Smart People Say This Is Coming

Towards Hyperinflation

Hyperinflation is widely accepted as a period of out of control price rises, doubling the cost of living inside three years.It occurs when a currency loses its ability to store value, encouraging long-term savings to pour into circulation where they swamp the much narrower supply of consumer money, and cause the whole lot to lose purchasing power.

There is no specific recipe, but the pattern we risk repeating today would be typical.

Step #1: Savers, already aware of very real inflation in the cost of living, find it applies more and more to their non-discretionary purchases, such as food and energy;

Step #2: They become increasingly irritated that their currency assets earn interest at the very low official rates — typically less than 1% in the West. To beat this, they need to take big risks by lending to minor institutions. These are the smaller banks which are insignificant enough to be allowed to fail, and therefore do not get access to cheap central-bank money. They are the institutions which have to bid market rate to get depositors’ money. And of course, they will eventually fail, because they are competing in the loans market against megabanks with unfairly cheap money and a government guarantee to protect them;

Step #3: Savers also begin to understand that the government cannot adjust to higher rates because its own enormous borrowing costs forbid it;

Step #4: Savers then cash in their deposits and steadily sell/redeem their bonds, anticipating that bonds in general will repeat their 1970s’ performance, shedding value continually over the medium to long term. (By 1980 the bond market was a shriveled rump, and it didn’t re-appear until 1986, when inflation was well under control.)

Step #5: Central banks will collect the unwanted bonds (quantitative easing programs have so far collected nearly $1 trillion) and create new cash to pay the sellers — again, large and favored client banks;

Step #6: Savers now re-invest, carefully avoiding things which will repay them nominal dollars (i.e. deposits and bonds). Everything else will go up in price as the new Fed cash seeks better stores of value;

Step #7: More and more savers will reach their inflation pain threshold and start at Step 1 above.

indicators:
Commodity price inflation;
Large debts, particularly government debt;
Long-term low returns for savers;
A source of new money — usually the printing press. Unusually, they are all now pointing in the hyperinflationary direction. If you’ve been thinking about buying gold as a hedge against the rapid loss of your purchasing power, now would be a very good time to act. BullionVault provides you a way to do it while keeping your gold safe.

Faber & Paulson With Their Views

John Paulson: Paulson made waves in 2008 with his billion dollar gains from the sub-prime crisis. The master wave rider was short all the way down and then reversed his bearish course in stunning fashion as he went long the very same things he made so much money betting against. In late February he referred to the market as the “buying opportunity of a lifetime”. Paulson’s reflation trade is turning out to be another home run. Paulson clearly believes in the Fed’s ability to reflate us out of this mess. In the last 6 months he has made massive bets on gold and gold related equities. In addition, Paulson has put his money on the opposite side of the trade he made a killing in last year – he now owns massive stakes in several large banks including Bank of America as well as the toxic Capital One Financial. Paulson is even putting together money for a “real estate recovery” fund.
His latest 13-F shows an interesting mix of financials, gold and healthcare related names. The hedging behind this allocation is quite brilliant. He owns massive stakes in defensive healthcare names, large stakes in the full blown recovery names (banks) and the gold positions will serve as a hedge against inflation and/or the doomsday scenario. Paulson, clearly believes inflation is likely to occur in the coming years as his bets on hard assets and real estate show.
Marc Faber: Faber has been remarkably prescient over the course of the last few years. He was very bearish throughout all of 2008 and turned bullish on March 9th of 2009 – the day the market bottomed. He even said the market was due for a 6 month rally.
He has a very similar outlook to Paulson (though his long-term outlook remains somewhat different). Faber is very bullish on hard assets and emerging market equities. He believes the Federal Reserve is in the process of causing horrible inflation and even refers to Ben Bernanke as a “criminal”. Faber is bullish on gold, gold stocks and foreign equities (primarily emerging market equities) in the long-term and remains bearish on paper assets such as the dollar and bonds in the long-term. Faber does maintain that the dollar is oversold in the very near-term and that the Euro is overbought. He also believes stocks may be near their peak for 2009.
Faber is particularly bullish on Thailand and Singapore where he sees continued value. In Thailand he likes the following companies: Tipco Food, Samui Airport Property Fund, Thai Tap Water and in Singapore he likes Design Studio Furniture. In terms of hard asset related equities Faber likes Newmont Mining, Novagold and Sprott Resources.
In the long-term Faber believes the Fed is simply reflating the bubble that helped cause this mess to begin with. He believes it will result in a total unraveling of the capitalist system.

An American Czar openly Advocating Socialism & Communism.......Isn't that Grand????!!!!

Sunstein: Americans too racist for socialism

Defends communism, welfare state, says 'white majority' oppose programs aiding minorities

JERUSALEM – The U.S. should move in the direction of socialism but the country's "white majority" opposes welfare since such programs largely would benefit minorities, especially blacks and Hispanics, argued President Obama's newly confirmed regulatory czar, Cass Sunstein.
"The absence of a European-style social welfare state is certainly connected with the widespread perception among the white majority that the relevant programs would disproportionately benefit African Americans (and more recently Hispanics)," wrote Sunstein.
The Obama czar's controversial comments were made in his 2004 book "The Second Bill of Rights," which was obtained and reviewed by WND.
In the book, Sunstein openly argues for bringing socialism to the U.S. and even lends support to communism.
"During the Cold War, the debate about [social welfare] guarantees took the form of pervasive disagreement between the United States and its communist adversaries. Americans emphasized the importance of civil and political liberties, above all free speech and freedom of religion, while communist nations stressed the right to a job, health care, and a social minimum."
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Continued Sunstein: "I think this debate was unhelpful; it is most plausible to see the two sets of rights as mutually reinforcing, not antagonistic."
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Sunstein claims the "socialist movement" did not take hold in the U.S. in part because of a "smaller and weaker political left or lack of enthusiasm for redistributive programs."
He laments, "In a variety of ways, subtle and less subtle, public and private actions have made it most difficult for socialism to have any traction in the United States."
Sunstein wants to spread America's wealth
WND first reported Sunstein penned a 2007 University of Chicago Law School paper in which he debated whether America should pay "justice" to the world by entering into a compensation agreement that would be a net financial loss for the U.S. He argues it is "desirable" to redistribute America's wealth to poorer nations.
A prominent theme throughout Sunstein's 39-page paper, entitled "Climate Change Justice" and reviewed by WND, maintains U.S. wealth should be redistributed to poorer nations. He uses terms such as "distributive justice" several times. The paper was written with fellow attorney Eric A. Posner.
"It is even possible that desirable redistribution is more likely to occur through climate change policy than otherwise, or to be accomplished more effectively through climate policy than through direct foreign aid," wrote Sunstein.
He posited: "We agree that if the United States does spend a great deal on emissions reductions as part of an international agreement, and if the agreement does give particular help to disadvantaged people, considerations of distributive justice support its action, even if better redistributive mechanisms are imaginable.
"If the United States agrees to participate in a climate change agreement on terms that are not in the nation's interest, but that help the world as a whole, there would be no reason for complaint, certainly if such participation is more helpful to poor nations than conventional foreign-aid alternatives," he wrote.
Sunstein maintains: "If we care about social welfare, we should approve of a situation in which a wealthy nation is willing to engage in a degree of self-sacrifice when the world benefits more than that nation loses."
Sunstein proposed 'socialist' bill of rights
In "The Second Bill of Rights," WND also reported, Sunstein proposed a new "bill of rights" in which he advanced the radical notion that welfare rights, including some controversial inceptions, be granted by the state. Among his mandates:
The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
The right to earn enough to provide adequate food and clothing and recreation;
The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
The right of every family to a decent home;
The right to adequate medical care and the opportunity to achieve and enjoy good health;
The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
The right to a good education.
On one page in his book, Sunstein claims he is "not seriously arguing" his bill of rights be "encompassed by anything in the Constitution," but on the next page he states that "if the nation becomes committed to certain rights, they may migrate into the Constitution itself."
Later in the book, Sunstein argues that "at a minimum, the second bill should be seen as part and parcel of America's constitutive commitments."
WND has learned that in April 2005, Sunstein opened up a conference at Yale Law School entitled "The Constitution in 2020," which sought to change the nature and interpretation of the Constitution by that year.
Sunstein has been a main participant in the movement, which openly seeks to create a "progressive" consensus as to what the U.S. Constitution should provide for by the year 2020. It also suggests strategy for how liberal lawyers and judges might bring such a constitutional regime into being.
Just before his appearance at the conference, Sunstein wrote a blog entry in which he explained he "will be urging that it is important to resist, on democratic grounds, the idea that the document should be interpreted to reflect the view of the extreme right-wing of the Republican Party."

Yup, They're Talking About A VAT In Congress

Into the VAT
In prior editions of these Sound Of Cannons musings, I’ve mentioned that sooner or later, the financially pressed government would look to replenish its coffers by adopting a Value Added Tax (VAT) of the sort so favored by European nations.
Last week, the Wall Street Journal ran a story on this very topic, revealing that House Speaker Nancy Pelosi is seriously considering “going there.” The full text of the brief but important story follows…
Candor about taxes is rare in Washington, so when House Speaker Nancy Pelosi admits that Democrats may have to impose a huge new tax on the middle class to fund their spending ambitions, believe her.
Speaking with PBS's Charlie Rose on Monday, Mrs. Pelosi mused publicly about the rising possibility of enacting a value-added tax, or VAT, as part of broader tax reform. "Somewhere along the way, a value-added tax plays into this," she said. "Of course, we want to take down the health-care cost, that's one part of it. But in the scheme of things, I think it's fair to look at a value-added tax as well."
The allure of a VAT for politicians is that it applies to every level of production or service, rakes in piles of money, and is largely hidden from those who ultimately pay it—namely, consumers. With a $9 trillion 10-year budget deficit, $4 trillion in spending in fiscal 2010 alone, and a $1 trillion (at a minimum) health-care entitlement in the wings, Mrs. Pelosi knows that not even the revenue from the expiration of the lower Bush tax rates in 2011 will cover the bills. Nearly every European country that has passed national health care has also eventually imposed a VAT, and it's foolish to think the U.S. will be different.
Mrs. Pelosi is the second prominent Democrat to call for a VAT in recent weeks. John Podesta, an adviser to President Obama and president of the very liberal Center for American Progress, called in September for a "small and more progressive" VAT. Mrs. Pelosi and Mr. Podesta argue a new tax is necessary to address the nation's exploding financial liabilities, as if those liabilities exploded on their own. Of course, VATs always start "small" and get bigger. The bills for the Democratic spending blowout are coming due even sooner than advertised, and the middle class will pay, whatever Mr. Obama's campaign promises.
It’s hard to square the idea of adopting a VAT with Obama’s firm pledges not to raise taxes on the middle class by “one single penny.” Should his administration preside over the adoption of a VAT tax, it would unquestionably be seen in much the same light as the “Read my lips, no new taxes” pledge that, when broken, did so much to overthrow George Bush the First.
Unlike most progressive taxes, the VAT would be nearly impossible to rig in such a way that it would leave the masses untouched. Typically, to appeal to the masses, the government would set some sort of income test, under which you wouldn’t have to pay the toll. But that won’t work with VAT, because like kudzu, the tax winds itself through every level of economic activity. Detangling it in a politically acceptable way is simply impractical.
Of course, the administration and its congressional allies could try to pull this off by trying to position it as a tax on business, versus individuals. But I have to believe that line of reasoning would quickly be revealed for the scam it is. If businesses didn’t pass those taxes on to consumers, they would soon be out of business – it’s as simple as that. The Heritage Foundation has done some work on this and found that if VAT was instituted and allowed to rise to the levels now prevailing in Europe, the average American household would spend upwards of $10,000 a year on the tax.
What is amazing to me in all of these discussions about the government’s many grand schemes is that there is no substantive national discourse about the need to cut the cost of government itself. Why aren’t there any committee meetings with indignant congressmen pounding the podium about the soaring cost of government as an institution and the need for deep, deep cuts? The reason is straightforward: members of the political class – on both sides of the aisle – pursue their elected positions not for the betterment of society but for the attainment of personal power.
And that power goes hand in hand with longevity. Suggesting a reduction in the size of the government to a member of the government is like suggesting to a ship captain that they put to sea in a boat with a hole in the hull. Sure, they might make it out past the breakwater, but with the hold quickly filling up with negative votes related to cutting back services deemed essential, or merely desirable, to a large constituent group, the cruise is sure to end badly, and well before it reaches its destination.
And so, we are left with a bankrupt, ballooning government that will increasingly grab out in any and all directions to try and buttress its revenues.
According to The Hill, the timing being suggested by Pelosi for this latest coup against capitalism is after the healthcare bill has been passed, which looks increasingly likely from where I sit. While it is hard to imagine that they’ll be able to pull it off, they are sufficiently desperate that they may very well attempt it – coming up with all sorts of dubious spin to get it passed. Already I have read VAT discussed as being necessary to help pay for universal healthcare, and as a thing to look at as part of a major overhaul of the U.S. tax system. But in the end, it will probably be the “businesses needing to pay their fair share” that will lead the charge. After all, no one likes greedy business owners, right?
All of which raises the question, aren’t members of Congress supposed to represent the best interest of the citizenry in this democracy? If that is the case, how is it that they can even contemplate this sort of initiative?
At the risk of sounding like one of the right-wing talk show hosts that are so adroit at getting my blood boiling (over social issues – I tend to fall in line with their economic viewpoint), I would like to propose an amendment to the Constitution. Here it is:
“In order to vote, you must have paid income taxes in the previous year.”
Simple, easy, and sure to greatly reduce the sort of gallivanting socialism that occurs when the public at large can vote itself money out of public coffers.
Of course, I would prefer that no one had to pay any income tax, but as that is unlikely in the extreme, this new amendment would be a reasonable fallback. Without it, the productive elements of our society become little more than fattened cows for those who are not.
As it is, our representatives are free to sell out entrepreneurs and workers, in favor of votes from those who are neither. This is not a formula for a healthy economy – or a democracy, for that matter.

Czar This!

Holdren sought 'planetary regime'

Urges making U.S. government subject to U.N.-run apparatus

White House science czar John Holdren has called for the United States to surrender sovereignty to a "Planetary Regime" armed with sufficient military power to enforce population limits on nations as a means of preventing a wide range of perceived dangers from global eco-disasters involving Earth's natural resources, climate, atmosphere and oceans.
As previously reported, WND has obtained and reviewed a copy of the 1970s college textbook "Ecoscience: Population, Resources, Environment" that Holdren co-authored with Malthusian population alarmist Paul R. Ehrlich and Ehrlich's wife, Anne. The authors argued that involuntary birth-control measures, including forced sterilization, may be necessary and morally acceptable under extreme conditions, such as widespread famine brought about by "climate change."
On page 943, the authors recommended the creation of a "Planetary Regime" created to act as an "international superagency for population, resources, and environment."
The authors argued, "Such a Planetary Regime could control the development, administration, conservation, and distribution of all natural resources, renewable or nonrenewable, at least insofar as international implications exist." (Emphasis in original text.)
In the next sentence, the authors specified the following conclusion: "Thus, the Regime could have the power to control pollution not only in the atmosphere and the oceans, but also in such freshwater bodies as rivers and lakes that cross international boundaries or that discharge into the oceans."
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Arguing in their 1970s textbook for passage of the United Nations Law of the Sea Treaty and for a proposed complimentary United Nations Law of the Atmosphere Treaty, Holdren believed the Planetary Regime could be developed out of the U.N. administrative apparatus established to administer the treaties as well as the United Nations Environment Program and various unspecified U.N. population agencies.

Holdren acknowledged the U.S. would have to surrender sovereignty to the Planetary Regime and that the Planetary Regime would need military arms for the envisioned super-government to succeed.
Writing on page 917, the authors expanded the concept to envision "an armed international organization" that would function as "a global analogue of a police force" to enforce global nuclear disarmament.
"The first step necessarily involves partial surrender of sovereignty to an international organization," the authors contended, qualifying their conclusion by noting "as long as most people fail to comprehend the magnitude of the danger, that step will be impossible."
Holdren clearly specified the Planetary Regime would be charged with global population control.
On page 943, Holdren continued: "The Planetary Regime might be given responsibility for determining the optimum population for the world and for each region and for arbitrating various countries' shares within their regional limits. Control of population size might remain the responsibility of each government, but the Regime should have some power to enforce the agreed limits."
'Sustainable well-being'
The St. Petersburg Times' fact-check website, Politifact.com, argued that in his Senate confirmation hearings, Holdren disavowed "optimal population" targets, a central thesis of the 1970s textbook, as a proper role of government.
While Holdren may have abandoned "optimal population" targets as a principle of public policy, an address he gave as president of the American Association for the Advancement of Science, subsequently published in Science Magazine in January 2008, shows he has adopted instead the standard of "sustainable well-being" as a guiding principle that could be utilized to set targets for acceptable population growth.
In that article, Holdren listed "continuing population growth" as a shortfall making the goal of realizing "sustainable well-being," a point he supported by footnoting Paul Ehrlich's 1968 book "The Population Bomb," thereby linking his current thinking with his 1970s-era thinking.
In that footnote, Holdren wrote that the "elementary but discomforting truth" of Ehrlich's 1968 book "may account for the vast amount of ink, paper, and angry energy that has been expended in vain to refute it."
Holdren's "sustainable well-being" appears a nearly identical concept to what is known as the United Nation's "Agenda 21" articulating the concept of "sustainable development" that is currently institutionalized in the Division for Sustainable Development of the U.N. Department of Economic and Social Affairs.

Here's a Take on 2012~Gulp!

2012 forecast: Food riots, ghost malls, mob rule, terror. Trends chief says people should brace for 'the greatest depression'

A trends forecaster says the current economic "rebound" from last winter's Wall Street collapse of banks, insurance companies and automobile manufacturers is an artificial blip created by 'phantom money printed out of thin air backed by nothing."
And Gerald Celente of TrendsResearch.com, says people right now should be bracing for "the greatest recession" which will hit worldwide and will mark the "decline of empire America." Crop failures could be among the minor concerns.
"Here we are in 2012. Food riots, tax protests, farmer rebellions, student revolts, squatter diggins, homeless uprisings, tent cities, ghost malls, general strikes, bossnappings, kidnappings, industrial saboteurs, gang warfare, mob rule, terror," he writes for a quarterly publication that is available through subscription on his website.
The recent surge in Wall Street indexes back to near the 10,000 level, still far below the 14,000 prior to the crash, should be no reassurance for anyone, he said.
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"There's no recovery. This is merely a cover-up," he said. "The market crashed in March of 2009 and around the world they papered over the damage from the collapse with phantom money printed out of thin air backed by nothing," he said.
This is "much bigger" than an economic collapse, he said. "This is the decline of empire America."
Find out what you can do to be more prepared
"Look what's happened to the dollar," he warned. "Gold prices are surging forward. That's the evidence. The rest that's coming from Washington and Wall Street is rhetoric."
"This is the beginning of the greatest depression. We're telling our readers to take pro-active measures in anticipation of much worse to come," he said.
USA Today says Celente "has a knack for getting the zeitgeist right," and CNBC says, "The man knows what he's talking about."
The Wall Street Jounral has said, "Those who take their predictions seriously … consider the Trends Research Institute."
He said during the Radio America/WND interview that retail sales this coming Christmas season will be the "real nail in the economic coffin."
"The second American revolution has already begun; it just hasn't been announced yet by the mainstream media," he said. "Anybody waiting for hope to show up at the door with a big bag full of money is going to be in for a shock."
Tim Barello in the Examiner noted that since 1980 Celente has made at least 40 accurate predictions about major world events, such as the 1987 stock market crash.
"Throughout the 1990's, many other forecasts came true, including the collapse of the Soviet Union, surges in global terrorism, the popularity of spiritual and new age philosophies, public backlash against globalization, upsurges in online shopping, and the 1997 Asian financial crisis, to name a select few," he wrote.
Now comes his forecast for a global depression and for the United States, "Obamageddon."
"We want to make it very clear that the policies leading to the decline of 'Empire America' have been long in the making," Celente told Barello. "What has happened in the Obama administration is that they have taken policies far beyond even what Bush took with the TARP program; for example, with his stimulus package, with the buyouts, with the bailouts, the rescue packages, these are unprecedented in American history.
"Never before has so much phantom money been printed out of thin air, backed by nothing, producing practically nothing," Celente continued. "You don't even have to be a student of history to know the outcome of this. All you have to do is have your eyes open, and start thinking for yourself."
In his conversation with the Examiner, Celente warned with the "bubble" bursts, U.S. taxpayers will be slammed because, unlike during the dot-com bubble, the stock market bubble and the real estate bubble, they are stockholders in a long list of major companies.
He forecasts the possibility of a civil war, and says if people want to see what Main Street America will look like, they should "drive around Detroit. Look at all the blown out houses and empty neighborhoods. Look at the violence that's increasing. … Look at the types of heinous crimes being committed by people – some blowing their whole families away…"

When A Smart Moth******er Warns You, Beware!

Icahn: Risk of Double Dip, Investor 'Bloodbath'

There is a real risk of a double-dip recession and the market is acting in a "schizophrenic" way, which could cause a "bloodbath" for investors, billionaire investor Carl Icahn told CNBC Friday.
"If you get a double-dip recession and they start coming down, it's going to be a bit of a bloodbath," Icahn said.
"The amateur investor is going to get hit badly again because they're pouring money into these funds. Some of these funds managers I do not think are experienced enough to handle some of the distressed stuff they're buying and they're going to get burned," he said.
Icahn said he still sees investment opportunities in advertising, telecom, the Internet and bankruptcies. But making money out of bankruptcies should only be attempted by the experts, he said.

"We're quite involved in the secular change in the way advertising is going to be done. Obviously the cell-phone business is a growth business," he said.
"You've got secular changes that are hitting the world, especially in the way we buy. So the Internet, I don't have to say - it's obvious, is the great new thing. And advertising on the Internet as apposed to printed media," he added.
Meanwhile, real estate is a perfect example of a good market to short, according to Icahn.
Icahn said he questions why "any individual in their right mind" would buy into Real Estate Investment Trusts (REIT). Investors could never liquidate the underlying value of the buildings on their portfolios, he said.
"I think there's overcapacity in the office market and in shopping centers because you have a secular change in the way retailers are behaving and the way consumers are behaving," he added.
There are still opportunities in the debt markets, but "it's not what it was," he said.
Precarious Position
The economy is in a precarious position and the outlook for consumer confidence and unemployment remains bleak, according to Icahn.
"I think that you have to be cautious. It's on a precipice right now and it could really go either way," he said.
Icahn warned against seeing the recent stock rally as a sign that the economy has turned a corner.
"It's a myth to say the market is a good indicator of the economy. I think individuals are much more of an indictor," he said.
"The market is schizophrenic at this point. So you have trillions of dollars literally in consumers hands, they don't want to spend it, they're afraid to spend it," he added.
Yahoo, Microsoft Deal
Icahn, who owns a stake in Yahoo, thinks the Internet search firm is in a "great" secular area. And Carol Bartz, the company’s new president and CEO, is a "real operator" who is "getting things done," he said.
"It cannot compete with a giant like Google and a giant like Microsoft . And you can't let ego get in your way and say: "We're Yahoo and we can compete," Icahn told CNBC.
"I think Google and Microsoft are going to be these two huge dinosaurs. I don't want to call them dinosaurs, but these behemoths that are going to war with each other," he said.
The Internet search deal between Microsoft and Yahoo, which sees Microsoft's Bing search engine power the Yahoo Web site, was a "great deal," according to Icahn.
"I think Wall Street hasn't really appreciated how great that deal is," he said.