a matter of when, not if,” says our Assoc. Editor ralph Lockwood, eyeing next week’s meeting of the Federal Reserve’s Open Market Committee.
It might not arrive next week, but arrive it will, Ralph explains: “You need only consider the imperative to keep interest expense low for the biggest borrower of all: the U.S. government. The Fed’s zero rate policy has led to lower interest expenses, despite exploding Treasury debt.”
“Since late 2007, debt held by the public has doubled from $5 trillion to $10 trillion, yet interest expense on the debt has declined from $230 billion to $190 billion:”

“More investors,” says Ralph, “will come to understand that everything they learned in college about Keynesian economic policies is invalid unless total systemic debt grows eternally. They’ll start to design portfolios for an environment of inflation or deflation, not a happy, ‘Goldilocks’ scenario.”
Ralph’s taking sides: “Given the macro backdrop, and how governments and central banks are dealing with the limits of sovereign debts, I’m expecting inflation to get steadily worse.”

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

2012-01-23T23:32:00.000-05:00

"There are only two ways to sleep well at night... be ignorant or be prepared." - Simon Black, editor of Sovereign Man

Is There a Single U.S. Mainstream News Story About the Mass Burial of 30 People Outside Chicago?

2012-01-23T23:30:00.000-05:00

Unfortunately, the source of this story is the Daily Mail. What’s worse is that I’m not able to find any other source that doesn’t reference the Daily Mailpiece. It says that the mass burial took place on Wednesday (January 18, 2011).
This is not a new practice.
I found this, from last year:

After uncovering the desecration scandal at Burr Oak Cemetery in 2009, Cook County Sheriff Tom Dart on Thursday called for legislation to reform indigent burials in Cook County.
Dart pointed to complaints at Homewood Memorial Gardens, which has held the county contract for indigent burials since 1980. He cited babies being buried 10 to 15 to a box, some with animal remains.
“From a law enforcement standpoint, it’s disturbing,” Dart said. “From a human standpoint, it’s appalling.”

Is this just par for the course in the U.S. now? The new normal? Nothing to see here?
Via: Daily Mail:
It’s a practice more closely associated with third world countries, but in bleak times in a Chicago-area suburb, 30 people were buried in a mass grave on Wednesday.
The pauper’s burial section at Homewood Memorial Gardens was established for those who could not afford to pay for a burial plot.

And it is a problem that’s sweeping America as tough economic times have led to an increase in the number of indigent burials the morgue must perform.

Gerald Celente on Trend Forecasting and the Crisis of Western Civilization

2012-01-23T23:27:00.000-05:00

Gerald Celente: My background is such that after graduate school and I got my Masters in Public Administration, I started running political campaigns in Westchester County in New York, which is a very affluent area. I was very successful at it so they sent me up to Albany, where I became the assistant to the secretary of the New York State Senate; Albany, of course, is the capital of New York State. It was there that I really started learning about the political game. It was probably the worst job I ever had because it was watching grown men suck up and bow down all day to get to the top.

So from there I taught at St. John’s University and it was the nation’s first course in American politics and campaign technology – how to run a political campaign. From there I moved to Chicago and was a government affairs specialist for the chemical industry. I used to put together, when they were just being formed, political action committees. So I would hire the people, do the work to get legislation overturned or get different legislation passed. So I have been around the political scene long enough to have a good feel of it.

Then in the late 1970s it was that lightbulb moment, and Jimmy Carter had just come back from Iran. The Iranian conflict was heating up and, ironically, it is just heating up as we are speaking now. Not much has changed; only the names and players. So Carter comes back from spending New Year’s Eve with the Shah and his wife and announces that the Shah is the “Island of Stability” in the Middle East. At that moment I became a political atheist. I’d been following this thing for years. I knew how the United States government and the MI5 in the UK overthrew the democratically elected government of Mossaddegh in Iran, in 1953, because he had the NERVE to nationalize the oil fields, take it away from Anglo-Iranian oil – better known today as BP and Standard Oil, better known today as Exxon. So I knew also what a brutal dictator the Shah was and how he had imprisoned and slaughtered and tortured tens of thousands of people. So when a revolution broke out, I knew it was real and I knew that Carter was lying to the American people and the world.

So then when I got over all of that I wondered what would be the implications of all of this and I realized that current events form future trends, and that is the foundation of my work. You look at things for the way they are, not the way you want them to be. It’s not what you like, dislike, hope for, wish for, believe in – that has nothing to do with it. So what will be the implications? And the implications were that gold and oil prices would go up as this situation worsened. So then, not knowing what I was doing, I started playing the gold and oil futures market. And I made enough money to quit my job (laughing) and I began the Trends Research Institute, with the understanding that if you look at things as they occur on a global basis and try to assess their implications, you can get a pretty good idea where things are going to go.
Nobody can predict the future – there’s too many wild cards. But you can get a good idea by seeing the face of the future, just like you’re doing what you’re doing and I’m doing what I’m doing because of decisions that we have made. So that’s the foundation of my work. But also, what I do differently than everyone else in the field, is that our stream of consciousness is beyond just one category of information. For example, economists will continue to study the economy but what do they know about what’s going on socially, changes in the family, geopolitics, environment, health care, entertainment? Are they looking at all the other integrating trends? Because all things are connected. So that’s what we do differently, with the understanding that too many people see the view of the world through the eyes of their profession. I call it ‘desk vision’ – they see the world from behind their desk.
So our concept and our ‘globalnomic’ system is to take in as much information as we can on a global basis, always making connections between different fields. I believe this is really the key to our success as well as being political atheists; we don’t have any so-called skin invested in this. When you turn on CNBC or CNN or anything else and you listen to the political analysts or financial analysts, they are either selling something or selling their agenda. My motto is what I learned from my dear father, may his soul rest in peace – think for yourself; don’t repeat what everybody else is saying.
Daily Bell: You mentioned earlier you call yourself a political atheist. Would you elaborate?
Gerald Celente: I don’t believe in anybody’s political religion. Knock yourself out. You want to believe in your fairytale, that’s okay with me but don’t lay it on me. Don’t tell me I have to believe in your political garb because I REALLY GET ANGRY! Who are you to tell me I have to believe in your line of crap? Have you been there? Do you know what it looks like? I’ve been there.
I used to be standing inside the Senate chambers, a new guy, standing talking to my pal, talking about what guys talk about. And all of a sudden a senator would walk in and he’d have some flunky over there, opening the door so the guy could walk in. And my buddy would leave me and follow the senator like a little puppy dog and pull out the chair so the senator could sit down. Then my friend would come back and I would say, “What’s the matter, man? The cat can’t sit down by himself? He needs some help?”
That’s all politics is. You know what politicians are? When are people going to grow up? Politicians are the same jerks you hated in high school and college that wanted to be class president and head of the student council. The brown-nosers, suck-ups, overly-ambitious, insincere – and now they are telling you what to do and you are paying attention to them and you are bowing down?
I have a line: “Conservatives believe and liberals lie.”
Arch rightwing conservatives, they actually believe their line of baloney. They say things like, “The only way we are going to make this country safe is to kill all them Muslims around the world.” They actually believe that.
The liberals, on the other hand, you point out one transgression of freedom after another that Obama has committed and they will come up with a line of excuses a mile long. They’re intellectually intelligent enough to know that they are lying but they don’t have the courage or the self-respect to admit it.
For example, when Obama gets elected he says, the first day, ‘I’m going to close Guantanamo in a year.’ Guantanamo’s still going on. ‘Well, you know, he’s not getting cooperation from Congress… Hey, listen. There’s only so much he can do.’ Obama just increased the war in Afghanistan when he put 100,000 more troops in there than Bush did. ‘Well, you know, Obama, you know … the military is very strong and he’s trying his best.’ Hey, listen. Obama said he wasn’t going to continue the Bush tax cuts that benefit the very, very rich. ‘Well, you know, he has to do some deals to make things happen.’ Hey, wait a minute! Obama just signed into law the National Defense Authorization Act that makes a belligerent – I guess they can accuse me of being belligerent because I think they are a bunch of people I don’t respect. I can have the military now come over, crash down my doors, grab me with no charges, no judge, no jury and no trial. They can blow my brains out or send me to one of their favorite countries for torture or they can even torture me at home. How come he did that? ‘Well, you know, it’s the Congress.’ In other words, they have invested so much in it emotionally that they don’t want to admit they’ve been conned. And the intellectually intelligent enough know they are lying to themselves but they lack the self-respect and courage to admit it.
I find in my research that the biggest offenders as Obama apologists are women because they all tell me, “You know, I like him,” just like they like Clinton, the guy who sold out the government before Obama did. If Bush was pulling off what Obama is pulling off all the liberals would be screaming bloody murder. But by their blind aversion to this two-bit song and dance man they lose all credibility for themselves and what they believe. To me, they are the ones holding back positive change because they are invested in a fraud and a liar.
Daily Bell: Tell us about your firm and its predictive ability. What is your methodology? Why have you been successful?
Gerald Celente: As we discussed, we call a trend for what it is, rather than investing in a belief. You asked me why I’m a political atheist; this is the reason why. I don’t care if you like this guy. I don’t care if you’re in a bad relationship and you’re making up excuses for it. That’s what people keep getting hung up on. Whether it’s in economics, whether it’s in politics, whether it’s in social behavior, it’s what they believe, what they like, what they want, rather than assessing the implications.
Daily Bell: You are a leading spokesperson for what we call alternative media. What gives you the courage to speak out?
Gerald Celente: Oh, it’s very simple. I was married for 23 years. I’m divorced now, since the mid-90s. Everybody I love is dead. My parents, may they rest in peace, aunts and uncles, everybody. I have no kids. Again, I don’t tell anybody what to think. My motto is, “Think for yourself.” My definition of hell is taking that last breath of life and knowing that you lied to yourself and you weren’t the person you claim to be. So for me, it’s about speaking about who I believe I am. I don’t call it courage; I call it being true to myself.
Daily Bell: Would you share some examples of your predictions?
Gerald Celente: I think my biggest one that really started to set the stage was in January of 1987, when I sent out a press release saying that the stock market would collapse in 1987, and it did.
Then I had a number of smaller predictions, though no less significant, talking about a whole different range of issues such as alternative healthcare. I was talking about vitamins and acupuncture and chiropractic when you were a heretic to talk about it. As a matter of fact, the first book I worked on, in 1986, was called Natural Healing, by Dr. Jack Soltanoff. So I started learning about organic foods and diets, and started making forecasts in those areas. In those days there was no such thing as Whole Foods or big health food stores. So then I came out with organic foods and gourmet coffees and that started making more headlines in the mainstream media.
Then in one of my books, Trend Tracking, that I wrote in the late ’80s – I had forecast that there was a climb in the United States for a new third party and I mentioned Ross Perot as the type of maverick. Now, remember, this is in ’88 and George Bush Sr. was president and he was very high in the popularity ratings. Then subsequent forecasts throughout the decades kept putting me ahead of the pack.
Here’s one that almost killed me, almost destroyed my career and you can look it up. December 14, 2000, USA Today, the headline read, “2001 Won’t be our year, Trend Seer says.” And I warned that a wave of anti-Americanism was sweeping the globe and Americans wouldn’t be safe at home or abroad. A number of years earlier in one of my other books, Trends 2000, I coined the term “Crusades 2000″ and said there would be major terror strikes against the United States because of their foreign policy and how they were supporting dictators around the world, these monarchs and autocrats and on and on in these Muslim worlds. So this forecast comes out in December 2000, and of course, September becomes 9/11. Now I am getting flooded by the media. “How did you predict this? How did you know this was going to happen?” I said, “Are you kidding me? I have been writing about this. It has to do with foreign policy.” That was the kiss of death! “NO IT WASN’T! It was because they hate our freedom and liberty! I just heard George Bush say that,” they said. (Laughing)
Daily Bell: Okay. Here are some more trends questions … some subjects, in no particular order. Give us some trends feedback, please. In other words, put them into economic and sociopolitical context for our readers. First one, the West – where are we headed?
Gerald Celente: The West is headed to dictatorship. It’s already happening. The merger of state and corporate power is by definition called fascism. I just mentioned the Defense Authorization Act. Before you had that you had the abrogation of the Constitution under Bush, with the Patriot Act, which Obama reinstated and made even tougher by signing this bill. When I say the merger of state and corporate powers, look at the $16.1 trillion that the Federal Reserve has funneled into businesses around the world. Whatever happened to that thing called capitalism? This is not capitalism; it’s fascism! The more societies break down and the bigger the screw-ups at the top, the harder they clamp down on the bottom. You see it going on around the world; they call it austerity measures. How about calling it enslavement?
Daily Bell: European Union and the euro …
Gerald Celente: Same thing… It’s fascism. They came up with a great little word – they call it Technocrats. How about bankers? Bankers have taken over Italy. Bankers have taken over Greece. You may have heard me say this but I’ll say it again and I’ll continue to say it again.
Here we have just gotten over this holiday season, the celebration of Jesus Christ, It’s more about going to Walmart or crashing down doors on Black Friday to get a loss-leader item or buying a bunch of crap that you don’t need to put under an artificial Christmas tree. When you think about the Prince of Peace, when’s the only time he became violent? It was when he picked up a whip and drove the moneychangers out of the temple? The moneychangers have taken over the temples – the temples of Athens, the temples of Rome, the temples of Berlin and the City of London. They’ve taken over Washington. They’ve taken over every capital of every major city in the world. So where’s it going? It’s very simple to see where it’s going. It’s called class warfare.
Daily Bell: The China Miracle …
Gerald Celente: China only does as well as Europe and the United States does. As goes the US and Europe, so goes China. As goes China, so goes Australia, Brazil, Chili and other natural resource producing countries. China has 1.3 billion people and a million problems. Already they have people rebelling – the pollution… When you don’t have people working As much as people talk about the Chinese Miracle, their per capita income ranks around Iraq’s. So the people are not making a lot of money. There’s another great gap between the rich and the poor. If you have 500 million doing well and a billion doing really lousy you have class warfare, and a lot of problems with the government.
Daily Bell: The United States and the dollar …
Gerald Celente: Temporarily, the dollar is being looked upon as a safe haven. For me, looking at the dollar as a safe haven is like jumping out of the Titanic and looking to the Lusitania as a safe haven. Not a good idea. In the long run, I am bullish on gold; my savings are primarily in gold and a bit of silver. All the governments are doing – whether it’s the Chinese government or the US government, all they have been doing since the panic of ’08 is printing digital money, not worth the paper it’s not printed on, to keep the Ponzi scheme going. And that’s all it is – one big Ponzi scheme.
Daily Bell: Upcoming US presidential election ….
Gerald Celente: Well, as it stands now – and we made this forecast a few months ago – it’s Obama. And the dark horse, as you know, is Ron Paul. If you look at Ron Paul and what he stands for, every liberal out there should be voting for him, but they point out things that they don’t agree with and highlight those and, of course, the big issues.
Daily Bell: Do you think Ron Paul can win?
Gerald Celente: It would be very difficult, particularly with the media. When you read the words – and this is not my language; this is the language of the so-called paper of record, the New York Times. They call what he says, in their editorials, “Claptrap Ideas”! Claptrap? Who are you? Don’t talk to me like that! Because I believe in his ideas, they’re claptrap, and I don’t believe in your crap? When you hear an arrogant jerk like Newt Gingrich saying that no decent American would support Ron Paul’s foreign policies – come over to me, fat boy, and call me an indecent American. Say that to my face – let me show you how tough you are. And then we have a guy running The Manchester Union, Joe McQuaid. He said the only people that support Ron Paul are the lunatic fringe. Hey, McQuaid, don’t call me lunatic fringe; I don’t believe in your crap. Can you handle that? This takes us back to the beginning of our conversation about people believing in their political religions and then calling anyone that doesn’t believe in their religion a name.
Daily Bell: Is the mainstream media controlled? By whom?
Gerald Celente: By the corporations. I mean, who owns ABC? Who owns NBC? Who owns CBS, CNN and FOX? Again, the merger of state and corporate powers is called fascism. I’ve been on every show virtually in the mainstream media, and if you go on my trends and the news feature, I announced that I am not going on anymore. I turned down interview requests for the new year. I don’t like hanging out with these people. I don’t believe in who they are and I don’t want to give support to what they are doing so I don’t go on them. So it goes back to your question about courage, I don’t want to lie to myself. Why am I going to do it – to make money? It’s not worth it for me. If they want to come to me and interview me in my place, we can begin a conversation.
Daily Bell: Are corporations and corporatism to blame for the current system?
Gerald Celente: No, it’s everybody – from the top to the bottom – from the corporate rip-off to the welfare cheat. It’s the person in the bureaucracy who’s not doing their job, or the person in the corporation who’s trying to game the system. It’s about morality and until morality is restored – and it’s not only America; it’s worldwide you have people taking pokes at America, you name the country. It’s not all of them but a lot of them. So it comes back to morality, and until morality changes, nothing will change.
People ask me how it’s going to change and I always go back to that wonderful Hindu saying, “When the student is ready the teacher appears.” Anybody who has really practiced anything, and really wanted to be great at it knows you need a great teacher, and you only find those great teachers when you’re dedicated. So my belief is that the leadership will appear when the people are ready, and to me the people are not ready. They’re not ready emotionally, spiritually or physically. So until the people change and regain that self-respect, dignity and courage, nothing will change.
Daily Bell: It appears that you have a very divided nation right now – you have the welfare state on one hand and the warfare state on the other. How do you propose any change under these conditions?
Gerald Celente: Again, it comes with the individual. When individuals find the greatness within themselves, when they reach the highest levels that they can do and keep going higher, then they don’t tolerate abusiveness, whether it’s in a personal relationship or a governmental relationship. Right now it’s not in their DNA! When you’re doing great and creating great, you don’t accept that kind of behavior from others and that’s when the system changes. I believe in the 20% solution. If 20% of the people would start working at trying to improve their own well-being at those levels, then everything changes.
Daily Bell: Is there an American empire?
Gerald Celente: There used to be. Now it looks like the other faded empires – fighting in foreign conflicts as you’re depleting your treasury. For example, they will laugh at Ron Paul, they will laugh him off the stage, when he said he doesn’t want to give foreign aide to other countries. He said how could you give foreign aide to other countries when we are bankrupt here? It makes perfect sense. But they’ll laugh at him. And you know who the media is? Remember the people who used to be in the high school newspaper and college newspaper? Just follow their career paths. It’s high school and college and they haven’t graduated yet.
The sickness of it all is that they are telling everybody else what to do. And the other solution that I keep coming up with – and the Daily Bell misinterpreted what I said about it – is direct democracy. They keep going back to ‘This is what Gaddafi wrote about’ – no, it’s not! This is not what Gaddafi was talking about when he wrote about direct democracy. Direct democracy is what they are doing in Switzerland. Let the people vote. I don’t need some guy like Obama hitting the stage and saying that we are going to attack Libya – and then getting on a jet plane with his wife, his kids and his mother-in-law and having a vacation in Rio. Let me vote on it. You want the war on drugs to go on? Good. I don’t. Let’s vote on it.
And then I hear, OH – WE COULD HAVE MOB RULE! The 51%! Mob rule – tyranny. Well ,guess what you’ve got now? You’ve got the mob ruling. Take all the Republicans and the Democrats, all 535 of them, telling 312 million people how to tie their shoes. You want to talk about mob rule?
So direct democracy is the only way out at this point in our evolution. We either evolve or we dissolve. Right now we are in dissolve mode. Look at New Year’s Eve – whoop-de-doo. Bloomberg with an American flag shirt on and Lady Gaga. Oh, wonderful.
Daily Bell: How would you fix the American financial system?
Gerald Celente: Same thing I recommend to everyone. It comes back to what I said before. It starts with the individual. Buy local. First you have to improve yourself on an individual basis and then on a national level. It begins with the local level. Bring production back home – repatriate, repatriate, repatriate. It’s one of our top trends for 2012. Bring production back home. You want Chinese and Indonesian or Vietnamese to make you stuff so that multi-nationals can ship it back to you and you can buy it at a low price and low quality and with that low quality and low price comes everyday paying low quality jobs? Keep doing that or go back to the model when you were making more money and you could really live a comfortable middle class life when you were making products at home, when quality, not bottom line, counted, when style mattered.
So that’s the way to do it. You start at the local level. I buy at the local butcher. I do everything I can. You do that at every level. You build at the domestic level. It comes back again to the individual. There is a website, Google “derelict Detroit” or “disintegrating Detroit” and you will see these pictures of Detroit, in it’s heyday and when it was being built. When you look at the architecture, look at the quality. And now what do you have? Big box stores, ugly buildings. I mean, going into one of these big box stores has all the elegance of walking into a self-storage unit to go do your shopping. Elegance and grace, quality and style. Alle romana et alla antica, they said during the Renaissance, in the manner of the Romans and the ancients, to describe the quality of their work. I don’t need some jerk telling me that only the bottom line counts. I am not a bottom-line feeder. If you shoot for the bottom line that’s where you end up – the bottom of the barrel. You’ve got money junkies out there – all they care about is money and the bottom line. Look how they have brought down not only the country but also the world.
Daily Bell: Are there some who are promoting a New World Order? What are your thoughts?
Gerald Celente: It’s not a new world order; it’s the bankers order. As I said, the new world order is nothing more than the moneychangers. And they are just throwing other labels on it – it’s the moneychangers, capisce? It’s about money – it’s always about money. Hey, Obama, where are you now that the Sudan is going to pieces? There’s not enough oil over there? Not enough sweet crude?
Daily Bell: What about the Federal Reserve? Should it be audited?
Gerald Celente: It needs to be dismantled. It was the major issue of this country since it’s founding up until 1913. You keep the moneychangers from running the country. That’s all they are. You know how they change names, they go from moneychangers to bankers – excuse me, I missed a step in there – moneychangers to loan sharks to bankers. They’re moneychangers and loan sharks. Get rid of them.
Daily Bell: What is your position on fiat currency?
Gerald Celente: If you are going to put paper out there back it up with something, but certainly more than your BS.
Daily Bell: Would unrestricted fiat currency managed by the state be better than what we have now?
Gerald Celente: No. I think we should have gold as part of any currency. Even Zoellick from the World Bank said gold should be part of any currency. The thing is to slow down. There’s no such thing as continued growth. Only money junkies and sick people think of continued growth. It’s winter; do the crops grow in the winter? You need a time for retraction, slowing down, reorganization. It’s running out of control and they keep feeding it with these steroids. I don’t disagree with what he’s saying. If that’s what he believes, that’s fine. I don’t know enough about his stance to say one thing or another about it – I want to make that really clear.
For me, and only speaking for myself, I think gold should be part of any currency. Gold has been around since hieroglyphics and it’s intrinsic; there’s something higher than the monetary system where gold fits in. When the three wise men came, they came with gold, frankincense and myrrh; they didn’t come with pork bellies and greenbacks. There’s something more about it, and that’s why it’s still around. If it was good enough for Christ it should be good enough for us.
Daily Bell: Where do you stand on Austrian economics?
Gerald Celente: Again, it’s one of those concepts where nothing is everything and some of it’s great. It’s the same as religion. There are pieces of it that you take and other pieces of it that you don’t. I am not a libertarian, by the way. I want regulations. You need regulations because there would be no minimum wage. People would be paid nothing. The banks would be robbing us even more than they are. So I’m in favor of some but it’s not black and white.
Daily Bell: Is some sort of lawless cabal running the US? In other words, do laws apply to some and not others?
Gerald Celente: The word justice is being misspelled. It’s J-U-S-T – U-S. The white-shoe boys, as I call them, there’s no justice for them. Like this guy, Corzine. ‘I can’t find 1.2 billion dollars’? Who can get away with that crap? You see him at these hearings with the other flunkies asking him questions. Did you see the plaque in front of his name? “The Honorable Jon Corzine.” Honorable, my ass!
Daily Bell: We were going to ask what you thought of Jon Corzine of Goldman Sachs. Tell us what happened with the MF Global bankruptcy. How are your finances?
Gerald Celente: It’s emblematic of what’s going on. All I was doing – and you have all these trolls out there writing this stupid crap… I buy gold in many different forms. One of the ways is – I believe the price is going up so in April I took contracts to take delivery in gold. So I bought gold at $1443.00 an ounce in April, to take delivery in December, and kept putting money into my account and building my account to take delivery. That’s all I was doing. They went in and raided my account. It’s criminal activity if anyone else does it. When are people going to grow up? They become slaves to their corporate and political masters. So again, going back to what you said about courage, to me it’s about dying in dignity. That’s all you have.
Daily Bell: How about the CFTC? Are they doing their job of protection and prosecution?
Gerald Celente: Well who’s the head of the CFTC, Gary Gensler? He was one of the lieutenants for Jon ‘the Don’ Corzine when Corzine was head of the Goldman Sachs gang, before he became senator of New Jersey. You get it?
Who’s Obama’s Chief of Staff? Bill Daley, from that wonderful Daley machine in Chicago. Where did he come from? Oh, vice chairman of Morgan Chase. Who was Bush’s treasury secretary? Oh, Henry ‘Frankenstein’ Paulson. Where was he from? He began as the CEO of Goldman Sachs after Jon ‘the Don’ Corzine left. This is the guy who created TAARP and came up with the BS line of ‘too big to fail.’ Him? Yeah, that’s right.
And who’s the guy under Clinton that was treasury aecretary who put into process the deregulation of the financial industry and the ultimate killing of the Glass-Steagall Act, which prevented commercial banks becoming investment banks? Investment banks! What a bunch of baloney that is. Casinos that gamble, and we have to pay them now when they make bad bets. That couldn’t be Robert Rubin, could it, the former co-chair of Goldman Sachs? And who’s the guy now that they just put on the head of the European Central Bank, Mario Draghi? Where was he from? Didn’t he run the European division of Goldman Sachs? And wait a minute now … what’s this guy in Italy now, Mario ‘Three-card Monte’? Wasn’t he an international advisor for Goldman Sachs?
The moneychangers are taking over the temple; you don’t have to go very far to look. It’s right there in front of everybody’s eyes and no one will call a spade a spade. The Rothschilds would be jealous to see what the Goldman Sachs gang, the JP Morgan Chase criminal operation, the Citigroup crooks, the Deutsche Bank bandits and the rest have pulled off.
Daily Bell: We believe that the Internet has spawned a kind of “Internet Reformation” and have been preaching this paradigm for about a decade. Where do you stand on this?
Gerald Celente: Oh, I believe it is, sure. But then again, we are writing about this in our top trends for 2012, about how we are about to lose that freedom as the fascist states keep taking over and using fear and hysteria to control us.
Daily Bell: Any final thoughts? Can you give us a few more predictions for 2012?
Gerald Celente: I believe that we have to watch out for something along the lines of an economic martial law. The European system is in collapse. The financial system in the United States is just as tenuous, if not more, and I believe they will not admit there will be a financial crash but rather they will use a geo-political issue to get the people in a state of fear and hysteria whereby they’ll then call a bank holiday or devaluation of the currency, or a hyperinflation of the currency, and blame it on somebody else. Right now the prime scapegoat seems to be Iran.
The United States and the European Union have declared war on Iran. Let’s call it what it is. They are making it impossible for Iran to sell oil. It’s a form of warfare. Just as history has been re-engineered as with WWII, when you look back, it’s a reverse situation of what the Americans did to the Japanese by cutting them off from oil. Now they are cutting the Iranians off from selling oil. Oil accounts for more than half of their GDP. They’re the third largest oil supplier in the world. And US senators in Washington voted a hundred to zero to impose sanctions on Iran in the Senate. So I believe that Iran is going to be the flashpoint war that’s going to be used as the cause to call martial law – economic martial law. And now, of course, that Obama has signed it into law on December 31 – Happy New Year, everyone – the National Defense Authorization Act will have the military in place to take care of any belligerent out there!
Daily Bell: Thanks for your courageous work and for speaking out. It’s been a pleasure.
Gerald Celente: All the best. Here’s hoping the new year that will bring enlightenment in a civilization that is far greater than the one we have now.

If The U.S. Government Keeps Spending Money Like This We Are Doomed And If The U.S. Government Stops Spending Money Like This We Are Doomed

2012-01-23T23:23:00.000-05:00

If you increased your credit card spending by a couple thousand dollars per month would your lifestyle improve? Of course it would. By going into large amounts of debt, it is possible to live a lifestyle that you can't really afford, at least for a while. But if you keep racking up huge amounts of credit card debt every single month, eventually it gets to a point where it is extremely difficult to even keep up with the minimum monthly payments and the credit card companies will not lend you any more money. Well, on a larger scale it is the same thing with government debt. Right now, the U.S. government is spending more than a trillion dollars more than it takes in every year. Even if the U.S. government spends all of that money on incredibly stupid stuff, it still gets into the pockets of ordinary Americans. In turn, those ordinary Americans use that money to pay the mortgage, buy food, shop at the mall, etc. All of this borrowing and spending by the U.S. government has created a "false prosperity" bubble that is not real. It may feel real to you right now, but it is unsustainable by definition. If the U.S. government suddenly started spending only the money that it actually brought in every year, our economy would be doomed and all of this "false prosperity" would rapidly disappear. But if the U.S. government continues to rack up debt at this pace we are doomed as well. In fact, every dollar that gets borrowed makes our eventual collapse ever worse. We are heading down the exact same road that Greece has gone. Eventually the rest of the world is not going to lend us gigantic mountains of super cheap money anymore. When the flow of cheap money stops, it can be extremely painful. Anyone that has ever seen the interest rates on their credit cards go above 20 percent knows how this feels. If we had addressed these problems as a nation a decade or two ago, perhaps we could have found a solution. But now there is no way out under our current financial system and a devastating economic collapse is on the horizon no matter what we do.

If there was a Hollywood movie where some crooks successfully stole 150 million dollars, what would you think of those crooks?

Would you have admiration for them?
Would you be disgusted with them?
Would you feel like your intelligence was insulted because nobody could ever steal 150 million dollars and get away with it?
Well, right now the federal government is stealing approximately 150 million dollars from our children and our grandchildren every single hour.
That's right - the U.S. government is borrowing an astounding 150 million dollars an hour that our children and our grandchildren will be expected to deal with.
It is a theft so vast that it is almost unimaginable.
So what should be done?
A lot of people out there think that our problems would be solved if the government would just quit borrowing so much money.
Well, it is just not that simple.
Look at Greece. They were forced by the EU and the IMF to dramatically reduce government spending. But when Greece reduced government spending, that caused the economy to shrink rapidly and it caused tax receipts to go down more than expected. So Greek budget deficits were even larger than anticipated and so Greece was forced to cut spending even more. But that created even more economic problems.
A recent article by John Mauldin described the nightmarish effect that this cycle has had on Greece....

And as Greece began shake and bake its way to "austerity," the very act of cutting deficits pushed the country into recession, which lowered tax revenues and increased expenses, putting the elusive goal of a balanced budget even further off. We should quickly note that this is not just a Greek problem. Spain's "draconian" cuts have meant that its 6% deficit target for the year has this week been raised to a more likely 8%, making it harder to get back to even.
For country after country, this is the Endgame. It is the end of the Debt Supercycle. Debt has grown to the size that it cannot be sustained. The market will not lend any more money on terms that can be afforded, and any efforts to cut spending and raise taxes will result in an even worse economy, in various degrees of recession, with falling revenues and rising costs.

This is what happens when a country that has been spending far beyond its means is forced to dramatically cut back.
Those that are convinced that balancing the federal budget in the United States will be relatively painless should take a close look at what is happening in Greece.
As I have written about previously, the Greek economy has been plunged into a 21st century "Great Depression". In Greece, 20 percent of all retail stores have already shut down, the unemployment rate for those under the age of 24 is sitting at 39 percent, and one third of the entire nation is living in poverty.
And this is only just the beginning for Greece.
Things are going to get even worse.
Unfortunately, many believe that the United States is destined to experience far worse pain than Greece is currently experiencing.
For example, Peter Schiff insists that the United States is in worse financial shape than Europe at this point. Just check out this video....

Anyone that attempts to downplay the U.S. debt problem is making a serious mistake. Yes, we are still able to borrow trillions of dollars for next to nothing, but that is going to come to an end.
Remember all of those "suckers" that signed up for mortgages at "teaser rates" that later got jacked up dramatically?
Of course you do.
So what happened to them?
When the rates went up many of them ended up losing everything.
Well, we have gotten ourselves into the exact same kind of a position. All of this cheap money has enabled us to live very nicely for now, but when the cheap money ends the nightmare will begin.
Right now, our debt is growing much, much faster than our economy is. Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.
What would your household finances look like if your total debt grew by 61 percent next year but your income only grew by 4 percent?
When I was a little boy, the U.S. national debt was considered to be a huge national crisis. Politicians from both major political parties were promising that they would fix things.
But what has happened since then?
Well, when Ronald Reagan took office the U.S. national debt was less than 1 trillion dollars. Today, the U.S. national debt is over 15.2 trillion dollars.
During 2011, the federal government went into more debt than the U.S. government accumulated from the time that George Washington became president to the time that Ronald Reagan became president.
That may be hard to believe, but it is true.
During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.
That is utter insanity, and yet most Americans have become convinced that this is "normal" and that there is nothing to worry about.
It is hard to grasp how much money a trillion dollars is.
If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
That is how much money a trillion dollars is.
And things look even worse when you look at the balance sheet of the U.S. government.
The U.S. government has total assets of 2.7 trillion dollars and has total liabilities of 17.5 trillion dollars. Those liabilities do not even count 4.7 trillion dollars of intragovernmental debt that is currently outstanding.
But it is not just the federal government that has been living a fantasy.
The chart posted below shows the growth of total debt in America over the past several decades. Consumers, businesses and government officials have been on a debt binge that is absolutely unprecedented....

The scary thing is that even with all of this borrowed money, our economy is still in the dumps.
So what in the world is it going to look like when the debt bubble totally bursts?
Even with all of this "borrowed prosperity", anger at the government is rapidly growing. A recent Gallup poll found that "satisfaction with government" in the United States is now at an all-time record low of 29 percent.
So how angry will the American people be when all of this "borrowed prosperity" disappears?
When this whole thing comes tumbling down, a lot of people are going to blame our problems on "capitalism".
In fact, it is already happening. Just check out what the founder of the World Economic Forum is saying....

"We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations," said Klaus Schwab, host and founder of the annual World Economic Forum.
"Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.
"We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual," the 73-year-old said, adding that "capitalism in its current form, has no place in the world around us."

But capitalism is not the problem. Capitalism has produced the greatest eras of prosperity that the world has ever seen.
No, the real problem is our debt-based financial system that is managed and run by the central banks of the world.
You see, debt-based central banking is not capitalism. But way too many people equate the two.
A lot of people cannot even imagine this, but theoretically you could have capitalism without any debt whatsoever.
But what we have today is a financial system that has debt as the very foundation. And such a system is inevitably going to fail someday.
As I have written about so many times before, the Federal Reserve is at the very heart of our economic problems here in the United States.
The Federal Reserve was designed to be a perpetual debt machine. And it has performed that task very well. The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created.
So yes, even though things seem somewhat "stable" for the moment, there are all kinds of reasons to be concerned about the viability of our economy and our financial system in the years ahead.
The other day, I was quoted in a Reuters article about our coming economic problems....

"Most people have a gut feeling that something has gone terribly wrong, but that doesn't mean that they understand what is happening," he said. "A lot of Americans sense that a massive economic storm is coming and they want to be prepared for it."

Of course the Reuters reporter did not even bother to spell my name correctly, but at least he got the quote right.
A great economic storm is coming.
Don't let this false prosperity and this "calm before the storm" fool you.
We are living in the greatest debt bubble the world has ever seen, and no matter how it plays out there is going to be a massive amount of pain.
You might want to get yourself and your family prepared for that.

Ron Paul Tops Twitter as Most Talked About Candidate

2012-01-23T23:21:00.000-05:00

According to the Washington Post’s @mentionmachine, Ron Paul was the most talked about candidate “on the most tumultuous day” of the South Carolina campaign.
The graph below confirms that the establishment media is pushing Newt Gingrich and Mitt Romney while ignoring Ron Paul.

Interestingly, the corporate media paid more attention to Barack Obama during the South Carolina primary than his presumptive Republican opponents.
The http://www.washingtonpost.com/blogs/election-2012/post/atmentionmachine-tracks-the-2012-candidates-whos-up-whos-down-on-twitter/2011/12/20/gIQAHC9s7O_blog.html as an “app that monitors Twitter and media across the Web for political candidate mentions, revealing trends and spikes that show where the conversation is and why. It launched Jan. 3, the day of the Iowa caucuses, and will run through the presidential election in November.”
The Republican establishment and corporate media have tried to ignore Paul since the campaign began. Chris Wallace of Fox News said the results in Iowa would not count if Paul won. Iowa governor Terry Branstad said in December that if Paul won the caucus in his state Republicans should ignore the victory.
Republican establishment media figures – most notably Rush Limbaugh, Michael Savage and Mark Levine – have viciously attacked Paul.
Earlier this month, CNN correspondent Dana Bash said she was “worried” about Ron Paul’s success in New Hampshire. Paul’s campaign cut off an interview with her after she tried to blame Paul for a media swarm in a New Hampshire restaurant that forced Paul to cut short a meet and greet, a situation that was created by the media.
The Post’s app adds more weight to the argument that the establishment media is purposely undermining the Paul campaign by either ignoring the candidate or negatively covering him.
In addition to the obvious establishment media campaign to defeat Paul, there is evidence that the voting process is being manipulated in order to defeat him.
As Eric Blair noted yesterday, there is something odd about GOP primary voting and polling. He finds it highly suspicious that Newt Gingrich won the South Carolina primary after canceling an event the day before due to lack of attendance. Ron Paul held an event in Charleston on the same day that was attended by over a thousand people.
“Primary elections are traditionally driven by enthusiasm. In other words, the average voter does not turn out for primaries unless they are motivated by a certain candidate. So, could someone please explain to me how Newt Gingrich, who has virtually no ground game, no money, and no fervent supporters, just won the South Carolina primary?” Blair writes. “Could the conspiracy to keep Ron Paul out of the Oval Office be this coordinated, this pervasive?”

Inventions Suppressed by the EPA

2012-01-23T23:18:00.000-05:00

There is a great deception taking place in this country. A deception that has deprived Americans of its most valued resource: the innovations of its people.

As far back as the founding fathers, inventors have driven the economy. Electricity, the computer, the automobile, all represent the greatness of our problem-solving skills. But when it comes to the gasoline engine, the only innovations for fuel efficiency that work actually do little or nothing to reduce our fuel consumption.
Or so we would be led to believe.

Why is it, with millions upon millions of mechanics that not one single device or modification has been found to reduce the burden of fossil fuels? Why is it that for all the rumors of tremendous gains-some in excess of 100 MPG's-that not one device has made it to the market? Why is it no more than 5% gains (or so) can be proven by any device ever invented for this machine upon which our society depends so heavily?

The solution to this quandary lies (as so many others) within the halls of our government, made visible when you take a little look at history.

Back in 1970, in the wake of the dawning of the "Age of Aquarius", as the people of this nation became aware of the poisoning of the planet and began to care about things like acid rain, the US Government founded the Environmental Protection Agency.

The purpose of this agency is explained in its name, and it has accomplished many good and wonderful things. Things like environmental clean-up of hazardous waste, monitoring and cleaning up industrial pollution and tremendous fines for violators (which are rarely collected, except from the little guys).

In the 1970's with the first ever "Energy Crisis", our fuel prices began to be an issue. Fuel-efficiency devices began popping up in almost every city, many of which (sadly) either did not work, or worse, caused harm to engines. This became an issue to consumers, and they cried for protection from their leaders and the EPA was assigned the task of validating the claims these inventors made.

In response to the outraged citizens' cry for help, our government, in conjunction with the newly formed EPA, established acceptable testing methodologies and dubbed them the "Federal Testing Protocols" or FTP. These tests put a vehicle through a series of driving conditions during which the exhaust was monitored and measured, and the claims either validated or invalidated.
Both the consumer and the successful inventor now had their champion. Someone they could trust to both protect the unwary and to defend the righteous. Inventors with discoveries to share with others turned to them, all to be turned away as abject failures.
In its entire history, the EPA has not found one single innovation to be effective at increasing fuel efficiency. After thousands (or tens of thousands) of inventions being tested by their protocols, not one has received their vote of approval.
Thousands of inventions proved false? Doesn't this strike you as odd?
As you read on, remember the phrase "your mileage may vary". This was the disclaimer put on every vehicle sold in the USA, which these tests validated. The reason is they have known since day one their tests were not conclusive, and this was their way out.
Here's how the testing procedures work.
A vehicle is presented to the testing facility, and subjected to a battery of tests where the vehicle is run under simulated operating conditions in a controlled environment. Samples (this fact is curiously not mentioned in their description) of the exhaust are taken throughout the entire course which are then tested for carbon content. Applying certain algorithms, and considering the displacement of the engine, the fuel consumption is determined.
Ask yourself one question. If you don't measure the fuel consumption, how can you get a mileage count?
You can't.
Look at it like this. Take a bottle of water and remove an eye dropper full and have it analyzed. The results will show H2O and whatever trace minerals are present. Drink almost all the water and repeat the process. The tests will be identical, with the addition of a little of your saliva, because the percentages of the constituents are the same. Yet only a fraction of the water remains.
According to the EPA, both bottles hold the same amount of water.
With cars, the computer determines the percentages in the exhaust using what is known as an Oxygen Sensor. This device senses the oxygen present in the exhaust and sends a signal to the computer. The computer takes that signal and translates that into the Air-Fuel Ratio. Then, as the engine runs, it continues to adjust the AFR to keep it at the level for which it was programmed.
So, no matter how much fuel your system consumed, the computer, doing what it does, will always keep the ratio (the percentage values) within a certain range.
Let me repeat that. "The computer will always keep the percentage values of the exhaust within a certain range." So, these tests can never show a mileage gain, as all they measure are percentages!
So long as the computer modulates the fuel delivery, they can not show any gains in these tests with ANY device that works on engine efficiency. Ever. Period. End of discussion.
When I approached the EPA regarding the inadequacies of their testing protocols I discovered in validating The Gadgetman Groove, they referred me to a new program, called the Environmental Technology Verification Program (or the ETV) who "verifies the performance of innovative technologies that have the potential to improve protection of human health and the environment."
The problem is they refused to alter these protocols by adding the additional parameters of measuring the fuel consumed during the tests, or the quantity of the exhaust. Either of these would solve the issue, but they refused, stating this "does not fit accepted EPA testing protocols" and would thereby "render any results so obtained invalid."
After more than three months of communications with this division, they finally stopped answering my calls and my e-mails.
Why? I mean, if their mission statement says the ETV "develops test protocols" why won't they add these parameters? Is there something wrong with measuring the fuel? How would this invalidate the results?
It can't.
The bottom line here is many thousands of people, myself included, have fallen prey to this falsehood. An unknown number of solutions have been created to solve our world's problems, and the respected authorities, through application of faulty and inadequate testing methods, shove them (and their solutions) into obscurity.
If they were to agree to adding to the protocols, it would prove conclusively the fraud that has been perpetrated on every fuel-efficiency developer since the mid-70's that has submitted their devices for validation.
And that, they will not do,
It is tme for us to make up our own minds, and to not only question authority, but to challenge it.

Why Washington Wants 'Finito' With Putin

2012-01-23T23:14:00.002-05:00

Washington clearly wants 'finito' with Russia's Putin as in basta! or as they said in Egypt last spring, Kefaya--enough!. Hillary Clinton and friends have apparently decided Russia's prospective next president, Vladimir Putin, is a major obstacle to their plans. Few however understand why. Russia today, in tandem with China and to a significant degree Iran, form the spine, however shaky, of the only effective global axis of resistance to a world dominated by one sole superpower.

On December 8 several days after election results for Russia's parliamentary elections were announced, showing a sharp drop in popularity for Prime Minister Putin's United Russia party, Putin accused the United States and specifically Secretary of State Hillary Clinton of fuelling the Russian opposition protesters and their election protests. Putin stated, "The (US) Secretary of State was quick to evaluate the elections, saying that they are unfair and unjust even before she received materials from the Office of Democratic Institutions and Human Rights (the OSCE international election monitors-w.e.) observers."

Putin went on to claim that Clinton's premature comments were the necessary signal to the waiting opposition groups that the US Government would back their protests. Clinton's comments, the seasoned Russian intelligence pro stated, became a "signal for our activists who began active work with the US Department of State."

Major western media chose either to downplay the Putin statement or to focus almost entirely on the claims of an emerging Russian opposition movement. A little research shows that, if anything, Putin was downplaying the degree of brazen US Government interference into the political processes of his country. In this case the country is not Tunisia or Yemen or even Egypt. It is the world's second nuclear superpower, even if it might still be an economic lesser power. Hillary is playing with thermonuclear fire.

Democracy or something else?

No mistake, Putin is not a world champion practitioner of what most consider democracy. His announcement some months back that he and current President Medvedev had agreed to switch jobs after Russia's March 4 Presidential vote struck even many Russians as crass power politics and backroom deal-making. That being said, what Washington is doing to interfere with that regime change is more than brazen and interventionist. The same Obama Administration which just signed into law measures effectively ripping to shreds the Bill of Rights of the US Constitution for American citizens is posing as world supreme judge of others' adherence to what they define as democracy.

Let's examine closely Putin's charge of US interference in the election process. If we look, we find openly stated in their August 2011 Annual Report that a Washington-based NGO with the innocuous name, National Endowment for Democracy (NED), is all over the place inside Russia.

The NED is financing an International Press Center in Moscow where some 80 international NGOs can hold press briefings on whatever they choose. They fund numerous "youth advocacy" and leadership workshops to "help youth engage in political activism." In fact, officially they spent more than $2,783,000 in 2010 on dozens of such programs across Russia. Spending for 2011 won't be published until later in 2012.

The NED is also financing key parts of the Russian "independent" polling and election monitoring, a crucial part of being able to claim election fraud. They finance in part the Regional Civic Organization in Defense of Democratic Rights and Liberties "GOLOS." According to the NED Annual Report the funds went "to carry out a detailed analysis of the autumn 2010 and spring 2011 election cycles in Russia, which will include press monitoring, monitoring of political agitation, activity of electoral commissions, and other aspects of the application of electoral legislation in the long-term run-up to the elections."

In September, 2011, a few weeks before the December elections the NED financed a Washington invitation-only conference featuring the Russian "independent" polling organization, the Levada Center. According to NED's own website Levada, another recipient of NED money, had done a series of opinion polls, a standard method used in the West to analyze the feelings of citizens. The polls profiled "the mood of the electorate in the run up to the Duma and presidential elections, perceptions of candidates and parties, and voter confidence in the system of 'managed democracy' that has been established over the last decade."

One of the featured speakers at that Washington conference was Vladimir Kara-Murza, member of the federal council of Solidarnost ("Solidarity"), Russia's democratic opposition movement. He is also "advisor to Duma opposition leader Boris Nemtsov" according to NED. Another speaker came from the right-wing neo-conservative Hudson Institute.

Nemtsov, one of the most prominent of the Putin opposition today is also co-chairman of Solidarnost, a name curiously enough imitated from the Cold War days when the CIA financed the Polish Solidarnosc workers' opposition of Lech Walesa. More on Nemtsov later.

And on December 15, 2011, again in Washington, just as the series of US-supported protests were being launched against Putin, led by Solidarnost and other organizations, the NED held another conference titled, Youth Activism in Russia: Can a New Generation Make a Difference? The featured speaker was Tamirlan Kurbanov, who according to the NED, "most recently served as a program officer at the Moscow office of the National Democratic Institute for International Affairs, where he was involved in developing and expanding the capacities of political and civic organizations; promoting citizen participation in public life, youth engagement in particular." The National Democratic Institute is an arm of the NED.

The shady history of NED

Helping youth engage in political activism is precisely what the same NED did in Egypt over the past several years in the lead up to the toppling of Mubarak. The same NED was instrumental by informed accounts in the US-backed "Color Revolutions" in 2003-2004 in Ukraine and Georgia that brought US-backed pro-NATO surrogates to power. The same NED has been active in promoting "human rights" in Myanmar, in Tibet, and China's oil-rich Xinjiang province.

As careful analysts of the 2004 Ukraine "Orange revolution" and the numerous other US-financed color revolutions discovered, control of polling and ability to dominate international media perceptions, especially major TV such as CNN or BBC is an essential component of the Washington destabilization agenda. The Levada Center would likely be in a crucial position in this regard to issue polls showing discontent with the regime.

By their description, the National Endowment for Democracy (NED) is a "private, nonprofit foundation dedicated to the growth and strengthening of democratic institutions around the world. Each year, with funding from the US Congress, NED supports more than 1,000 projects of non-governmental groups abroad who are working for democratic goals in more than 90 countries."

It couldn't sound more noble or high-minded. However, they prefer to leave out their own true history. In the early 1980's CIA director Bill Casey convinced President Ronald Reagan to create a plausibly private NGO, the NED, to advance Washington's global agenda via other means than direct CIA action. It was a part of the process of "privatizing" US intelligence to make their work more "effective." Allen Weinstein, who helped draft the legislation establishing NED, said in a Washington Post interview in 1991, "A lot of what we do today was done covertly 25 years ago by the CIA." Interesting. The majority of funds for NED come from US taxpayers through Congress. It is in every way, shape and form a US Government intelligence community asset.

The NED was created during the Reagan Administration to function as a de facto CIA, privatized so as to allow it more freedom of action. NED board members are typically drawn from the Pentagon and US intelligence community. It has included retired NATO General Wesley Clark, the man who led the US bombing of Serbia in 1999. Key figures linked to clandestine CIA actions who served on NED's board have included Otto Reich, John Negroponte, Henry Cisneros and Elliot Abrams. The Chairman of the NED Board of Directors in 2008 was Vin Weber, founder of the ultraconservative organization, Empower America, and campaign fundraiser for George W. Bush. Current NED chairman is John Bohn, former CEO of the controversial Moody's rating agency which played a nefarious role in the still-unraveling US mortgage securities collapse. As well today's NED board includes neo-conservative Bush-era ambassador to Iraq and to Afghanistan, Afghan-American Zalmay Khalilzad.

Putin's well-rehearsed opposition

It's also instructive to look at the leading opposition figures who seem to have stepped forward in Russia in recent days. The current opposition "poster boy" favorite of Russian youth and especially western media is Russian blogger Alexei Navalny whose blog is titled LiveJournal. Navalny has featured prominently as a quasi-martyr of the protest movement after spending 15 days in Putin's jail for partaking in a banned protest. At a large protest rally on Christmas Day December 25 in Moscow, Navalny, perhaps intoxicated by seeing too many romantic Sergei Eisenstein films of the 1917 Russian Revolution, told the crowd, "I see enough people here to take the Kremlin and the White House (Russia's Presidential home-w.e.) right now"

Western establishment media is infatuated with Navalny. England's BBC described Navalny as "arguably the only major opposition figure to emerge in Russia in the past five years," and US Time magazine called him "Russia's Erin Brockovich," a curious reference to the Hollywood film starring Julie Roberts as a trade union organizer. However, more relevant is the fact that Navalny went to the elite American East Coast Yale University, also home to the Bush family, where he was a "Yale World Fellow."

The charismatic Navalny however is also or has been on the payroll of Washington's regime-destabilizing National Endowment for Democracy (NED). According to a posting on Navalny's own blog, LiveJournal, he was financed in 2007-2008 by the NED. His Washington NED contact person was Frank Conatser. A facsimile of an email exchange between Navalny and Conatser fronm November 17, 2007 is partially reproduced here.

From: Frank Conatser [mailto:frankc@NED.ORG]

Sent: Saturday, November 17, 2007 12:12 AM

To: Navalny Alexey; Aleksey Navalny

Cc: John Squier; Marc Schleifer

Subject: NED Agreements No. 2006-576 & No. 2007-688

Frank Conatser

Grants Administrator for Eurasia

National Endowment for Democracy

1025 F St, NW, Suite 800

Washington, DC 20004

202-378-9660 (phone)

202-378-9860 (fax)

(excerpt from email exchange between Alexey Navalty and NED)

Along with Navalny, key actors in the anti-Putin protest movement are centered around Solidarnost which was created in December 2008 by Boris Nemtsov, Vladimir Ryzhkov and others. Nemtsov is hardly one to protest corruption. According to Business Week Russia of September 23, 2007, Nemtsov introduced Russian banker Boris Brevnov to Gretchen Wilson, a US citizen and an employee of the International Finance Corporation, a financing arm of the World Bank. Wilson and Brevnov married. With the help of Nemtsov Wilson managed to privatize Balakhna Pulp and Paper mill at the giveaway price of just $7 million. The enterprise was sucked dry and then sold to the Wall Street-Swiss investment bank, CS First Boston bank. The annual turnover of the mill was reportedly $250 million.

CS First Boston bank also paid for Nemtsov's trips to the very expensive Davos World Economic Forum. When Nemtsov became a member of the cabinet, his protégé Brevnov was appointed the chairman of the Unified Energy System of Russia JSC. Two years later in 2009 Boris Nemtsov, today's "Mr anti-corruption," used his influence reportedly to get Brevnov off the hook for charges of embezzling billions from assets of Unified Energy System.

Nemtsov also took money from jailed Russian oligarch Mikhail Khodorkovsky in 1999 when the latter was using his billions to try to buy the Russian parliament or Duma. In 2004 Nemtsov met with exiled billionaire oligarch Boris Berezovsky in a secret gathering with other exiled Russian tycoons. When Nemtsov was detailed by Russian authorities for allegations of foreign funding of his new political party, "For Russia without Lawlessness and Corruption," US Senators John McCain and Joe Liberman and Mike Hammer of the Obama National Security Council came to support of Nemtsov.

Nemtsov's close crony, Vladimir Ryzhkov of Solidarnost is also closely tied to the Swiss Davos circles, even founding a Siberian Davos. According to Russian press accounts from April 2005, Ryzhkov formed a Committee 2008 in 2003 to "draw" funds of the imprisoned Khodorkovsky along with soliciting funds from fugitive oligarchs such as Boris Berezovsky and western foundations such as the Soros Foundation. The stated aim of the effort was to rally "democratic" forces against Putin. On May 23, 2011 Ryzhkov, Nemtzov and several others filed to register a new Party of Peoples' Freedom to ostensibly field a presidential candidate against Putin in 2012.

Another prominent face in the recent anti-Putin rallies is former world chess champion turned right-wing politician, Garry Kasparov, another founder of Solidarnost. Kasparov was identified several years ago as being a board member of a Washington neo-conservative military think-tank. In April 2007, Kasparov admitted he was a board member of the National Security Advisory Council of Center for Security Policy, a "non-profit, non-partisan national security organization that specializes in identifying policies, actions, and resource needs that are vital to American security." Inside Russia Kasparov is more infamous for his earlier financial ties to Leonid Nevzlin, former Yukos vice-president and partner of Michael Khodorokvsky. Nevzlin fled to Israel on being charged in Russia on charges of murder and hiring contract killers to eliminate "objectionable people" while Yukos vice-president.

In 2009 Kasparov and Boris Nemtsov met with no less than Barack Obama to discuss Russia's opposition to Putin at the US President's personal invitation at Washington's Ritz Carlton Hotel. Nemtsov had called for Obama to meet with opposition forces in Russia: "If the White House agrees to Putin's suggestion to speak only with pro-Putin organizations this will mean that Putin has won, but not only that: Putin will become be assured that Obama is weak," he said. During the same 2009 US trip Nemtsov was invited to speak at the New York Council on Foreign Relations, perhaps the most influential US foreign policy think-tank. Significantly, not only has the US State Department and US-backed political NGOs such as NED poured millions into building an anti-Putin coalition inside Russia. The President personally has intervened into the process.

Ryzhkov, Nemtzov, Navalty and Putin's former Finance Minister Alexei Kudrin were all involved in organizing the December 25th Moscow Christmas anti-Putin rally which drew an estimated 120,000.

Why Putin?

The salient question is why Putin at this point? We need not look far for the answer. Washington and especially Barack Obama's Administration don't give a hoot about whether Russia is democratic or not. Their concern is the obstacle to Washington's plans for Full Spectrum Dominance of the planet that a Putin Presidency will represent. According to the Russian Constitution, the President of the Russian Federation head of state, supreme commander-in-chief and holder of the highest office in the Russian Federation. He will take direct control of defense and foreign policy.

We must ask what policy? Clearly strong countermeasures against the blatant NATO encirclement of Russia with Washington's dangerous ballistic missile installations around Russia will be high on Putin's agenda. Hillary Clinton's "reset" will be in the dustbin if it is not already. We can also expect a more aggressive use of Russia's energy card with pipeline diplomacy to deepen economic ties between European NATO members such as Germany, France and Italy, ultimately weakening the EU support for aggressive NATO measures against Russia. We can expect a deepening of Russia's turn towards Eurasia, especially with China, Iran and perhaps India to firm up the shaky spine of resistance to Washington's New World Order plans.

It will take more than a few demonstrations in sub-freezing weather in Moscow and St. Petersburg by a gaggle of corrupt or shady opposition figures such as Nemtsov or Kasparov to derail Russia. What is clear is that Washington is pushing on all fronts-Iran and Syria, where Russia has a vital naval port, on China, now on Russia, and on the Eurozone countries led by Germany. It has the smell of an end-game attempt by a declining superpower.

The United States today is a de facto bankrupt nuclear superpower. The reserve currency role of the dollar is being challenged as never since Bretton Woods in 1944. That role along with maintaining the United States as the world's unchallenged military power have been the basis of the American Century hegemony since 1945.

Weakening the role of the dollar in international trade and ultimately as reserve currency, China is now settling trade with Japan in bilateral currencies, side-stepping the dollar. Russia is implementing similar steps with her major trade partners. The primary reason Washington launched a full-scale currency war against the Euro in late 2009 was to preempt a growing threat that China and others would turn away from the dollar to the Euro as reserve currency. That is no small matter. In effect Washington finances its foreign wars in Iraq, Afghanistan, Syria, Libya and elsewhere through the fact that China and other trade surplus nations invest their surplus trade dollars in US government Treasury debt. Were that to shift significantly, US interest rates would rise substantially and the financial pressures on Washington would become immense.

Faced with growing erosion of her unchallenged global status as sole superpower, Washington appears now to be turning increasingly to raw military force to hold that. For that to succeed Russia must be neutralized along with China and Iran. This will be the prime agenda of whoever is next US President.

Not Everything is “Interstate Commerce”

2012-01-23T23:13:00.000-05:00

The United States federal government finds a seemingly endless array of ways to exercise authority it does not rightly possess. But perhaps the widest path to the destruction of state sovereignty winds its way through the Constitution’s commerce clause.

Since the infamous Wickard v. Fliburn case, the feds use the commerce clause to justify virtually unlimited intrusion into nearly every corner of American life. From regulating the nation’s entire health care system to waging a “war on drugs,” federal agents wield power over the states and the people via the commerce clause.

Rep. John Yarmuth reluctantly admitted the truth during a radio interview in August 2010. The show host asked the Kentucky Democrat: what can’t the federal government do if it can mandate Americans must purchase health insurance.

“It really doesn’t prohibit the government from doing virtually anything – the federal government. So I don’t know the answer to your question, because I am not sure there is anything under current interpretation of the commerce clause that the government couldn’t do,” Yarmuth replied.

Of course, the commerce clause was never intended to grant such sweeping power. It was meant to allow the feds to regulate trade across state lines with some ancillary power to regulate shipping and transportation. That’s it. It didn’t grant the federal government the power to regulate manufacturing or agriculture, and it certainly wasn’t meant to allow the feds to interfere with commerce engaged in strictly within a state’s own borders. James Madison alluded to the limits of the commerce regulating power.

“It is very certain that [the commerce clause] grew out of the abuse of the power by the importing States in taxing the non-importing, and was intended as a negative and preventive provision against injustice among the States themselves, rather than as a power to be used for the positive purposes of the General Government.”
Some states are beginning to fight back against federal intrusion into intrastate commerce. Legislatures in Iowa, Florida and New Hampshire will consider bills during the 2012 session that seek to reestablish the states’ control over commerce within their borders. And the Tenth Amendment Center expects a number of other states to follow suit this year.
House File 380 in Iowa reaffirms that the Constitution grants the federal government the power to regulate commerce among the several states, but the power to regulate intrastate commerce is reserved to the states or the people under the Ninth and Tenth Amendments. The bill goes on to declare:
All goods produced or manufactured, whether commercially or privately, within the boundaries of this state that are held, maintained, or retained within the boundaries of this state shall not be deemed to have traveled in interstate commerce and shall not be subject to federal law, federal regulation, or the authority of the Congress of the United States under its constitutional power to regulate commerce.
If the bill passes into law, any agent attempting to enforce federal law in violation of the act would be guilty of an aggravated misdemeanor and subject to appropriate penalties.
The Iowa bill, sponsored by Rep. Kim Pearson (R-Pleasant Hill), was initially filed in Feb. 2011 and will carry over into the 2012 session. Senate File 272, introduced at the same time by Sen. Kent Sorenson, serves as the companion bill.
A second Senate bill, Senate File 385, with 11 co-sponsors, proposes even stricter penalties. It would make it a class D felony to enforce any federal law interfering with intrastate commerce – that’s commerce within Iowa’s borders.
Rep. Matt Caldwell (R-Ft. Meyers) and Sen. Greg Evers (R-Crestview) sponsor the Florida version of the Intrastate Commerce Act. The bills’ language reads similar to Iowa’s, and the Florida act also makes it a felony for any agent to enforce federal law on intrastate commerce within Florida.
The New Hampshire General Court will consider HB1406. The bill, sponsored by Rep. Richard Ockerman (R-Rockingham) and Marc Tremblay (R – Berlin), declares, “all goods produced or manufactured, whether commercially or privately, within the boundaries of the state that are held, maintained, or retained within the boundaries of the state shall not be deemed to have traveled in interstate commerce and shall not be subject to federal law, federal regulation, or the authority of the Congress of the United States under its constitutional power to regulate commerce.”
The New Hampshire Intrastate Commerce Act does not stipulate penalties for agents attempting to enforce federal law on intrastate commerce.
But the New Hampshire General Court will take up stronger intrastate commerce legislation applying specifically to food grown in the state. HB1650-FN exempts any food grown or produced, and consumed in New Hampshire from federal regulation, providing that “any public servant of the state of New Hampshire as defined by RSA 640:2 that enforces or attempts to enforce a federal act, order, law, statute, rule, or regulation upon a foodstuff labeled ‘Made in New Hampshire,’ that is produced commercially or privately in New Hampshire, and that remains within the state of New Hampshire shall be guilty of a class B misdemeanor.”
Six legislators have signed on as sponsors of this bill.
And Utah will also consider an agriculture-centric version of the Act – Senate Bill 34 “prohibits federal regulation of an agricultural product that remains in Utah after it is made, grown, or produced in Utah, and addresses the designation of a Utah agricultural product.”
Putting a stop the federal government’s abuse of the commerce clause would fundamentally change the way the feds do business. Intrastate commerce acts establish a beachhead. The states must stand up and say, “No! We will no longer sit back and allow you to push us around!” It is our hope the legislatures in Florida, New Hampshire and Iowa will get these bills passed, and that other states will follow suit.

Single state defies Obama detention plan

2012-01-23T23:09:00.000-05:00

When Congress adopted and Barack Obama signed the National Defense Authorization Act of 2012, alarms were raised over the possibility that it would allow the indefinite and rights-free detention of those who are called “belligerents,” even if they are American citizens.
While the argument over those provisions rages, one state lawmaker in Rhode Island has jumped into action to protect the danger he sees for residents of his state, proposing a resolution to exempt his constituents from sections of the federal law.

Rep. Daniel P. Gordon Jr. today told WND he has drafted a resolution, which is being circulated among the lawmakers even now, to express opposition to the sections of the NDAA “that suspend habeas corpus and civil liberties.”
“Sections 1021 and 1022 of the act, signed into law on New Years Eve of 2011, provide for the indefinite detention of American citizens by the military on American soil, without charge, and without right to legal counsel and right to trial,” he explained.
The instruction manual on how to restore America to what it once was: “Taking America Back.” This package also includes the “Tea Party at Sea.”
“Given the fact that the constitutions of Rhode Island and that of the United States are replete with guarantees of individual liberties, right to habeas corpus, and right to freedom of speech, the offending sections of that law are repugnant to the sensibilities of anyone that has a basic understanding of the foundation of this country,” he said.
The opinions on the legislation signed by Obama vary. Commentator Chuck Baldwin, who himself has been the target of smears by the Department of Homeland Security-related apparatus, explained the law, “for all intents and purposes, completely nullifies a good portion of the Bill of Rights, turns the United States into a war zone, and places U.S. citizens under military rule.”
He noted that Mike Adams at NaturalNews.com was horrified, writing, “One of the most extraordinary documents in human history – the Bill of Rights – has come to an end under President Barack Obama. Derived from sacred principles of natural law, the Bill of Rights has come to a sudden and catastrophic end with the president’s signing of the National defense Authorization Act, a law that grants the U.S. military the ‘legal’ right to conduct secret kidnappings of U.S. citizens, followed by indefinite detention, interrogation, torture and even murder. This is all conducted completely outside the protection of law, with no jury, no trial, no legal representation and not even any requirement that the government produce evidence against the accused.
“When signing the NDAA into law, Obama issued a signing statement that
in essence said, ‘I have the power to detain Americans … but I
won’t,” Baldwin wrote.
Baldwin was vilified by an anti-terror campaign in Missouri several years ago when authorities there described suspicious characters as those who might have supported Baldwin or other third-party candidates during a presidential election.
Others pooh-poohed the concerns about the apprehension of Americans. Wayne Bowne, an academic at Southeast Missouri State University not far from where state officials had issued that warning about Baldwin, said, “The NDAA not only does not empower the U.S. military to detain American citizens indefinitely, it specifically prohibits this.
“The NDAA confirms as U.S. law the practice that foreign terrorists … will be held indefinitely by the U.S. military. Indeed, this is a far more generous policy than allowed under international law,” he wrote.
“While the ACLU and Ron Paul may whine about the loss of liberty by terrorists and complain about nonexistent threats to our freedoms within a law that specifically prohibits these threats, even the Obama administration agreed that the NDAA would not result in indefinite detentions of U.S. citizens or permanent residents,” he wrote.
Gordon knows there are those who don’t worry, but he’s not willing to jeopardize freedoms on the assumption something won’t happen.
He cites Charles C. Krulak and Joseph P. Hoar, both retired four-star Marine generals, who have concerns.
“Both of these distinguished gentlemen understand that the first obligation of military personnel is the oath to support and defend the Constitution of the United States. Violation of that oath, constitutional provisions and that of the Posse Comitatus Act of 1878 is a slippery slope to tyranny,” he said.

“When I took the oath of office, I swore that I would support the constitutions of Rhode Island and the United States. And before one single constituent of mine is snatched up in the dead of night, without due process under our laws, they’ll have to pry those documents from my cold dead hands,” he said.
He told WND the problem is made worse by the wording of the law. It’s unclear exactly what is a “belligerent” and who will make that determination? Is someone angry at the government over a ticket for an alleged traffic infraction a belligerent?
“This should be terrifying to Americans,” he said.

Obama sued over indefinite detention and torture of Americans act

2012-01-23T23:06:00.002-05:00

U.S. President Barack Obama at the White House in Washington January 13, 2012 (Reuters / Kevin Lamarque)

In the past, journalist Chris Hedges has worked for NPR, The New York Times and the Christian Science Monitor. In his latest endeavor, however, he is teaming up with an unlikely pair: a couple of attorneys that will help him take on the president.
US President Barack Obama is the target of a suit filed by Pulitzer Prize-winner Hedges, and the reasoning seems more than obvious to him. The decision to take the commander-in-chief to court comes as a response to President Obama’s December 31 signing of the National Defense Authorization Act, or NDAA, a legislation that allows the US military to detain American citizens indefinitely at off-site torture prisons like Guantanamo Bay.
Obama amended the NDAA with a signing statement on New Year's Eve, insisting that while the Act does indeed give him the power to detain his own citizens indefinitely without charge, that doesn’t mean he will do so. Specifically, Obama wrote that his administration “will not authorize the indefinite military detention without trial of American citizens.” Under another piece of legislation, however, the government is being granted the right to suspend citizenship of any American if the Enemy Expatriation Act joins the ranks of the NDAA as an atrocious act approved by the president.
“Once again, you just have to be accused of supporting hostilities which could be defined any way the government sees fit. Then the government can strip your citizenship and apply the indefinite detention section of the NDAA without the benefit of a trial,” journalist Stephen Foster Jr. wrote earlier this month of the Act.
In a blog post published on Monday to TruthDig.com, Hedges announces his effort to take Obama to court, and says his team of attorneys will challenge the president over the legality of the Authorization for Use of Military Force, a provision promised under the NDAA.
In his explanation, Hedges says the signing signals “a catastrophic blow to civil liberties.”
“I spent many years in countries where the military had the power to arrest and detain citizens without charge,” writes Hedges. “I have been in some of these jails. I have friends and colleagues who have ‘disappeared’ into military gulags. I know the consequences of granting sweeping and unrestricted policing power to the armed forces of any nation. And while my battle may be quixotic, it is one that has to be fought if we are to have any hope of pulling this country back from corporate fascism.”
Like other NDAA opponents, Hedges addresses in his explanation the issue that vague verbiage throughout the legislation creates an almost open-ended scenario for the government to grab anyone in America and put them behind bars. Instead, rather, the legislation leaves American authorities to go after anyone it can use the Act to attack.
As an international correspondent and world-renowned journalist, Hedges has traveled the globe and says he has been put in some hairy situations. Under the NDAA, he says, he might as well be considered a war criminal in the eyes of America.
Under NDAA, the military can enforce indefinite detention on anyone “who was a part of or substantially supported al-Qaeda, the Taliban or associated forces that are engaged in hostilities against the United States.” As Hedges and others point out, groups such as “associated forces” are never defined, nor are determinations like “substantially supported.”
“I have had dinner more times than I can count with people whom this country brands as terrorists,” writes Hedges. “But that does not make me one.” Regardless, any affiliation with a group branded as such could lead authorities to leap to such conclusions.
Everyone from presidential candidate Ron Paul to the American Civil Liberties Union have questioned Obama’s intentions in signing the NDAA, but Hedge’s lawsuit is the first legal filing lobbed at the president. Regardless of what the president intends by putting the NDAA into law, ACLU Executive Director Anthony Romero wrote, "Obama's action … is a blight on his legacy because he will forever be known as the president who signed indefinite detention without charge or trial into law.”
Hedges thinks he knows what those intentions are, however.
“I suspect the real purpose of this bill is to thwart internal, domestic movements that threaten the corporate state,” says Hedges. “The definition of a terrorist is already so amorphous under the Patriot Act that there are probably a few million Americans who qualify to be investigated if not locked up.” When that piece of legislation is coupled with NDAA, the end result could be catastrophic.
“I suspect it passed because the corporations, seeing the unrest in the streets, knowing that things are about to get much worse, worrying that the Occupy movement will expand, do not trust the police to protect them,” concludes Hedges. “They want to be able to call in the Army. And now they can.”

Arrows Up!!!

2012-01-23T23:03:00.002-05:00

What Is Regulatory Capture?

2012-01-23T22:41:00.000-05:00

A little financial/regulation/regulatory education for the SOC readers. Enjoy!

Government Math Hides True Unemployment

2012-01-23T01:37:00.000-05:00

According to economist John Williams of Shadow Government Statistics, the unemployment rate for the month of December 2011 was closer to 22.4 percent–not the 8.5 percent reported by the Bureau of Labor Statistics.

Obama’s 8.5% is far removed from reality.
To get closer to the real number, we must consult the (U6) figure that is often touted as ‘true unemployment’. This figure adds into the equation those who fall under the contemporary definition of ‘discouraged worker’ and those who can only find ‘part-time’ work.

Today’s definition of a discouraged worker is one who has not found work within the last year. Prior to 1994, a discouraged worker was defined as one who had not found work within the last month. That’s a big discrepancy. If we add those lost souls back into the equation, we come up with a more realistic unemployment rate of right around 22.4%. That’s less than three clicks shy of the 25% often cited for the worst levels of the Great Depression in 1933. That 25% unemployment figure was reflective of all workers both on and off the farm.

Many economists, intent on disproving any comparison of today’s unemployment with that of the ‘Great Depression’, will often cite the non-farm unemployment figure of 34%. But it should be pointed out that during that time, 27% of America’s employed worked on the farm. Today that number is only 2%.

Warning Signs That We Should Prepare For The Worst

2012-01-23T01:36:00.000-05:00

The warning signs are all around us. All we have to do is open up our eyes and look at them. Almost every single day there are more prominent voices in the financial world telling us that a massive economic crisis is coming and that we need to prepare for the worst. On Wednesday, it was the World Bank itself that issued a very chilling warning. In an absolutely startling report, the World Bank revised GDP growth estimates for 2012 downward very sharply, warned that Europe could be on the verge of a devastating financial crisis, and declared that the rest of the world better "prepare for the worst." You would expect to hear this kind of thing on The Economic Collapse Blog, but this is not the kind of language that you would normally expect to hear from the stuffed suits at the World Bank. Obviously things have gotten bad enough that nobody is even really trying to deny it anymore. Andrew Burns, the lead author of the report, said that if the sovereign debt crisis gets even worse we could be looking at an economic crisis that could be even worse than the last one: "An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09." Burns also stated that the "importance of contingency planning cannot be stressed enough." In other words, Burns is saying that it is time to prepare for the worst. So are you ready?

But of course it isn't just the World Bank that is warning about these things. The chorus of voices that is warning about the next great financial crisis just seems to grow by the day.

Some of these voices were profiled in a Bloomberg article the other day entitled "Apocalypse How? Dire ’12 Forecasts". The following is just a sampling of quotes from that article....
-John Mauldin, president of Millennium Wave Advisors: "We've got a cancer. That cancer is debt"
-Mark Spitznagel of Universa Investments: "Too much malinvestment has been kept alive, and history shows an inevitable wipeout, which started in 2000."
-Michael Panzner of Financial Armageddon: "The fundamental outlook is even worse now than it was a few weeks ago, given (the lack of positive) developments in Europe and growing evidence that the economies of major countries around the world are deteriorating fast."
If you have time, you should go check out the rest of that article. It really is fascinating.
When this crisis is over, all sorts of people are going to be running around claiming that they predicted it. But it does not take a genius to see what is coming. All you have to do is open up your eyes and look at the flashing red warning signs.
So what should we all be looking for next?
March 20th is a key date to keep your eye on. That is the day when Greece will either makes its 14.5 billion euro bond payment or it will default.
Greece does not have a prayer of making that payment without help. If Greece can convince the EU and the IMF to release the next scheduled bailout payment and if Greece can reach a satisfactory deal with private bondholders, then the coming Greek default might be "orderly". But if something goes wrong, the coming Greek default might be quite "disorderly".
At this point, almost everyone in the financial world is anticipating a Greek default of one form or another....
-Edward Parker, the managing director for Fitch's sovereign and supranational group in Europe, the Middle East and Africa, recently declared that a Greek default is inevitable....

"It is going to happen. Greece is insolvent so it will default."

-Moritz Kraemer, the head of S&P's European sovereign ratings unit, made the following statement on Bloomberg Television on Monday:

"Greece will default very shortly. Whether there will be a solution at the end of the current rocky negotiations I cannot say."

-Richard McGuire, a strategist at Dutch bank Rabobank, was recently quoted by CNBC as saying the following....

"People often ask if Greece is going to default which ... is a misnomer because Greece is (already) defaulting"

-Diane Swonk, the chief economist at Mesirow Financial in Chicago, says that the default by Greece will probably be an "orderly" one but that the situation could change at any moment....

"It appears at the moment that the market is accepting a Greek default as inevitable, and it will be an orderly default. But that can change on a dime."

But whether there is a default or not, the reality is that Greece is already experiencing a full-blown economic depression. In Greece, 20 percent of all retail stores have already shut down. The unemployment rate for those under the age of 24 is now at 39 percent. Large numbers of Greeks are trying to get themselves and their money out of the country while they still can.
Pessimism regarding Greece is at an all-time high. Michael Fuchs, the deputy leader of Angela Merkel's political party, recently made the following statement....

"I don't think that Greece, in its current condition, can be saved."

But of course Greece is not the only declining economy in Europe by a long shot.
Italy has a much larger economy, and if Italy totally collapses it will be an absolute nightmare for the entire globe.
Right now, the Bank of Italy is forecasting a significant recession for the Italian economy in 2012. The following is from a statement that Bank of Italy has just released....

"The uncertainty that surrounds the medium-term perspectives of the Italian economy ... are extraordinarily high and are directly linked to the evolution of the eurozone debt crisis"

Italy's youth unemployment rate has hit the highest level ever, and nearly all sectors of the Italian economy are showing signs of slowing down.
Plus there is the looming problem of Italian debt. As I wrote about yesterday, when you add the maturing debt that the Italian government must roll over in 2012 to their projected budget deficit, it comes to 23.1 percent of Italy's GDP.
Originally it was hoped that the economic problems in Europe could be contained to just a few countries. But now it has become clear that is just not going to happen.
Trends forecaster Gerald Celente recently explained to ABC Australia that much of Europe is already essentially experiencing an economic depression....

"If you live in Greece, you’re in a depression; if you live in Spain, you’re in a depression; if you live in Portugal or Ireland, you’re in a depression,” Celente said. “If you live in Lithuania, you’re running to the bank to get your money out of the bank as the bank runs go on. It’s a depression. Hungary, there’s a depression, and much of Eastern Europe, Romania, Bulgaria. And there are a lot of depressions going on [already]."

The troubling news out of Europe just seems to keep coming in waves. Here are some more recent examples....
-Manufacturing activity in the euro zone has fallen for five months in a row.
-Germany's economy actually contracted during the 4th quarter of 2011.
-It is being reported that the Spanish economy contracted during the 4th quarter of 2011.
-Bad loans in Spain recently hit a 17-year high and the unemployment rate is at a 15-year high.
So will all of this economic trouble eventually spread to the United States?
Of course it will.
The global economy is more interconnected today than ever. Back in 2008 the financial crisis that started on Wall Street ended up devastating economies all over the planet. The same thing will happen during this next great financial crisis.
Only this time the U.S. is in a much weaker position. The U.S. debt problem has gotten much worse since the last crisis.
During 2008, our national debt crossed the 10 trillion dollar mark. Less than 4 years later, we have crossed the 15 trillion dollar mark.
So what are we going to do the next time large numbers of banks fail and unemployment skyrockets?
Where are we going to get the money to bail out all of those banks and to take care of all of those newly unemployed people?
Some people say that socialism is the answer, but the truth is that we are already a socialist welfare state. If you can believe it, nearly half of all Americans live in a household that receives some form of financial benefits from the U.S. government.
During the next great crisis, the number of people that are dependent on the government will go even higher.
If you don't want to end up dependent on the government, you should heed the warning signs and you should use this time to prepare for the hard times that are coming.
When even the World Bank tells us to hope for the best but to prepare for the worst, you know that it is late in the game.
Unfortunately, the vast majority of people out there only believe what they want to believe. They don't want to believe that a great economic crisis is coming, and so when it does happen they are going to be absolutely blindsided by it.

The final countdown…

2012-01-23T01:32:00.000-05:00

“Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach.” Debt talks “have not produced a constructive response.”
- The Institute of International Finance, January 13, 2012
“The war situation has developed not necessarily to Japan’s advantage..”
- Japanese Emperor Hirohito after the atomic bombing of Hiroshima and Nagasaki, announcing Japan’s surrender to the Allies.
There is a terrible hubris at the heart of mankind. Like every other living thing on the planet we are products of nature, but we consider ourselves to be well above it. We are beset by regular reminders of our vulnerability, but quickly dismiss them off-handedly to a spiritual plane, calling them “acts of God” as if to show that we could never have prevented them.
In a significant essay for Foreign Affairs, “The Black Swan of Cairo,” Nassim Taleb shows how the efforts of our authorities to suppress volatility actually end up making the world less predictable and more dangerous.
“Although the stated intention of political leaders and economic policy makers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite. These artificially constrained systems become prone to “Black Swans” – that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.”
There is an analogy from the natural world. In the 1960s and 1970s, mid-western American states fell victim to scores of wildfires. Constant interventions by the US Forest Service appeared to have little positive impact – if anything, the problems seemed to worsen. Over time, foresters came to appreciate that fires were a normal and healthy element of the forest ecosystem.
By continually suppressing small fires, they were unwittingly creating the conditions for larger and less containable wildfires in the future. Naturally occurring fires are necessary to remove old forest cover, underbrush and debris. If they are suppressed, the inevitable fire to come has a far greater store of latent fuel at its disposal.
Economist Murray Rothbard jangled the sensibilities of the Keynesians when he wrote his classic study, “America’s Great Depression:”
“If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don’t interfere with the market’s adjustment process. The more the government intervenes to delay the market’s adjustment, the longer and more gruelling the depression will be, and the more difficult will be the road to complete recovery.”
But politicians must be seen to be doing something – like encouraging the construction of a £33 billion white elephant rail link in the middle of an austerity recession.
Not interfering with the market’s adjustment process is simply allowing Schumpeterian “creative destruction” to operate, and cleanse the forest. But that process is anathema to well-compensated entrenched interests that suckle from the teat of the State. Banks, for example.
So while “laissez faire” would accelerate any banking crisis and shorten the resultant economic contraction, it would reveal the identity of too many naked swimmers when the tide retreats. Instead, courtesy of highly paid lobbyists, we get a long drawn out depression. The example of Japan’s zombie banks from the 1990s is still fresh, but ignored in the west.
Rothbard identified the ways in which government can hobble the adjustment process:
1. Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further.
2. Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments which, in their turn, will have to be liquidated in some later depression. A government’s “easy money” policy prevents the market’s return to the necessary high interest rates.
3. Keep wage rates up.
4. Keep prices up.
5. Stimulate consumption and discourage saving. More saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved capital even further.
6. Subsidize unemployment. Any subsidization of unemployment (via unemployment “insurance”, relief, etc.) will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.
An iatrogenic illness is one caused by the doctor himself. The economies of the west now face policy measures of the sort highlighted by Rothbard that are stated to be in our interests, but which are more likely to do harm to the patient and prolong the recession.
Taleb uses the example of the turkey before Thanksgiving. The turkey is fed for 1,000 days and every day seems to reaffirm the farmer’s generosity of spirit. Until the last day, when the turkey’s confidence and contentment is at its maximum. The “turkey problem” occurs when “a naïve analysis of stability is derived from the absence of past variations”.
To put it another way, the US property market cannot decline because it hasn?t declined in living memory. As Taleb puts it, as humans we inhabit two systems simultaneously: the linear and the complex.
The linear is predictable and permits the use of mathematical tools of high predictive value.
Complex systems,on the other hand, are marked by an absence of visible causal links between their elements, “masking a high degree of interdependence and extremely low predictability.” They also incorporate non-linear elements often called “tipping points.”
One reason for the severity of the financial crisis, and the losses incurred by banks, is that bankers and financial analysts were using linear tools in a non-linear, highly complex environment otherwise known as the financial markets.The models didn’t work.
The problem we face now as investors will end up being existential for some banking institutions and sovereigns. Our (uncontentious) core thesis is that throughout the west, more debt has been accumulated over the past four decades than can ever be paid back.
The question, effectively to be determined on a case-by-case basis, is whether bondholders are handed outright default (which looks increasingly like the case to come in Greece) or whether the authorities, in their understandable but misguided attempts to keep the show on the road, resort to a policy of inflation that could at some point easily spiral out of control.
As Rothbard wrote, “The longer the inflationary boom continues, the more painful and severe will be the necessary adjustment process… the boom cannot continue indefinitely, because eventually the public awakens to the governmental policy of permanent inflation, and flees from money into goods, making its purchases while [the currency] is worth more than it will be in future.”

“The result will be a ‘runaway’ or hyperinflation, so familiar to history, and particularly to the modern world. Hyperinflation, on any count, is far worse than any depression: it destroys the currency – the lifeblood of the economy; it ruins and shatters the middle class and all ‘fixed income groups;’ it wreaks havoc unbounded… To avoid such a calamity, then, credit expansion must stop sometime, and this will bring a depression into being.”

It may be a new year, but we are beset by the same problems that have been recurring since the crisis began. In most cases, those problems have worsened. One of the few improvements has been in the recapitalisation of Anglo-Saxon banks, but continental European banks seem acutely vulnerable to the potential outcome of a disorderly sovereign default.

Since the problems are the same, so are our preferred solutions: a specific focus on only the most creditworthy sovereign and quasi-sovereign debt (where it offers a positive real return); a specific focus on only the most defensive and internationally diversified equities; genuinely uncorrelated investments; and exposure to objectively the highest quality currencies, namely precious metals.

Euro zone politicians and policy makers have had plenty of time to come to terms with the continent’s problems, and continue to show no willingness to grasp admittedly difficult nettles.

It is symptomatic of the balkanised and adversarial nature of politics in the euro zone (a unified body that exists in theory but barely in fact) that Christian Noyer, chairman of the French central bank, anticipated France’s credit downgrade by suggesting that Britain should be downgraded first.

As the Hildebrand scandal also revealed, most of Europe’s central bankers are not fit to sweep the streets. And still time is running out. Readers of a certain age will recall a late 1980s “big hair” rock anthem called “The Final Countdown.” It was released by essentially a one-hit wonder band.

Its name was Europe.

Recovery at risk as Americans raid savings

2012-01-23T01:30:00.002-05:00

More than four years after the United States fell into recession, many Americans have resorted to raiding their savings to get them through the stop-start economic recovery.

In an ominous sign for America's economic growth prospects, workers are paring back contributions to college funds and growing numbers are borrowing from their retirement accounts.
Some policymakers worry that a recent spike in credit card usage could mean that people, many of whom are struggling on incomes that have lagged inflation, are taking out new debt just to meet the costs of day-to-day living.

American households "have been spending recently in a way that did not seem in line with income growth. So somehow they've been doing that through perhaps additional credit card usage," Chicago Federal Reserve President Charles Evans said on Friday.

"If they saw future income and employment increasing strongly then that would be reasonable. But I don't see that. So I've been puzzled by this," he said.
After a few years of relative frugality, the amount of money that Americans are saving has fallen back to its lowest level since December 2007 when the recession began. The personal saving rate dipped in November to 3.5 percent, down from 5.1 percent a year earlier, according to the U.S. Commerce Department.
Jeff Fielkow, an executive vice president at a recycling company in Milwaukee, Wisconsin, contributed less to retirement savings and significantly cut back on dining in restaurants and taking vacations in order to keep college savings on track for his two children. "We would love to save more," he said, "but we're doing the best we can."
There have been some signs of a quickening in U.S. economic growth recently after it emerged from recession in mid-2009.
Hiring was stronger than forecast in December and confidence among consumers rose to its highest level in eight months in January.
But many see a long, hard slog ahead and economic growth this year is not expected to be much more than 2.0 percent, barely up from 2011's growth pace.
The big risks include Europe's debt crisis as well as the shaky finances of many Americans, hit by a five-year decline in house prices and still high unemployment. U.S. consumers account for about two thirds of the country's economic output measured by total spending.
Retail sales rose at the weakest pace in seven months in December, according to data published last week.
Sales in 2012 are expected to grow at slower rate than last year, an industry group said on Monday. The National Retail Federation projected sales would rise 3.4 percent this year, compared with than 4.7 percent in 2011.
"When the stock market and the housing market were booming, we saw that a lot of people would take on more debt and save less. They felt the saving was being done for them," said Mark Vitner, managing director and senior economist at Wells Fargo Securities in Charlotte, North Carolina.
"Today, the saving rate is falling out of necessity. Food and energy prices have risen and folks don't have as much money to spend on the things that they would like."
Just as Americans used to borrow against the value of their homes before the property crash, now many are taking out loans from their 401(k) retirement savings plans.
Almost a third of plan participants currently have a loan outstanding, according to an upcoming survey of 150,000 holders of 401(k)s by consulting firm Aon Hewitt.
"People are at a loss, and they are struggling," said Pam Hess, director of retirement research at consulting firm Aon Hewitt.
RAIDING THE RETIREMENT FUND
Loans taken from retirement savings accounts jumped 20 percent last year across all demographics, according to a survey to be published in March. Among lower earners they leapt by as much as 60 percent, said Aon Hewitt's Hess. The vast majority of borrowers, she said, need the money for essential expenses like bills, car repairs and college tuition.
The non-profit Employee Benefit Research Institute's (EBRI) annual retirement confidence survey hit a new low in 2011 with 27 percent of workers saying they're "not at all confident" they'll have enough for a comfortable retirement. Almost 15 percent expect to work until at least the age of 70, up from 11 percent in 2006.
New York real estate broker Leila Yusuf had been very conscientious about saving for retirement, typically socking away $5,000 to $10,000 a year. But her income slid by 30 percent in the last two years as the housing market hit the doldrums and she stopped making contributions.
"I couldn't afford to do it after four deals didn't go through," said Yusuf, 37. "I need money to live on."
In another sign of Americans struggling to make ends meet, EBRI found that more than 20 percent of those aged 50 or older changed their medical prescriptions to save money and almost as many had skipped or postponed doctor appointments for the same reason. Almost 28 percent reported having difficulty paying their monthly bills.
COLLEGE SAVINGS TAKE A HIT TOO
The amount of money Americans put aside for their children's college fees is taking a hit too. Assets in the popular state-managed college savings funds known as 529s dipped more than 10 percent in the third quarter of 2011. Estimated outflows were $354 million between July and September contrasted with inflows of $927 million in the same period of 2010, according to Financial Research Corp.
Indicative of the trend, contributions to the 529 plans managed by investment management firm Vanguard dropped 1.0 percent in 2011 after climbing 17 percent from 2009 to 2010. Parents of younger children are continuing to save, according to Vanguard, "but they may be concerned about the economy and market conditions and have cut back a little."
At the same time, college students are borrowing twice as much as they did a decade ago when adjusted for inflation, according to the College Board, and Americans now owe more on student loans than on credit cards.
Household borrowing on cards, car loans, student loans and other installment debt jumped almost 10 percent from October to November, according to the Federal Reserve, its biggest jump in a decade.
Welcomed by some as a sign of confidence in the economic recovery, others worried it was really a reflection of desperation.
"Apparent stronger consumption at year-end was associated with falling savings rates, compensating for stagnating income growth," Dennis Lockhart, president of the Federal Reserve Bank of Atlanta said on January 11.
"I question whether this consumer spending momentum will be sustained without a pickup in income growth."
In a sign of concern among policymakers about the weak finances of many Americans, the Federal Reserve this month suggested an array of ways the U.S. government could help shore up the housing market.
House prices have fallen 33 percent from their 2006 peak, resulting in an estimated $7 trillion in household wealth losses and about 12 million homeowners are saddled with mortgages worth more than their properties.
Americans are steadily working off their overall debt levels, including their mortgages. Credit card balances, while little changed compared to a year ago, are down 18 percent from a peak in September 2008.
"It's not like it was a year or two ago when it really felt like a recession, and there was no job growth," said Scott Hoyt, a senior director of consumer economics at Moody's Analytics. "It's better than that and you can see that in the spending. But there's still no reason to go back to the free-spending days prior to the recession."
"Americans are still coming to terms with fact they're not going to earn as much income as they once thought and they are not going to have as much wealth," said Vitner at Wells Fargo. "They are now trying to work out how they are going to have to adjust their lifestyle to fit that."

The Shock of a New Paradigm

2012-01-23T01:27:00.000-05:00

A Pair Of "Nicely Saids"

2012-01-22T18:43:00.000-05:00

"If we want everything to stay as it is, everything will have to change."
– from The Leopard by Giuseppe Tomasi di Lamedusa
"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought, and that's sort of exactly the Mexican story. It took forever and then it took a night."
– Rudiger Dornbusch

(Very prophetic if you're able to read the meaning....SOC.Ed)

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

2012-01-18T20:28:00.002-05:00

"Gross inequalities in skills and achievements have been the rule, not the exception, on every inhabited continent and for centuries on end. Yet our laws and government policies act as if any significant statistical difference between racial or ethnic groups in employment or income can only be a result of their being treated differently by others.

Nor is this simply an opinion. Businesses have been sued by the government when the representation of different groups among their employees differs substantially from their proportions in the population at large. But, no matter how the human race is broken down into its components -- whether by race, sex, geographic region or whatever -- glaring disparities in achievements have been the rule, not the exception."

~Thomas Sowell

Doctor Doom Warns: “World War III Will Occur In the Next Five Years”

2012-01-17T23:09:00.000-05:00

Well known economist, trend forecaster and Gloom, Boom and Doom Report publisher Dr. Marc Faber joined some of the world’s leading investment minds at the Barron’s 2012 Roundtable to discuss what’s in store for 2012 and beyond with respect to the economy, inflation, political stability and a host of other issues.
As is generally the case, Dr. Faber doesn’t mince words and warns that, despite what happens in the near term, the end game is global conflict.

Excerpted from Barron’s 2012 Roundtable via SGT Report
Marc Faber: On another optimistic note, World War III will occur in the next five years. That means the Middle East will blow up. New regimes there will be less Western-friendly. The West has also figured out it can’t contain China, which is rising rapidly and will have more military and naval power in Southeast Asia. The only way for the West to contain China is to control the oil tap in the Middle East.
Bill Gross (Founder, Pimco): How does your World War III hypothesis affect the financial markets? Is it positive for stocks?
Marc Faber: It is very positive for stocks and negative for bonds, because debt will grow dramatically. There will be massive monetization of debt. When the U.S. entered World War II total credit equaled 140% of GDP, and there were no unfunded liabilities. Now total credit-market debt is 380% of GDP, and unfunded liabilities make that 800%.
Brian Rogers (Chairman, T. Rowe Price): How is World War III good for stocks?
Felix Zulauf (Zulauf Asset Management): Unused capacity in an economy can be directed to the defense and war industry. That will be paid for by new government debt, and that keeps the economy growing.
Scott Black (President, Delphi): Marc, if Israel strikes Iran’s nuclear facilities, they will use air power. They aren’t going to commit ground troops. It won’t be the kind of conflagration you’re thinking.
Bill Gross: War takes place today in cyberspace and in terrorist space. Whether or not there will be a land war isn’t the question.

Dr. Faber has also expressed his views on prior occasions, suggesting that World War III is an inevitable outcome when nations begin to default on trillions of dollars worth of debt (whether by refusing to pay or simply easing their monetary supply).
In August of 2010 Faber urged his subscribers to begin making preparations for worst case scenarios:

In his latest GBD Report, Faber again advises those with the means to do it, to leave urban areas and seek safety in rural, country areas, preferably farms, and to be prepared to defend that land in the event the worst happens:
Faber has an interesting suggestion for investors if the plunge comes to pass.
With tongue apparently in cheek, he says buy a farm you can tend to yourself way out in the boondocks. And protect it with high voltage fences, barbed wire, booby traps, military weapons and Dobermans.

While several members of the Roundtable disagree with the idea that a conventional global war is out of the question, suggesting instead that conflicts will be dealt with through air superiority and in cyberspace (in itself a potentially catastrophic battlefield for modern civilization), they are ignoring the real possibility that an attack on Iran, or even a rogue attack against Europe or the United States, could escalate to such a level that China or Russia would have no choice but to get involved.
While hard to believe, we’ve seen it before. Twice just in the last century.
Not many people would have believed it prior to 1914 either. But within just a few short months of the assassination of Archduke Ferdinand in late June of that year, millions were dead and the Western front had extended hundreds of miles across Europe to the North Sea.
Events played out with similar velocity in World War II when Adolf Hitler’s aptly named Blitzkrieg (Lightning War) overtook entire nations in a matter of days.
It only takes one country, one sociopathic leader with his finger on the button, to get the ball rolling. Then there is no stopping it.

Ron Paul Tied With Romney As Most Electable Republican

2012-01-17T23:07:00.002-05:00

A new CNN poll once again debunks the myth that Ron Paul is not electable, showing the Congressman tied with Mitt Romney in a hypothetical head to head contest against Barack Obama.

“The poll also indicates Paul statistically tied with Obama, with the president at 48% and the longtime congressman at 46%,” reports CNN. “But according to the poll, the president is doing better against two other Republican presidential candidates. If Rick Santorum were the GOP nominee, Obama would hold a 51%-45% advantage over the former senator from Pennsylvania. And if Newt Gingrich faced off against the president, Obama would lead the former House speaker 52%-43%.”

Paul’s performance against Obama has improved compared to previous CNN polls taken over the course of the last year, illustrating his momentum.

The results are similar to a CBS poll last week which found that Paul was just one percentage point behind Obama in terms of a head to head run off. Aside from Mitt Romney, the poll showed that all the other Republican candidates would be beaten by Obama.

Numerous establishment Republicans have regurgitated the hoax that Paul is not electable in an effort to undermine his campaign, flagrantly ignoring polls which illustrate the exact opposite to be true.

The corporate media has also been instrumental in manufacturing doubts about Paul’s electability, dismissing him as “the buffer between Mitt Romney and the other candidates,” a claim Paul has soundly rejected.

“I’ve been electable,” Paul told CBS News last week. “I’ve won 12 elections already, and we’re doing quite well now. It’s amazing that I do so much better than those other candidates that are all electable. They’re all in fourth, fifth and sixth place, but they’re all electable, but I come in second or third, and all of the sudden people say, ‘Oh, he’s not electable.’ I don’t know how that adds up.”

As Mark R. Crovelli highlights, when Republicans decided to pick a “moderate” four years ago in the belief that such a choice would secure the White House, it didn’t end too well.

“Here’s a novel idea for Republicans: Vote based upon principle, not based upon whatever the bobble-headed morons in the media establishment say is strategically expedient,” he writes. “Your strategic pragmatism got you nowhere four years ago. Young people and independents in this country are not any more impressed with bland flip-floppers from Massachusetts than they are impressed with nut-job moderates from Arizona. These guys don’t even impress Republicans themselves. If they want a “moderate” who stands for war and socialized medicine, they might as well stick with the moderate, warmongering socialist they already have.”

They Are Actually Going To Let Greece Default!

2012-01-17T23:04:00.002-05:00

I wish that I had an "aha moment" to share with you today, but instead all I have is an "ack moment" to share. As I was analyzing all of the info coming out of Europe in recent days, I came to the following realization: "Ack! They are actually going to let Greece default!" The only question is whether it is going to be an orderly default or a disorderly default. Of course the EU (led by Germany) could save Greece financially if it wanted to. But Germany has decided against that course of action. Many in the German government are sick and tired of pouring bailouts into Greece and then watching Greek politicians fail to fully implement the austerity measures that were agreed upon. At this point a lot of German politicians are talking as if a Greek default is a foregone conclusion. For example, Michael Fuchs, the deputy leader of Angela Merkel's political party, recently made the following statement: "I don't think that Greece, in its current condition, can be saved." But that is not entirely accurate. Greece could be saved, but the Germans don't want to make the deep financial sacrifices necessary to save Greece. So instead they are going to let Greece default.

Many prominent voices in the financial world that have been watching all of this play out are now openly declaring the Greece is about to default. Moritz Kraemer, the head of S&P's European sovereign ratings unit, made the following statement on Bloomberg Television on Monday: "Greece will default very shortly. Whether there will be a solution at the end of the current rocky negotiations I cannot say."

You might want to go back and read that again.
One of the top officials at one of the top credit rating agencies in the world publicly declared on television that "Greece will default very shortly."
That should chill you to your bones.
If the EU allows Greece to default, that would be a signal to investors that the EU would allow Italy, Spain and Portugal to all default someday too.
Confidence in the bonds of those countries would disintegrate and bond yields would go through the roof.
Right now, confidence in government debt is one of the things holding up the fragile global financial system. Governments must be able to borrow gigantic piles of very cheap money for the system to keep going, and once confidence is gone it is going to be incredibly difficult to rebuild it.
That is why a Greek default (whether orderly or disorderly) is so dangerous. Investors all over the world would be wondering who is next.
At the end of last week, negotiations between the Greek government and private holders of Greek debt broke down. Negotiations are scheduled to resume Wednesday, and there is a lot riding on them.
The Greek government desperately needs private bondholders to agree to accept a "voluntary haircut" of 50% or more. Not that such a "haircut" will enable the Greek government to avoid a default. It would just enable them to kick the can down the road a little farther.
But if Greece is able to get a 50% haircut from private investors, then why shouldn't Italy, Spain, Portugal and Ireland all get one?
Once you start playing the haircut game, it is hard to stop it and it rapidly erodes confidence in the financial system.
This point was beautifully made in a recent article by John Mauldin....

So our problem country goes to its lenders and says, "We think you should share our pain. We are only going to pay you back 50% of what we owe you, and you must let us pay a 4% interest rate and pay you over a longer period. We think we can do that. Oh, and give us some more money in the meantime. And if you refuse, we won't pay you anything and you will all have a banking crisis. Thanks for everything."
The difficult is that if our problem country A gets to cut its debt by 50%, what about problem countries B, C, and D? Do they get the same deal? Why would voters in one country expect any less, if you agree to such terms for the first country?

But if Greece is able to negotiate an "orderly default" with private bondholders, that would be a lot better than a "disorderly default". A disorderly default would cause mass panic throughout the entire global financial system.
One key moment is coming up in March. In March, 14 billion euros of Greek debt is scheduled to come due. If Greece does not receive the next scheduled bailout payment, Greece would default at that time.
But the EU, the ECB and the IMF are not sure they want to give Greece any more money. There are a whole host of austerity measures that the Greek government agreed to that they have not implemented.
Since the Greeks have not fully honored their side of the deal, the "troika" is considering cutting off financial aid. The following comes from the New York Times....

Officials from the so-called troika of foreign lenders to Greece — the European Central Bank, European Union and International Monetary Fund — have come to believe that the country has neither the ability nor the will to carry out the broad economic reforms it has promised in exchange for aid, people familiar with the talks say, and they say they are even prepared to withhold the next installment of aid in March.

But the austerity measures that Greece has implemented so far have pushed the Greek economy into a full-blown depression. Greece is experiencing a complete and total economic collapse at this point. The following comes from the New York Times....

Greece’s dire economic condition can hardly be overstated. After two years of tax increases and wage cuts, Greek civil servants have seen their income shrink by 40 percent since 2010, and private-sector workers have suffered as well. More than $75 billion has left the country as people move their savings abroad. Some 68,000 businesses closed in 2010, and another 53,000 — out of 300,000 still active — are said to be close to bankruptcy, according to a report issued in the fall by the Greek Co-Federation of Chambers of Commerce.
“It’s an implosion — it’s an endless sequence of implosions from bad to worse, to worse, to worse,” said Yanis Varoufakis, an economics professor at the University of Athens and commentator on the Greek economy. “There’s nothing to stop the Greek economy losing 60 percent of its G.D.P., given the path it is at.”

But Greece is not the only one in Europe with major economic problems. The unemployment rate for those under the age of 25 in the EU is an astounding 22.7%. And as I have written about previously, there are a whole host of signs that Europe is on the verge of a major recession.
Greece is just the canary in the coal mine. The truth is that the entire European financial system is in danger of collapsing.
Today, it was announced that S&P has downgraded the European Financial Stability Facility. It is pretty sad when even the European bailout fund is getting downgraded.
Of course most of you know what happened on Friday by now. Very shortly after U.S. financial markets closed, S&P downgraded the credit ratings of nine different European nations.
Only four eurozone nations (Germany, Luxembourg, Finland, and the Netherlands) still have a AAA credit rating from S&P.
But even more importantly, the nightmarish decline of the euro is showing no signs of stopping.
Right now, the EUR/USD is down to 1.2650. It is hard to believe how fast the EUR/USD has fallen, but if a major financial crisis erupts in Europe it is probably going to go down a whole lot more.
So what happens next?
Well, if there is a Greek default all hell will break loose in Europe.
But even if Greece does not default, the coming recession in Europe is going to put an incredible amount of strain on the eurozone.
Many have been speculating that Greece or Italy could be the first to leave the euro, but actually it may be the strongest members that exit first.
The number of prominent voices inside Germany that are calling for Germany to leave the euro continues to increase.
In addition, public opinion in Germany is rapidly turning against the euro. One recent poll found that only 47 percent of Germans were glad that Germany joined the euro, and only 36 percent of Germans want "a more federal Europe".
As this crisis continues to unfold, there will probably be even more "ack moments". European leaders have mismanaged this crisis very badly from the start, and there is no reason to believe that they are suddenly going to become much wiser.
Once again, it is important to emphasize the role that confidence plays in our financial system. The entire global financial system runs on credit. Banks and investors lend out money because they have confidence that they will be paid back. When you take that confidence away, the system does not work.
Let us hope that the folks over in Europe understand this, because right now we are steamrolling toward a credit crunch that could potentially make 2008 look tame by comparison.
***Epilogue***
Now another of the three major credit rating agencies, Fitch, is publicly saying that Greece will default....

"It is going to happen. Greece is insolvent so it will default," Edward Parker, Managing Director for Fitch's Sovereign and Supranational Group in Europe, the Middle East and Africa told Reuters on the sidelines of a conference in the Swedish capital. "So in that sense it shouldn't be a surprise to anyone."