Saturday, September 20, 2008
http://www.informationclearinghouse.info/article20809.htm The Party's Over By Patrick J. Buchanan 19/09/08 "CS" -- - The Crash of 2008, which is now wiping out trillions of dollars of our people's wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another. The new era will see a more sober and much diminished America. The "Omnipower" and "Indispensable Nation" we heard about in all the hubris and braggadocio following our Cold War victory is history. Seizing on the crisis, the left says we are witnessing the failure of market economics, a failure of conservatism. This is nonsense. What we are witnessing is the collapse of Gordon Gecko ("Greed Is Good!") capitalism. What we are witnessing is what happens to a prodigal nation that ignores history, and forgets and abandons the philosophy and principles that made it great. A true conservative cherishes prudence and believes in fiscal responsibility, balanced budgets and a self-reliant republic. He believes in saving for retirement and a rainy day, in deferred gratification, in not buying on credit what you cannot afford, in living within your means. Is that really what got Wall Street and us into this mess — that we followed too religiously the gospel of Robert Taft and Russell Kirk? "Government must save us!" cries the left, as ever. Yet, who got us into this mess if not the government — the Fed with its easy money, Bush with his profligate spending, and Congress and the SEC by liberating Wall Street and failing to step in and stop the drunken orgy? For years, we Americans have spent more than we earned. We save nothing. Credit card debt, consumer debt, auto debt, mortgage debt, corporate debt — all are at record levels. And with pensions and savings being wiped out, much of that debt will never be repaid. Our standard of living is inevitably going to fall. For foreigners will not forever buy our bonds or lend us more money if they rightly fear that they will be paid back, if at all, in cheaper dollars. We are going to have to learn to live again without our means. The party's over Up through World War II, we followed the Hamiltonian idea that America must remain economically independent of the world in order to remain politically independent. But this generation decided that was yesterday's bromide and we must march bravely forward into a Global Economy, where we all depend on one another. American companies morphed into "global companies" and moved plants and factories to Mexico, Asia, China and India, and we began buying more cheaply from abroad what we used to make at home: shoes, clothes, bikes, cars, radios, TVs, planes, computers. As the trade deficits began inexorably to rise to 6 percent of GDP, we began vast borrowing from abroad to continue buying from abroad. At home, propelled by tax cuts, war in Iraq and an explosion in social spending, surpluses vanished and deficits reappeared and began to rise. The dollar began to sink, and gold began to soar. Yet, still, the promises of the politicians come. Barack Obama will give us national health insurance and tax cuts for all but that 2 percent of the nation that already carries 50 percent of the federal income tax load. John McCain is going to cut taxes, expand the military, move NATO into Georgia and Ukraine, confront Russia and force Iran to stop enriching uranium or "bomb, bomb, bomb," with Joe Lieberman as wartime consigliere. Who are we kidding? What we are witnessing today is how empires end. The Last Superpower is unable to defend its borders, protect its currency, win its wars or balance its budget. Medicare and Social Security are headed for the cliff with unfunded liabilities in the tens of trillions of dollars. What we are witnessing today is nothing less than a Katrina-like failure of government, of our political class, and of democracy itself, casting a cloud over the viability and longevity of the system. Notice who is managing the crisis. Not our elected leaders. Nancy Pelosi says she had nothing to do with it. Congress is paralyzed and heading home. President Bush is nowhere to be seen. Hank Paulson of Goldman Sachs and Ben Bernanke of the Fed chose to bail out Bear Sterns but let Lehman go under. They decided to nationalize Fannie and Freddie at a cost to taxpayers of hundreds of billions, putting the U.S. government behind $5 trillion in mortgages. They decided to buy AIG with $85 billion rather than see the insurance giant sink beneath the waves. An unelected financial elite is now entrusted with the assignment of getting us out of a disaster into which an unelected financial elite plunged the nation. We are just spectators. What the Greatest Generation handed down to us — the richest, most powerful, most self-sufficient republic in history, with the highest standard of living any nation had ever achieved — the baby boomers, oblivious and self-indulgent to the end, have frittered away.
http://www.informationclearinghouse.info/article20811.htm The Point of No Return By Mike Whitney 19/09/08 "ICH" -- - Following another eratic day of trading on the stock market, Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke convened an emergency meeting of the Senate Banking Committee and other congressional leaders to request fast-track authority for a sweeping plan to buy back illiquid assets and other complex securities from distressed and under-capitalized banks. The turbulence in the financial markets has intensified and there is every indication that the situation will get worse before it gets better. There are a number of signs that the financial system is at the brink of collapse and that Wall Street is headed for a 1929-type crash. Depositors have begun to withdrawal their savings from money market funds alarmed by the gyrations in the market and the daily deluge of bad economic news. According to the Washington Post, funds dropped "by at least $79 billion, or about 2.6 percent" on Wednesday alone. The withdrawals are the equivalent of a slow bank run just at the time when stressed commercial banks need access to cheap capital to finance daily operations and provide loans for a steadily weakening economy. There's also been a surge of panic-buying of US Treasurys which is considered the safest of investments. According to the Wall Street Journal, during Wednesday's market-rout, "investors were willing to pay more for one-month Treasurys than they could expect to get back when the bonds matured. Some investors, in essence, had decided that a small but known loss was better than the uncertainty connected to any other type of investment. That's never happened before." (Wall Street Journal) Also, the VIX, or "fear gauge", has soared to levels not seen since the crisis began in August just over a year ago. On Tuesday, interbank lending rates spiked upwards causing banks to abruptly stop lending to each other. When banks stop lending to each other, they cannot perform their primary function of transmitting credit to consumers and businesses, and the economy shuts down. That is why the Fed and other members of the western banking cartel made a surprise announcement at 3 AM (EST) Wednesday morning. From the FED: "Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets....The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks." Before the end of the day, the Fed had quadrupled the amount of dollars (to $247 billion) that central banks around the world could access in an effort to loosen up trading between the banks and resume lending to loan applicants and businesses. According to Bloomberg: "The Fed will spray dollars around the world via swap lines with other central banks. They can then auction them in their own markets." At first, the stock market reacted positively to the Fed's announcement, but by noon the market was 200 points down and losing altitude fast. It took another surprise announcement by the Treasury Dept--of a massive government intervention to remove the bad loans and withering mortgage-backed securities from banks' balance sheets---of to jolt the market out of its funk and send it climbing 410 points higher on the day. Paulson's emergency session of Congress last night was characterized by lawmakers who attended as "chilling". The situation is much worse than government officials have let on so far. The resurrecting of the Resolution Trust Corporation (RTC) is a desperate attempt to address the banking systems troubles head-on by providing a taxpayer funded clearinghouse for illiquid assets and toxic mortgage-related securities for which there is presently no market. The taxpayer is being asked to pay up to $1 trillion for the speculative excesses of Wall Street investment banks and their fraudulent securities scam. Homeowners who are likely to lose their homes through foreclosure will not benefit from Paulson's RTC. Both presidential candidates have already declared their support for the plan. According to the New York Times: "Rumors about the Bush administration’s new stance swept through the stock markets Thursday afternoon. By the end of trading, the Dow Jones industrial average shot up 617 points from its low point in mid afternoon, the biggest surge in six years, and ended the day with a gain of 410 points or 3.9 percent." If ever there was proof of Plunge Protection Team activity; Thursday's market is it. The market was sinking fast at midday even though the Fed just added nearly $250 billion in liquidity to the global system. Investors were buying short-term Treasurys in record numbers, the VIX "fear gauge" was soaring, money markets were collapsing, and the aftershocks from defaulting AIG and Lehmen were still being felt around the world. Were investors really that eager to buy back battered investment bank stocks or was the PPT busy panic-buying up futures and forcing the market upwards 617 points? Bloomberg News: "Options under consideration (by congress) include establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corp. to insure investors in money-market funds, said two people briefed by congressional staff who spoke on condition of anonymity because the plans may change." Not a dime of public money is provided for over-extended homeowners trying to stay out of foreclosure. Not one congressman or senator at Thursday's meeting rejected the bailout plan or called for a criminal investigation to establish whether laws were broken in the sale of fraudulent securities which have clogged the global system; pushed banks, hedge funds, insurance companies and homeowners into default, and precipitated the greatest financial crisis in the nation's 230 year history. Ironically, the very people who created this mess, are the ones who will decide how to resolve it; the Federal Reserve and the US Treasury. Where else, but Washington would such massive failure be rewarded with more power and authority. The investment giants and the Federal Reserve are entirely responsible for the current meltdown. Currency deregulation brought foreign capital flooding into the equities and bond markets while the real economy suffered. Businesses were off-shored while good paying manufacturing jobs were moved overseas. Wall Street gorged itself on foreign capital while America was transformed into a nation of construction laborers and service industry workers. Now those jobs are vanishing by the millions and unemployment lines are swelling. The ratings agencies, prevaricating mortgage applicants, and appraisers all played a part, but it's Wall Street that's really to blame. They lobbied to deregulate the system so investment banks could merge with commercial banks and allow the world's biggest risk takers to have unrestricted access to the cheapest capital available; deposits. They even crafted a bogus ideology, "market fundamentalism"; touting trickle-down, free market, Voodoo economics that was entirely designed to further enrich the wealthy and savage the middle class. Earlier this week, former Senator Jack Kemp appeared at a whistle-stop with John McCain in Jacksonville, Florida. Kemp was one of the primary architects of "supply side" economics, the thoroughly discredited Reagan-era doctrine which has led us to our present economic catastrophe. Kemp's theories fit with Milton Friedman's "greed is good" Chicago School mumbo jumbo. Both Friedman and Kemp believe that what is good for the stock market is good for America, ignoring the shocking economic polarization that has divided the nation. Now, more and more people are beginning to see that Friedman was a charlatan who provided ideological cover for obscenely rich financiers and their dodgy investment scams. Economist and author Henry Liu summed it up brilliantly in a recent article in the Asia Times: "The collapse of market fundamentalism in economies everywhere is putting the Chicago School theology on trial. Its big lie has been exposed by facts on two levels. The Chicago Boys' claim that helping the rich will also help the poor is not only exposed as not true, it turns out that market fundamentalism hurts not only the poor and the powerless; it hurts everyone, rich and poor, albeit in different ways. When wages are kept low to fight inflation, the low-wage regime causes overcapacity through over investment from excess profit. And monetary easing under such conditions produces hyperinflation that hurts also the rich. The fruits of Friedman test are in - and they are all rotten." Whatever headwinds the country now faces economically can be directly attributed to the inherently flawed ideology of market fundamentalism. Tuesday's 449 point bloodbath on Wall Street is the beginning of an unavoidable market crash. Regardless of Paulson's plan, there's more pain on the way. According to Bloomberg: "More than $19 trillion has been wiped off global stock market value since a high on Oct. 31 as the worst U.S. housing recession since the Great Depression and a resulting global credit crisis slowed the world economy." All of the economic indicators point to greater losses. Once the system begins to deleverage, there's nothing anyone can do to stop it. Paulson can place himself in front of a market avalanche if he so chooses, but it won't change the outcome. Market corrections are as inexorable as the force of gravity. That's why equity bubbles cannot be allowed to develop without interest rate intervention. Responsible action by the Central Bank could have prevented the present crisis. On Wednesday, Forex.tv reported that the net long-term TIC flows came in below the consensus forecast, totaling $6.1 billion in July, while total TIC flows for the month fell to $74.8 billion, according to data released by the U.S. Treasury on Tuesday morning. Economists had been expecting net long-term flows to rise to $55.0 billion compared to the previous month's previously reported figure of $53.4 billion. $6.1 billion does not begin to meet the requirements of our current account deficit of $700 billion. The dollar is headed for a fall. On Wednesday, New York Mayor Michael Bloomberg warned that the "next wave" of financial pain may come from overseas if foreign entities stop buying U.S. debt."It's not clear who's going to be buying our debt," said Bloomberg. "It may very well be that the next wave is going to come back and bite us." The New York Times tells a similar story except this time about Asia: "Asia’s savings have, in essence, bankrolled American spending for decades (but) Asian interest in American assets is wilting, a trend that seems to have started over the summer...Little-noticed data released by the Treasury Department on Tuesday showed that a sharp shift in international capital movements began in July. Private investors pulled a net $92.9 billion out of the United States, after putting $46.8 billion into American securities in June. ("Asia rethinks American Investments Amid Market Upheaval", Keith Bradsher, New York Times) Foreign central banks and investors have turned off the spigot. They can see that the US financial system is teetering and that the dollar is weakening. "The perceived risk of U.S. government debt, long held to be absent of any default risk, also climbed to a record yesterday as the government's involvement in bailing out financial markets weighed on its own balance sheet." (Bloomberg News) The "full faith and credit" of the United States government is slipping. US debt will be downgraded. Triple A is no longer guaranteed. America's stock just moved to Level 3 assets. The US is now a subprime economy on life support. Presently, "there is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion." (Mish's Global Economic Trend Analysis) $273.7 Billion is a paltry sum, insufficient to meet the needs of even a minor run on the banking system. The storm hasn't even touched ground in middle America, and already the system is buckling. 2009 is shaping up to be bleak, indeed. The battered and over-leveraged US financial system is facing its greatest challenge in the months ahead. The frantic search for capital has already begun, but with predictably disappointing results. Neither China nor the Saudi princes are buying any more failing investment banks. They'll leave that to the US taxpayer. What started off as a brilliant plan to offload garbage mortgage-backed paper to gullible investors around the world has suddenly backfired and now threatens to bring the entire system crashing down and change the geopolitical power paradigm for the forseeable future. Reid: "NO ONE KNOWS WHAT TO DO" On Monday night, Senate Majority Leader Harry Reid was briefed on the gravity of the financial situation in a secret meeting with the Treasury Secretary and Federal Reserve Chairman. Reid's remarks are the best summary yet of the troubles that lie just ahead. He said, "We are in new territory, this is a different game...No one knows what to do."
Friday, September 19, 2008
LINK COURTESY OF GEIST... http://www.financialsense.com/stormwatch/geo/pastanalysis/2008/0919.html Financial Collapse and Destructive War by J. R. Nyquist Weekly Column Published: 09.19.2008 I took a break while working on this column and read an email which contained the following phrase: “several U.S. Treasury charts are not unlike what you see before a country goes into default.” The email writer noted, “That really would be ‘game over’ for the United States. “ If the United States went bankrupt the following sequence would occur: The U.S. government would lose its credibility, the country’s currency would fail and imports could not be maintained – especially oil imports. There would be shortages. But the sequence doesn’t end with shortages. It doesn’t end with mere economic loss. When the financial structure collapses, the national security structure collapses. Then nothing will restrain the military power of Russia and China. A few days ago Russia’s representative to NATO, Dimitry Rogozin, made a striking statement. He warned that the Europeans risk war if Georgia joins the alliance. “We will terminate all contact with NATO because we cannot cooperate with an organization which supports an aggressor against us. If NATO makes another mistake in its relations with the East, we will be unable to continue our relations. Our people will not understand. For us, it is a ‘red line.’” He then characterized Mikhail Saakashvili as a war criminal and “puppet of the United States.” Rogozin warned that Europe should stay out of the “somebody else’s war, which is a war against Russia.” What did Rogozin mean by this? If the Europeans know what is good for them, they will leave the Americans to fend for themselves. In other words – Europe must break with the United States. The real conflict is between Russia and America. Europe need not get involved. The Kremlin’s position was clarified recently by Prime Minister Putin. He said that George Bush was a good man, but that George Bush was no longer in charge of the U.S. government. Evil advisors have taken over in Washington, and these must be dealt with. If you follow Russia closely, and listen to the words of Russian leaders, then you know that there is a low-level war being fought between Russia and America. In fact, it is a war of national survival and Russia is determined to prevail. This has not been stated directly, but was indirectly alluded to by Vladimir Putin when he spoke to the Russian people after the Beslan massacre in 2004. “Despite all the difficulties,” said Putin in a televised speech, “we have managed to preserve the core of the colossus that was the Soviet Union.” And that core has come under attack. “Someone” wants to destroy what remains of the USSR. The Russian leadership is consistent in its policy. Talk of Russia’s “partnership” with America has always been a smokescreen. The Kremlin seeks to justify future military action against the United States and has long been building a case. The Kremlin wants America cut off from its allies, and has patiently waited for the advent of financial collapse as the signal to push hard for Europe’s neutrality. As explained in previous columns, this is the basis of Russia’s recent turn of policy. “Some want to cut a juicy morsel from us,” said Putin in 2004, referring to the oil-rich Caucasus region. “Others are helping them. They are helping because they believe that, as one of the world’s major nuclear powers, Russia still poses a threat to them, and therefore this threat must be removed. And terrorism, of course, is only a tool for achieving these goals.” They want to break the back of the Russian state. They want to deprive Russia of its nuclear arsenal because it “still” threatens them. “This is a challenge to the whole of Russia,” Putin explained, “to the whole of our people. This is an attack on our country.” The plan is to “intimidate” Russia with “inhuman cruelty,” to “paralyze our will and demoralize our society.” The Russian president added: “It would appear that we have a choice of resisting them or agreeing to their claims, surrendering or allowing them to destroy and split Russia….” It is a case of kill or be killed, split or be split. Russia is therefore at war with America. “One cannot fail to see the obvious,” said Putin. “We are not just dealing with separate actions aimed at frightening us, or separate terrorist sorties. We are dealing with direct intervention by way of terrorism against Russia, with total, cruel and full-scale war in which our compatriots die again and again.” Putin is lying, of course. He knows that the wars of the Caucasus were contrived by the Russian General Staff and the KGB. The Kremlin has long operated on the basis of a secret policy. This policy includes the retreat from ideology, the abdication of the Communist Party and false liberalization. KGB defector Anatoliy Golitsyn described this secret policy five years before the Berlin Wall came down, warning that a long-range strategy had been jointly agreed upon by Russia and China in 1960. He outlined the details of the planned collapse of Communism: including the unification of Germany, the elimination of the Warsaw Pact and the push for European neutrality at the outset of a renewed Cold War. To be sure, no policy works exactly as the planners envisioned. There were setbacks and delays. But the objective of the conspiracy remains. It is global revolution. This was Lenin’s conception. This was also the rationale of the Soviet state and the mission of the KGB. The collapse of the Soviet Union was conceived as a strategic maneuver in the late 1950s. It was discussed by KGB Chairman Alexander Shelepin at a secret meeting in 1959. The KGB infiltrated and financed various dissident movements inside the Soviet Bloc. The future role of these movements was clear. A period of fake democracy would be initiated and the West would be “put to sleep.” The Communists in the East denied their faith publicly. They repeated Lenin’s New Economic Policy with a straight face and their hands out. When Communism lost its official standing in Russia, the Communists discovered the feebleness of their revolutionary order. They discovered that fraud is a two-way street. The party bosses weren’t the only ones who could steal, cheat and lie. The reality of the Soviet economy was, in part, expressed in a simple formula: “We pretend to work and they pretend to pay us.” A fraudulent system engenders a fraudulent citizenry and a hollow center. The Soviet public suspected the official ideology was rotten with lies; so once the bankruptcy of the system was publicly admitted the people were confirmed in their cynicism. Besides this, they never really cared about class struggle. The ruling ideology was not theirs. They did not choose it willingly, or embrace it enthusiastically. It was imposed on them by Lenin and Stalin. Only a sub-faction within the aspiring cadre of the Communist Party Soviet Union appreciated Marxist concepts. For such people, Communist ideas signified foreknowledge and power. It was the science and method, pure and rigorous, of global revolutionary conquest. It was a method of seizing power, winning wars and crushing enemies. That is why Mao Zedong scoffed at the atomic bomb. Weapons don’t decide everything, he said. Man decides what happens, and men are guided by ideas, and the ideas of Marx and Lenin are “more powerful than a machine gun,” and more destructive than the atomic bomb. To understand the power of Communist ideas we must come to terms with the emergence of the modern nihilistic misfit and his special brand of narcissistic megalomania. Lenin once wrote that there is no such thing as Communist dogma. This statement may confuse the party idiots, but it clarifies the real situation for the politically perceptive. The apparent abdication of the Communists during the period 1989-91 was a subterfuge long in the making. It was conceivable by the strategists in Moscow because the framework of their ideology involved the integration of sociology, economics and psychology with politics and war. It represented the science of “divide and conquer” carried to perfection. Today the name of Hitler has become a caricature. In our mind’s eye we see the carpet-chewing megalomaniac foaming at the mouth, screaming hate before demented crowds, parading around with goose-stepping soldiers. We call Hitler a “madman” and dismiss him as an aberration. We fool ourselves by thinking there is nobody like him today. But the leaders in Moscow and Beijing are more cunning and better equipped for mass extermination than Hitler ever was. The leaders of the totalitarian countries, behind the façade of liberal reform, are serial killers imprinted with an impulse to butchery. They want more victims, and they want the victims piled ever higher. These are the blood-proofs of their power, and the ultimate assurance of longed-for preeminence. If the ancient Romans destroyed Carthage without nuclear weapons, without modern instruments of war, what will Moscow and Beijing do to the United States when America is paralyzed by financial collapse? Again and again I am asked the question: Why would the leaders of Russia or China want to destroy the United States? One might as well ask why Hitler sought the destruction of the Jews. Why did Genghis Khan exterminate entire cities and depopulate entire regions of the earth? You say that these are the acts of “madmen.” But history is populated with madmen. Everyone can see that Lenin’s successors have refused to bury him. They buried Stalin. They buried Khrushchev. They buried everyone in the country. But they refuse to bury Lenin. He lays in state, in his mausoleum, the great symbol of Communism’s persistence and the KGB’s ongoing mission. The cadre stays the course. The dynamos continue to propel the great engine of destruction. They are there, wearing their masks – in league with their comrades around the globe (in Cuba, in Venezuela, in Bolivia, in South Africa, in Congo, in the American universities). Only when they bury Lenin, only when the Red Tsar is laid to rest, should we accept the death of Communism as an authentic happening in Russia. You see, it doesn’t matter if one percent of a country actually adheres to something. If that one percent is driven to dominate, if that one percent guides the machine, if that one percent makes policy and follows the same old strategy, then the rest are fodder. They are grist for a terrible mill. Ideas are decisive in every system, even if those ideas are a rationale for mass murder, even if those ideas only appeal to thieves and murderers. The killer has an impulse to kill, the tyrant to tyrannize and the warmonger to make war. Vladimir Putin has referred to himself as a “Soviet person.” He has publicly decried the fall of the Soviet Union. He has overseen the return of Soviet symbols to the Russian military, the rebuilding and modernization of key elements of the old Soviet war machine. Whether he is a true tsar or the public face of a secret ruling group, the spirit of Lenin bleeds through his cold Napoleonic façade. America’s financial collapse threatens to uncork the totalitarian genie from its bottle. I believe it is too late to stop the worst from happening. The sequence has begun. The Kremlin knew that a financial crash was about to take place. They’ve been waiting on it. They are prepared to exploit it. And the Americans are completely oblivious. They are utterly unprepared.
Folks, the people are complete idiots. Stocks booming on a fairy tale about fixing a broken system. Gold trading very quietly while the Euro booms and Bonds Fall making long term interest rates increase, as they need to do to attract anyone to touch the toilet paper Dollar. I am amazed at how many of the pundits on TV can believe that Bernanke and Paulson are great and talented men. These people have followed in Alan Greenspan's path and DESTROYED the U.S. Economic System and horribly hurt the World's system because The Dollar is the International Reserve Currency, but not for long. Gold is now starting to wake up, but be very careful because the elites hate gold as it exposes their criminal behaviors. They will do ANYTHING IT TAKES to keep gold down as you have just seen. Oddly, they say they want the Dollar UP, but the truth is they really want/need it to be weak as it helps the Current Account Deficit. But they can't have it both ways. They can't really do anything but make things incredibly worse the more they do anything... THEY ARE JUST DIGGING A DEEPER GRAVE FOR US ALL! Your ONLY SAVIOR at this point is GOLD...hang on to what you have! I can't possibly keep up with these fast moving markets to inform you in real time to what is happening, but I will do my best to keep you linked to those sites that have the TRUTH. You will have to do lots of reading every day, so forget your usual TV time, although I do recommend THE DAILY SHOW, COLBERT REPORT, AND KEITH OLBERMANN to keep your perspective. More as I am able... STAY STRONG OR PERISH!
Velkom to Amerika! By Joel Bowman As any dictator worth his salt will tell you, the simplest way to avoid criticism is to outlaw it. Yesterday, in a characteristically misguided effort to “do something” about the current turmoil in the financial markets, the government did just that. Posing for the news cameras of the world, the Securities and Exchange Commission’s chairman, Christopher Cox, announced that the practice of selling short financial institutions is now banned. Just to be clear, this draconian ruling pertains not only to naked short selling - where traders sell short a company without first acquiring stock in it – but to ALL short selling. We’ll say that again: to sell short any one of 799 financial companies identified by the SEC is, as of 9:30am today, to engage in an illegal activity. We half expected this announcement to be followed by the line “Dissidents will be shot on sight.” Short selling, if we are to believe what the financial Gestapo tells us, is responsible for the ongoing tumult in the markets - not the flagrant destruction of shareholder wealth by miserly CEOs; not their greed-infused appetite for risky mortgage backed securities; and certainly not the delusional reticence of these suits to admit they made mistakes and to take their medicine alongside those whose money they squandered. Such exercises in government-sponsored deceit should come as no surprise to even the most casual students of history. Deceit is, after all, as old as the trust it betrays. From Eve’s apple to the “proverbs” of Chairman Mao’s Little Red Books, we humans have a long and embarrassing history of being duped. Whether in the realm of finance or politics, the ingredients required to achieve a functioning dictatorship are commonly held. They include, in no particular order: 1) A healthy disdain for free thought and its expression, 2) A team of henchmen to execute your oppressive orders (and those found to be flouting them). 3) A scapegoat to take the fall when your policies collapse under the weight of their own idiocy and (and this final one is arguably the most important), 4) A populace too fearful or ignorant to do anything about it. But perhaps the dictators have their guns pointed at the wrong target. The punishments the market dealt out to the perpetrators of such fiscal madness are rarely without reason. Had Jim Chanos not blown the whistle on Ernon’s foray into the grubby world of book cooking, for example, who knows how long their criminal activities might have lasted, or how many shareholder dollars might have been burned in the process. Victimizing those who bring to light these actions does not diminish their inherent criminality. At best it merely delays the inevitably implosion of the institution in question; at worst, it allows for an environment where unchecked lawlessness become commonplace. As Jonathan Weil astutely observed in an excellent column for Bloomberg earlier this week, “Mr. Market doesn't believe any major U.S. bank's balance sheet, partly because the SEC has done all it can to buy them time. For the first time in 13 years, a money-market fund broke the buck. U.S. taxpayers just bought 80 percent of AIG for $85 billion, marking the nation's official coming-out party as a socialist state, only with fewer social-welfare benefits for the bottom 99 percent. “More bailouts are a near certainty,” Weil continued, “after the Federal Reserve and Treasury crossed the line in the sand they drew just three days ago when they let Lehman fail. Nobody knows what the criteria for a bailout are, only that Fed chief Ben Bernanke and Treasury's Hank Paulson might know it when they see it.” If we are to believe what Christopher & Co. tell us, guys like Chuck Prince and Stan O'Neal and Dick Fuld are not to blame for engaging in company-destroying speculations...it’s the messengers who told us about it that deserve to be punished. May we not forget that it was this same warped logic that got us into such a precarious position in the first instance. One may be inclined to feel that it was shameless disrespect for shareholders, criminal deceit and back ally collusion with ratings agencies that are to blame...not the short sellers that alert investors to them in the first place. “The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets,” Christopher Cox said yesterday. Apparently Mr. Cox was oblivious to the irony of his statement. The SEC has no problem with market manipulation, in other words, provided it is they who are doing the manipulating. “The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets,” continued Cox. We wonder what sort of equilibrium can come from an up without a down? What mutant form of “equal” comes from allowing only one side of the equation? But far from inspiring fear and trepidation in the hearts of free market enthusiasts, this outlandish step by the financial Gestapo resulted in a 410 point Dow rally. Rather than running for the hills, investors took yesterday’s shameless intervention as their cue to don their rally caps. Call us cynical, but your editors tend to feel very uneasy when politicians get the urge to “do something” concerning the business of Mr. Market. Personally, we like it better when politicians are locked in battle amongst themselves. At least then they are less likely to “do something.” In fact, we’d feel most inclined to vote for the politician who ran with the slogan, “Vote Joe Blogs – We Promise to Do Nothing.” Alas, abstinence is not in the nature of the beast. Banning short selling may have delayed the inevitable force of market gravity, but it does not make bad debt good. Whether that debt is owned by moribund financial institutions or by the U.S. government, one day it will have to be repaid. Until that day comes, proceed with caution. [Ed. Note: Intervention of this magnitude has not reared it’s ugly head since the days of the Great Depression. During such times, we strongly recommend holding assets that represent no debt and which are nobody else’s liability. The obvious choice here is gold. If you want to add some of history’s idiocy hedge to your portfolio, but are unsure as to the best way to go about it, may we suggest giving the following report a quick read through. In it, you’ll learn five ways to safeguard your wealth by investing in our favorite yellow metal.
http://www.huffingtonpost.com/jim-moore/a-nation-of-village-idiot_b_127340.html Don't let them tell you this economic meltdown is a complicated mess. It's not. Our national financial crisis is readily understood by anyone who has seen greed and hypocrisy. But we are now witnessing them on a profound, monumental scale. Conservative Republicans always want the government to stay out of business and avoid regulation as long as they are making lots of money. When their greed, however, gets them into a fix, they are the first to cry out for rules and laws and taxpayer money to bail out their businesses. Obviously, Republicans are socialists. The Bush administration has decided to socialize the debt of the big Wall Street Firms. Taxpayers didn't get to enjoy any of the big money profits on the phony financial instruments like derivatives or bundled sub-prime paper, but we get the privilege of paying for their debt and failures. Let's just consider the money. The public bailout of insurance giant (becoming a dwarf) AIG is estimated at $85 billion. According to one report, that's more than the Bush administration spent on Aid to Families with Dependent Children during his entire time in office. That amount of money would also pay for health care for every man, woman, and child in America for at least six months. How did we get here? That's pretty easy to answer, too. His name is Phil Gramm. A few days after the Supreme Court made George W. Bush president in 2000, Gramm stuck something called the Commodity Futures Modernization Act into the budget bill. Nobody knew that the Texas senator was slipping America a 262 page poison pill. The Gramm Guts America Act was designed to keep regulators from controlling new financial tools described as credit "swaps." These are instruments like sub-prime mortgages bundled up and sold as securities. Under the Gramm law, neither the SEC nor the Commodities Futures Trading Commission (CFTC) were able to examine financial institutions like hedge funds or investment banks to guarantee they had the assets necessary to cover losses they were guaranteeing. This isn't small beer we are talking about here. The market for these fancy financial instruments they don't expect us little people to understand is estimated at $60 trillion annually, which amounts to almost four times the entire US stock market. And Senator Phil Gramm wanted it completely unregulated. So did Alan Greenspan, who supported the legislation and is now running around to the talk shows jabbering about the horror of it all. Before the highly paid lobbyists were done slinging their gold card guts about the halls of congress, every one from hedge funds to banks were playing with fire for fun and profit. Gramm didn't just make a fairy tale world for Wall Street, though. He included in his bill a provision that prevented the regulation of energy trading markets, which led us to the Enron collapse. There was no collapse of the house of Gramm, however, because his wife Wendy, who once headed up the Commodities Futures Trading Commission, took a job on the Enron board that provided almost $2 million to their household kitty. And why not? Wendy got a CFTC rule passed that kept the federal government from regulating energy futures contracts at Enron. If John McCain gets elected and chooses Phil Gramm as his Treasury Secretary, which many politico types see as likely, they will be able to talk about the good old days when Gramm was in congress and McCain was in the senate and they were in the midst of the Savings and Loan crisis. The S and L scandal, which may look precious when compared to our present cascade of problems, isn't hard to understand, either. But it is impossible to take John McCain seriously on our current financial Armageddon since he was dabbling in the historic collapse of 747 S&Ls that occurred during Ronald Reagan's era. In the early 80s under the Republican president, congress deregulated the savings and loan industry in much the same way that Gramm made sure there were no laws hindering our current financial malefactors on Wall Street. S&Ls simply lobbied until they had less regulation and then began making rampant, unsound investments. The guy who was going the wildest with financial freedom was Charles Keating, who headed up Lincoln Savings and Loan of California. Because the S&L industry had managed to get congress to increase FDIC insurance from $40,000 to $100,000 on deposits, the irresponsible investing of people like Keating began to put taxpayer insurance funds at great risk of loss. Keating placed money in junk bonds and questionable real estate projects and because so many other S&Ls started acting the same way the Federal Home Loan Bank Board (FHLBB) began to push for a regulation that limited these dangerous speculative "direct" investments to 10% of an S&L's assets. And Keating didn't like it; he called on a private economist named Alan Greenspan, who promptly produced a study saying that there was no danger in "direct" investments. But that didn't convince the FHLBB and as further scrutiny showed Lincoln Savings and Loan was making even more historically bad investment decisions, a federal investigation was launched. So Keating called his home state senator John McCain. McCain and four other US senators (known to history as the Keating Five) met with Edwin Gray, then chairman of the FHLBB. McCain had been hesitant to attend but had reportedly been called a "wimp" behind his back by Keating. The message to the FHLBB and Gray from the Keating Five was to lay off Lincoln and cool the investigation. Gray and the FHLBB did not relent but Lincoln stayed in business until 1989 when it collapsed with the rest of the S&L industry. The life savings of more than 20,000 elderly investors disappeared with the failure of Lincoln. Keating went to prison for five years. Charles Keating was John McCain's pal. They met in 1981 and Keating dumped $112,000 in the McCain campaign bank accounts between '82 and '87. A year before McCain met with the FHLBB regulators, his wife Cindy and her father, according to newspaper reports at the time, invested about $360,000 in one of Keating's shopping centers. The Arizona Republic reported McCain and his wife and their babysitter took nine trips on Keating's private jet to the Bahamas to stay at the S&L liar's decadent Cat Cay resort. The senator didn't pay Keating back for the plane rides until years later when he was under investigation. McCain wasn't found guilty of anything but bad judgment, which is an historic understatement. Republicans, who led deregulation of the S&L industry, delayed the bailout until after the 1988 election to make sure George H. W. won the White House. The cost to taxpayers for helping these 747 bad actors in the S&L industry was finally estimated at $1.4 trillion. If the bailout had begun in 1986 instead of after the presidential election, the cost would have been contained at $20 billion. And now the Republicans who engineered our present crisis and got us into the S&L debacle of the 80s are before us saying the markets need regulation. No, actually, they don't need regulation. Why don't you Republican capitalists who believe in the free markets get out of the damned way and let them work and allow these various financial nuthouses be crushed by the weight of their own stupidity? When it is all over, we'll have sane and sober people create laws to make sure it doesn't happen again, assuming we survive this chaos. Also, while you are handing out our tax money to idiots on Wall Street, save a little of the long green for the unemployed auto and construction workers and all of the other people who have lost their jobs because you were too stupid to notice what Phil Gramm was doing and you were convinced everything was going to be just fine because the markets work. These, then, are the people -- the Republicans -- who want to run our government for four more years. John McCain isn't just one of them. He rides their jets. He takes their campaign donations. He makes them his campaign advisors. And he tells us to trust him. He must think we are a nation of village idiots. Hell, maybe we are.
Posted On: Friday, September 19, 2008, 9:49:00 AM EST Potential Infinite Bailouts To Explode Money Supply Author: Jim Sinclair Dear Friends, Today's reported potential infinite bailout of all and any portends, if adopted, is the largest increase in dollars outstanding since the Jurassic Age. It closely models actions undertaken regarding the production of currency liquidity seen in the "Weimar Republic." It is reported now that more than 1000 hedge funds are on the rocks. This has the potential for a significant financial impact. The only way to hide the numbers from the statistics produced by the suspected actions of the Fed is to value the indebtedness purchased at 100%, claiming a wash transaction. The only conclusion is that when the smoke clears and the advertised actions have been adopted, nothing more dollar negative than this has ever occurred due to the potential expansion of T bills and therefore dollar supply explosion. Gold is the only currency with no liability attached to it which, as you have seen recently, will be selected as the currency of the people. Respectfully yours, Jim
Thursday, September 18, 2008
WE ARE ALL FUCKED! Turned on the TV, it was on MSNBC, Morning Joe... Pat Buchanan was speaking the truth...for once... Arie Fliescher, neocon Mouth for Hire was spewing lies.. Joe Scarborough, biggest fool on the planet and Mika Brezinski, you know who's daughter control the conversation like they had a clue. THERE IS SO MUCH BULLSHIT FLYING AROUND on TV that it is a wonder we don't have mass suicides by now. Folks, the Guv'mint pulled out everything but the Nuclear Bomb yesterday. Osamba bin Laden must be laughing heartily, because he has completely SUCCEEDED in getting our IDIOT IN CHIEF, BUSH to BANKRUPT this nation in an unwinnable war. We are now the NEW ZIMBABWE OR UNITED STATES OF ENRON. Gold will boom even higher and faster now as it has to absorb ALL THE LOST VALUE of PAPER MONEY which now is so profuse that it will soon block out the sun. This is a VERY DANGEROUS TIME PEOPLE. WE ARE IN A STATE OF ECONOMIC COLLAPSE and it's in HIGH GEAR! It doesn't do any good to describe the individual markets right now because they will all change on a dime. Most significanat is that BONDS ARE FALLING so long term interest rates ARE GOING UP! And they will continue up until they attract investors into the Dollar. Go to ZIMBABWE for current experience in this predicament and take a large bag to carry your spending money in. No need to take toilet paper, as you will have it in the bag. More later... I could go on forever, as I am beyond furious at our "Leaders" Many executions should be in the works for lots of our most prominent people. My apologies to our Founding Fathers.
What a Hell of a day! Gold plays with us for the first part of the session but hangs in there against all opposition. Finally, the shorts give in and cover and gold skyrockets about $75 higher, only to have our wonderfully supportive Guv'mint jump into the Daily Spin Cycle and propose even more and bigger bailouts which causes the equities lemmings to think the solution has been found. Stocks run up, the CNBC BLABBER MOUTHS all chime in together that this is a good time to throw your money away even faster in the Stock Market. And the doofuses who have the only REAL MONEY in the World, GOLD, throw it away to the waiting Elite Vultures in the trenches. A Nation of Complete Idiots! This World is now DROWNING in Worthless Paper Money which is devaluing the already worthless Paper Money floating around faster and faster into the Earth's Toilet. I'm tired after only maybe four hours sleep in two days, so I'm going to bed early to recuperate. PLEASE read the following two articles by my new favorite authors: ELAINE MEINEL SUPKIS BANKRUPT FEDERAL RESERVE WILL SPRAY THE EARTH WITH DOLLARS http://elainemeinelsupkis.typepad.com/ezmoneymatters/2008/09/bankrupt-federa.html BOB CHAPMAN ALL ROADS LEAD TO HYPERINFLATION http://theinternationalforecaster.com/International_Forecaster_Weekly/All_Roads_Lead_To_Hyperinflation DO NOT AVOID LONG ARTICLES. You learn the most from them. Good Night and Good Luck tomorrow.
Leading indicators fall 0.5% in August By Rex Nutting Last update: 10:03 a.m. EDT Sept. 18, 2008Comments: 10 WASHINGTON (MarketWatch) -- The U.S. economy looks to weaken further in coming months. The index of leading economic indicators fell 0.5% in August after a 0.7% drop in July, the Conference Board reported Thursday. "The good news on lower gas prices is more than offset by renewed, even intensified, financial market turmoil. The economy right now is so slow that it doesn't have much cushion for shocks like the recent bailouts and bankruptcies," said Ken Goldstein, labor economist at the private research group.
Central banks aim to boost liquidity Fed provides additional $180 billion for short-term dollar auctions By William L. Watts, MarketWatch Last update: 7:40 a.m. EDT Sept. 18, 2008Comments: 156LONDON (MarketWatch) -- The world's biggest central banks moved Thursday to inject massive amounts of liquidity into the financial system in a bid to alleviate extreme distress in short-term, dollar-denominated money markets. http://www.marketwatch.com/news/story/central-banks-flood-credit-markets/story.aspx?guid=%7B94F2A55B%2D5E97%2D4445%2D89EA%2D3E10D4B7D733%7D
U.S. weekly initial jobless claims rise 10,000 to 455,000 By Robert Schroeder Last update: 8:30 a.m. EDT Sept. 18, 2008Comments: 2 WASHINGTON (MarketWatch) -- Initial claims for state jobless benefits rose by 10,000 to 455,000 in the week ending Sept. 13 as residents of Louisiana hit by Hurricane Gustav filed for benefits, the Labor Department said Thursday. The four-week average of initial claims also rose, by 5,000, to 445,000. The number of continuing claims fell to 3.47 million, a drop of 55,000, for the week ending Sept. 6. The four-week average of continuing claims stayed at close to a five-year high, rising by 29,750 to 3.46 million.
TODAY'S REPORTS: Jobless claims Philly Fed Leading indicators Well, I tried to stay up all night to monitor this market, as I finally lifted the short leg of my hedge late last night, but only made it until just before 2:00AM PDST before I just HAD to close my eyes for an hour. The alarm went off at 3:00am and I hit the snooze button. Another hour and a half later I opened my eyes in a daze praying that the market hadn't moved against me. It had been higher, to 88950, but has pulled back from there and is now moving up again. The news that the Central Banks of the World have agreed to inject about $180 BILLION (DOWN from the original $360 BILLION proposed)into the ECONOMIC BLOOD STREAM of the World began last night around 10pm pdst. CNBC is easier to watch in the LATE NIGHT, as all the American coked out fools aren't babbling. But everyone was VERY excited about the newest economic event, somewhat like if a Martian Space Ship had landed on the White House Lawn. Far too many of even the older commenters would say, "I've never seen anything like this in my career!"...Hell, I have...twice! This is the old "burn the Dollar down" scenario that Sinclair has predicted would happen. The nuts will flood the World with paper before they will ever admit they have screwed up and killed the World and don't have a clue what they're doing. The WORST would be that they DO KNOW what they're doing and their intention all along was to murder a couple of BILLION of us to de-populate the world to allow the limited resources of the Earth to be consumed by THEM. It's the age-old CONSPIRACY of the Illuminati/Freemason running the World from behind the Curtain... I believe it completely. The Euro has been climbing well all the way up to 1.4542, but is now at 1.4475. The Dollar sank last night to .7731 but is now at .7761 or so. Good for gold. Let's pray that gold skyrockets on the opening and just keeps going simply because the World now knows that The United States IS BANKRUPT! Read Elaine Meinel Supkis...she is eloquent! It's 5AM PDST...Time for Charts. Good luck to you all. I will be very busy protecting my open long position, so charts may be few until later in the day.
Central banks aim to boost liquidity Fed boosts swap facilities as short-term money markets freeze By William L. Watts, MarketWatch EDT Sept. 18, 2008 LONDON (MarketWatch) - The Federal Reserve and other major central banks announced Thursday they would inject hundreds of billions of dollars worth of liquidity into the financial system in a bid to thaw frozen short-term money markets. http://www.marketwatch.com/news/story/central-banks-coordinated-liquidity-boost/story.aspx?guid=%7B94F2A55B%2D5E97%2D4445%2D89EA%2D3E10D4B7D733%7D
Wednesday, September 17, 2008
US Economy: Rudderless and Reeling From Direct Hits A raid on private pensions? By Paul Craig Roberts EXCERPT "A country that had intelligent leaders would recognize its dire straits, stop its gratuitous wars, and slash its massive military budget, which exceeds that of the rest of the world combined. But a country whose foreign policy goal is world hegemony will continue on the path to destruction until the rest of the world ceases to finance its existence." http://www.informationclearinghouse.info/article20771.htm
QUITE A RUN UP TODAY...LOOKS LIKE WE'RE BACK IN THE SADDLE FOLKS. BE PREPARED FOR PULLBACKS ALONG THE WAY AS VOLATILITY IS NOW GOING TO INCREASE DRAMATICALLY. YOU HAVE JUST SEEN YOUR FIRST $90 DAY, WHICH WILL BECOME COMMON FROM NOW ON, IN BOTH DIRECTIONS... BUT MORE THAN LIKELY NOT IN THE DOWN DIRECTION AS MUCH UNTIL WE GET QUITE A BIT HIGHER, WHEN $50 SWINGS WILL BE COMMON. AREN'T YOU GLAD YOU OWN SOME GOLD NOW? THE END OF AMERICA AS WE HAVE KNOWN IT IS NOW IN PROGRESS... BE ADAPTABLE IN ALL THINGS.
TODAY'S REPORTS: Housing starts Current account Gold has just touched, and gone slightly above, the 75% retrace point at 78850 (see charts) Gold has been trading sideways in a range between a top of 794 and a low of around 777 yesterday and since. Monday the low was at 76740. The markets are constantly having to evaluate each new action taken by the "elites" as they put more tape on the new holes in the economy which I liken to a moist cardboard box with a heavy item in it. It keeps tearing and getting softer ready to disintegrate if anyone moves it too quickly or forcefully. We just have to have faith in THE FUNDAMENTALS and know that gold is soon going to explode when either someone moves the box too quickly, or the elites run out of tape. Hang in there as this game is all ours eventually. Just don't do anything rash if your emotions get to you. The reports are taking a backseat to all these bailouts as far as having an effect on price movement, but people are still watching and reacting to the data. The housing report has to say more bad stuff. The Current Account should be worse with the strong Dollar. Let's see how they manipulate it.
Tuesday, September 16, 2008
We are spoiled for choice this morning, dear reader; we scarcely know where to begin... ...with yesterday’s 504 point sell-off on Wall Street? ...with the biggest bankruptcy in Wall Street history – Lehman filed chapter 11 with $613 billion in debt? ...with our old dictum: the force of a correction is equal and opposite to the deception that preceded it? ...with another look at the Big Picture...at what it means for capitalism when its biggest firms go bust? ...with the past or the future? With a look back, at how a company that survived the Civil War, the railroad bankruptcies, the Panics, WWI, the Great Depression, WWII, and the Cold War couldn’t survive the biggest financial boom in Wall Street history? Or a look ahead, at what will happen after one of the biggest dealers in the $400 trillion derivative market bites the dust? Do we take the high road – with a lofty discourse on the perils of excess leverage? Nah...let’s take the low road: We told you so! Yes, dear reader, we watch the masters of the universe go down...with a fair amount of amusement and even schadenfreude. They claimed to be the smartest people on the planet – and demanded to be paid as if they were. They said they were doing the world a big favor – “allocating capital” so efficiently we would all get rich. And, of course, no one would get richer than they. But who could complain about their billions in bonuses when we were all getting rich? Now, it turns out, they weren’t so smart, after all. Like all hustlers, they weren’t smart enough to ignore their own lies. They were the ones who packaged up all that subprime debt – mortgage loans on over-priced property to people who couldn’t pay the money back; they knew what was in that “mystery meat.” Then, they got the useful stooges at the rating companies to call it Grade A. And then, they bought it themselves! What were they thinking? Not only that, they bought it on leverage – so that if it went bad, their whole company would go belly up! And now, mothers no longer want their babies to grow up to be stockbrokers and investment bankers. Now they want them to grow up to be bankruptcy lawyers! That’s where the money is! But let’s stop gloating and try to figure out what is going on... We are in a deflationary correction. The financial industry made a fortune by flogging debt; now it is taking huge losses because its collateral is going bad, its assets are declining in value and its business is soft. Merrill Lynch was worth $86 billion in January of 2007. Now, it is selling itself to the Bank of America for $50 billion. Why the sale? Because Merrill is afraid that it could go the way of Lehman Bros. That latter firm was worth $45 billion in February 2007. Now it is worth nothing...or close to nothing. Shares traded hands yesterday at 29 cents. Goldman Sachs, meanwhile, is said to be the best firm on the Street. But even it is suffering. It is supposed to announce revenues down 73% for the 3rd quarter. The handwriting has been on the wall for a long time. Once its collateral began to go down in ’07, the bubble in the financial industry couldn’t last long. We saw what was coming down the pike and have been sending our dear readers to the Strategic Financial Survival Library for resources on how to continue to make money in the coming bust. (If you haven’t checked it out, you can get access to the Survival Library here .) Still, unlike our readers, investors are shocked; they hadn’t bothered to read the headlines. Yesterday, they sold stocks and the dollar. Oil held stead – still over $100. The euro rose...and gold jumped $26. *** Speaking of gold... This week, Barron’s interviewed some sages of finance. “In a total disaster,” said Peter Bernstein, “where there is a run on paper currency, you'll get your biggest bang for your buck in gold...if everything hits the fan, gold should be worth several thousands dollars an ounce.” Yesterday, at least some investors must have seen a total disaster headed their way. They bought gold. But let us return to the big picture. For the last 13 years, the U.S. money supply has been increasing at about 2 times the rate of GDP. This is known, to monetary sticklers, as “inflation.” But the “inflation” that most people think of is the kind you see at the gas pump and supermarket checkout counter. Nobody squawks when the sticklers’ inflation raises house and stock prices. But nobody doesn’t squawk when it raise consumer prices. The monetary inflation of the last 13 years caused only modest consumer price inflation – for many reasons often described in these daily reckonings. To wit, China was making things cheaper. Wal-Mart was selling them cheaper. And the dollars spent by consumers in America tended to end up in the pockets of investors in Asia and Arabie, not in the U.S. domestic money supply. But all good things must come to an end...especially things that are too good to be true. And now, the great bubble in credit has been popped – and everyone’s squawking. The financial industry is in decline – and will probably not recover in our lifetimes. Inflation has given way to deflation. Just look at what happened to Lehman Bros. Hardly more than a year ago, investors had an asset worth $45 billion. Now they have nothing. What happened to that $45 billion? It disappeared. In California, the average house has lost about $120,000 (we are just guessing, but probably not far off) in market value. What happened to that $120,000? It disappeared. The Chinese stock market has disappeared half of investors’ money. The oil market has disappeared nearly a third of producers’ fondest hopes for future revenues. Jobs have disappeared. Sales are disappearing. Growth rates are disappearing. Bonuses have disappeared. And it is happening all over the world. Thanks to a globalized economy, the entire globe gets to suffer a slump. But what’s really new? This is what always happens when boom turns to bust. Asset values disappear. And with them, the money supply itself contracts. People spend less freely. They lend less recklessly. More money stays tucked away for longer periods in pockets and bank accounts. Prices fall. Many assets turn out to be worthless and many people go broke. Investors buy gold to protect themselves. Gold never overstates its earnings, understates its liabilities or declares bankruptcy. When everything else goes to Hell, gold is still there...still doing its job. Of course, the feds try to prevent nature from taking her course. They counter a natural correction with further unnatural deception. They lend at lower rates than those set by willing buyers and sellers. They spend even more recklessly than usual – often going to war in order to stir up financial activity. Today, for example, the Federal Reserve honchos will meet. The bank already lends to Wall Street at less than half the rate of consumer price inflation. The betting on Wall Street is that it will lower its key interest rates again – so that it can lend to Wall Street at even better rates. That’s one reason why Merrill wants to sell itself to the Bank of America – so that it can take advantage of more of this free money. Of course, when there is a serious correction, the financial authorities also make a great show of repairing the damage, supposedly caused by greed and the lack of regulation. Typically, there are a few show trials...a few rich people are ruined and run out of town...and new programs and regulations are put in place which tend to delay recovery and make the next bust-up even worse. But among one of the feds’ tricks, one is particularly dangerous: they can print money. Yes, dear reader, when the going gets rough, the feds turn on the printing press. That’s when owning gold really pays off. More on this...as the story develops... Until tomorrow, Bill Bonner The Daily Reckoning
SPOOKY STATS FROM THE U.S. MINT by The Mogambo Guru I had just gotten off the phone to find out why the silver I ordered last month has not arrived, and I get some runaround about how there is no silver to be had to fill my order. Naturally, being familiar with how the supply/demand dynamic works, I call the little clerk a lying piece of thieving garbage, because it is impossible that the market price of silver is going down in an environment of zero supply and obviously rising demand! Well, the phone mysteriously went dead right after that, and before I could call him back and REALLY tell him off, I see where this is common right now, as Theodore Butler says that “Premiums are up and delivery delays are longer. This is something we are all witnessing for the first time.” And James Turk at Free Market Gold & Money Report notes that it is the same thing in the gold market, too! He says that a normal person would assume that the size of the working stock of gold held by the United State’s Mint to make the popular Gold Eagle coins and miscellaneous trinkets would vary “from month to month, just like inventory varies from month to month in any business as a result of changes in production and the ebbs and flows in sales.” It gets spooky when he goes on to note that “indeed, the Mint’s inventory did vary monthly, up until March 2006. But according to the Treasury’s reports, the Mint’s working stock has remained exactly 2,783,218.656 ounces since April 2006. How is it possible that the Mint’s working stock has remained unchanged for 28 months?” Instantly I was on my feet, shouting, “Because they are all a bunch of lying, corrupt scumbags exploiting a fiat currency and insane levels of fractional-reserve banking, which is the very reason why you should be buying gold and silver in the first place!” I thought, you know, that this witty interruption of mine would impress Mr. Turk, and so I sat back down with a big smile on my face and crossed my arms in smug self-satisfaction as I waited for him to shower me with praise, and maybe offer to buy me a drink, or a pizza, or let me use his car for a couple of hours or days. Sure enough, he immediately said, “There are an infinite number of possible answers. Maybe the Treasury does not want to part with its remaining gold at these current low prices. Maybe the Treasury does not want Americans to exchange their fiat dollars for the safe haven of gold as the central banking fiat money scheme implodes. Maybe the Mint doesn’t have any gold because the 2,783,218.656 ounces were loaned out. Maybe the Treasury doesn’t have any gold either. Of course, no one really knows because the Treasury isn’t talking.” So, realizing that I am going to have to do more to impress Mr. Turk, I stand up and say, “I think it is all of these, and more! So much more! Maybe even involving creatures from outer space, probably in the form of spores; and these spores, see, have infected the brains of everybody except smart people like you and me, so that they could control the behaviors of members of Congress, the Federal Reserve, the media, the schools and most of the general moronic populace to cause the collapse of the world’s economy, whereupon flying saucers containing the Main Invasion Force (MIF) will appear and take over the world, whereupon everybody will cry out, ‘Save us, oh, Mighty, Mighty Mogambo (MMM)!’ and I will laugh – ‘hahahaha!’ – rudely in their faces and say, ‘It’s too late for that now! You should have listened to me years and years ago when I told you to either stop electing socialist/collectivist morons who will bankrupt us with allowing, and then spending, a fiat currency multiplied to ridiculous extremes by a ludicrous fractional-reserve banking system, or start buying gold and silver, but preferably both! So shut the hell up, you morons, because you are getting exactly what halfwits like you so Richly, Richly Deserve (RRD)!’” Apparently, Mr. Turk was not impressed by my insights, and has not been around many paranoid, schizoid, raving gold-bug lunatics like me, either. Obviously visibly shaken, he cleverly diverts my attention by appealing to my greed, and notes that the gold-mining XAU Index shows that “The XAU Index has fallen back to the bottom line of its long-term uptrend channel.” If you have ever worked with technical analysis, you know that the price of something that “has fallen back to the bottom line of its long-term uptrend channel” that has been in effect since October 2000 is one of those rare Holy Grail occurrences that make you salivate with sheer greed and all you can think of is, “Who can I borrow some money from with which to buy this asset at an interim low?” and “How much money am I going to make when the price of gold goes ‘boing!’ back up to the top of the channel and will it be enough to quit my stupid job?” On the other hand, the same XAU Index measured not in dollars but in grams of gold reveals that “It now takes only 5.0 goldgrams to purchase the XAU Index, just a whisker above the all-time historic low of 4.9 goldgrams reached in November 2000.” Such a paradox will obviously be resolved somehow, and Mr. Turk figures that “we will not see the prices of the mining stocks this dirt cheap again for years to come – if ever.” I’m betting he is right. You should, too, as that is the One Real Lesson (ORL) to be gleaned from the long, sad, sordid history of fiat currencies in the hands of governments; go gold! Until next time, The Mogambo Guru for The Daily Reckoning
Jim Sinclair’s Commentary Dominoes are falling all over the place. Did you know that the female Governor of the Fed who was advertised as their derivative expert retired over a year ago? Still love your ETF? Don’t! --------------------------------- AIG fears cause securities trading to halt By Rosie Murray-West Last Updated: 9:16pm BST 16/09/2008 Shareholders were left unable to trade popular commodity securities yesterday, due to fears over the future of their backer, AIG. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/17/cnetc117.xml
September 16, 2008 US To Declare October ‘Economic Emergency’, Suspend Elections By: Sorcha Faal http://www.whatdoesitmean.com/index1141.htm CREDIT TO CSPANJUNKIE FOR THE LINK WARNING BY geist: geist said... Sorcha Faal... Internet Hoax Queen Courtesy of David Booth... http://www.abovetopsecret.com/forum/thread304918/pg1 September 16, 2008 5:19 PM
Treasury International Capital (TIC) Data for July Treasury International Capital (TIC) data for July 2008 are released today and posted on the U.S. Treasury website (www.treas.gov/tic). The next release, which will report on data for August, is scheduled for October 16, 2008. Net foreign purchases of long-term securities were $6.1 billion. Net foreign purchases of long-term U.S. securities were negative $25.6 billion. Of this, net purchases by private foreign investors were negative $20.7 billion, and net purchases by foreign official institutions were negative $4.9 billion. U.S. residents sold a net $31.7 billion of long-term foreign securities. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been negative $8.2 billion. Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $8.4 billion. Foreign holdings of Treasury bills decreased $4.4 billion. Banks' own net dollar-denominated liabilities to foreign residents declined $58.1 billion. Monthly net TIC flows were negative $74.8 billion. Of this, net foreign private flows were negative $92.9 billion, and net foreign official flows were $18.2 billion. -------------------- NET OF 74.8 BILLION IS A GOOD NUMBER...WAIT UNTIL NEXT MONTH'S REPORT... WON'T EVEN BE CLOSE TO BEING HEALTHY.
TODAY'S REPORTS: Retail chain index Consumer price index Core CPI Home builders' index FOMC 2:15PM EASTERN TIC REPORT TODAY AT 9:00AM PDST The TIC Report should be very interesting, but not as much as next month's which will have more date from the present and begin to show the decrease in Foreign Flow of Funds to us. Right now gold has just rallied 75% plus of the sell off leg last night. So many things are going on right now it is almost impossible to guess where gold is going to move in the short term. Many people thought gold should have moved up $100 yesterday, but look what happened. In the long run, we all know where it's going, so be prepared for that because once gold starts moving up it will be fast and in large increments and you don't want to be trying to buy in that environment. My best suggestion for you all is to read Elaine Meinel Supkis, who is posting an enormous amount of current info laced with bits of History and some of the Elite's philosphy to explain why this all is really happening. Bob Chapman is excellent at telling you how the various elements are interacting to show why the various markets are moving the way the are. DON'T MISS OUT ON THIS INFO BECAUSE YOU DON'T LIKE TO READ LONG ARTICLES! I CAN'T CONDENSE THIS INFO INTO A SHORT COMMENT. My short comment is: BUY GOLD NOW! Good luck today..we're all going to need it from now on.
Monday, September 15, 2008
World Stock Markets Crash September 15, 2008 Elaine Meinel Supkis http://elainemeinelsupkis.typepad.com/ezmoneymatters/2008/09/world-stock-mar.html YOU SIMPLY MUST READ EVERYTHING THIS WOMEN POSTS EVERY DAY. SHE IS PROLIFIC BEYOND BELIEF!
TODAY'S REPORTS: Empire state index Industrial production Jim Sinclair's predictions all come true! What else can I add to it? Everything we have discussed for the past months will now come to pass. At the moment the markets are waiting for the stock market to open and everyone is in "prayer mode" hoping that this won't affect them... IT WILL! The idiots on CNBC are babbling incoherently trying to decipher this mess and haven't even come close to the truth... THE UNITED STATES IS NOW BANKRUPT! The bankruptcy of Lehman and all others who will now fail will start migrating through every institution in the country and then start moving out into the World like the ripples in a lake after a stone is thrown in it. THIS IS A HUGE STONE! I can't predict Human Nature, but always expect humans to take the stupidest actions in a crisis. This will be no different, so don't do anything drastic until you are willing to put your life and your survival on the pass line. If you have PMs...HANG ON TO THEM! If you DON'T have gold...CALL KATHY LUCATERO at MONEX... and get some NOW! Gold should EXPLODE very soon. Too bad Dan Norcini is trapped in the dark down in HOUSTON.