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Archive for October 2009

US government report recommends blocking popular websites during pandemic flu outbreak

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by Mike Adams, NaturalNews Editor
Originally posted Friday, October 30, 2009

THE US GOVERNMENT HAS ISSUED a new report that recommends blocking access to popular websites during a pandemic outbreak in order to preserve internet bandwidth for investors, day traders and securities clearing house operations. The concern is that a pandemic would cause too many people to stay at home and download YouTube videos and porn, hogging all the internet bandwidth and blocking throughput for investment activities, thereby causing a stock market meltdown.

This isn’t an April Fool’s joke. It’s all based on a public report issued by the Government Accounting Office (GAO), available from their website at http://www.gao.gov/new.items/d108.pdf

In this article, I’m going to explain how a pandemic outbreak could theoretically bring down Wall Street. But to get to that, you’ll first need to find out what the GAO said in its curious report (see below). Parts of this article are presented as satire, but the underlying facts quoted here are all true and verifiable (links are provided to all sources).

This report in question is entitled, “GAO Report to Congressional Requesters, INFLUENZA PANDEMIC” and includes this subtitle: Key Securities Market Participants Are Making Progress, but Agencies Could Do More to Address Potential Internet Congestion and Encourage Readiness.

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The Extinction of Ethics in Finance – The Fallout

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by Greg Simmons
Originally posted October 13, 2009

I AM WRITING THIS ARTICLE for those of you who suffered losses due to the market meltdown of 2008. So I guess I’m writing this for pretty much – nearly everyone. It’s my sincere hope that you’ve been able to recoup some of your losses considering we’ve just had the greatest bear market rally in history. My aim is to get anyone who will listen to take advantage of the breathing-room this rally has bought us and ask yourself a series of questions.

The two most important questions anyone with any money at risk in the US financial markets should ask themselves at this critical point in economic history are exceedingly simple. One, are you prepared for another market meltdown? And two, what is your new exit strategy when things do go wrong?

Another perplexing question you might ask yourself is this. How did my financial advisor not have a clue that history’s most catastrophic economic storm was brewing in the credit markets? It was blatantly obvious. The canary in the coal mine fell off its perch, dead as a doornail, in February of 2008 when the ‘auction rate preferred’ paper froze (an instrument of 7 to 28 day maturity that the wealthy have historically kept their liquid cash in at 100 basis points higher than money market funds) – a sign that anyone with any knowledge of the financial markets should have known was ominous and would precipitate other catastrophic events.

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Will Obama’s Economic Policies Destroy the US Dollar?

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by Gerard Jackson
Originally posted 26 October 2009

ONE DOESN’T NEED TO BE AN ECONOMIC genius to see that the US dollar is in trouble. That Americans are hopelessly confused about what is happening to their currency is no surprise. However, before we get to the point of whether Obama’s economics will do the dollar in I think it is important to provide a brief outline of the history behind the economic thinking that is sometimes used to explain exchange rate movements in the hope that this will give readers a better understanding of the current situation.

Economics is not as easy as some people think, particularly those political activists who are passing themselves off as honest journalists. Unfortunately, most of the economic commentariat are not much better informed. Regardless of what some commentators assert a weak currency does not necessarily reflect a weak economy.

More than 80 years ago Mises pointed that those who argue that a strong economy must always mean a strong currency “…do not understand that the valuation of a monetary unit depends not on the wealth of a country, but rather on the relationship between the quantity of, and the demand for, money. Thus, even the richest country can have a bad currency and the poorest country a good one.” (On the Manipulation of Money and Credit, 1978. The article was first published in 1923).

End of US$ Global Reserve Currency

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by Jim Willie CB
Originally posted October 15th, 2009

THE HERALDED END TO THE Petro-Dollar defacto standard completes the loop, the vicious cycle that will work to destroy the USDollar. In a sense, the US$ had to face an end, its sunset guaranteed when Nixon defaulted on its redemption value. The United States served as custodian for the global reserve currency. Naturally, the most damage will be to the US as a consequence of its twilight, especially after the recent era of fraud & counterfeit. Few look back to that date in 1971 as prophetic for declaring the USDollar’s days as limited and finite.

The world will continue to trade the US$ in future years, but it must stand on its own value, based upon its own merit, the result of balancing its supply & demand, from the integrity of its fundamentals. Some climax events have come, or at least are previewed on an unfortunate path.

Never in my memory has USGovt leadership been so disrespected. Never has Wall Street been so culpable for financial ruin, yet still in power running the USGovt finance ministries. The global revolt against the United States has many sides, but the financial aspect is most profound. It is hardly even covered in the US press. The US citizens have little comprehension of the enormity of a lost global reserve currency, with all its privileges, abused for constructing financial engineering towers and funding foreign wars. The direct effects will be felt in higher costs and assured supply, including credit.

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America has lost its soul and collapse is inevitable

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Death of ‘Soul of Capitalism’: Bogle, Faber, Moore
20 reasons America has lost its soul and collapse is inevitable
By Paul B. Farrell, MarketWatch
Oct. 20, 2009
Jack Bogle published “The Battle for the Soul of Capitalism” four years ago. The battle’s over. The sequel should be titled: “Capitalism Died a Lost Soul.” Worse, we’ve lost “America’s Soul.” And, worldwide, the consequences will be catastrophic.
That’s why a man like Hong Kong contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today.”
No, not just another meltdown, another bear-market recession like the one recently triggered by Wall Street’s too-greedy-to-fail banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great “American Economic Empire” for 233 years will collapse, a total disaster, a destiny we created.
OK, deny it. But I’ll bet you have a nagging feeling that maybe he’s right, that the end may be near. I have for a long time: I wrote a column back in 1997: “Battling for the Soul of Wall Street.” My interest in “The Soul” – what Jung called the “collective unconscious” – dates back to my Ph.D. dissertation, “Modern Man in Search of His Soul,” a title borrowed from Jung’s 1933 book, “Modern Man in Search of a Soul.” This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.
Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav’s “The Seat of the Soul,” Thomas Moore’s “Care of the Soul” and sacred texts.
But for Wall Street and American capitalism, use your gut. You know something’s very wrong: A year ago, too-greedy-to-fail banks were insolvent, in a near-death experience. Now, magically, they’re back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing federal debt are killing taxpayers.
Yes, Wall Street has lost its moral compass. It created the mess, but now, like vultures, Wall Streeters are capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.
Here are the Top 20 reasons American capitalism has lost its soul:
1. Collapse is now inevitable
Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global “wars, massive government-debt defaults, and the impoverishment of large segments of Western society.” Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is “inevitable.”
When? He hesitates: “But what I don’t know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000.” But the end is inevitable, a historical imperative.
2. Nobody’s planning for a ‘Black Swan’
While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think “Black Swan” and read evolutionary biologist Jared Diamond’s “Collapse: How Societies Choose to Fail or Succeed.”
A crisis hits. We act surprised. Shouldn’t. But it’s too late: “Civilizations share a sharp curve of decline. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.”
Warnings are everywhere. Why not prepare? Why sabotage our power, our future? Why set up an entire nation to fail? Diamond says: Unfortunately “one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions.”
Sound familiar? “This type of decision-making is the opposite of the short-term reactive decision-making that too often characterizes our elected politicians,” thus setting up the “inevitable” collapse. Remember, Greenspan, Bernanke, Bush, Paulson all missed the 2007-8 meltdown: It will happen again, in a bigger crisis.
3. Wall Street sacked Washington
Bogle warned of a growing three-part threat — a “happy conspiracy” — in “The Battle for the Soul of Capitalism:” “The business and ethical standards of corporate America, of investment America, and of mutual fund America have been gravely compromised.”
But since his book, “Wall Street America” went over to the dark side, got mega-greedy and took control of “Washington America.” Their spoils of war included bailouts, bankruptcies, stimulus, nationalizations and $23.7 trillion new debt off-loaded to the Treasury, Fed and American people.
Who’s in power? Irrelevant. The “happy conspiracy” controls both parties, writes the laws to suit its needs, with absolute control of America’s fiscal and monetary policies. Sorry Jack, but the “Battle for the Soul of Capitalism” really was lost.
4. When greed was legalized
Go see Michael Moore’s documentary, “Capitalism: A Love Story.” “Disaster Capitalism” author Naomi Klein recently interviewed Moore in The Nation magazine: “Capitalism is the legalization of this greed. Greed has been with human beings forever. We have a number of things in our species that you would call the dark side, and greed is one of them. If you don’t put certain structures in place or restrictions on those parts of our being that come from that dark place, then it gets out of control.”
Greed’s OK, within limits, like the 10 Commandments. Yes, the soul can thrive around greed, if there are structures and restrictions to keep it from going out of control. But Moore warns: “Capitalism does the opposite of that. It not only doesn’t really put any structure or restrictions on it. It encourages it, it rewards” greed, creating bigger, more frequent bubble/bust cycles.
It happens because capitalism is now in “the hands of people whose only concern is their fiduciary responsibility to their shareholders or to their own pockets.” Yes, greed was legalized in America, with Wall Street running Washington.
5. Triggering the end of our ‘life cycle’
Like Diamond, Faber also sees the historical imperative: “Every successful society” grows “out of some kind of challenge.” Today, the “life cycle” of capitalism is on the decline.
He asks himself: “How are you so sure about this final collapse?” The answer: “Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent … overspends … costly wars … wealth inequity and social tensions increase; and society enters a secular decline.” Success makes us our own worst enemy.
Quoting 18th century Scottish historian Alexander Fraser Tytler: “The average life span of the world’s greatest civilizations has been 200 years” progressing from “bondage to spiritual faith … to great courage … to liberty … to abundance … to selfishness … to complacency … to apathy … to dependence and … back into bondage!”
Where is America in the cycle? “It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical ‘society cycle.’ … The U.S. is somewhere between the phase where it moves ‘from complacency to apathy’ and ‘from apathy to dependence.'”
In short, America is a grumpy old man with hardening of the arteries. Our capitalism is near the tipping point, unprepared for a catastrophe, set up for collapse and rapid decline.
15 more clues capitalism lost its soul … is a disaster waiting to happen
Much more evidence litters the battlefield:
1. Wall Street wealth now calls the shots in Congress, the White House
2. America’s top 1% own more than 90% of America’s wealth
3. The average worker’s income has declined in three decades while CEO compensation exploded over ten times
4. The Fed is now the ‘fourth branch of government’ operating autonomously, secretly printing money at will
5. Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits
6. Bill Gross warns of a “new normal” with slow growth, low earnings and stock prices
7. While the White House’s chief economist retorts with hype of a recovery unimpeded by the “new normal”
8. Wall Street’s high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee
9. 401(k)s have lost 26.7% of their value in the past decade
10. Oil and energy costs will skyrocket
11. Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world’s reserve currency
12. In two years federal debt exploded from $11.2 to $23.7 trillion
13. New financial reforms will do little to prevent the next meltdown
14. The “forever war” between Western and Islamic fundamentalists will widen
15. As will environmental threats and unfunded entitlements
“America Capitalism” is a “Lost Soul” … we’ve lost our moral compass … the coming collapse is the end of an “inevitable” historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.
Faber is uncertain about timing, we are not. There is a high probability of a crisis and collapse by 2012. The “Great Depression 2” is dead ahead. Unfortunately, there’s absolutely nothing you can do to hide from this unfolding reality or prevent the rush of the historical imperative.

by Paul B. Farrell, MarketWatch
Originally posted Oct. 20, 2009

JACK BOGLE PUBLISHED “The Battle for the Soul of Capitalism” four years ago. The battle’s over. The sequel should be titled: “Capitalism Died a Lost Soul”. Worse, we’ve lost “America’s Soul”. And, worldwide, the consequences will be catastrophic.

That’s why a man like Hong Kong contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today.”

No, not just another meltdown, another bear-market recession like the one recently triggered by Wall Street’s too-greedy-to-fail banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great “American Economic Empire” for 233 years will collapse, a total disaster, a destiny we created.

OK, deny it. But I’ll bet you have a nagging feeling that maybe he’s right, that the end may be near. I have for a long time: I wrote a column back in 1997: “Battling for the Soul of Wall Street.” My interest in “the soul” – what Jung called the “collective unconscious” – dates back to my Ph.D. dissertation, “Modern Man in Search of His Soul”, a title borrowed from Jung’s 1933 book, “Modern Man in Search of a Soul.” This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.

Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav’s “The Seat of the Soul,” Thomas Moore’s “Care of the Soul” and sacred texts.

Read the rest of this entry »

Marching Toward Zombieland

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Marching Toward Zombieland
When sober-minded individuals begin to regard an enterprise within a nation as “an enemy of the people” you can bet that some serious blood is going to flow.  This is now essentially the situation for the Goldman Sachs company, which last week announced third-quarter earnings of over $3 billion largely derived from converting zero percent loans from taxpayers into zero risk profits off of anything paying more than zero percent in interest, revenue, or dividends.
The “people” across this big country may not have a clue how any of this is done, and there may be much to fault them on from the care-and-feeding of their own bodies to the content of their dreams, but you can’t argue with the fact that they are heavily armed to an extreme. And although it may be hard to measure with precision, one might venture to state that they are increasingly pissed off. How else explain popular entertainments like “Zombieland?”
The political part of what has to date appeared to be an economic problem is resolving into a crisis of authority and legitimacy.  When those in charge of a nation’s livelihood prove to be comprehensively false and dishonest, the economic automatically turns political. Nobody believes the bankers anymore, of course, and nobody believes the interlocutors of the bankers – the Federal Reserve chairman, the Secretary of the Treasury, the heads of the SEC and a dozen other regulatory bodies – and increasingly the charming figure in the White House cannot be believed on these issues of the nation’s livelihood.
The questions lately revolve around whether the nation is destroying itself by inflation or deflation – by the willful destruction of the value of our currency to evade the repayment of debt, or by the hapless destruction of households, companies, and governments by default and bankruptcy.  It’s a fire-or-ice debate. Either way the nation is going down as a viable enterprise. The fiction that we can return to a Crate-and-Barrel credit card orgy has sustained the false of heart and mind for some months now, but even that pleasant reverie will come to an end as the foreclosures mount.  Only remember, men living in their cars who have lost nearly everything else will still have guns.
All these tensions beat a path into the holiday season when emotions run high, when blessings are counted and sorrows taste most bitter. So the big question now floating above the sheer data of Goldman Sachs profit announcement is: what kind of year-end bonuses will they dare to pay their executives and minions, and how will the “people” react? It seems to me that conditions are ripening for a bloodbath. The kind of heinous acts that we have feared emanating from foreign “evildoers” since the awful stunt of 9/11/01 are now most likely to come from among our own “people” – a few pounds of Semtex in the lobby of Goldman Sachs’s New York headquarters… a few men with market-grade small arms converted to full-automatic outside on the Wall Street sidewalk one evening at holiday time when the suits are leaving work for the day…. It won’t take much.
President Obama had better strike first. He’s about the only figure left in the whole termite mound who has a shred of even potential credibility left because he still has the power to act.  He can instruct the people who work for the executive branch to “claw back” any and all ill-gotten bank bonuses; he can direct the Justice Department to investigate everything from the uses of federal bailouts to grand-scale accounting fraud; he can fire people in high places who have failed to act and lost legitimacy. If he doesn’t do these things soon then he’s finished, too. In the wake of such a failure things will get fractal fast.
The sense that Wall Street has pulled off a coup d’etat and taken over the machinery of the United States is the most powerful meme out there now, and its power is growing in magnitude every day among all classes of Americans.  I can’t say how much it reflects reality.  Even if it is a result of sheer happenstance – the tragic evolution of an industrial economy into a financial finagling economy – the citizens will still experience it as a stealing of their future.  Whatever else one might say about American culture, it is keenly attuned to a sense of heroes and villains.  We take great pride in our ability to blow away the bad guys. And life imitates art, as Oscar Wilde observed.  If a zombie virus is on the loose in America, the first infections showed up in the zombie banks, among the zombie bankers. Watch out, Lloyd Blankfein!  Woody is on his way….
James Howard Kunstler

by James Howard Kunstler
http://www.kunstler.com

WHEN SOBER-MINDED INDIVIDUALS begin to regard an enterprise within a nation as “an enemy of the people” you can bet that some serious blood is going to flow. This is now essentially the situation for the Goldman Sachs company, which last week announced third-quarter earnings of over $3 billion largely derived from converting zero percent loans from taxpayers into zero risk profits off of anything paying more than zero percent in interest, revenue, or dividends.

The “people” across this big country may not have a clue how any of this is done, and there may be much to fault them on from the care-and-feeding of their own bodies to the content of their dreams, but you can’t argue with the fact that they are heavily armed to an extreme. And although it may be hard to measure with precision, one might venture to state that they are increasingly pissed off. How else explain popular entertainments like “Zombieland”?

Read the rest of this entry »

Predicting Worse Ahead from America’s Economic Crisis

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Predicting Worse Ahead from America’s Economic Crisis
September 4th, 2009 7:46 AM
by Stephen Lendman
Austrian economist Ludwig von Mises (1881 – 1973) said: “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Under Alan Greenspan, Ben Bernanke and successive US Treasury Secretaries, America chose the latter path and now faces the consequences of their reckless, criminal behavior.
In early 2009, economist Michael Hudson said:
The (US) economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but (at) the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored,” only delayed to postpone a painful day of reckoning.
Economist Hyman Minsky (1919 – 1996) described a “Ponzi finance” system during prolonged expansions and economic booms. Speculative excesses create bubbles, triggering structural instability, then asset valuation collapse that turns euphoria to revulsion and market crashes.
On December 29, 2008, the Wall Street Journal online headlined: “As if Things Weren’t Bad Enough, Russian Professor Predicts End of US,” then continued:
“For a decade, Russian academic (and former KGB analyst) Igor Panarin has been predicting the US will fall apart in 2010” to include an “economic and moral collapse, a civil war, and the eventual breakup of the country.” For years, no one took him seriously, but no longer. He’s invited to Kremlin receptions, gets interviewed twice a day, publishes books, is a frequent lecturer, and appears regularly in the media as an expert on US – Russia relations as well as the great interest in his predictions and new book titled, “The Crash of America.”
On March 25, 2009, RussiaToday.com headlined: “Is there anything Obama can do about the US Collapse?” No, according to Panarin, for these reasons:
— “the moral and psychological factor and the stress of the American population;”
— America’s deepening financial and economic crisis; and
— “the increase of anti-Americanism in the world,” the result of continued US belligerency.
Panarin sees America collapsing into six areas of foreign influence and perhaps disintegrating as a nation:
— depressed northern states close to Canada “in their mentality and economic development;”
— the Southwest “fuel and energy complex, the oil sector” close to Mexico;
— California and the Pacific Northwest falling under Chinese influence;
— the Northeast and Middle Atlantic regions under the EU;
— Alaska may be returned to Russia; and
— Hawaii may become a Japanese or Chinese protectorate.
Panarin sees 2010 as America’s tipping point and says no miracle rescues can save it. In addition, he cites French political scientist Emmanuel Todd’s 1976 prediction of the Soviet Union’s dissolution that got him laughed at and scorned at the time but proved right.
Todd now predicts a similar fate for the US in his 2002 book, “After the Empire: The Breakdown of the American Order.” He cites:
— unilateral militarism shows weakness, not strength;
— America is parasitic, relying on voluntary or extracted “tributes” from vassal states;
— global terrorism is a myth;
— many nations, including EU states, China and Russia, are beginning to resist US adventurism;
— terminal corruption and decay;
— economic weakness and decline;
— producing little, America’s “specialty is consumption (so) relies on foreign imports” to satisfy it;
— a declining middle class and growing poverty will curtail spending sharply;
— if capital inflows cease, the dollar will crash:
— a coming collapse of the stock market, financial institutions and the dollar;
— a ballooning trade deficit and shrinking manufacturing base;
— a predatory ruling class plundering the world with impunity, yet out of touch with its own people growing poorer, more desperate and angrier;
— America’s abandonment of universalism and egalitarianism;
— excess consumption trapping people in an ocean of debt and lowering their living standards;
— “the rest of the world….is on the verge of discovering that it can get along without America; America is realizing that it cannot get along without the rest of the world;”
— an emerging Eurasia will end US supremacy, then isolate and curtail its dominance; and
— “If America continues to endeavor to show its power, it will simply reveal (to) the world its impotence.”
For his part, Panarin compares America to the Titanic after hitting an iceberg when it was unclear whether the crew would try to save the ship or more importantly its passengers. Unfortunately, under Bush and Obama, they’re trying to save themselves at the expense of the ship and passengers.
After disintegration, Panarin sees three dominant influence areas emerging – the EU, Russia and China. After 11 years of monitoring US policies, he believes his prediction is largely confirmed and states the following:
America’s FY 2009 “budget deficit is 4.5 times the 2008 deficit, while firearms sales are up 40%. On October 1, the coupons that were given state workers are to be cashed out. When (they) realize that they are getting nothing for (them), they will take out their firearms and chaos will unfold.”
Further, on September 30, 2009, results will be published that are “destined to shock investors worldwide. After that, and (Japan and China’s) snubbing of the dollar….which will transfer 50% of (their) international operations to Yuan starting in 2010, the currency will then flow like a landslide out of style.” Already nations like China, Russia, Brazil, Argentina and others are trading in their own currencies or will do so shortly.
In Panarin’s view, “the probability of the US ceasing to exist (in its present form) by June 2010 exceeds 50%. At this point, the mission of all major international powers is to prevent chaos” because what hurts America also harms them.
A Multiple-Dip Depression
Economist John Williams publishes the shadowstats.com electronic newsletter with updated sample data on his site. He calls government figures corrupted and unreliable because manipulative changes rigged them for political and market purposes. To correct them, he reverse-engineers GDP, employment, inflation, and other key data for greater reliability to subscribers.
On August 1, Williams called the “Current Economic Downturn (the) Worst Since (the) Great Depression.” It began a year earlier than reported, triggered a systemic solvency crisis, and the effects of “a multiple-dip depression (are) far from over.”
The July 31, 2009 national income accounts “confirmed that the US economy is in its worst economic contraction since the first downleg of the Great Depression, which was a double-dip” one like today’s.
Intermittent upturns are common, like from spiked auto sales from the cash-for-clunkers program that borrowed future purchases for today’s. “Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly nonresponsive to traditional stimuli.”
The economy suffers from deep structural problems related to household income. Consumers are over-indebted, can’t borrow, and Washington’s policies aren’t helping them. Continued economic decline will follow. “The current depression is the second dip in a multiple-dip downturn that started in 1999 (and triggered) the systemic solvency crisis” that was visible by August 2007 but started in late 2006.
The worst lies ahead, the result of the “government’s long-range insolvency and (dollar debasing that risks) hyperinflation during the next five years,” and perhaps sooner in 2010. It will cause “a great depression of a magnitude never before seen in” America, disrupting all business and commerce and reverberating globally.
Williams defines deflation as a decrease in goods and services prices, generally from a money supply contraction. Inflation is the reverse. Hyperinflation debases the currency to near worthlessness. Officially, two or more consecutive declining quarters means recession, but better measures are protracted weakened production, employment, retail sales, construction, capital investment, and demand for durable goods among other factors.
A depression occurs when inflation-adjusted peak-to-trough contraction exceeds 10%, and a great depression when it’s 25% or worse.
Today’s economic downturn preceded the systemic solvency crisis after key data “hit cycle highs and began to weaken in late-2005 for housing and durable goods orders….early-2006 for nonfarm payrolls, (and) late-2006 for retail sales and industrial production, patterns more consistent with a late-2006” real recession onset. Gross Domestic Income (GDI) data confirms this analysis.
Its real growth peaked in Q 1 2006, and revised GDI data contracted in seven of the last nine quarters. “Revised GDP shows the sharpest annual decline in the history of the quarterly GDP series,” suggesting a much deeper and protracted downturn than previously reported.
July 2009 marked the 19th consecutive month of contraction, “the longest downturn since the first downleg of the Great Depression.” More recent GDP declines of 3.3% and 3.9% in Q 1 and Q 2 2009, “are the worst showings in the history of the quarterly GDP series” dating back to 1947-48. In 1946, a greater contraction occurred because of post-war production cutbacks, but it was short-term.
Today’s most reliable economic indicators show the downturn is deepening, not abating as deceptive media accounts report. “The SGS (Shadow Government Statistics) alternative measure of GDP suggests (a) 5.9% contraction….versus the official year-to-year” 3.9% figure.
The official estimated annualized Q 2 2009 decline was 1% compared to SGS’s figure “in excess of five-percent.” Its alternative data show “deeper and more protracted recessions” than officially reported, suggesting a deepening crisis ahead.
The CBO’s Grim Forecast
Even the conservative Congressional Budget Office sees a weaker economy ahead, contrary to most consensus views of a sustainable upturn. Its latest projections are as follows:
— 2010 U-3 unemployment at 10.2%, edging down to 8% by 2011 and 4.8% by 2014;
— in 2010, 12 million will be underemployed;
— for the next five years, economic weakness and lower demand will pressure workers with unemployment or underemployment;
— part-time work only will be available for millions wanting full-time jobs;
— low consumption will persist through 2014;
— unemployment benefits will be exhausted;
— households will be pressured to make mortgage payments, pay for health care, meet other obligations, and provide for their families at a time state and city budget crises force deep cuts in vital social services, not made up for by the federal government;
— tax revenues are down 17%, the sharpest decline since 1932;
— $600 billion in investment losses will result plus another $5.9 trillion in lost output through 2014; and
— the federal deficit will nearly double over the next 10 years to about $20 trillion.
In sum, CBO projects a more severe protracted downturn than it earlier forecast in January.
Troubled Times Ahead
On July 14, Egon von Greyerz, Founder and Managing Partner of Zurich-based Matterhorn Asset Management AG, specializing in precious metals and other investments, said “The Dark Years Are Here” and explained why.
Because of “the devastating effects of credit bubbles, government money printing (and) disastrous actions that governments are taking, (upcoming) tumultuous events will be life changing for most people in the world.” They’ll begin by year end, last for two to three years, then be followed by extended economic, political, and social upheaval, perhaps continuing for two decades.
Greyerz cites three main concerns:
— exploding unemployment and government deficits;
— trillions of unreported bank losses and worthless derivatives; and
— rising inflation, high interest rates, collapsed Treasury bond (and UK gilt) valuations resulting in more money creation, worthless paper, and a “perfect vicious circle (leading to) a hyperinflationary depression followed by the collapse of the dollar and British pound.
America is hemorrhaging financially and economically. Other countries now realize they hold “worthless” US dollars. Reckless money creation achieved short-term hope, benefitted Wall Street alone short-term, elevated world stock markets, and led some to believe the crisis was over when, in fact, it’s worsening.
Aside from expected short-lived upturns, “every single sector of the real economy is deteriorating whether it is production, unemployment, corporate profits, real estate, credit defaults, construction, federal deficits, local government and state deficits etc.”
In response, the Fed keeps printing money and destroying its value. “This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?”
We’re in “the first phase of this tragic saga.” Likely by year end, a second more serious one will start. Real unemployment now tops 20%. It hit 25% in the Great Depression with 35% of the nonfarm population out of work and desperate.
“It is our firm opinion that (US) non-farm unemployment levels will reach 35% at least….in the next few years” with all uncounted categories included.
Growing millions with no jobs, incomes, savings, or safety net protections will create “a disaster of unimaginable consequences that will affect the whole fabric of American society” to a degree far greater than in the Great Depression.
Growing unemployment now plagues Western and Eastern Europe as well, and by 2010 will more greatly affect most parts of the world, “including China, Asia and Africa. Never before has there been a global unemployment crisis affecting the world simultaneously.” Ahead expect sharp drops in consumption and global trade leading to depression, poverty, “famine and social unrest.”
Already, conditions are worse than in the 1930s, but the worst is yet to come. Expect:
— an extremely severe global depression in most countries with grave economic, political, and social consequences;
— social safety net protections will end;
— private and state pensions will likely collapse; and
— unemployment, poverty, homelessness, hunger, and famine will cause a protracted period of economic, political, social, and institutional upheaval.
If von Greyerz, Panarin, Todd, and others with similar views are right, a deepening, protracted, unprecedented global catastrophe approaches that “will be life changing for most people in the world.”
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Stephen Lendman is a research associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Monday – Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.

by Stephen Lendman
Posted originally September 4th, 2009

AUSTRIAN ECONOMIST LUDWIG VON MISES (1881 – 1973) said: “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Under Alan Greenspan, Ben Bernanke and successive US Treasury Secretaries, America chose the latter path and now faces the consequences of their reckless, criminal behavior. In early 2009, economist Michael Hudson said: “The (US) economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but (at) the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored, but only delayed to postpone a painful day of reckoning.”

Economist Hyman Minsky (1919 – 1996) described a “Ponzi finance” system during prolonged expansions and economic booms. Speculative excesses create bubbles, triggering structural instability, then asset valuation collapse that turns euphoria to revulsion and market crashes.

On December 29, 2008, the Wall Street Journal online headlined: “As if Things Weren’t Bad Enough, Russian Professor Predicts End of US” and then continued:

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