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2012 – The year of living dangerously

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by Jim Quinn
of The Burning Platform
Posted on 8th January 2012 

http://www.theburningplatform.com/?p=27063

“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability –  problem areas where America will have neglected, denied, or delayed needed action.” – Strauss & Howe – The Fourth Turning – 1997

IN DECEMBER 2010 I WROTE AN ARTICLE CALLED Will 2012 Be as Critical as 1860?, THAT PONDERED WHAT MIGHT HAPPEN WITH THE 2012 presidential election and the possible scenarios that might play out based on that election. Well, 2012 has arrived and every blogger and mainstream media pundit is making their predictions for 2012. The benefit of delaying my predictions until the first week of 2012 is that I’ve been able to read the wise ponderings of Mike Shedlock, Jesse, Karl Denninger, and some other brilliant truth seeking analysts regarding what might happen during 2012. The passage above from Strauss & Howe was written fifteen years ago and captured the essence of what has happened since 2007 and what will drive all the events over the next decade. Predicting specific events is a futile human endeavour. The world is so complex and individual human beings so impulsive and driven by emotion, that the possible number of particular outcomes is almost infinite.

But, as Strauss and Howe point out, the core elements that created this Crisis and the reaction of generational cohorts to the implications of debt, civic decay and global disorder will drive all the events that will occur in 2012 and for as far as the eye can see. Linear thinkers in mega-corporations, mainstream media and Washington D.C. focus on retaining the status quo, their power and their wealth. They believe an economic recovery can be manufactured through monetary manipulation and Keynesian borrowing and spending. They are blind to the fact that history is cyclical, not linear. In order to have an understanding of what could happen in the coming year, it is essential to keep the big picture in focus. As we enter the fifth year of this twenty year Crisis period, there is absolutely no chance that 2012 will see an improvement in our economy, political atmosphere or world situation. Fourth Turnings never de-intensify. They exhaust themselves after years of chaos, conflict and turmoil. I can guarantee you that 2012 will see increased mayhem, riots, violent protests, recessions, bear markets, and a presidential election that will confound the establishment. All the episodes which will occur in 2012 will have at their core one of the three elements described by Strauss & Howe in 1997: Debt, Civic Decay, or Global Disorder.

Debt – On the Road to Serfdom

The world is awash in debt. Everyone is focused on the PIIGS with their debt to GDP ratios exceeding the Rogoff & Reinhart’s 90% point of no return. But, the supposedly fiscally responsible countries like Germany, France, U.K., and the U.S. have already breached the 90% level. Japan is off the charts, with debt exceeding 200% of GDP. These figures are just for the official government debt. If countries were required to report their debt like a corporation, their unfunded entitlement promises to future generations are four to six times more than their official government debt.

Any critical thinking person can look at the chart above and realize that creating more debt out of thin air to solve a debt problem is foolish, dangerous, and self serving to only bankers and politicians. The debt crisis took decades of terrible choices and bogus promises to produce. The world is now in the midst of a debt driven catastrophe. At best, the excessive levels of sovereign debt will slow economic growth to zero or below in 2012. At worst, interest rates will soar as counties attempt to rollover their debt and rolling defaults across Europe will plunge the continent into a depression. The largest banks in Europe are leveraged 40 to 1, therefore a 3% reduction in their capital will cause bankruptcy. Once you pass 90% debt to GDP, your fate is sealed.

“Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare. Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?”Rogoff & Reinhart

The ECB doubling their balance sheet and funnelling trillions to European banks will not solve anything. The truth that no one wants to acknowledge is the standard of living for every person in Europe, the United States and Japan will decline. The choice is whether the decline happens rapidly by accepting debt default and restructuring or methodically through central bank created inflation that devours the wealth of the middle class. Debt default would result in rich bankers losing vast sums of wealth and politicians accepting the consequences of their false promises. Bankers and politicians will choose inflation. They believe they can control the levers of inflation, but they have proven to be incompetent, hubristic, and myopic. The European Union will not survive 2012 in its current form. Countries are already preparing for the dissolution. Politicians and bankers will lie and print until the day they pull the plug on the doomed Euro experiment.

The false storyline of debt being paid down in the United States continues to be propagated by the mainstream press and decried by Paul Krugman. The age of austerity storyline gets full play on a daily basis. Total credit market debt in 2000 was $27 trillion. It skyrocket to $42 trillion by 2005 as George Bush and Alan Greenspan encouraged delusional Americans to defeat terrorism by leasing SUVs and live the American dream by putting zero down on a $600,000 McMansion, financing it with a negative amortization no doc loan. Paul Krugman got his wish as a housing bubble replaced the dotcom bubble. Debt accumulation went into hyper-speed in 2006 and 2007 as Wall Street sharks conducted a fraudulent feeding frenzy by peddling their derivatives of mass destruction around the globe. By the end of 2007, total credit market debt reached $51 trillion.

In a world inhabited by sincere sane leaders, willing to level with the citizens and disposed to allow financial institutions that took world crushing risks to fail through an orderly bankruptcy process, debt would have been written off and a sharp short contraction would have occurred. The stockholders, bondholders and executives of the Wall Street banks would have taken the losses they deserved. Instead Wall Street used their undue influence, wealth and power to force their politician puppets to funnel $5 trillion to the bankers that created the crisis while dumping the debt on taxpayers and unborn generations. The Wall Street controlled Federal Reserve provided risk free funding and took toxic mortgage assets off their balance sheets. The result is total credit market debt higher today than it was at the peak of the financial crisis in March 2009.


Our leaders have done the exact opposite of what needed to be done to address this debt crisis. The country is adding $3.7 billion per day to the National Debt. With the debt at $15.2 trillion, we have now surpassed the 100% to GDP mark. The National Debt will be $16.5 trillion when the next president takes office in January 2013. Ben Bernanke has been able to keep short term interest rates near zero and the non-existent U.S. economic growth and European disaster has resulted in keeping long-term rates near record lows. Despite these historic low rates, interest on the National Debt totalled $454 billion in 2011, an all-time high. The effective interest rate was approximately 3%. If rates stay at current levels, interest will be between $400 and $500 billion in 2012. Each 1% increase in rates would cost American taxpayers an additional $150 billion. A rapid increase in rates to the 7% level would ratchet interest expense above $1 trillion and destroy the last remaining vestiges of Bernanke’s credibility. It can’t possibly happen in 2012. Right? The world has total confidence in pieces of paper being produced at a rate of $3.7 billion per day.

Confidence in Ben Bernanke, Barack Obama and the U.S. Congress is all that stands between continued stability and complete chaos. What could go wrong? Debt related issues that will likely rear their head in 2012 are as follows:

  • A debt saturated society cannot grow. As debt servicing grows by the day, the economy losses steam. The excessive and increasing debt levels will lead to a renewed recession in 2012 as clearly detailed by ECRI, John Hussman and Hoisington Investment Management.

“Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.” – ECRI 

At present, we observe agreement across a broad ensemble of models, even restricting data to indicators available since 1950 (broader data since 1970 imply virtual certainty of recession). The uniformity of recessionary evidence we observe today has never been seen except during or just prior to other historical recessions.-  John Hussman 

Negative economic growth will probably be registered in the U.S. during the fourth quarter of 2011, and in subsequent quarters in 2012. Though partially caused by monetary and fiscal actions and excessive indebtedness, this contraction has been further aggravated by three current cyclical developments: a) declining productivity, b) elevated inventory investment, and c) contracting real wage income. In summary, the case for an impending recession rests not only on cyclical precursors evident in productivity, real wages, and inventory investment, but also on the disfunctionality of monetary and fiscal policy. – Van Hoisington 

  • The onrushing recession will send housing down for the count. With 2.2 million homes already in the foreclosure process and another 13 million homes with negative or near negative equity, the recession will push more people over the edge. As foreclosures rise a self reinforcing loop will develop. Home prices will fall as banks dump houses at lower prices, pushing millions more into a negative equity position. Home prices will fall another 5% to 10% in 2012, with a couple years to go before bottoming.
  • The recession will result in companies laying off more workers. It won’t be as dramatic as 2008-2009 because companies have already shed 6 million jobs. The working age population will increase by 1.7 million, the number of people employed will go up by 1 million, but the official unemployment rate will drop to 7% as the BLS reveals that 10 million people decided to relax and leave the workforce. Surely I jest. The government manipulated unemployment rate will rise above 9%, while the real rate will surpass 25%.
  • The American people rationally increased their savings rate to 6.2% in the 2nd Quarter of 2009. When you are over-indebted and the country heads into recession, spending less and saving more is a sane option. Consumer expenditures accounted for 69% of GDP in 2007, prior to the economic collapse. The “recovery” of 2010-2011 has been driven by Ben’s zero interest rate policy, the resumption of easy credit peddling by the Wall Street banks, and consumers convinced that going further into hock to attain the American dream is rational. Consumer spending as a percentage of GDP has actually risen to 71% and the savings rate has plunged to 3.6%. The 20% drop in gas prices since April bottomed in December. This decline temporarily boosted consumer spending, but prices are on the rise again. With the State and local governments reducing spending, do the Wall Street Ivy League economists really believe consumers will increase their consumption to 73% of GDP and reduce their savings rate to 1%? If you open your local newspaper you will see the master plan. Car dealers are offering 0% financing with nothing down for 60 months. The GMAC/Ditech/Ally Bank zombie lives as subprime auto loans are back. The “strong” auto sales are a debt financed illusion. Ashley Furniture is offering 0% financing for 50 months with no payments through Wells Fargo Bank. When the Federal Reserve provides the Wall Street banks with 0% funding, banks are willing to take big risks knowing that Uncle Ben and the naive American taxpayer will be there to bail them out when it blows up again.
  • With recession a certainty as fiscal stimulus wears off, home prices fall, employment stagnates, and consumer spending grinds to a halt, what will happen to the stock market? The Wall Street shills paraded on CNBC and interviewed by the multi-millionaire talking head twits assure you that stocks are undervalued and the market will surely be up 10% to 15% by 2013. It’s a mortal lock, just as it has been for the last twelve years, with the S&P 500 at the same level as January 1999. The fact is the stock market drops 30% on average during a recession. The talking heads declare that corporate profits are at record levels and will continue higher. Not bloody likely. Corporate profit margins are at an all-time peak about 50% above their historical norms. Profits always revert to their mean. These profits are not sustainable as they were generated by firing millions of workers, zero interest rates for banks, fraudulent accounting by the banks, and trillions in handouts from the middle class taxpayers to corporate America.

In a true free market excess profits will draw more competitors and profits will fall due to competition. When corporate profits exceed the mean by such a large amount, you can conclude that crony capitalism has replaced the free market. Government bureaucrats have been picking the winners (Wall Street, War Industry, Big Media, Big Healthcare) and the American people are the losers. Corporate oligarchs prefer no competition so they can reap obscene risk free profits and reward themselves with king-like compensation. Mean reversion will eventually be a bitch. Real S&P earnings have reached the 2007 historic peak. To believe they will soar higher as we enter a recession takes the same kind of faith shown by Americans buying a $600,000 McMansion in Stockton with no money down in 2005. The result will be the same. Do you ever wonder how corporations are doing so well while the average American sinks further into debt, despair and poverty?

The brilliant John Hussman captures the gist of an investor’s dilemma in his latest article:

“With 10-year Treasury yields below 2%, 30-year yields below 3%, corporate bond yields below 4%, and S&P 500 projected 10-year total returns below 5%, we presently have one of the worst menus of prospective return that long-term investors have ever faced. The outcome of this situation will not be surprisingly pleasant for any sustained period of time, but promises to be difficult, volatile, and unrewarding. The proper response is to accept risk in proportion to the compensation available for taking that risk. Presently, that compensation is very thin. This will change, and much better opportunities to accept risk will emerge. The key is for investors to avoid the allure of excessive short-term speculation in a market that promises – bends to its knees, stares straight into investors’ eyes, and promises – to treat them terribly over the long-term.”


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“We are on the verge of a Great, Great Depression”

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by George Washington
Posted originally June 1, 2011

THE NEWS THAT FREQUENT CNBC GUEST Peter Yastrow of Yastrow Origer (and formerly with DT Trading) told CNBC that “We’re on the verge of a great, great depression. The [Federal Reserve] knows” is going viral today. But this is not news to anyone who has been paying attention. As I pointed out Tuesday, billion dollar fund managers agree: the government never fixed the underlying economic problems, so we’ll have another crash. I provided details last month: As noted in January, the housing slump is worse than during the Great Depression.

As CNN Money points out today: Wal-Mart’s core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried, CEO Mike Duke said Wednesday. “We’re seeing core consumers under a lot of pressure,” Duke said at an event in New York. “There’s no doubt that rising fuel prices are having an impact.”

Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in. Lately, they’re “running out of money” at a faster clip, he said. “Purchases are really dropping off by the end of the month even more than last year,” Duke said. “This end-of-month [purchases] cycle is growing to be a concern.

And – in case you still think that the 29% of Americans who think we’re in a depression are unduly pessimistic – take a look at what I wrote last December. The following experts have – at some point during the last two years – said that the economic crisis could be worse than the Great Depression:

States and Cities in Worst Shape since the Great Depression

States and cities are in dire financial straits, and many may default in 2011. California is issuing IOUs for only the second time since the Great Depression. Things haven’t been this bad for state and local governments since the 30s. Loan Loss Rate Higher than During the Great Depression

In October 2009, I reported: In May, analyst Mike Mayo predicted that the bank loan loss rate would be higher than during the Great Depression. In a new report, Moody’s has just confirmed (as summarized by Zero Hedge): The most recent rate of bank charge offs, which hit $45 billion in the past quarter, and have now reached a total of $116 billion, is at 3.4%, which is substantially higher than the 2.25% hit in 1932, before peaking at at 3.4% rate by 1934.

Here’s a chart summarizing the findings:

Indeed, top economists such as Anna Schwartz, James Galbraith, Nouriel Roubini and others have pointed out that while banks faced a liquidity crisis during the Great Depression, today they are wholly insolvent. See this, this, this and this. Insolvency is much more severe than a shortage of liquidity.

Unemployment at or near Depression Levels

USA Today reports today: So many Americans have been jobless for so long that the government is changing how it records long-term unemployment. Citing what it calls “an unprecedented rise” in long-term unemployment, the federal Bureau of Labor Statistics (BLS), beginning Saturday, will raise from two years to five years the upper limit on how long someone can be listed as having been jobless.

The change is a sign that bureau officials “are afraid that a cap of two years may be ‘understating the true average duration’ — but they won’t know by how much until they raise the upper limit,” says Linda Barrington, an economist who directs the Institute for Compensation Studies at Cornell University’s School of Industrial and Labor Relations.

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Restore America now: end the Fed, stop the wars, abolish the income tax!

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by Ron Paul 
Published  June 14th, 2011

Last week, more than 70 days after President Obama sent our military to attack Libya without a congressional declaration of war, the House of Representatives finally voted on two resolutions attempting to rein in the president. This debate was long overdue, as polls show Americans increasingly are frustrated by congressional inaction. According to a CNN poll last week, 55 percent of the American people believe that Congress, not the president, should have the final authority to decide whether the U.S. should continue its military mission in Libya. Yet for more than 70 days Congress has ignored its constitutional obligations and allowed the president to usurp its authority.

Finally, Congressman Dennis Kucinich was able to bring to the floor a resolution asserting that proper constitutional war power authority resides with Congress. His resolution simply stated that “Congress directs the President to remove the United States Armed Forces from Libya by not later than the date that is 15 days after the date of the adoption of this concurrent resolution.”

Opponents of the withdrawal resolution said the 15 day deadline was too abrupt. But as I pointed out during debate, the president attacked Libya abruptly – he didn’t even bother to consult Congress – so why can’t he order an end to military action just as abruptly? When members of Congress took an oath of office to defend the Constitution, we did not pledge to defend it only gradually, a little bit at a time. On the contrary, we must defend it vigorously and completely from the moment we take that oath. I was pleased that 87 Republicans were able to put the Constitution first and support this resolution.

House Speaker John Boehner offered his own resolution on the same day, which declared that Congress would not support the insertion of US ground troops into Libya. Although this unfortunately was far from adequate to satisfy our constitutional obligations, it certainly was a step in the right direction and I am pleased that it passed in the House. Just days before Speaker Boehner’s resolution, an amendment to the defense authorization act prohibited the president from using any funds in the bill to insert US troops into Libya. A separate amendment last week prohibiting any funds appropriated to the Department of Homeland Security from being used to attack Libya came within just a handful of votes from passing. All of these votes demonstrate that members of Congress increasingly understand that our foreign wars are deeply unpopular with their constituents. We are broke, and the American people know it. They expect Congress to focus on fixing America’s economic problems, rather than rubber stamping yet another open-ended military intervention in Libya.

I believe these resolutions and amendments indicate that the tide is turning in the right direction. I am confident we will see Congress move toward ending our unconstitutional wars. The American people are demanding no less. The president’s attack on Libya was unconstitutional and thus unlawful. This policy must be reversed.
Ron Paul
http://www.house.gov/paul

China demands American austerity

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from The Daily Bell
Originally posted June 09, 2011

China warns U.S. debt-default idea is “playing with fire … Republican lawmakers are “playing with fire” by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China’s central bank said on Wednesday. The idea of a technical default – essentially delaying interest payments for a few days – has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday. But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn. – Reuters

Dominant Social Theme:
Don’t even try it. Don’t even go there. You owe us the interest and … you … will … pay!

Free-Market Analysis:
We tend to go back and forth regarding the world’s larger financial fix. We have arrived at the idea, eventually that the Anglo-American power elite responsible for the mess wants to push Western citizens as far as possible without setting up full-scale revolutions. The idea is simply to afflict Western Middle Classes with such misery that they will not notice when their countries’ sovereignty is removed in favor of a One World Order.

The best way to do this is to keep people distracted and miserable – hovering on the edge of foreclosure, food insecurity and professional oblivion. In Europe this has been accomplished by ensuring that many countries have borrowed far more than they can pay back, thus ensuring generations of “austerity” (assuming that Europe’s young people don’t revolt against the prospect). Hey, it’s a fine line.

America has been a tougher nut to crack. Americans come from hardy immigrant stock and have tended to be thrifty and hard working, certainly in the past. The Anglo-American power elite has been at work for decades to ensure these admirable qualities are subdued. Result? America’s finances are a mess.

The US deficit is scheduled to reach $1.4 trillion, and the U.S. Treasury Dept., responsible for funding it, needs to borrow more money than it is authorized to do. Republicans in the House and Senate have seized on the opportunity to demand that the Obama Administration agree to significant cuts in spending.

The Democrats, for their part, warn that using the debt-ceiling to enforce frugality is a most dangerous strategy, one that could virtually sink the United States’ credit. If the US cannot borrow, it will have to default on its debt payments, which would likely lead to some sort of devaluation of the dollar. Since the dollar is the reserve currency of the world, this would lead to significant tumult abroad.

China is willing to do its part in this all, apparently. According to a Reuters’ article that appeared yesterday (see excerpt above), China’s top officials have some strong opinions about a potential default in the US. Reuters quotes Li Daokui, an adviser to the People’s Bank of China, as saying that a default could undermine the U.S. dollar. “I think there is a risk that the U.S. debt default may happen,” Li told reporters (according to Reuters) on the sidelines of a forum in Beijing. “The result will be very serious and I really hope that they would stop playing with fire.”

While no one seems to know how much US debt China holds, Reuters claims confidently that it is $1 trillion. We’ve read US$800 million and US$ 2 trillion as well. But US$1 trillion sounds about right. That’s certainly a lot of money. Do Chinese officials really expect to get repaid? Here’s Li again: “I really worry about the risks of a U.S. debt default, which I think may lead to a decline in the dollar’s value.”

Ben Westmore, a commodities economist at National Australia Bank, is also upset that the Republicans are holding the debt-ceiling hostage. “It has dire implications for the economy at a time when the macro data is softening. It’s just a horrible idea.”

Financial markets remain steady, but that may not be the case if the stand-off continues. Republicans, Reuters informs us, have been working on the theory that bondholders would put up with a delay in payments in return for a bipartisan deal that would lower US spending and make the country stronger in the long term.

According to Reuters, central banking officials around the world are less sanguine about the ramifications than Republicans are. “This could then create huge panic globally,” Reuters quotes one Indian central banking official as saying. At the same time, India’s Treasury officials continue to buy and hold dollars. The government held US$39.8 billion in U.S. Treasuries as of March.

Of course, Reuters doesn’t mention that countries HAVE to buy dollars in order to purchase oil from Saudi Arabia, which will not accept anything else. This is how the dollar’s reserve currency status is enforced.

The article concludes by quoting Yuan Gangming, a researcher with the Chinese Academy of Social Sciences, as saying that default was indeed a real risk. “The possibility is quite high to see a default of the U.S. debt, which would harm many countries in the world, and China in particular.”

We’re not so sure as Gangming that the “possibility is high” that the US will default, or not seriously anyway. The House is led by Ohio Republican John A. Boehner (about as radical as a mushroom). Boehner is one of a handful of elite politicians, one of the most powerful men in the world thanks to his position as Speaker of the House. The idea that John Boehner will lead a radical restructuring of America’s finances does not seem especially feasible to us.

Of course, a good deal of pressure is being put on Boehner by the Republican-oriented Tea Party, and perhaps this will serve to shove the Republicans out of what would otherwise be their comfort zone. Hard to tell, really.

What is more significant from our point of view is the message the Chinese are sending. The Chinese central bankers, like central bankers around the world are not willing to entertain an iota’s reconfiguration of America’s debt. It’s a kind of dominant social theme – a fear based promotion. We’re not sure it will hold, but the rhetoric is stern. We have seen the same sort of implacable rigor in Europe, where the ECB has been at the forefront of the fight to ensure that Greece and the rest of the PIGS pay ever euro of their increasingly unpayable sovereign debt.

The mechanism of American austerity, then, is to be Chinese insistence on the immutability of American repayment terms. What the sovereign crisis is doing to Europe, the Chinese will do to America. In fact, American “austerity” is already here. The Chinese are providing the proximate cause, but increasingly we believe this was the plan all along.

Britain is in the same fix, Europe is rioting, the Middle East has gone up in smoke and Africa is trending the same way. Surely this couldn’t be coincidence could it? We think not. The world’s economic system is controlled out of the City of London via the Bank for International Settlements (based in Switzerland) and over 100 central banks around the world. The Anglosphere elite that constructed this system knew full well it would self-destruct over time.

They knew it in Europe, too. In fact, it has been admitted. The Eurocrats knew that the current system was unstable and would break down. They intended to take advantage of it to build a more centralized system and in fact they are currently doing so.

The wild card, as we have pointed out, is the Internet itself (and the truth-telling it provides), which we believe has destabilized Europe far beyond what the elites expected. They are said to be meeting somewhat unhappily in Switzerland today, as part of the annual Bilderberg affair. War is supposedly on the menu, along with selecting an IMF chief – and stabilizing Europe. There is to be austerity, yes, but not revolution.

In America, austerity is coming, too. The Chinese and perhaps the Japanese (and other creditors) will demand it. But the same realities hold for America as for Europe. There is perhaps a limit to what people will put up with, a limitation reinforced by the Internet Reformation.

Conclusion:
We have no doubt that a chaotic financial situation around the world was intended to increase pressure for a more centralized currency – and for more centralized bank regulations, etc. We are not so sure the current plan will hold. Will the elites get their chaos? They might wish to be careful what they wish for.

Our economic future – From best to worst case

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by Doug Casey of Casey Research
Posted originally June 7, 2011

THERE IS A GREAT DEAL OF UNCERTAINTY ABOUT WHAT THE FUTURE OF THE U.S. ECONOMY MAY LOOK LIKE – so I decided to take a stab at what’s likely to happen over the next 20 years. That’s enough time for a child to grow up and mature, and it’s long enough for major trends to develop and make themselves felt.

I’ll confine myself to areas that are, as the benighted Rumsfeld might have observed, “known unknowns.” I don’t want to deal with possibilities of the deus ex machina sort. So we’ll rule out natural events like a super-volcano eruption, an asteroid strike, a new ice age, global warming, and the like. Although all these things absolutely will occur sometime in the future, the timing is very uncertain – at least from the perspective of one human lifespan. It’s pointless dealing with geological time and astronomical probability here. And, more important, there’s absolutely nothing we can do about such things.

So let’s limit ourselves to the possibilities presented by human action. They’re plenty weird and scary, and unpredictable enough.

THE MARKET FOR PROGNOSTICATION

People are all ears for predictions, whether from psychics or from “experts,” despite the repeated experience that they’re almost always worthless, often misleading and more than rarely the exact opposite of what happens.

Most often, the predictors go afoul by underrating human ingenuity or extrapolating current trends too far. Let me give you a rundown of the state of things during the last century, at 20-year intervals. If you didn’t know it’s what actually happened, you’d find it hard to believe.

1911— The entire world is at peace. Stability, freedom and prosperity prevail almost everywhere. Almost every country in Europe is ruled by a king or queen. Western civilization has spread to nearly every corner of the world and is received with appreciation. Stunning breakthroughs are being made in science and technology. There’s no sign of a gigantic world war about to come out of nowhere to rip apart the political and cultural map of Europe and bankrupt everybody. Who imagined that a dictatorial communist regime would arise in Russia?

1931— It’s early in a disastrous worldwide depression. Attention is on economic troubles, not on the virtually unthought-of possibility that in less than 10 years a new world war would be under way against Nazism and a resurgent Germany.

1951— Except for Vietnam, all that remains of the colonies the West had established in the 19th century are quiescent. Nobody guessed almost all would either be independent, or on their way, in 10 years. China has joined Russia – and many other countries – as totally collectivist. Who imagined that Germany and Japan, although literally leveled, would be perhaps the best investments of the century? Who guessed that the U.S. was already at its peak relative to the rest of the world?

1971— Communist and overtly socialist countries all over the world seem to be in ascendance, soon to be buoyed further by a decade of rising commodity prices. The U.S. and the West are entering a deep malaise. Little significance is attached to rumblings from the Islamic world.

1991— Communism has collapsed as an ideology, the USSR has disappeared, and China has radically reformed. Islam is increasingly in the news.

2011—The world financial/economic crisis is four years old, but things are still holding together. Islamic terrorism and collapse of old regimes in the Arab world dominate the news. China is viewed as the world’s new powerhouse.

BAD AND WORSE

Regrettably, I’m not much of a linguist. But I do pick up interesting semantic trivia. In Spanish they don’t say “in the future,” as we do in English, which implies a definite outcome. Instead they say “en un futuro” – in a future – which implies many possible outcomes. It’s a better way of assessing reality, I think.
Here are three 20-year futures to consider. There are, obviously, many, many more – but I think these encompass the three most realistic broad possibilities.

• BEST CASE – FACTS GET FACED

Realizing what a disaster the complete destruction of their currencies would be, most governments decide to endure the pain of allowing interest rates to rise and limiting increases in the money supply. Poorly run corporations and banks are left to fail. Talk of abolishing the Federal Reserve, and using a commodity for money, becomes serious and widespread.

Shaken, the U.S. ends its profligate ways, in part because it lacks the means to continue, and in part because everyone but collectivist ideologues has actually learned something from the brutal ‘10s and ‘20s.

Amidst massive protests, the government closes much of its counterproductive apparatus, eliminates many taxes, and lets 30% of its employees go. It also, albeit reluctantly, liberalizes its regulation of the economy because it has become impossible to deny that the U.S. has been falling behind in all areas.

Although there is a resurgence of libertarian thought – reminiscent of the Reagan-Thatcher era – simple practicality is mainly responsible for forcing the government’s hand. For one thing, it can’t afford the bureaucracy needed to enforce detailed interference. For another, entrepreneurs are increasingly just doing what they please, partly from necessity and partly from a growing sense of righteousness. Interest rates go to 25%, to compensate for high levels of inflation. That’s high enough to make it worthwhile for people to save, and the capital base starts growing. The stock market has collapsed to its lowest level in living experience (in real terms), but the values available encourage people to become investors. Business is restructured on a sound, debt-free basis, with little speculation.

The U.S. radically cuts its military spending and pulls almost all troops out of their foreign bases and wars. The War on Drugs comes to an end, and the crime rate in both the U.S. and Mexico plummets.

The government solves most of its overhanging financial problems with a seriously devalued – but not hyperinflated – dollar. The Social Security deficit is eliminated by abstaining from benefit increases and by inflating away much of what had been promised before. Most Americans suffer a severe drop in their standard of living, as they’re forced into new patterns of production and consumption. A generation of college students find that their degrees in sociology, political science, economics, English lit, Black studies, gender studies and underwater basket weaving are of no real value.

When it’s all over, the tough times that started in ’07 prove to have been no more than a cyclical bump in the road, like all the other recessions since WW2, just much bigger.

A rough and memorable ride, but it ends with a return to prosperity.

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WikiLeaks nuclear bomb story preceded Osama death

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from The Daily Bell
Posted originally May 03, 2011

Capturing bin Laden ‘would unleash hell’ … The mastermind of the 9/11 attacks warned. Also that al-Qaeda has hidden a nuclear bomb in Europe which will unleash a “nuclear hellstorm” if Osama bin Laden is captured, leaked files revealed. The terror group also planned to make a 9/11 style attack on London’s Heathrow airport by crashing a hijacked airliner into one of the terminals, the files showed. Khalid Sheikh Mohammed told Guantanamo Bay interrogators the terror group would detonate the nuclear device if the al-Qaeda chief was captured or killed, according to the classified files released by the WikiLeaks website. – MSN.com

Dominant Social Theme:
We got this son-of-a-gun. Hooray. Now we need to watch out for pocket nuke retaliation.

Free-Market Analysis:
What are the odds that WikiLeaks would release an Osama bin Laden nuclear bomb story only a week before his putative death at the hands of American Navy Seals? We have long pointed out that WikiLeaks is probably some sort of Anglo-American intel operation and this story excerpted above ran at US/MSN.com (NewsNine) – among other mainstream US outlets – is right in line with that expectation.

This seems to us, when coupled with the “death” of bin Laden, to be obvious propaganda, designed to frighten citizens of the West into giving up more wealth and power to the globalist facilities that will supposedly keep everyone “safe” from the terrorists. It is a kind of dominant social theme, that bin Laden’s death will result in retaliation and thus the already authoritarian West will have to undergo further totalitarian incursions.

We wrote yesterday that the supposed death of bin Laden presaged other more dire consequences, possibly and we wonder now if they are not the most fundamental ones – merely a ratcheting up of the police state in the US and the West generally. The economic malaise has not lifted and has in fact gotten worse. It is very obvious that civil unrest remains feasible across the West, especially as summer approaches. Thus further measures are to be put in place. Osama bin Laden’s “death” justifies such.

Nonetheless, the Western power-elite does not control information any longer to the same degree and the reactions to bin Laden’s death on many alternative news, blogs and even mainstream media sites was overwhelmingly skeptical. The elites can continue to insist on framing the larger dialogue as they like, but they have lost the hearts and minds of many. Seen from this point of view, the probably phony death of bin Laden is an act of desperation more than a clever ruse. They continue to run the script. It’s all they know how to do.

Osama bin Laden probably died years ago of kidney failure, or perhaps assassination. Al-Qaeda itself is a very dubious proposition, as it was initially funded by Western intel to fight the Soviet Union which invaded Afghanistan. Additionally Osama bin Laden apparently worked closely with the CIA in the 1980s and is said to have traveled to America and then to France for medical treatment. We are faced with the proposition that bin Laden himself was an American intelligence asset and that al-Qaeda (whatever it is/was) was in large part funded or at least set up by the West.

We have a great deal of difficulty with the announcement of the death of Osama bin Laden as we believe he died long ago. We think the war on terror itself is a phony enterprise designed mainly to provide an excuse to further erect the facilities of global governance by providing the US in particular with the justification to globalize its military and policing operations – and to position them more dramatically at home. The convergence of the WikiLeaks story with the death of bin Laden again reinforces this viewpoint. While bin Laden’s supposed death may provide cover for NATO and the US, the larger significance may simply be a ratcheting up of the war on terror. This is what the WikiLeaks story is telling us.

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Ron Paul: Lies are told to get us into these wars!

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