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Archive for July 2010

The Ruling Elite Called

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by Jim Quinn
Posted 29 July 2010 in The Burning Platform

I JUST GOT OFF THE HORN WITH THE RULING ELITE. WE HAD AN EMERGENCY CONFERENCE CALL and to tell you the truth, they ain’t happy. You little people are not responding the way you are supposed to. A significant portion of you are not getting more optimistic because they tell you to. Instead of just reading the headline on Bloomberg that durable goods orders skyrocketed in June, you actually read the details that said durable goods orders plunged. It is getting difficult for the ruling elite to keep the masses sedated and dumbed down. These damn bloggers, with their facts and critical thinking, are throwing a wrench into the gears.

Obama and his crack team are working round the clock to lock down the internet, but it will take time. Not that they are totally dissatisfied. They’ve been able to renovate their penthouses and purchase new mansions in the Hamptons with the billions in bonuses you supplied through TARP. The $1.2 trillion supplied by your children and grandchildren to buy up toxic mortgages off their balances sheets was a godsend. They will never call you suckers, not to your face.

“What comes after a quadrillion?”

Their spirits were buoyed by the 2,600 pages DONK (Dodd/Frank) financial reform bill. So many loopholes, so little time. Obama and his crack team of Obamanistas in the White House, supported by their mouthpieces in the mainstream media, have been able to easily manipulate the non-thinking masses into believing this bill would have stopped the last financial crash and will stop the next one. The Ministry of Truth has been working overtime utilizing Federal Reserve paid shill economists like Alan Blinder and Mark Zandi to perpetuate the myth that the actions taken in the last 18 months have averted a Depression, saved 8 million jobs, created a long-lasting recovery, wiped out Swine Flu, and earned Paul Krugman a nobel prize in fiction.

This is where we have a problem. The worshippers of Keynes, that rule the country, are pissed off at you. Don’t you realize that government spending of your money, borrowed from the Chinese, with the bill passed to your grandchildren, was supposed to reinvigorate your animal spirits? They handed you other people’s money to buy cars and homes and what do you do? You stop buying cars and homes as soon as they stop paying you to buy cars and homes. You ungrateful bastards.

Bennie has been hugely successful at ruining the retirements of millions of grandmothers by paying them .20% on their money market accounts while forcing mortgage rates for 30 years down to 4.5%. And still you don’t buy houses. Timmy has instructed Fannie Mae to make home loans to anyone with a pulse who can make an X on a piece of paper. No money down, no proof of income, no assets. Just like the good old days. Still you don’t buy houses. What is wrong with you?

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We’ve never seen anything like this summer:
 An interview with Arch Crawford

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from The Daily Crux
July 2010

“Dear Daily Crux reader,
This week’s interview concerns one of the most unusual subjects in the financial markets. Because it’s time-sensitive, we aren’t publishing at our normal time. Our guest this week is an investment advisor who has been writing his newsletter for over 30 years. He was named the #1 market timer for 2008 and 2009 by the Hulbert Financial Digest, which ranks over 500 investment newsletters. His name is Arch Crawford.

He has been writing his Crawford Perspectives advisory since 1977 – and has been profiled in The Wall Street Journal, The New York Times, Forbes, Barron’s, Kiplinger’s, and dozens of other publications around the world. He’s shared his insights on CNBC, the Nightly Business Report, Good Morning America, and ABC’s 20/20. Crawford is on record for predicting some of the most important events in recent history, including the 1987 stock market crash, the beginning of the gold’s historic rally, and the September 11 terrorist attacks.

And about that “unusual” bit? Arch Crawford uses astrology to time his market calls. He recently caused a stir by making some shocking predictions for the near future… beginning as early as this Friday, July 30th. Skeptical? So are we… which is why we sat down with Mr. Crawford to get his controversial take. Read on for the full story. Good investing, Justin Brill,
Managing Editor, The Daily Crux


The Daily Crux Sunday Interview:
We’ve never seen anything like this summer:
An interview with Arch Crawford

The Daily Crux: Mr. Crawford, you’ve made a name for yourself as one of the best market timers over the past 30 years, using a combination of traditional technical analysis and some rather unusual techniques. For readers who may not be familiar with your work, can you tell us a little bit about yourself and how you developed your unique approach to the markets?

Arch Crawford: Well, I first got interested in the stock market when I was about 13 years old and I put my first trade on when I was 14. I was keeping up with all the stocks under $10. I started with stocks in the As and Bs. I never got through the Cs because there were a lot of them way back then. 

After high school, I went to the University of North Carolina studying math and physics. I was spending too much time over at the library looking up stock market stuff and my grade point average began to suffer. So I figured before my grades dropped through a “major support level” – to use a market analogy – I should just go ahead and do what I really wanted to do. So I left there and went to work for Merrill Lynch in Raleigh, North Carolina.

My job was marking stock prices up on the chalk board.

I liked it so much, I said, “This is great! This is what I want to do with my life. Send me to New York!” They just laughed at me. But one of the brokers there got me the book Technical Analysis of Stock Trends by Edwards and McGee, which was sort of the bible of that kind of analysis. Merrill Lynch used to get the trend line charts each week. They would have charts for about 600 stocks, and they would come in every Monday for the previous week. I would get them and draw all the lines of support and resistance and trend lines and all that. Then I would look at them the next week and see if they did what I thought they would do, and if not I’d try to figure out why.

So I was sort of self-taught in technical analysis. About six months later I thought I had learned enough, so I told Merrill I was going to quit, and move to New York to look for a job. They said, “Don’t do that. We’ll transfer you.” 
So, when I was 20 years old, I got on a bus and went to New York City. I think they upped my pay from about $55 a week to $70 or $75 a week. I went right up into the research department and I was actually drawing the charts for their fundamental analysts. Those analysts didn’t have any interest in technicals, but they wanted to see weekly charts of their stocks back years and years. I kept them up to date so they’d have an idea of the general market direction of the stocks they followed. There were 45 industry specialists, so that was about 400 charts in all. That alone would take until about noon on Wednesday each week.

At nights, I made friends with the Merrill Lynch librarian and would spend until midnight running 10-day moving averages on every figure coming out in the Wall Street Journal and Barron’s, learning which ones were too similar and which ones were unique in the type of information. The technical guy at Merrill Lynch at the time was Robert Farrell. He later became the most famous and best-regarded technical analyst on Wall Street. He saw that I was really interested in working hard at it, and he took me on as his first-ever assistant. I worked there with him for  three and a half years. In those days, technical market analysis was regarded a lot like astrology is today. They stuck our office down a long, empty hallway that dog-legged off to the left. It was down past the telephone switching room. If you didn’t know we were there, you sure wouldn’t come looking for us.

When I had been there for a couple of months, I made a call that there would be a crash the next year – in early 1962 – and I said if the pattern I saw stayed symmetrical, the top would be in the middle of December 1961. Well it did stay balanced out, and the market topped on the 13th of December. It continued to trace out a head and shoulders pattern, and it broke down through the neckline of the pattern on the day that Kennedy made the steel companies roll back a price increase. That’s what actually caused the crash. It was never an economic crash. It was just political – Wall Street punishing Kennedy. [Laughter]. I made a bunch of money on put options on that crash. After I left Merrill, I started my own business as an advisor. Later I was a trader, and I was a stock broker for a short time, a year and a half maybe. I never wanted to be a stock broker. Then I started my newsletter in 1977.

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What Is It?

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by James Howard Kunstler
Posted originally on July 26, 2010

THE NEW YORK TIMES RAN A STORY OF CURIOUS IMPORT THIS MORNING: “Mel Gibson Loses Support Abroad”. Well, gosh, that’s disappointing. And just when we needed him, too. Concern over this pressing matter probably reflects the general mood of the nation these dog days of summer – and these soggy days, indeed, are like living in a dog’s mouth – so no wonder the USA has lost its mind, as evidenced by the fact that so many people who ought to know better, in the immortal words of Jim Cramer, don’t know anything.

Case in point: I visited the Slate Political Gabfest podcast yesterday. These otherwise excellent, entertaining, highly educated folk (David Plotz, Emily Bazelon, and Daniel Gross, in for vacationing John Dickerson) were discussing the ramifications of the economic situation on the upcoming elections. They were quite clear about not being able to articulate the nature of this economic situation, “…this recession, or whatever you want to call it…” in Ms. Bazelon’s words. What’s the point of sending these people to Ivy League colleges if they can’t make sense of their world?

Let’s call this whatever-you-want-to-call-it a “compressive deflationary contraction“, because that’s exactly what it is, an accelerating systemic collapse of activity due to over-investments in hyper-complexity (thank you Joseph Tainter). A number of things are going on in our society that can be described with precision. We’ve generated too many future claims on wealth that does not exist and has poor prospects of ever being generated. That’s what unpayable debt is. We have such a mighty mountain of it that the Federal Reserve can “create” new digital dollars until the cows come home (and learn how to play chamber music), but they will never create enough new money to outpace the disappearance of existing notional money in the form of welshed-on loans.

Hence, money will continue to disappear out of the economic system indefinitely, citizens will grow poorer steadily, companies will go out of business, and governments at all levels will not have money to do what they have been organized to do.

This compressive deflationary collapse is not the kind of cyclical “downturn” that we are familiar with during the two-hundred-year-long adventure with industrial expansion – that is, the kind of cyclical downturn caused by the usual exhalations of markets attempting to adjust the flows of supply and demand. This is a structural implosion of markets that have been functionally destroyed by pervasive fraud and swindling in the absence of real productive activity.

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2011: The Year Of The Tax Increase

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from The Economic Collapse
Originally posted July 2010


UNLESS THE US CONGRESS ACTS, THERE IS GOING TO BE A MASSIVE WAVE OF TAX INCREASES IN 2011. In fact, some are already calling 2011 the year of the tax increase. A whole host of tax cuts that Congress established between 2001 and 2003 are set to expire in January unless Congress chooses to renew them. But with Democrats firmly in control of both houses that appears to be extremely unlikely. These tax increases are going to affect every single American (at least those who actually pay taxes). But this will be just the first wave of tax increases. Another huge slate of tax increases passed in the health care reform law is scheduled to go into effect by 2019. So Americans that are already infuriated by our tax system are only going to become more frustrated in the years ahead. The reality is that the U.S. government will soon be digging much deeper into our wallets.

The following are some of the tax increases that are scheduled to go into effect in 2011:

1 – The lowest bracket for the personal income tax is going to increase from 10 percent to 15 percent.

2 – The next lowest bracket for the personal income tax is going to increase from 25 percent to 28 percent.

3 – The 28 percent tax bracket is going to increase to 31 percent.

4 – The 33 percent tax bracket is going to increase to 36 percent.

5 – The 35 percent tax bracket is going to increase to 39.6 percent.

6 – In 2011, the death tax is scheduled to return. So instead of paying zero percent, estates of $1 million or more are going to be taxed at a rate of 55 percent.

7 – The capital gains tax is going to increase from 15 percent to 20 percent.

8 – The tax on dividends is going to increase from 15 percent to 39.6 percent.

9 – The “marriage penalty” is also scheduled to be reinstated in 2011.

It is being estimated that the total cost of these tax increases to U.S. taxpayers will be $2.6 trillion through the year 2020.

Ouch! But wait, there are even more tax increases coming. The “health care reform law” contains over a dozen new taxes that will be implemented in stages over the next decade. When you add all of these taxes to the taxes that were mentioned earlier, the result is going to be absolutely devastating. According to an analysis by the Congressional Joint Committee on Taxation the health care reform law will generate $409.2 billion in additional taxes by the year 2019.

Double ouch! So is it any wonder why the public has such a low opinion of the U.S. Congress? Every single major poll done on the topic shows that approval ratings for Congress are at record lows. For example, Gallup’s 2010 Confidence in Institutions poll found Congress ranking dead last out of the 16 institutions rated this year.

Of course there are a whole host of reasons why the American people are upset with Congress, but one of the big ones is the fact that we are literally being taxed to death. However, it is not just federal income taxes that are killing us. In a previous article entitled “Taxed Enough Already!“, we listed just a few of the taxes that Americans have to pay each year:

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Nielson Probability of US Hyperinflation or Debt Implosion

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by Lorimer Wilson
Posted originally July 22 2010

“The collapse of the U.S. economy is a certainty – only the manner of the economic collapse has yet to be determined. In time the global derivatives bubble will produce the same result which has occurred to every other currency not backed by gold throughout history: those currencies, our “money”, will become worthless.”

Those were the alarming words of Jeff Nielson of BullionBullsCanada.com in a recent speech* which I have edited and reformatted below (with his permission) for the sake of brevity and clarity.

Derivatives: An unregulated $1 Quadrillion market
“Warren Buffett once described derivatives as ‘financial weapons of mass destruction’ – and for a very good reason. While U.S. ‘unfunded liabilities’ are larger than the entire global economy, the derivatives market is 20 times larger than the entire global economy – at an astonishing $1 quadrillion. Yes, you heard me correctly – $1 quadrillion! And get this – this derivative market is totally unregulated. It is totally lacking in transparency, meaning that all we know about this $1 quadrillion mountain of banker-paper is what the bankers tell us.”

Nielson pointed out that “During the 2008 U.S. financial crisis, the Wall Street banks required $10 trillion in loans, hand outs and guarantees just to temporarily prevent their bankruptcy – more than all other bail-outs for all the rest of the world, for all of history, combined – and the entire crisis was based upon settling the derivatives positions of just one Wall Street investment bank, namely, Lehman Brothers – and even that $10 trillion was not enough to prevent the collapse of the U.S. financial sector.”

Furthermore, “The Wall Street banks also needed to have the U.S. accounting rules changed, so that they could assign their own ‘fantasy valuations’ to the debts/assets on their books, instead of the actual market value of those assets” said Nielson. “Without those most radical accounting changes in history the Wall Street banks would have been reporting their own bankruptcies rather than reporting their supposed ‘record’ profits.”

All is NOT as it seems
Nielson went on to say that “While the Wall Street banks brag about billions in supposed profits, there are still trillions of dollars of toxic assets being hidden off their balance sheets. We know there has been no increase in the real value of these ‘assets’ because, in just two years, the average amount of losses on their books has increased 5-fold relative to the value of their assets when the first bank failures occurred. Thus, if anything, these ‘toxic assets’ are even more worthless than they were when the collapse began.

Despite this huge mountain of unstable debt, Wall Street has actually increased the size of the derivatives bubble by 30% since the U.S. housing-bubble first burst. This caused Neil Barofsky, the U.S. ‘watch-dog’ assigned to oversee the TARP bail-out, to exclaim recently that the risk of collapse of the entire U.S. financial sector has increased not decreased saying:

“Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding road, but this time in a faster car.”

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The Death of Paper Money

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by Ambrose Evans-Pritchard
Originally published 25 Jul 2010

As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974. Ebay is offering a well-thumbed volume of “Dying of Money: Lessons of the Great German and American Inflations” at a starting bid of $699 (shipping free… thanks a lot).

THE CRUCIAL PASSAGE COMES IN CHAPTER 17 ENTITLED “VELOCITY”. Each big inflation – whether the early 1920s in Germany, or the Korean and Vietnam wars in the US – starts with a passive expansion of the quantity of money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck. People’s willingness to hold money can change suddenly for a “psychological and spontaneous reason” , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.

“Velocity took an almost right-angle turn upward in the summer of 1922,” said Mr O. Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to “smell a government rat”.

Some might smile at the Bank of England “surprise” at the recent the jump in British inflation. Across the Atlantic, Fed critics say the rise in the US monetary base from $871bn to $2,024bn in just two years is an incendiary pyre that will ignite as soon as US money velocity returns to normal. Morgan Stanley expects bond carnage as this catches up with the Fed, predicting that yields on US Treasuries will rocket to 5.5pc. This has not happened so far. 10-year yields have fallen below 3pc, and M2 velocity has remained at historic lows of 1.72.

As a signed-up member of the deflation camp, I think the Bank and the Fed are right to keep their nerve and delay the withdrawal of stimulus – though that case is easier to make in the US where core inflation has dropped to the lowest since the mid 1960s. But fact that O. Parsson’s book is suddenly in demand in elite banking circles is itself a sign of the sort of behavioral change that can become self-fulfilling.

As it happens, another book from the 1970s entitled “When Money Dies: the Nightmare of The Weimar Hyper-Inflation” has just been reprinted. Written by former Tory MEP Adam Fergusson – endorsed by Warren Buffett as a must-read – it is a vivid account drawn from the diaries of those who lived through the turmoil in Germany, Austria, and Hungary as the empires were broken up.

Near civil war between town and country was a pervasive feature of this break-down in social order. Large mobs of half-starved and vindictive townsmen descended on villages to seize food from farmers accused of hoarding. The diary of one young woman described the scene at her cousin’s farm.

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Matt Simmons: “Oil spill clean up costs over $1 trillion, we have now killed the Gulf of Mexico”

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Submitted by Tyler Durden
Posted on Zero Hedge July 21, 2010


MATT SIMMONS SHARES SOME STARTLING REVELATIONS IN HIS LATEST BLOOMBERG TV INTERVIEW, in which he says none of the propaganda matters on TV 24/7 (photoshopped or not) as the ultimate clean up cost will likely be well over $1 trillion, and a result he is unconcerned about his BP short. He ultimately see the stock going down to $1.

What Simmons alleges however is far more startling and audacious: that this is a joint cover up effort between the administration and BP, in which both entities keep throwing sand in the eyes of observers while distracting everyone from the matter at hand: “What we don’t know anything about is the open hole which is caused by the drill bit when it tossed the blow-out preventer way out of the hole…and 120,000/day minimum of toxic poison has now covered the floor of the Gulf of Mexico. So what they’re talking about is the biggest environmental cover-up ever. And they knew that that well, that riser, would finally deplete. And then they could say it’s over.”

On blaming the catastrophe on Transocean: “For two days they kept saying it’s a rig fire. When the rig sank they could no longer call it a rig fire. It’s a riser leak… Because if they said the truth they would all go to jail.” The conclusion: “Unfortunately, we now have killed the Gulf of Mexico.”

See it here: http://www.youtube.com/watch?v=DwX9RXFRJD4&feature=player_embedded

On whether the well pressure should be a concern:
“No, it’s a total diversion – that’s the gas condensation that was trapped in the drilling riser which blew off the wellhead at 10:01 PM CT on April 20th, it’s a mile-long compressed natural gas.”

”What we don’t know anything about is the open hole which is caused by the drill bit when it tossed the blow-out preventer way out of the hole… and 120,000 minimum of toxic poison has now covered the floor of the Gulf of Mexico. So what they’re talking about is the biggest environmental cover-up ever. And they knew that that well, that riser, would finally deplete. And then they could say it’s over. And unfortunately, we now have killed the Gulf of Mexico.”

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Blame Central Banking, Not Banks

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from The Daily Bell
Originally posted Friday, July 16, 2010

THE FINANCIAL CRISIS BLAME-GAME: HAVE WE GOT IT RIGHT IN JUST BLAMING THE BANKERS? At the Feast of the Immaculate Economy – well before the crisis of 2007 and 2008 – there were many guests. Governments keen for endless amounts of cheap money to fund their mighty public sector programmes, homeowners keen for an extra bedroom even though their income didn’t quite stretch, central banks who appeared to almost wilfully ignore what was going on under their very noses. And the waiters, of course, the bankers, running around the table filling everyone’s glass to over-flowing, whipping everyone up into an ever-increasing frenzy and taking their very nice cut (and cut and cut), thank-you very much. In the blame game that followed it is the waiters who have got the spanking. Of course, if the waiters failed and had to pack up and leave, governments wouldn’t get served, consumers would have nothing to eat and the whole system would seize up. So we had to ask all the guests to dip into their pockets for a whip round to save the waiters. And that made us very angry. Is it simply about rumuneration and lending? Or does it go deeper than that? With the Government about to announce the details of the new powers it is to give the BoE, what are the dangers ahead for the finance sector, whether it’s from Basel III, new European regulation or the G20? And what effect could that have on the prospects for economic growth? I look forward to your thoughts. – Kamal Ahmed, writing in the UK Telegraph

Dominant Social Theme: Is it just the bankers’ fault?
Free-Market Analysis: We will take Mr. Ahmed up on his offer. We do not believe that blaming the bankers gets it “just right.” In fact, it is the most common of all dominant social themes – that economic downturns are the fault of big, powerful private interests. This sort of populism has been cultivated by the power-elite throughout the past several centuries as a way of promoting an “us versus them” mentality. Let the “people” blame capitalism and turn to government for solutions and the power elite that stands behind government benefits inordinately.

In a sense this article in the UK Telegraph is surprising because for the most part the mainstream press, even in this day and age, is circumspect about criticizing central bankers. It was in fact surprising when criticism of the Federal Reserve went mainstream last year, but this was perhaps in part due to the massive nature of the downturn and the availability of a high-profile Fed critic, Congressman Ron Paul (R-Tex). As a result of Ron Paul’s efforts, the Fed is facing an audit of its recent activities. The audit is not so far-reaching as Ron Paul and others hoped, but it is a start.

In Britain, criticism of the central bank has been more subdued, perhaps because the Bank of England is such an extraordinarily powerful institution, one of the first of its kind and the model for most other central banks around the world There is no doubt, of course, that the British central bank played its part in the financial meltdown just as the American central bank did. Nonetheless, the British press has been circumspect. Here’s some more from the article:

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What does the Financial Reform Bill do other than being completely and utterly worthless?

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from The Economic Collapse
Posted originally July 18, 2010


IS IT POSSIBLE TO WRITE A 2,300 PAGE PIECE OF LEGISLATION THAT ACCOMPLISHES next to nothing and is pretty much completely and utterly worthless? The answer is yes. Barack Obama has been trumpeting the Dodd-Frank financial reform bill as the “biggest rewrite of Wall Street rules since the Great Depression”, but the truth is that after the Wall Street lobbyists got done carving it up, the bill that was left was so watered down and so toothless that it essentially accomplishes nothing except creating even more government bureaucracy and even more mind-numbing paperwork.

The bill is so riddled with loopholes for the big banks that it is basically the legislative equivalent of Swiss cheese. The Democrats in the Senate were ecstatic when they announced that they had secured the 60 votes needed to pass this legislation, but when they are asked about what the financial reform bill will do, most of them are left stammering for some kind of cohesive response. The sad truth is that most of them probably don’t understand the bill and none of them will probably ever read the entire thing.

So will the financial reform bill do any good at all? Well, yes. A very, very small amount. Essentially, it is kind of like going over to the Pacific Ocean and scooping out a couple of cups of water. That is about how much good this bill is going to do. But U.S. Senate Majority Leader Harry Reid is making this sound like this is some kind of history-changing legislation….

“We’re cleaning up Wall Street.”
Oh really? Charles Geisst, professor of finance at Manhattan College recently had the following to say about this absolutely toothless bill… Like health-care reform, this bill is being drawn up to grab headlines but its details betray it as nothing more than a slap on the wrist for Wall Street. It is true that Wall Street can commit grand theft and apparently get off with nothing more than community service. The truth is that most of us never expected the U.S. government to truly take on Wall Street. The relationship between the two is just way too cozy for that to happen. So does the financial reform bill actually accomplish anything? Yes. Let’s take a look at the “sweeping changes” contained in the bill….

• Federal regulators will receive more authority to monitor everything from mortgages to complex derivatives. (Oh goody!  Just what we needed – more federal regulation!  As if federal agencies have ever been very good at regulating the financial industry…)

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What If He’s Right?

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by James Howard Kunstler
from Clusterfuck Nation
Posted originally July 19, 2010

JUST WHEN AMERICA WAS CELEBRATING THE PROVISIONAL END of BP’s Macondo oil blowout, and getting back to important issues like Kim Kardashian’s body-suit collection, along comes Matthew Simmons with a rather strange and alarming outcry on doings in the Gulf of Mexico that contradicts the mood of renewed festivity, as well as just about every shred of reportage from any media outlet, mainstream or otherwise.

Matt Simmons’ Houston-based company has been the leading investment bank to the U.S. oil industry for a long time, financing exploration and drilling in places like the Gulf of Mexico. Simmons, 68, recently retired from day-to-day management of the company. For much of the decade he has been what may be described as a peak oil activist. His 2005 book, Twilight in the Desert, warned the public that Saudi Arabia’s oil production had reached its limits and, more generally, that an oil-dependent world was entering a zone of serious trouble over its primary resource. He took this aggressive stance despite risking the ire of the people he did business with.

Matt Simmons is a sober individual and a very nice man (I’ve met him twice over the years), a button-downed corporate executive who’s been around the oil business for 40 years. His knowledge is deep and comprehensive.  From the beginning of the BP Macondo blowout incident in April, he’s taken the far out position that the well-bore is fatally compromised and that BP has been consistently lying about their operations to stop the flow of oil. Perhaps most radically, Simmons claims that an oil “gusher” is pouring into the Gulf some distance from the drilling site itself.

Last week, Simmons came on Dylan Ratigan’s MSNBC financial show, but he did a longer interview over at the King World News website. (click here for Eric King’s interview with Simmons). Simmons’ current warning about the situation focuses on the gigantic “lake” of crude oil that is pooling under great pressure 4,000-5,000 feet down in the “basement” of the Gulf’s waters.  More particularly, he is concerned that a tropical storm will bring this oil up – as tropical storms and hurricanes usually do with deeper cold water – and with it clouds of methane gas that will move toward the Gulf shore and kill a lot of people. (I really don’t know the science on this and welcome any reader to correct me, but I suppose that the oil “lake” deep under the Gulf waters contains a lot of methane gas dissolved at pressure, and that as the oil rises toward the ocean’s surface, and lower pressures, the gas will bubble out of solution.)

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