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Archive for September 2009

Money Talks, Gold Shouts

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Money Talks, Gold Shouts
By John Browne        
Sep 10 2009 2:39PM
In the second quarter of 2008, when it became clear that bankrupted financial institutions would be bailed out by the federal government, gold did a funny thing. In the wake of a financial crisis of that magnitude, one normally would have expected asset prices, including gold, to plummet. Most observers expected the metal to dip from the $800 level down to $600, or below. Instead, gold held up well during the teeth of the crisis, and has recently increased to just over $1,000.
The biggest change in the gold market has been the unwillingness of certain governments to sell their gold. Some powerful states, such as China, are beginning to hoard gold and to become net sellers of U.S. Treasury securities. In addition, private investors are buying so many gold coins that fabrication plants are months behind on physical deliveries. In short, individuals, institutions and governments are losing faith in paper currencies, particularly the U.S. dollar. Despite the opportunity cost associated with trading interest-bearing government securities for pay-to-store bullion, they are buying gold.
Throughout much of recorded history, gold has proved to be the ultimate form of money. Due to its inherent scarcity, it has been the bane of governments who wished to spend more that they had or could borrow. Certain governments even diluted the gold content of their coins in order to dupe buyers.
The United States entered into federation with a sole reliance on gold as its legal tender. It was not until the Civil War that the U.S. government issues its first paper currency. However, this was not fiat money. All currency issued was backed by gold, and later by silver. But over the years, the backing was withdrawn as government looked to expand the money supply. By 1933, every $20 note was backed by only one ounce of gold at the Federal Reserve. That year, the Fed refused President Roosevelt’s request to further dilute the gold backing of dollars. In response, Roosevelt confiscated gold from all Americans. The Fed acquiesced and printed more paper dollars.
Not content, Roosevelt devalued the U.S. dollar by 75 percent against gold the next year, unleashing a great inflation. Every American who had surrendered gold in 1933 lost 75 percent. Those who owned no gold proclaimed Roosevelt a hero.
In 1971, President Nixon broke the U.S. dollar’s last link to gold, prompting the second great inflationary wave. Inflation became so bad that gold rose from $35 to $850 an ounce by 1981.
In more recent history, President Bush II and former Fed Chairman Alan Greenspan elevated the process monetary debasement into an art form, creating the largest asset boom in history and sowing the seeds of collapse in the financial system. They left the U.S. dollar so debased that the 1980 gold price of $850 is equivalent to $2,200 in today’s shattered currency!
It follows that, at $1,000 an ounce, gold stands at less than half its historic peak. In a recession, when cash is scarce and price levels are falling, it is amazing that gold stands as high as it does. One can only guess where the price will go when the trillions of dollars of electronic government bailout dollars start vigorously circulating.
If we were to return to a gold standard today, each ounce of gold held at the Fed would have to back a breathtaking $39,000 dollar bills. It is a far (1,950 times) cry from the $20 for each ounce of gold of just seventy-six years ago! Is it any wonder that the euro, the currency of the nascent European Union, stands just a shade below its all time high of $1.45?
These signs of chronic monetary decay have not been lost on individual investors or governments holding U.S. dollar surpluses. The key player in this respect is China, the largest holder of U.S. Treasuries – and now the world’s largest gold producer.
Recently, my friend Ambrose Evans-Pritchard reported in the London Telegraph on his interview with Mr. Cheng Siwei, Vice Chairman of China’s Communist Party’s Standing Committee. According to Evans-Pritchard, Mr. Siwei said, “Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not [to] stimulate the market.”
This single statement should send shivers down the necks of all who believe in the paper currencies of debtor countries. Similarly, it should warm the heart of all those who already own gold. China has indeed resisted upsetting the international gold market with massive purchases. Quietly, she has merely ‘diverted’ part of her own production into her treasury vaults!
Also, China has sought to protect its citizens from the debasement of paper currencies by lifting restrictions on its citizens’ ownership of precious metals. They can be expected to be large buyers of gold and silver (‘poor man’s gold,’ at only $15 an ounce).
In order to protect themselves from the ravages of governments who believe in massive deficit-financed entitlements, Western citizens should think carefully about whether to trust paper currency over real money. Its an easy decision to reach.

by John Browne
Originally posted Sep 10 2009
http://www.europac.net

IN THE SECOND QUARTER OF 2008, when it became clear that bankrupted financial institutions would be bailed out by the federal government, gold did a funny thing. In the wake of a financial crisis of that magnitude, one normally would have expected asset prices, including gold, to plummet. Most observers expected the metal to dip from the $800 level down to $600, or below. Instead, gold held up well during the teeth of the crisis, and has recently increased to just over $1,000.

The biggest change in the gold market has been the unwillingness of certain governments to sell their gold. Some powerful states, such as China, are beginning to hoard gold and to become net sellers of U.S. Treasury securities. In addition, private investors are buying so many gold coins that fabrication plants are months behind on physical deliveries. In short, individuals, institutions and governments are losing faith in paper currencies, particularly the U.S. dollar. Despite the opportunity cost associated with trading interest-bearing government securities for pay-to-store bullion, they are buying gold.

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Written by aurick

13/09/2009 at 11:52 pm

The Federal Reserve is Immoral

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The Federal Reserve is Immoral
Posted 13 Aug 2009
During the first few days of each month comes a task that is increasingly approached with dread around here and, unfortunately, that condition is likely to persist for some time.

Shortly after banks make their month-end update to various short-term savings accounts that we hold, these balances are queried, only to find that, almost without exception, interest credited is less than it was in prior months and far less than it was eight or ten months ago.

Why?

Largely as a result of the Federal Reserve keeping short-term interest rates pegged to zero.

You see, aside from some Certificates of Deposit that were locked up late last year which, today, provide the strangest of feelings during a very strange period in history (i.e., feeling lucky to get about 2.5 percent interest for a one-year CD), it’s nearly impossible to get more than a two percent return these days on any kind of an FDIC-insured account and, more likely than not, you’ll get less than one percent.

Speaking as one who knows from experience, there’s a big difference between one or two percent and five or six percent, what used to be the “minimum” rate of return for a super-safe savings account backed by the government.

More importantly, if this is causing us angst every month, I can only imagine what it’s doing to the budgets of other savers whose finances are far less comfortable than ours.

Put simply, the freakishly low short-term interest rates that the Federal Reserve is jamming down everyone’s throat are immoral and, maybe, just maybe, a lot more people are beginning to see this, along with other practices of our central bank that are just not right.

Maybe, just maybe, something will finally be done about reforming (or, as suggested by Rep. Ron Paul, abolishing) this banking cartel – hopefully before the Fed celebrates its 100-year anniversary in a few years.

Just to be clear on the terminology here, Merriam-Webster offers the following:
immoral
adjective
not moral; broadly : conflicting with generally or traditionally held moral principles

moral
adjective
1a: of or relating to principles of right and wrong in behavior
Setting aside questions about the dark veil of secrecy surrounding who and how much the central bank has been helping with their problem loans, problem assets, and problems staying solvent, there are at least three ways that the organization David Wessel calls “the fourth branch of government” is acting badly these days – by punishing savers, by enriching the banks, and by fleecing the poor.

Of course, none of this is really new – it all just seems a whole lot more relevant today than ever before given the current state of affairs in this country and around the world.

Punish the Savers

As noted above, it used to be that you could always count on getting five or six percent interest in a “no-risk” savings account backed by the FDIC. In fact, going all the way back to 1955 (when the interest rate data at the Fed’s website stops), the average short-term lending rate is right between those two marks – 5.66 percent.

Ever since I was a teenager, I can remember thinking, “If I could somehow amass a million dollars, that would surely generate enough money to live on for the rest of my life”.

Well, welcome to the 21st century, where the asset bubbles keep a-poppin’ and the interest rates keep a-droppin’.

Over most of the last hundred years, aside from the dollar losing more than 90 percent of its purchasing power (versus a loss of zero during the prior ten decades), there hasn’t been too much to complain about in the Fed’s management of money and interest rates but, since asset bubbles and the attendant “mopping up” process have become a way of life, the rate of return on savings has been abysmal.

With the exception of the “baby-steps” rate raising campaign a few years ago, the Fed funds rate has been below two percent since 2002 – after the decade’s first asset bubble met its pin.

Now, if there was a good reason for keeping rates so low, this might all make some sense to senior citizens who have looked disappointingly at their bank statements for years, but given the fact that the low-rates in 2002-2004 led to the housing and credit bubbles forming and then bursting a few years later, and here we are with even lower rates today, all of this should make anyone with half a brain realize that there is something seriously wrong with the system as it currently operates.

In a nation in dire need of internal savings, the fact that savers are being punished as never before is just plain wrong – immoral – and the idea that we live in an era of “low inflation” is just salt rubbed in the wounds of senior citizens who, year after year, watch prices for health care and energy rise by some multiple of the one or two percent they can earn on their savings.

Twenty years from now (perhaps sooner), they’ll look back on today’s monetary policy and say to themselves, “What were they thinking, punishing the savers like that when the U.S. desperately needed savings?”

Enrich the Banks

As if it weren’t bad enough that savers are cheated every time the Federal Reserve lowers interest rates, the worst part is that banks are the beneficiaries.

You see, in addition to buying up many of the bad assets previously held on bank’s books over the last year or so – the result of waves of imprudent bank lending – when the Fed lowers interest rates it helps to make the business of banking much more profitable and, conventional wisdom has it that our financed-based economy will then begin to recover.

And when the banks can borrow at these super-low rates, that means that savers can’t earn much more in interest.

Banks come first and savers are far down on the list.

Why does the system work this way?

Well, most people haven’t got a clue what the Federal Reserve is or what it does (though, understandably, there is growing interest in this topic, ever since the wheels fell off of the global economy last fall), but the crucial bit of information that the now-slightly-more-curious public should learn quickly is that the central bank was not set up to help the people or the government, but, rather, to help the big banks.

In fact, according to G. Edward Griffin, who happened to write a whole book on the subject, the very reason that the Federal Reserve was formed back in 1913 was so that big banks could wrest back control of the banking system from the many small, fledgling, independent banks all around the country that were taking away their business.

Look around you today. You might see lots of little banks failing, but only a few large ones ever go under and none of the country’s biggest banks ever fail.

The Fed was created by the big banks, for the big banks, and its unwritten “mission statement” is to do whatever it takes to ensure the survival and profitability of those big banks, getting the government to step in with public money when necessary for “the greater good”, effectively socializing the losses while keeping the gains in private hands.

That’s why what we have today – a wholly unsustainable system of ever-expanding credit and debt dominated by a handful of “too big to fail” banks – keeps getting propped up.

The masses are led to believe that credit is the “lifeblood of the economy” when, in fact, credit is the lifeblood of a banking system that has, over time, sucked the life out of the economy.

It’s hard to imagine anything that is more immoral than the Federal Reserve’s role in this process, now almost a hundred years in the making.

Fleece the Poor

In arriving at the third and final way that the Federal Reserve is immoral, clearly, that last thought in the previous section was premature.

In fact, there is one very good example of something being done today by the central bank that is even more immoral than a nearly century long wealth transfer from the public sector to the private banking system – the ongoing assistance being provided by the Fed in helping the banking system reach out and find new customers so that every possible dollar can be extracted from them.

You see, the country’s big banks (along with the central bank that serves their interests) would much prefer that poor people all across the country not go to a place like you see to the right and, for a small fee, convert their paycheck into cash and forever live within their means.

Bankers would much rather see the nation’s poor open up checking accounts and then venture further into the world of modern day banking, quickly learning to spend well beyond their means.

Left unsaid in the Fed’s many efforts to reach out to the “unbanked” is that checking accounts are a sort of “gateway drug” for many people – a road to debt serfdom where, in addition to paying interest on money borrowed to buy stuff that they don’t need, these “newly banked” poor will also be fleeced by a bewildering array of fees and charges in a system that is set up to systematically suck as much money out of as many people as possible.

Over the years, the Federal Reserve has made great efforts to attract new customers for banks, in some cases providing cartoon characters to make the whole idea of debt serfdom seem like a friendly sort of condition, much in the same way that Joe Camel once attracted new smokers.

Under the guise of “education” and with “consumer protection” as its goal, the Federal Reserve might seem to be “looking out for the little guy”, but they’re not. They’ve had the power to do this for many years now but, for obvious reasons, have exercised their “power to protect” the consumer only sparingly, allowing millions of subprime borrowers to give the housing bubble one last giant hurrah before it finally burst.

Fortunately, it appears that the Obama administration would like to see the American consumers’ interests watched over by some other group and for good reason. A report earlier in the week in the Financial Times detailed how big banks in the U.S. plan to extract almost $40 billion in overdraft fees from American consumers whose balance sheets haven’t been bolstered by government bailouts.

It seems that, with the collapse of the mortgage finance bubble, big banks are now reverting to a profit model that is driven more by extracting fees from their customers wherever possible and overdraft fees from the cash-strapped are “the mother lode”.

A full 90 percent of overdraft fees come from just 10 percent of all checking accounts and most of this 10 percent have low credit scores and/or are recent entrants to the world of mainstream banking.

Not surprisingly, the highest overdraft fees come from the biggest banks – Citigroup, Bank of America, JP Morgan Chase, Wells Fargo, SunTrust, and Citizens Bank.

For banks, overdraft fees are a low risk, high profit part of their business, not something that is usually mentioned as part of the Fed’s outreach programs. It is a sophisticated, large scale sort of “payday loan” system that many Americans fall prey to and, as long as customers have their payroll checks automatically deposited, the bank will always have first crack at the money and people will continue to spend more than they make because, when you get down to the very basics here, most people aren’t very good at math.

But, banks are.

Maybe Ron Paul is right – the Fed should be abolished.

Then markets could set interest rates, banks would have to fend for themselves, and there would be one less group helping to extract what little money the poor have left.
Tim Iacono
Iacono Research.com
Read all the other articles written by Tim Iacono

by Tim Iacono
Iacono Research.com
Originally posted 13 Aug 2009

DURING THE FIRST FEW DAYS OF EACH MONTH comes a task that is increasingly approached with dread around here and, unfortunately, that condition is likely to persist for some time.

Shortly after banks make their month-end update to various short-term savings accounts that we hold, these balances are queried, only to find that, almost without exception, interest credited is less than it was in prior months and far less than it was eight or ten months ago.

Why?
Largely as a result of the Federal Reserve keeping short-term interest rates pegged to zero.
You see, aside from some Certificates of Deposit that were locked up late last year which, today, provide the strangest of feelings during a very strange period in history (i.e., feeling lucky to get about 2.5 percent interest for a one-year CD), it’s nearly impossible to get more than a two percent return these days on any kind of an FDIC-insured account and, more likely than not, you’ll get less than one percent.

Speaking as one who knows from experience, there’s a big difference between one or two percent and five or six percent, what used to be the “minimum” rate of return for a super-safe savings account backed by the government. More importantly, if this is causing us angst every month, I can only imagine what it’s doing to the budgets of other savers whose finances are far less comfortable than ours.

Read the rest of this entry »

Guess What? He’s a Terrible President

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August 19, 2009
Guess What? He’s a Terrible President
By DAVID MICHAEL GREEN
Both President Obama’s health care plan and his presidency are going down the toilet.
This is well, and right, and just as it should be.
Obama is turning out to be a disastrous president, wholly unsuited for the times and our national and global challenges, and his job approval ratings reflect this.
In Obama, we get all the corporate toadying of the last Democratic president, along with an even greater unwillingness than Clinton – and who would’ve thought that was possible – to name names, call out enemies, and throw a freakin’ punch every other year or so.  (We’re also getting a continuation of the civil rights and civil liberties policies of Dick Cheney, as an extra added bonus, but that’s another story.)  What makes it even more astonishing this time around, however, is that we’ve seen this movie before, and we know how it ends.  There is apparently absolutely no bottom – as the events of recent weeks have reconfirmed – to the pit of vicious lies, brutal tactics, and democracy-demolishing antics of which regressives will avail themselves in their practice of contemporary American politics.  In addition to not being prepared for that, Barack Obama is still seemingly unable to raise his voice a decibel or two against the very people who are helping him to destroy his own presidency.  Indeed, he is negotiating ‘bipartisan’ (read:  total capitulation) deals with them, even as they relentlessly trash him before a national audience.
Is this president so deluded that he believes there are limitations on what the right will do not only to the republic, for which Obama seems to have only passing regard, but also to his presidency, for which we might imagine he would have at least some concern?  Does the Kumbaya Kid think that regressives won’t seek to annihilate him every bit as much as they did Bill Clinton, even as they are obsessing at this very moment over harebrained conspiracy stories challenging his very legal right to be president, his very citizenship?  Does this guy who seems to want, more than anything, for everyone just to be happy and sing along in the same key, still really believe in bipartisanship, at the very moment when the very people with whom he is negotiating are reinforcing the most absurd and inflammatory lies asserting the elder-cide intentions of his health-care bill?
Sorry.  Did I say “his health-care bill”?  Problem number one here is that there’s no such thing.  As in just about everything else of consequence this administration has been involved in, he seems quite content to simply defer to Congress and allow the sausage-making process on the Hill to generate precisely the policy abomination one might expect, with all the political liabilities we’ve come to know and love from such a dispiriting collection of 535 (minus two or three) moral midgets.
Sorry.  Did I say “defer to Congress”?  Looks like I goofed again.  What this really means – and this is problem number two – is deferring to a select group of members of Congress.  In particular, conservative Democrats and supposedly moderate Republicans (you know, like fuel-efficient Hummers).  Right now, for example, probably the two most important actors in America on the healthcare question are Max Baucus and Chuck Grassley.  Both have received massive campaign contributions from the industries which have most at stake in this legislation.  No doubt, however, that’s entirely a coincidence.  What they are doing right now, and what Obama is allowing them to do, is nothing less than neutering any serious aspects of healthcare reform.  In the end, having succeeded at doing that, and being the tail that wags the entire dog of this 300 million person country, Grassley won’t even vote for the bill, nor will any Republican.  As in the stimulus bill, Obama continues to allow legislation to be murdered by a thousand cuts.  All in the name of some bipartisanship god he has taken to worshiping, even though none of the knife-wielders will be around to go anywhere near the stinking corpse they’ve created when it’s eventually tossed up on the congressional slab for a vote.  Seems pretty nutty to me, but I guess when you stop and think about it, Obama’s definition of bipartisan participation in the legislative process really does make sense after all:  Republicans murder the bill, then Democrats vote for it.  Everybody gets to play a part.  Everybody contributes.
From what can be gathered so far, the legislation will accomplish very little in terms of real reform, will diminish existing health-care programs, will nevertheless still exacerbate the explosion of national debt, and will not even begin to kick in until 2013.  Hey, for all the good this will do Americans, why not just complete the job and have all the benefits go to people living in Kuala Lumpur?
Will healthcare be universal in America, bringing this country into line with the standards of what every other industrialized democracy has practiced for the better part of a century?  No.  Will we massively increase the amount of actual health care we provide while eliminating the incredible bloat in costs of our predatory, special-interest oriented system by adopting the obvious no-brainer choice of the single-payer model?  Fat chance.  Will a real public option even be created, which might instantly show up the incredible profiteering and waste in the insurance industry, while simultaneously giving lie to the endless rhetoric about private sector efficiency and government bungling?  No, there won’t (but President Obama wants you to know he appreciates your asking).  The Capitulation Administration signaled this week that it is giving up on that as well.  Because of Republican opposition, of course.  You remember those guys don’t you?  The folks who have such small minorities in Congress that they can’t even muster forty percent of Senate votes to block consideration of legislation by filibuster?
That’s who Obama is caving to.  That’s who’s in charge.  It seems that we regular folks are in the process of getting a fresh education about the way American politics really works.  Evidently, there’s a new algorithm I wasn’t aware of.  It goes like this:  When Republicans control Congress and the White House, they rule.  When Democrats control Congress and the White House… Republicans still rule.  Okay.  Well at least we know how it works.  And it’s not necessarily all bad news, either.  No point in fussing with those messy elections anymore!
Meanwhile, one needn’t dig deep into the bowels of the thousands of pages of legalese contained within the five separate health-care proposals now making their way through Congress in order to figure out whether they contain good news or not.  You can tell a lot about somebody or something just by the company they keep.  Suffice it to say that both the insurance and pharmaceutical industries are now spending hundreds of millions of dollars running ads on television in favor of healthcare “reform”.  I can hardly think of a handier or more pure litmus test for determining whether this is good legislation or not.  If those guys are for it, and especially if they’re spending millions to make it happen, it’s a very safe bet that I’m against it.  And if those industries are for it, it’s a very safe bet that the deal is they get rich and we get nothing.  Except maybe poor.  And sick.
The pharmaceutical ads are especially galling, proving that there really is nothing immoral enough to be excluded from the discourse of American politics.  These spots feature the two actors who portrayed Harry and Louise – the very same marionettes who whored themselves back in 1993 and got a paycheck in exchange for making sure that tens of millions of Americans would be denied health care in every year since then.  Now they’re back, this time advocating for legislation rather than against it, and sanctimoniously telling us that “it’s about time” that “we may finally get healthcare reform”.  When “Sally” – slayer of American healthcare for a few shekels of blood money – righteously intones that, “with a little more cooperation, a little less politics, and we can get the job done this time”, I want to reach into the television and detach her head from the rest of her.  She certainly isn’t making any use of it.  I’d go for the heart, but that seems to have been removed long ago.  Is there some reason that these people haven’t been taken out back and shot?  And, failing that, do they have some sort of new, special, high-tech pillows that allow folks like this to sleep at night despite a 40,000 ton conscience crushing down on their skulls?
Now why in the world would the insurance and pharmaceutical industries be running ads in favor of healthcare reform?  I’m just thinking out loud here, but I wonder if it has anything to do with the deals that a certain Barack Obama has cut with them behind the scenes, promising to limit to pathetically minimal amounts any future inhibitions on the trough-gorging to which they’ve grown well accustomed.  In agreements which the New York Times has delicately characterized as “potentially at odds with the president’s rhetoric”, Obama has bought the support of these industries for a pittance.  At least, that is, a pittance of his capital.  The true costs will continue to fall on tens of millions of Americans with no or lousy healthcare, including the tens of thousands who die each year because of that simple fact.  In exchange for their political support, our ‘socialist’ president secretly promised the pharmaceutical and insurance industries that their costs under any new legislation would be capped at $80 and $155 billion, respectively, over ten years time.  In short – nickels and dimes.
One might be excused for beginning to get the feeling that what Obama really wants from healthcare reform is simply to be able to say that he did it.  No matter that there is almost no reform in his healthcare reform legislation.  No matter that he doesn’t even have his own proposal, but is deferring to the worst elements of a legislative body that is a wholly owned subsidiary of American corporate interests.  No matter that whatever little effect the legislation will have won’t even begin to be seen for another four years, and then will be phased in after that, over yet another period of several years.  And no matter that, even after the law goes into effect, this country will continue to suffer from all the major maladies of a system designed principally to provide profits for a few, rather than healthcare for all.
What continues to astonish me, however, is what passes for political calculus in the White House these days.  I never assumed that Obama would necessarily be any different from Bill Clinton, in the sense that he might actually have a set of good progressive politics or that he might actually give a damn about the American public.  No disappointment there (although did he have to be even worse than that, more like Bush than Clinton?).  However, I always assume that almost all politicians are completely consumed by the one thing that Clinton was ever truly passionate about:  self-interest.
But, even purely from that narrowest of perspectives, does the Obama team actually believe that their strategy is helping their guy politically?  Do they really like the way that their failure to articulate a plan, or even a set of fundamental principles, has worked out in terms of shaping the debate over healthcare?  Is it really their belief that they can go to the voters in 2012 and win their hearts with a nothingburger healthcare plan, passed three years prior, and due to fully kick in three years hence?  I hate more than a root canal sans novocaine to sound like one of the regressives whom I so very much loathe, but if this is the level of political sophistication to be found in the Obama White House, then, no, as a matter of fact, I really don’t want this clown negotiating with Vladimir Putin.
Barack Obama has given us the worst of all worlds. Passage of a healthcare reform bill – even something barely remotely worthy of the name – now seems like a dubious proposition. If it does pass, it won’t be worth squat.  Meanwhile, all the ugliest and most deceitful tactics of regressive politics have floated to the surface in the cesspool of American political discourse, weakly countered at best by a White House that could make SpongeBob SquarePants look like the love child of Genghis Khan and Joseph Stalin by comparison, and is so lame that it couldn’t anticipate and inoculate against these assaults that any fool who wasn’t entirely comatose over the last three decades could plainly see were coming. Worst of all, when the smoke finally clears, this debacle will entail a massive discrediting of so-called liberalism, and a severe imperiling of the Democratic Party (not that it much matters) in the next two election cycles. Think about that for a second.  How absolutely, utterly, magnificently inept does one have to be to have revived the hopes of the GOP, a mere 200 days after George W. Bush and Dick Cheney left office?  Not just any idiot could pull off a stunt that big, I tell ya. A job like that requires a world-class moron.
What Obama should have done is simple, and therefore all the more astonishing that they missed it.  First off, he should have formulated a serious plan (perhaps in faux negotiations with certain key congressional leaders, to make them feel powerful and included, perhaps not), and stuck with it.  At the very least, he should have articulated three or four non-negotiable key principles that he demanded from any healthcare legislation.  These should have revolved around ideas that are simple to grasp and clearly beneficial to non-elite Americans. He should have sold that plan at big staged events, such as televised addresses to both houses of Congress – rather than these pathetic press conferences he keeps giving, where the press can ask any question they want, and where an unscripted Professor Wonk rambles out ten minute answers, chock full of pauses and clauses, guaranteed to anesthetize his audience or divert their attention entirely, to another subject altogether (can you say “Henry Lewis Gates”?).
He should have named enemies, right from the beginning. He should have warned Americans about what these people would do in the ensuing weeks and months.  And he should have called them out on it, angrily and by name, when they in fact did it.  When they started lying and frightening senior citizens in order to protect their legalized scams from reform, he  should have slugged them so hard they were knocked on their fat corporate asses, never to rise again.  He should’ve called them greedy, selfish, treasonous traitors who are willing to lie and steal to further enrich their bloated selves, while tens of thousands of Americans die every year from lack of medical care.
Above all, what Obama should have done was shown some passion.  The unflappable conciliatory professor act has got to go. Here’s a newsflash (evidently) for the Obama White House:  If the president has any desire to sell his policies, he’s got to sell his policies.  If he wants to lead, he has to lead.  And if he wants our support, he’s got to tell us why this is important.  With juice.  Mr. Folksy isn’t getting it – not by a long shot.
Finally, Obama should’ve jammed his plan down the throats of Congress, where – though you’d never know it – his party commands massive and filibuster-proof majorities.  I don’t know about anyone else, but I don’t think the nineteenth century model of the presidency is particularly appropriate here in the twenty-first.  We got Social Security and the rest of the New Deal programs because Franklin Roosevelt twisted arms on Capitol Hill.  We got Medicare and Medicaid and civil rights because Lyndon Johnson nearly pulled those arms out of their sockets, jamming his bills through a reluctant Congress by means of big carrots, bigger sticks, and razor-sharp strategy.
What did Millard Fillmore get?  James Buchanan?  If you can’t remember, don’t worry – it doesn’t mean that you’re deficient as a student of American history.  It just means that they didn’t get anything worth remembering.  Why is it that, in our time, Ronald Reagan and George W. Bush get everything they want from Congress, while Bill Clinton and Barack Obama – even after they’ve completely sold out to Wall Street, and even when they have massive majorities in Congress – wind up as if they’re the main source of entertainment for the fellas on Cell Block D?  Neither FDR nor Harry Truman nor Lyndon Johnson would recognize the Democratic Party anymore.  Unless they inadvertently mistook it for a squashed bug in the foyer of the GOP’s headquarters.
Having lived through the incredibly dismal Clinton era, I’m not exactly surprised to have another Democratic president whose only real constituents can be found in corporate boardrooms.  I am, however, shocked to have one who seemingly learned nothing from the experience of the Clinton years, who appears to be even more conciliatory than the foolish “Please sir, may I have another?” Clinton himself was, and who apparently lacks any real instinct even for political self-preservation.
So I have to ask:  Hey, Barack.  How’s this working out for you?  In eight months time you’ve squandered a massive and historic opportunity.  You’ve resuscitated a murderously evil political party that, with a little shove in the right direction, might instead have been buried dead forever.  You’ve let just about anybody say just about anything regarding you and your policies, without consequence.  People are running around claiming that you’re gonna kill grannies, and millions believe them.  You’re being pilloried for the bogus failures of the British healthcare system, and your mealy-mouthed-room-temperature-yesterday’s-leftover-oatmeal proposal – such that you even have one – doesn’t even bear the slightest resemblance to the NHS.
You’ve produced nothing of consequence in your Hundred Days, nor even in two hundred.  Historians will not mention you in the same breath as FDR, but rather right alongside the wondrous Mr. Fillmore.  You’ve responded to epic crises with half-measures that have produced quarter-results.  In the short period of your presidency, your job approval ratings have fallen from the high sixties to the low fifties.  In addition to those numbers beginning to look a lot like the guy with a cane walking onto your stage, they represent twice the drop an idiot named George W. Bush sustained during his first eight months in office.  Maybe because he accomplished far more in that time.  Far more (horrid though it was), as a matter of fact, than you are likely to do in four years, at the rate you’re going.  Far more, even with a split Congress.  How about that, Brother Barack?  You’re getting your ass kicked by the worst president in all of American history.
So, dude, how’s this working out for you?
For me?  Not so good.  I was hoping for something else.  Know what I mean?
I will say, however, that you seem to be a very, very nice young man.  Yes, yes – very nice indeed.  Definitely.
So much so that I give you my word:  If I ever want someone for my president who is so nice that he even lets vicious political savages tear him to shreds while they’re wrecking the country at the same time…
I promise that you’ll have my vote.
David Michael Green is a professor of political science at Hofstra University in New York.  He is delighted to receive readers’ reactions to his articles (dmg@regressiveantidote.net), but regrets that time constraints do not always allow him to respond.  More of his work can be found at his website, http://www.regressiveantidote.net.

by David Michael Green
Posted originally August 19, 2009

BOTH PRESIDENT OBAMA’S health care plan and his presidency are going down the toilet. This is well, and right, and just as it should be.

Obama is turning out to be a disastrous president, wholly unsuited for the times and our national and global challenges, and his job approval ratings reflect this.

In Obama, we get all the corporate toadying of the last Democratic president, along with an even greater unwillingness than Clinton – and who would’ve thought that was possible – to name names, call out enemies, and throw a freakin’ punch every other year or so. (We’re also getting a continuation of the civil rights and civil liberties policies of Dick Cheney, as an extra added bonus, but that’s another story.)

What makes it even more astonishing this time around, however, is that we’ve seen this movie before, and we know how it ends. There is apparently absolutely no bottom – as the events of recent weeks have reconfirmed – to the pit of vicious lies, brutal tactics, and democracy-demolishing antics of which regressives will avail themselves in their practice of contemporary American politics. In addition to not being prepared for that, Barack Obama is still seemingly unable to raise his voice a decibel or two against the very people who are helping him to destroy his own presidency. Indeed, he is negotiating ‘bipartisan’ (read: total capitulation) deals with them, even as they relentlessly trash him before a national audience.

Is this president so deluded that he believes there are limitations on what the right will do not only to the republic, for which Obama seems to have only passing regard, but also to his presidency, for which we might imagine he would have at least some concern?

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Written by aurick

09/09/2009 at 11:30 pm

Fairy Tales of Recovery, Reality of More Failures

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Fairy Tales of Recovery, Reality of More Failures
by Bob Chapman
Originally posted: September 2 2009
Little recovery with bailout funds, More failures to come in credit card, loans, and commercial real estate, Other currencies are not the answer for anybody, since all currencies rise and fall in relation to gold and silver, foreign investors feasting on US banks, negative GDP decline in other major economies, perpetual crisis for perpetual government control, Things dont look good and a TARP wont cover it, US poverty rate now higher than Mexico or Turkey.
The Illuminists are desperate. They are appealing the Bloomberg directive to reveal who received funding to keep from going bankrupt from the Federal Reserve.
In addition HR 1207 will pass in the House this month. The question is in what form. No matter what happens the Illuminati knows we are hot on their trail. They have to do everything possible to end the depression, or go for broke.
Thus far there has been little recovery even with an official $23.7 trillion committed by the Treasury and the Fed. This number alone shows you how serious this situation is. The banking sector is still broke and is using TARP funds to buy out failing smaller banks. The residential TARP funds returned will go toward helping bail out the collapsing commercial real estate industry. Quantitative easing has not worked, nor has TARP and the endless stream of money from TALF. We are anxious to see if the FASB sticks to its guns and demands mark-to-market accounting. That will pull the cover off of the fraud known as mark-to-model, which really is mark to whatever you want it to be. As you can now see this is a much deeper problem than a subprime problem. That just triggered events. As we pointed out before we are still facing a new wave of subprime loans written over the past year by FHA, Ginnie Mae, Fannie Mae and Freddie Mac, plus ALT-A, Option ARMS Pick-and-Pay Loans and the failure of prime loans that will stretch to 2013. On top of that we have commercial real estate loans now to deal with and credit card failure. This is what the Illuminati crime syndicate has brought you in their lust for more power and riches. We must not forget as well, standing in the wings, are America’s creditors, especially the Chinese who are dumping $25 billion to $100 billion in dollar denominated assets monthly. Their goal is to be out of dollar paper in another 1-1/2 years. Then there are the other sellers. There are few buyers, so the Fed will have to monetize trillions of dollars in dollar denominated bonds, which they are doing secretly presently. It is no wonder they are terrified of an audit, which would not only uncover their illegal activities, but also expose their leadership and participation in the outrageous suppression of gold and silver prices. The status of foreign creditors could turn on a dime. We predict they will abandon ship one at a time, as the dollar slips lower and lower. The Fed and the Treasury have tried over and over to keep the USDX, dollar index, over 80 for weeks and they have been totally unsuccessful. It settled this past Friday at 78.31, just ready to break to new lows. We wonder how long these countries will tolerate such arrogance and the dream of world government? One must remember these countries are suffering the fallout of the actions that have been deliberately executed by these Illuminists and they are not happy about that. They are all suffering recession and many depression. It is only a matter of time before they too dump dollar denominated assets.
We would like to say for individuals caught up in this mess worldwide, other currencies are not the answer. Only gold and silver related assets are the answer. Remember that, for in the final analysis all currencies will fall in value versus gold and silver and there are no exceptions. We have been there before and seen that, so do not be deluded into going into other currencies, or shares in foreign markets denominated in other currencies, they are not the answer, only gold and silver are.
Then we hear the fairy tales of recovery in the US, Europe and Asia. If you spend enough money you can create a recovery albeit of short duration. No one is out of the woods. Europe, particularly the eurozone, has cut issuance of money and credit to 3.7% but they are maintaining interest rates at 1%, which is in reality ½%. The European recovery will be a parallel movement for a year and without more cheap money or an increase in money and credit it will die and wither away. Then there are the ongoing real estate collapses in the US, Ireland, Spain and in the Persian Gulf. There could be a bank panic or holiday in any of these regions. If a panic occurs the first liquid asset sold will be US Treasuries and Agencies and the US dollar. This would spread terror in Frankfurt, Paris, London and NYC. All these stock exchanges could collapse as well. The NYSE, FTSE, CAC and the DAX as countries in trouble sell everything not nailed down to simply survive. The world is about to find out that free trade and globalization has been a disaster. The millions of jobs lost in the US and Europe, so that transnational conglomerates could prosper is in the final stages of death. The redistribution of wealth from the rich to the poor countries is about to end in a shattering smash-up. The myth of worldwide prosperity is about to end. Contrary to prevailing thought the biggest losers will be world exporters, such as China, which has already seen a 40% fall in exports. All the money and credit creation we have seen in China over the past seven months, some $1.9 trillion, isn’t going to work. They still face 30 million unemployed. Those jobs are not going to return for a long time if ever. Out of desperation there eventually will be tariffs, legislated in the US, Europe and in other countries and inflation will rise as a result.
In America the safety net of the FDIC doesn’t exist. It is virtually broke and that is why a few months ago unofficially the FDIC asked government for $500 billion. Putting this into perspective, about $700 billion would insure about 1% of all the qualifying deposits in the US.
Not only will the Federal Reserve Transparency Act, HR-1207, pass the House, but also it will pass the Senate, because you are going to write every Senator demanding that they pass it.
If passed, we will see our gold inventories. We’ll find out what toxic garbage the Fed has been buying from banks and what they have paid for it. We will find out every company that received funds and how they were spent. We will subpoena every piece of correspondence, fax, e-mail and phone calls the Fed has ever made. We will get a real balance sheet; not some version the GAO approved. Wait until the public sees how the Fed and its owners have looted the people for almost 100 years.
Two Republican lawmakers, Darrell Issa, (R-Ca) and Rep. Spencer Bachus, (R-OK), House Financial Services ranking members are seeking an audit of the trust that manages the government’s controlling stake in AIG.
Three more U.S. banks failed on Friday, bringing the total to 84 so far this year, as the industry continues to grapple with deteriorating loans on their books. 

Regulators shuttered Affinity Bank of Ventura, California, Bradford Bank in Baltimore, and Mainstreet Bank of Forest Lake, Minnesota, which in total are expected to cost the government’s deposit insurance fund about $446 million. 

The Federal Deposit Insurance Corp on Thursday reported that the insurance fund’s balance stood at $10.4 billion at the end of the second quarter. But the agency also noted that the figure was adjusted to account for $32 billion set aside for expected failures over the next year. 

FDIC Chairman Sheila Bair said this week that bank failures will remain elevated as banks go through the painful process of recognizing loan losses and cleaning up balance sheets. 

The total of 84 failures this year marks a sharp rise over the 25 last year, and the three failures in all of 2007.
We stated long ago the somewhere between 3,400 and 4,200 banks would go under and the FDIC would spend trillions of dollars to cover the loses. A loss of 3,400 banks would lead to losses of over $33 trillion.
The FDIC now has foreign banks and private equity groups about to engorge themselves on failing US banks. Worse yet, rather than cash the FDIC is allowing these financial firms to use equity which is unprecedented. The use of non-cash collateral assets is being used because the purchasing banks are broke and without TARP not only could they not buy anything, but they’d probably be out of business. What Ms. Bair has done has been to expedite the takeover of banks by bigger banks and involved the use of foreign banks as well as private equity partnerships.
As far as we are concerned, as a foreigner, you have to be deranged to buy dollar denominated assets with the massive monetization of agency securities, collateralized debt obligations and treasuries going on, never mind the underhanded secret deals the Fed is involved in to fund their markets. If we can understand what the fed is up too, so can these foreigners. That is what a more than $600 billion swap facility is all about, including suppression of foreign currencies in order to bolster the strength of the dollar.
This month, September, a great confusion will begin. The occupation of Iraq will continue; more troops will be sent to Afghanistan and Pakistan will become another major battleground. Terrorism will be used to continue to propagandize the American public, along with Cap & Trade and medical reform and the Swine Flu fiasco. These are all distractions to keep the publics’ eye off the continued failure of our financial system.
Deflation continues to eat away at assets, except for gold and silver, and the Fed creates money and credit to offset deflation’s savages.
The torrent of money and credit has pulled some nations at least temporarily out of the negative decline on GDP. Japan, France and Germany are examples. The question is when will their economies run out of stream? Probably when they attempt to raise interest rates. In the case of the eurozone the expansion of money and credit has already fallen 3.7%.
The global economic crisis, now more than two years old has allowed governments to run banking and financial systems in a usurpation of power over the individual and private property. What we are facing is perpetual crisis and intended government control. There will not be a return to normality. Next will come food shortages and rationing and one epidemic or pandemic after another. We wonder what will happen when the public finds out that all these problems were preplanned by the Illuminati. Then comes the control of all labor. Government is now spending 185% of tax receipts. The budget deficit will be between $1.6 and $2.00 trillion for fiscal 2009, ended on 9/30/09.
For those who hadn’t noticed, yoy commercial real estate values fell 27% and are off 36% from their 10/07 peak. We see a total drop of 70% to 75% from the highs, when all is said and done. Refinancing has to be found for $165 billion in properties by the end of the year, which is impossible, even with left over TARP funds.
Deflation has prices somewhere between minus 2% to plus 5% worldwide as imports and exports have fallen over 30%. As an example, Los Angeles, the busiest port in the US, imports have fallen 16.9% yoy. It is the exporters who are getting hit the hardest and some have cut prices in the process.
The only thing that keeps a veneer of equilibrium is the massive creation of money and credit pumped out by central banks worldwide. We said we had entered depression this past February and as when we called the beginning of recession two years before, no one shared our opinion. If we are not in depression than what is the significance of 20.8% unemployment, a factory utilization level of 65% and continued massive foreclosures? As we have said over and over again the Fed, Treasury, Wall Street and banking are in a box and they cannot get out. They deliberately created this horrible situation and there is no going back. It is impossible to reverse the process. We are in an economic and financial depression. The palliative supposedly is bigger budget deficits and credit expansion into infinity. We are going to see a replay of the 1970s. Inflation will catch up and overtake deflation one more time, but in the end deflation will prevail.
Fiscal spending is running wild and our president predicts a budget deficit of $9 trillion dollars over the next ten years. The Congressional Budget Office (CBO) says spending has to be cut 8% permanently over the next several years. In July alone federal spending rose 26%, as revenues fell 6%. Corporate tax receipts fell 58%, as individual revenues fell 21%. The official economic contraction is the worst since the great depression. Can you imagine what it really is? 9.4% unemployment is front-page news, but you didn’t hear about the 4.7% loss in salaries and wages of 4.7% for the 12 months ended in June. There are more government employees now than all those employed in manufacturing and construction. How is it that state employees now make 40% more than the average income in non-governmental jobs? What a perversion of government. It is no wonder that the US poverty rate is higher than in Mexico and Turkey.

by Bob Chapman
Originally posted: September 2, 2009

Short summary:
Little recovery with bailout funds, more failures to come in credit card, loans, and commercial real estate, other currencies are not the answer for anybody, since all currencies rise and fall in relation to gold and silver, foreign investors feasting on US banks, negative GDP decline in other major economies, perpetual crisis for perpetual government control, things don’t look good and a TARP won’t cover it, and the US poverty rate is now higher than Mexico or Turkey.

THE ILLUMINISTS ARE DESPERATE. They are appealing against the Bloomberg directive to reveal who received funding from the Federal Reserve. In addition HR 1207 will pass in the House this month. The question is in what form. No matter what happens the Illuminati knows we are hot on their trail. They have to do everything possible to end the depression, or go for broke.

Thus far there has been little recovery even with an official $23.7 trillion committed by the Treasury and the Fed. This number alone shows you how serious this situation is. The banking sector is still broke and is using TARP funds to buy out failing smaller banks. The residential TARP funds returned will go toward helping bail out the collapsing commercial real estate industry. Quantitative easing has not worked, nor has TARP and the endless stream of money from TALF.

We are anxious to see if the FASB sticks to its guns and demands mark-to-market accounting. That will pull the cover off of the fraud known as mark-to-model, which really is mark to whatever you want it to be. As you can now see this is a much deeper problem than a subprime problem. That just triggered events.

As we pointed out before we are still facing a new wave of subprime loans written over the past year by FHA, Ginnie Mae, Fannie Mae and Freddie Mac, plus ALT-A, Option ARMS, Pick-and-Pay Loans and the failure of prime loans that will stretch to 2013. On top of that we have commercial real estate loans now to deal with and credit card failure.

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The Writing is on the Wall – A politically incorrect analysis

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The Writing is on the Wall – A politically incorrect analysis
by Aubie Baltin CFA, CTA, CFP, PhD.
Originally posted 17 August 2009
As I was scribbling notes preparing to write this missive, I came across Jim Willy’s excellent latest piece http://www.freebuck.com/articles/jwillie/090813jwillie.htm
on Gold-Eagle (a must read) and although I actually comfortable standing out there all alone, I was pleased to discover that he too sees the “Writing On The Wall.” A currency crisis is now upon us but most (especially our Government Leaders led by Obama, Hillary, Geitner and Bernanke) refuse to recognize that it even exists. US Treasuries and GSE’s are being slowly diversified out of and their diversification is gaining traction and power, but little publicity. “Foreign creditors are attempting to protect their core US$ denominated reserves, while clearly undermining the US $ on the margin, as alternatives are sought.”
To date, their alternative choices are not currency but hard assets, commodities, properties and companies from the resource sectors of the world. The paradigm shift now taking place will change the face of the United States permanently, yet few here in the US recognize the changing landscape. The only concessions that the Chinese have made is that they are not dumping their holdings on the world’s bond markets, but they and their Government surrogates are working overtime to unload their US $ holdings by buying up resources and resource based companies (Editor’s Note: An example is the recent purchase of 17% of Teck Minerals – symbol TCK – the largest Canadian mining conglomerate which produces copper, zinc, moly and hard coke coal).
What do the Chinese know that we don’t?
Although oil prices have dipped recently, they are still at levels that are 3 times higher than they were 10 years ago. While our “Heads in the Clouds” Government keeps talking and what’s worse, acting about energy self sufficiency by developing alternate fuels, the Chinese have been taking advantage of this year’s low oil prices to step up their buying of oil fields and resource companies using their steadily depreciating US dollar reserves. Recently, the China National Petroleum Corp signed a deal with BP to develop an oil field in Iraq – yes, that Iraq, the one we liberated and were accused of doing so only to get our hands on their oil. The Chinese are also attempting to buy the Argentinean division of the Spanish oil firm, Repsol. China’s Sinopec Group bought Addax Petroleum. China’s Aviation Oil signed a letter of intent to purchase a refinery in South Korea and PetroChina bought 45.5% of Singapore Petroleum; recently they have made major investments into the Canadian Tar Sands and that’s just the beginning. While China, India and the rest of the world have told us in no uncertain terms that they will not be destroying their economy with any Cap & Trade nonsense, we are rushing head long, at break neck speed, avoiding all debate, into CAP & TRADE.
Why this buying spree? Simple, China as well as everybody else (except our politicians) knows that oil will only stay this cheap as long as the world remains in Recession/Depression. Once growth resumes, prices will explode and China is, unlike America, investing in the future. More importantly, their time horizons are long term and not the 1½ year focus of American politicians. After all the Chinese do not have to worry about elections or pacifying their “Green” lunatic fringe. China’s energy consumption has been growing at 5% a year. In May alone, sales of automobiles in China rose 47%, while its oil imports hit a 14-month high. Moreover, China knows it will need a lot more oil in the near future as their population of 1.3 billion people is only just now buying their first cars.
Hillary has just received a wake up call while on her trip to India where she was told in no uncertain terms that India will not destroy their economy for some idiotic no win fight on Global Warming. She will continue to run up against the exact same common sense attitude from the rest of the world. DEPRESSION is inevitable if the US implements its recently passed CAP & TRADE legislation. It will serve absolutely no purpose if the rest of the world does not go along and that is without getting in to the Global warming argument. I don’t need a crystal ball to come up with this conclusion.
So what steps is America taking to insure that we maintain and assure our future energy requirements? Dreaming about replacing Coal, Oil and Natural Gas, of which the US has the world’s largest untapped reserves with alternate sources of energy {like Ethanol?) and new technologies which are not yet on the drawings boards?
THE STATUS OF THE US DOLLAR AS A RESERVE CURRENCY
The pressure from Russian, China, Brazil and our friends in the Middle East to change the world’s monetary order is pressing forward at breakneck speed. At the recent G-8 meetings, China asked for a forum to debate proposals for a new global reserve currency! China has not yet started selling its Treasuries or Agency Bonds, but they have already spent $157 Billion this year buying American Companies. This has helped to fuel the current Government manipulated Stock Market BUBBLE that will very shortly turn into history’s biggest Bull TRAP. But they are not stopping there as they proceed to buy just about anything of value that they can get their hands on to use up their hoard of US Dollars. They are moving as quickly as possible, without crashing the world’s financial system, while paying lip service to our idiot politicians that we send over there. What are we doing in the mean time? We’re making the entire situation worse by ballooning our deficits, debt and money supply and doing our best to destroy America’s CONFIDENCE in herself!
BANK EARNINGS (?) AN OXYMORN
There is now a proposal on the table to bailout second mortgages on top of the already $ trillions committed to the utterly corrupt banking sector. The fact that you might have some lenders taking capital injections to reduce 2nd liens while leaving 1st mortgages intact is simply a backdoor further bailout of banks beyond any sensible financial policy. Americans would not tolerate this if they realized what was happening. I hope you don’t expect Obama, Geitner and Bernanke to enlighten you. My gut feelings were sadly being confirmed when the private-public investment program was announced.
“THE OBVIOUS IS OBVIOUSLY WRONG,”
BULL MARKET TRAP: If there is one sure thing out there, it is that “The Obvious Is Obviously Wrong,” which was the other name that I was considering using for my newsletter. Everybody and his mother were looking at that Head and Shoulders Breakdown. All the while, I was warning you that “this is a Manipulated Market” and Goldman, JPM, Geitner, Bernanke et al, needed to create a “Bear Trap” in order to get enough buying power to kick start a short covering rally in the hopes that it would set off a new Bull Market. But be careful not to get trapped again by the euphoria pouring out of Wall Street and the Media. What we are getting is NOT a new Bull Market, it is the set up for the BIGGEST BULL MARKET TRAP in history. How can I be so sure? Any elementary application of 1st year Austrian economic theory will tell you that the policies now being implemented in conjunction with the record amounts of money creation, debt build-up and monetization of the Government’s debt leave no other conclusion. It is impossible to spend your way out of debt and into prosperity. Worst of all, we are rapidly turning our Free Market Capitalist Economy into an ever more Marxist Socialist Economy. Cap & Trade and Health Care reform will be the straws that break the back of Capitalism.
THE STREET’S BEATING EARNINGS REPORTS
When CFOs find themselves in the midst of a Recession and in a massive downturn quarter with the talk of Depression and Deflation in the air, what else would you expect but for companies to write off everything including the kitchen sink. They lay off as many workers as they can and write down all their excess inventory and then go hat in hand to the Government and demand if not a complete bailout, at least some serious concessions. Successful or not, they not only cut their Income Tax liability but if they create enough losses, they are also able to recapture past years’ taxes. The result of all this is that the following quarterly earnings reports must by definition be better than the last quarter. The Wall Street, analysts who completely missed the last two quarters, do as they always do and project the past into the future. Naturally, they go from too optimistic to too pessimistic, so most companies’ earnings naturally beat the Street’s expectations. Do beating street estimates now replace real cash flow and real earnings in determining a stock’s value?
A NEW BULL MARKET: DON’T YOU BELIEVE IT!
Nothing has changed! All the Government’s initiatives and spending policies are DOOMED TO FAILURE. WE CANNOT BORROW, PRINT AND SPEND OUR WAY INTO PROSPERITY. MARXISM, SOCIALISM, KEYNESIANISM or whatever you want to call it has NEVER worked and what’s worse, has always ended up in a disaster. AH YES, I forgot -This Time It Will Be Different!
The last time our country was under so much Governmental Control was during FDR’s reign. Now I know that he is still considered the Savior of Capitalism and one of our country’s greatest heroes, but between Hoover and FDR, who carried on Hoover’s policies to the extreme, they turned what should have been no more than a 2-3year Recession into a 17 year Depression which took WWII to get us out of.
LESSONS OF HISTORY
According to the “The Economist” a Keynesian magazine, while there are some similarities between now and the 1930’s, the world should be able to avoid a 1930’s Depression due to some big differences. Specifically, in the 1930’s, countries were on the Gold Standard, which restricted their ability to ease monetary policy as economies went into Recession after the Wall Street crash of 1929. Rather than allowing taxes to fall as incomes declined, America raised taxes beginning in 1932 and eventually FDR raised the top marginal tax bracket to 93% to balance the budget .The claim is now that governments have a better understanding of macroeconomics (really? They certainly fooled me) we too are raising taxes dramatically and with public spending taking up a much larger share of GDP, their ability to stabilize demand is greater (a detriment, not an advantage). The third difference between today and the 1930’s is that there were no organizations such as the G7-8-20 or the IMF to oversee the world economy. (Check their track record and see if we are prepared to follow their prescriptions.) These are the thoughts of most of our economic leaders.
Each one of us must challenge these thoughts, for these are only fantasies, not facts, and these fantasies are not based on truth, but rather illusion and PC history. The first claim is that easing monetary policy can reverse a deflationary spiral. Deflation is caused by excess capacity leading to lower prices, leading to falling profits, leading to reductions in employment output and wages. When excess capacity is financed by debt, the need to generate cash flow will lead to predatory actions resulting in a much faster collapse in prices. When the risk of losing jobs is high and prices are falling, people rich or poor are unwilling to borrow to buy even at low interest. With excess capacity and small or negative returns on marginal investments, there is no incentive to invest and further add to capacity. THE ONLY SURE WAY TO END A RECESSION QUICKLY IS TO ALLOW THE RECESSION TO RUN ITS COURSE. THIS GETS RID OF EXCESS CAPACITY AND FREES UP RESOURCES TO FUEL THE NEXT BOOM
Another way (that has always made matters worse) is for the government to ease monetary policy by monetizing its debt and printing money. This is now happening all over the world. Throughout history, whenever a country has wantonly printed money, it has always lead to hyper-inflation and the collapse of the economic system .It will be no different this time. THE NATURAL LAWS OF ECONOMICS NEVER CHANGE. They are Laws not just suggestions. The printing of money destroys the value of money eventually resulting in a loss of confidence in Fiat money and a return to a semi-barter system which further contracts the economy. During the depression of the 1930’s, money was sound, the US owned most of the world’s GOLD (80%) however, that is certainly not the case today. The second claim of having a much better understanding of macroeconomics is also not true. A steady 75 year Socialist Marxist takeover of our education system has left us with virtually no Free Market Capitalist Economists in any positions of influence. So much so that we never even get any alternative capitalist suggestions from Republicans. With public spending taking up an ever larger share of GDP, their ability to stabilize demand is not greater as almost every state is teetering on the verge of bankruptcy. My previous articles have analyzed the “lies” of current macroeconomic theory and I will concentrate my discussion on how a large government sector affects the response to a deflationary contraction.
The essential question is which government is best able to act to stabilize demand: A government with a large share of the economy, which is running a financial deficit and has a huge overhanging debt load or a government with a small share of the economy which has a balanced budget and minimal debt? The first case describes most of the governments in the world today. The second case describes many of the governments in the late 1920’s. We know from experience that anything that the government undertakes takes 3 to 6 times as long and costs as much as 10 times more than if handled by the private sector. Look at our stimulus package. Only 10% of the money has been spent to date with no noticeable benefit and yet what are we doing? Starting to talk about a new and larger stimulus package.
Today’s economists have their heads stuck in the clouds of model building that have been proven never to have worked. But they and their ideologies are not capable of descending from their ivory towers to come up with real solutions for a real world.
WE ARE REPEATING THE EXACT SAME FOLLIES AS THE FDR ADMINISTRATION AND WE WILL END UP WITH THE EXACT SAME RESULTS ONLY WORSE BECAUSE OUR COUNTRY IS IN MUCH WORSE FINANCIAL SHAPE TODAY THAN WE WERE IN THE 1930’s.
WHERE TO NOW DOW
It’s time to take profits on the Call positions of the “Strangles” that you took 2 weeks ago. Not only are you in substantial overall profit, but there is a good chance that your presently out-of-the-money Puts may also turn profitable if you did as recommended and took long term (Sep/Oct) positions. Another possibility is to Buy Aug PUTS to protect your call profits and let them run; Just in case this Rally explodes in a massive short-covering explosion to 9500 – 10,000. If most of the shorts cover that takes away any underpinning that any sell-off might have had.
If you think that it’s different this time around, IT IS NOT! Unlike all the new BULL MARKET fans who are just now jumping on the band wagon, I called for a 38% (9500) to 50% (10,400) Bull Trap Rally back in early March. Now, just like back in 1930, prominent Analysts, Politicians and Economists were all infected by the New Bull Market virus that seems so prevalent in today’s financial media.
“While the crash only took place six months ago”, said Herbert Hoover in May of 1930, “I am convinced we have now passed through the worst and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
Back to reality: This is how a Bull Trap develops. It starts out in the midst of the most extreme Bearish Sentiment and the Bearishness continues all the way up to the rally top (the odd-lotters have always been smarter at the extremes) despite the Politicians, Wall Street and Media doing their best to convince us that the worst is over and there is a new dawn.
The evening of March 6, 2009 saw the DOW at the biggest percentage below its 200 day average ever recorded. That and a conglomeration of other readings such as AAII’s most bearish readings ever and other bearish readings prompted me to hastily write and mail out my March 9th BUY signal.
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Check the track records of all the Bulls. If they did not see the Crash or the Recession coming, you can safely bet they also did not catch the March bottom. I for one, since March 9th, have been calling for a 38% retracement pullback to 9500 and now that we are approaching our target. DON”T YOU DARE GET CAUGHT UP IN ALL THE NEW EUPHORIA. Nothing has changed – there is a wave of Socialism sweeping the globe and especially here in America. “YOU CAN”T FOOL MOTHER NATURE” not for long anyway.
Is it just a coincidence that the 1929/30 rally lasted from the November 13, 1929 bottom until the April 16, 1930 top, five months and 3 days? Will this dead cat bounce rally, that we are now in, also only last 5 months and 3 days, until August 12? History does not always repeat exactly, but it always rhymes and we are now definitely Rhyming and living on borrowed time.
BEARS MAKE MONEY, BULLS MAKE MONEY, PIGS GET SLAUGHTERED.
GOLD
I know that I have been sounding like a broken record, but I have been right on for over a year. What else can I do? If there is one lesson that you must learn it is that the market will do whatever it has to do to make the majority wrong. I am not going to list for you all the extremely bullish fundamentals that have been developing for the precious metals over the past year. But there are two most important factors that have been overriding all that bullishness and they are (1) We are now in the quiet season for Gold and (2) we have not yet completed the consolidation phase of that wonderful 84 month Bull Market. But keep in mind that those 84 months were only Wave I. We are now completing Wave II with up Waves III and V yet to come. Wave III’s are never the shortest of the UP Wave and when it comes to Gold and commodities, Wave V is usually the biggest and the quickest. So stick with me the best is yet to come. I have not let you down in 7 years and I do not plan on starting now.
Although Gold could explode at any time now, stay with our plan of buying into weakness in either stock or bullion until Gold breaks out above $1050. At that time, load up on the balance of the positions you intended on taking. REMEMBER back in 2005 – my long term target for Gold was $6250. So far, only Alf Field has come anywhere close with his $6000 projection and then for some reason he stopped publishing. I guess he wanted to retire a big winner. Come back Alf, the world need good people especially NOW.
ONE OTHER POINT: Gold most often goes in the opposite direction as does the general markets and yet, while the markets have been rallying strongly over the last 5 months, Gold has held its own. That could be foretelling that both the timing and extent of the explosion will coincide with the BIGGEST BULL MARKET TRAP in history, due at any time over the next few weeks. The longer this stock market extends, the sharper will be the crash.
IF both CAP & TRADE and HEALTH CARE as proposed get passed into law, then I am looking at 1,500 to 2,000 on the DOW. The World will be looking at a 20 year plus DEPRESSION. They called me crazy when I called for Recession back in Jan. of 2007 – don’t make the mistake of underestimating me now.

by Aubie Baltin CFA, CTA, CFP, PhD.
Originally posted 17 August 2009
This article is a Must Read! – Aurick

AS I WAS SCRIBBLING NOTES preparing to write this missive, I came across Jim Willy’s excellent latest piece (see here), and although I am actually comfortable standing out there all alone, I was pleased to discover that he too sees the “Writing On The Wall.” A currency crisis is now upon us but most (especially our Government Leaders led by Obama, Hillary, Geithner and Bernanke) refuse to recognize that it even exists. US Treasuries and GSE’s are being slowly diversified out of and their diversification is gaining traction and power, but little publicity. “Foreign creditors are attempting to protect their core US$ denominated reserves, while clearly undermining the US $ on the margin, as alternatives are sought.”

To date, their alternative choices are not currency but hard assets, commodities, properties and companies from the resource sectors of the world. The paradigm shift now taking place will change the face of the United States permanently, yet few here in the US recognize the changing landscape. The only concessions that the Chinese have made is that they are not dumping their holdings on the world’s bond markets, but they and their Government surrogates are working overtime to unload their US $ holdings by buying up resources and resource based companies (Such as the recent purchase of 17% of Teck Minerals – symbol TCK – the largest Canadian mining conglomerate which produces copper, zinc, moly and hard coke coal).

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Let’s Get Physical With China

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Let’s Get Physical With China
— Posted Friday, 4 September 2009 | Digg This Article | Share this article | Source: GoldSeek.com
By: Adam Brochert
The recent development of the Chinese government no longer restricting Gold and silver ownership and now actively promoting it is a very, very big deal (see article reporting this here and see this clip from Chinese television promoting silver – please remember that this item would not appear on Chinese television without explicit central government approval). To quote from the linked article:
“The Chinese are being converted from being the lowest per capita [G]old consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of [G]old is likely to exceed that of India, which has been for years the world’s biggest [G]old market.”
This will generate huge physical demand for Gold and silver. I am currently intermediate-term bearish on silver and neutral on Gold because I still believe we need another deflationary price wave of asset liquidation. However, this story is a longer term development that is wildly bullish for precious metals investors and owners.
The physical markets for Gold and silver are severely constrained. Those who say otherwise are dishonest or ignorant. Paper Gold and silver, which is not the same as Gold and silver at all, is plentiful. It is easy to buy the GLD ETF, a futures contract or some other paper proxy for actual physical Gold. I think these instruments defeat the purpose of Gold and silver investing and actually help to keep the price much lower than it should be. I do not advise paper Gold. Those who want paper investments should invest in Gold mining companies, but I think it is prudent to first secure some physical Gold as a portfolio anchor and insurance against paper defaults.
The development of the Chinese government actively encouraging physical precious metal investment is not just important because of the sheer physical demand this move will generate. It is also philosophically and politically important and is yet another sign post pointing to the end of U.S. Dollar hegemony for those who care to pay attention.
A government with a fiat currency that is backed by nothing but paper promises should be trying to get its citizens to despise Gold! Gold is the enemy of fiat currency regimes and always has been. America has been taught that Gold investing is kooky or weird and for “end of the world” types. This mantra has been repeated by the mainstream financial community over and over and Americans, in aggregate, have been brainwashed to believe it.
Why wouldn’t the Chinese, who have an unbacked paper currency pegged to America’s unbacked paper currency, promote saving money in Yuan to their people? Why wouldn’t they tell their people how strong their banks are and how they can earn 5% or 10% on a long-term certificate of deposit? In short, why aren’t they lying to their people about money as our government lies to us?
There aren’t many reasonable options for this conundrum. They all center around one theme: the Chinese government wants more Gold and silver within its borders. Why would it want that? What is the point of the central government promoting an investment class that creates very few jobs and has little prospect for immediately growing the Chinese economy?
I believe China is preparing for a post-U.S. Dollar world and I believe they are planning to promote a precious metals backed currency in some form (whether their own or an international currency for trading purposes). I believe this is being done methodically and gradually by China and I believe it has grave long-term implications for the U.S. Dollar.
Though not good for the U.S. Dollar, a return to sound currency on any scale is a welcome development in my mind. Gold is money. Gold is a check on spendthrift governments that insist on Keynesian insanity. Gold stands in the way of those who believe increasing the indebtedness of a country is a way to grow or stimulate anything besides debt and increased central bank power.
While China has begun promoting real savings to their people, the United States continues to deny reality and promote toxic waste to its citizens, pretending that our Dollar is strong and our banking system is solvent. When demand for Gold and silver increases in the United States, our government conveniently stops making the retail coins they are legally bound to produce. The more popular these U.S. Mint coins become, the less our government wants to make them. Here’s a previous rant on this topic.
When stepping back from the day to day price swings, this is a big picture of an emerging economy and a declining one. It is not pretty. And please don’t think I’m excited by the prospect of China gaining global power – I’m not. I wish it weren’t so. American citizens need to buy physical metal in much bigger quantities than they have so far. Our government should be promoting physical precious metal investment and should be falling all over themselves to provide an unlimited supply of U.S. minted Gold and other precious metal coins. But alas, up is down and right is left in a fiat world, so all I can do is scream and yell in cyberspace to let off a little steam and hopefully let a few people know what’s coming so they can prepare.
As an aside, many people have asked me about how to buy and store precious metals. I am going to summarize how easy it is in one long-winded paragraph!
You can buy $10,000 worth of Gold by buying ten 1 ounce coins and it is roughly the same physical size as a $10 roll of quarters. Why are people concerned about storage? If you can’t find a safe place to put an object the size of a $10 roll of quarters, then you may have to consider paying for a safety deposit box or other storage facility. If you have hundreds of thousands of dollars to invest, well that’s a different story (email me – let’s do lunch!). I recommend government 1 ounce coins for novice investors (e.g., American Eagles, Canadian Maple Leafs, South African Krugerrands, Austrian Philharmonics) and they can be mail ordered with minimal shipping costs (may be cheaper than using a local coin shop but there’s nothing wrong with comparison shopping for such a big purchase). I would buy whichever of these 1 ounce coins has the lowest price on the day you are ready to make a purchase and avoid “rare” or “special” coins and just go for the plain Jane cheapest 1 oz. government Gold coins you can find. I have used several dealers in the past and never had a problem with any of them but I like apmex.com and gainesvillecoins.com (no financial relationship with these firms other than as a customer).
Let’s get physical along with China and restore some of the wealth destroyed over the past few years by replacing it with actual debt-free savings.
Adam Brochert

by Adam Brochert
Originally posted Friday, 4 September 2009
Source: http://www.GoldSeek.com

THE RECENT DEVELOPMENT OF THE  CHINESE government no longer restricting gold and silver ownership and now actively promoting it is a very, very big deal (see article reporting this here and see this clip from Chinese television promoting silver – please remember that this item would not appear on Chinese television without explicit central government approval). To quote from the linked article:

“The Chinese are being converted from being the lowest per capita gold consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of gold is likely to exceed that of India, which has been for years the world’s biggest gold market.”

This will generate huge physical demand for gold and silver. I am currently intermediate-term bearish on silver and neutral on gold because I still believe we need another deflationary price wave of asset liquidation. However, this story is a longer term development that is wildly bullish for precious metals investors and owners.

Read the rest of this entry »

Written by aurick

06/09/2009 at 11:26 pm

Treasury Default Not So Unthinkable

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Treasury Default Not So Unthinkable
by Rick Ackerman
Originally posted September 1, 2009
Although we can be certain Americans and their government owe far more than they will ever be able to repay, the question of how this debt eventually will be discharged is the economic conundrum of the day. Some think hyperinflation is the only way out, since it would allow debtors to repay all that they owe with worthless bank notes by then in copious supply. However, this is hardly a solution, since those on the receiving end – i.e. the lenders — would be ruined, as would the bond markets, banks and all other institutional conduits and agents of saving.
We’ve argued here that deflation will prevail, visiting pain on borrowers more or less in proportion to their sins. Lenders would wind up with the collateral, mainly in the form of residential real estate, but the advantage in this would probably be far less than what has been imagined by those who see bankers as conniving thieves out to steal the whole world’s tangible assets. In fact, the bankers would have to rent the homes back to those who had defaulted, saddling themselves with the politically unseemly problem of squeezing blood from a stone. Would they risk stirring up the mob, or would they instead settle up on relatively easy terms?  We don’t think they’ll have much choice.
Why No Inflation?
Our reasoning about such things has always been intuitive — and so far correct in explaining why the huge fiscal and monetary blowout by the Federal Government during the last two years has produced no significant inflation. This fact is especially telling in the housing sector, which as the inflationists well know was the main target of the government’s historically unprecedented fiscal and monetary blowout.
Anyone interested in the inflation/deflation “debate,” will be abundantly rewarded by reading the superb essay by Jeffrey Rogers Hummel at the Library of Economics and Liberty.  Hummel does not explicitly support the arguments of the deflationists, but he has nonetheless made a compelling case against the possibility of a Zimbabwe-style hyperinflation. Instead, he sees a much greater likelihood that the U.S. will simply default on some of its Treasury debt while acting to prevent the dollar from plummeting to the threshold of worthlessness. He also explains why “seigniorage” – i.e., revenue generated by monetary expansion – can no longer help the U.S. or any other government buy its way out of trouble.
If you read just one more essay on the subject of inflation/deflation, make it this one by clicking here.

by Rick Ackerman
Originally posted September 1, 2009

Read this, and then click on the accompanying piece
“Why Default  on U.S. Treasuries is Likely”

ALTHOUGH WE CAN BE CERTAIN THAT AMERICANS and their government owe far more than they will ever be able to repay, the question of how this debt eventually will be discharged is the economic conundrum of the day. Some think hyperinflation is the only way out, since it would allow debtors to repay all that they owe with worthless bank notes by then in copious supply. However, this is hardly a solution, since those on the receiving end – i.e. the lenders — would be ruined, as would the bond markets, banks and all other institutional conduits and agents of saving.

We’ve argued here that deflation will prevail, visiting pain on borrowers more or less in proportion to their sins. Lenders would wind up with the collateral, mainly in the form of residential real estate, but the advantage in this would probably be far less than what has been imagined by those who see bankers as conniving thieves out to steal the whole world’s tangible assets. In fact, the bankers would have to rent the homes back to those who had defaulted, saddling themselves with the politically unseemly problem of squeezing blood from a stone. Would they risk stirring up the mob, or would they instead settle up on relatively easy terms?  We don’t think they’ll have much choice.

Why No Inflation?
Our reasoning about such things has always been intuitive — and so far correct in explaining why the huge fiscal and monetary blowout by the Federal Government during the last two years has produced no significant inflation. This fact is especially telling in the housing sector, which as the inflationists well know was the main target of the government’s historically unprecedented fiscal and monetary blowout.

Anyone interested in the inflation/deflation “debate,” will be abundantly rewarded by reading the superb essay by Jeffrey Rogers Hummel at the Library of Economics and Liberty. Hummel does not explicitly support the arguments of the deflationists, but he has nonetheless made a compelling case against the possibility of a Zimbabwe-style hyperinflation. Instead, he sees a much greater likelihood that the U.S. will simply default on some of its Treasury debt while acting to prevent the dollar from plummeting to the threshold of worthlessness. He also explains why “seigniorage” – i.e., revenue generated by monetary expansion – can no longer help the U.S. or any other government buy its way out of trouble.

If you read just one more essay on the subject of inflation/deflation, make it this one by clicking on the link on right column “Why Default  on U.S. Treasuries is Likely”.

Written by aurick

05/09/2009 at 11:48 pm