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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘General Motors

U.S. Corp and the impending IMF merger

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by Robert Denner
of Daily Economic Update
Posted December 1, 2011

BEEN LOTS OF TALK AROUND LATELY REGARDING THE COLLAPSE OF THE U.S. DOLLAR AND WHAT THAT WOULD MEAN FOR THE UNITED STATES OF AMERICA AND THE WORLD. There has also been a lot of talk about the Federal Reserve Bank of the United States of America and how unhappy the people of the US are getting with this largely unknown organization.

These two forces are converging together in what could be a very serious and detrimental way as it relates to the average US citizen. This article will rely heavily on flawed analogies to help the lay person understand the inner workings of both the IMF and the Federal Reserve Bank. This is not to be taken as an academic piece and I would ask that it not be judged as such. This is meant to help those people that have recently woken up to the reality that their country has been hi-jacked and those that are desperate to get up to speed as quickly as possible. So let’s jump right into the thick of it shall we? First we need to start with what I hope are simple lessons so that you can take what I am about to teach you and apply it to the real world.

There is one thing that bankers and computer people love to do and that is to use big scary acronyms to scare off the simple folk. So here is your first lesson.

IMF and the SDR

So right off the bat we are using acronyms that mean absolutely NOTHING to the lay person and yet that is an actual sentence believe it or not… IMF stands for the International Monetary Fund. The SDR is short for Special Drawing Rights and is the currency of the IMF. The International Monetary Fund is a private bank that is used to help sovereign nations engage in international commerce. Just like if you owned a company and you used bank A, and your supplier used Bank B, the IMF would be the bank that both banks A and B used to transfer payments and credits back and forth to each other. To Company A and B (using Bank A and B) it would be seamless.

But the IMF does a whole lot more for the global economy. They are the creditor of last resort for a lot of countries. For if you want to engage in international commerce in the free world (meaning the world now) you must be a part of the IMF system. Should a country that is part of this system become over leveraged because of mismanagement and debt accumulation, the IMF stands ready to come to the rescue. To understand how this relationship has worked in the past (and the present); I MUST go into some history. I will keep it brief I promise.

To understand how the global monetary/commercial world works you have to go back to the end of World War II. Following the war the United States was alone as a major industrial power. The rest of the industrial countries were in shambles. The United States was also nearly alone as a producer of oil. It is this later point that needs to be highlighted.

The United States used its vast oil reserves and coupled it with a highly trained industrial labor force and put it to work in its vast expanse of industrial capacity to re-build the rest of the world. It is this fact that is at the very center of our current monetary system some 60 years later. So I will start with my first analogy…

The US Corp could be seen as a huge company like General Motors. Following WWII US Corp was the only company left with the capacity to make things and it had the working capital and energy to do what it wanted. US Corp went out into the world and started to acquire other businesses. First was Japan Corp which US Corp had beaten into a pulp during the war. US Corp decided that it was in its own best interest to build Japan Corp back up but it needed to make sure that it never again could threaten US Corp the way it did in WWII.  Japan Corp used its own currency called the YEN and US Corp obviously used the Dollar. So to make this all work, US Corp had to make sure that the workers at Japan Corp didn’t feel like the last of their country was being taken from them. To keep them vested in the viability of their own country it was very important to let them keep their own currency and their own political structure, albeit greatly modified under the surface. We allowed Japan Corp to keep their figurehead CEO (the Emperor) and we installed a new board of directors (Democratic institutions). We linked the Bank of Japan to US Corp’s bank the Federal Reserve Bank through a new institution called the International Monetary Fund and the World Bank.

If we were to compare this to General Motors this would be like GM buying another company and bringing it under the umbrella of the GM brand. So in this case Japan is like Pontiac and they are given free rein to run their subsidiary the way they see fit, SO LONG as they abide by the parent companies rules.

This setup worked wonderfully and within a decade Japan Corp was back on its feet and was supplying cheap labor and products for US Corp and with every single barrel of oil Japan Corp bought on the international market it further linked them with our monetary system.  To keep the Japanese citizens from feeling that it was the US Corp in charge of everything we came up with the International Monetary Fund and the World Bank. Of course these institutions were funded initially by the United States and Great Britain and as such they were just pseudo US institutions. But it worked and the Japanese subsidiary of US Corp gladly bought oil and products from the United States in its own currency (the Yen) but it was linked via the IMF to the US Dollar. For you see US Corp linked everything that the industrial world needed to the US Dollar. All gold/oil/silver/food/etc were priced first in US Dollars and depending upon the relative “strength” of your currency to the US Dollar, this would dictate how much of your currency it would take to purchase a barrel of oil or an ounce of gold. This gave US Corp a huge advantage in the world as we produced almost everything anyways. We had most of the world’s oil supply and a very large portion of the food supply. We were the largest producer of the big complex things the world needed to rebuild. We allowed the smaller subsidiaries to produce the little stuff we needed or wanted. Japan Corp was great at the later, supplying us with small radios and other cool electronic gadgets.

US Corp built a company with dozens and dozens of subsidiaries, each one of them bringing something to the table either large or small. And as the world re-built, other countries wanted to get in on the good times and they voluntarily sold themselves to US Corp. Other countries were very reluctant to join our big happy company. Those countries fell into two groups. Either they were affiliated with Russia Corp or they wanted to stay neutral. But in a world that was moving fast towards globalization it became apparent that each country would have to choose a side lest they be shut out of the global market. For remember that the only way to gain access to US Corp’s vast array of markets and supplies is to be a part of the IMF/World Bank. It was the only way to convert your currency to other currencies (like the US Dollar to buy OIL!!).

I will end this history lesson there as I could get sucked in for hours explaining how US Corp and Russia Corp went to economic(and sometimes real) war with each other and how Russia Corp tried to have it both ways by linking themselves partially to the IMF to gain access to US Corps vast supplies and labor.

I will leave that to YOU to go out and study on your own as it is a story to rival any fictional book you have ever read. The important thing to take away here is that the International Monetary Fund and the World Bank are institutions that were created by the United States and Great Britain. It is a global system that allows countries using different currencies to exchange their goods and services with each other almost seamlessly. Remember also that the system was setup INITIALLY to allow US Corp to control the world’s most important supplies. Things like FOOD, OIL, COMMODITIES (gold,silver,etc) and the rest. At the time this system was created it was the United States that was supplying the lion’s share of these items. But as the decades have come and gone, these items have increasingly come from other parts of the world.  And a good portion of these countries are ones that were FORCED into our system either out of necessity or by direct manipulation of their country by forces outside their borders(meaning the US and the IMF).

CONFESSIONS OF AN ECONOMIC HITMAN

This next part of our story is centered on how the US has maintained its spot at the top of the economic order even in the face of massive budget deficits and seemingly unending debt loads. The title of this section is called Confessions of an Economic Hit Man, as I give a nod to a book of the same name written by a man named John Perkins. Mr. Perkins is a trained economists and his specialty was international finance. His job was to go out into the world and sell foreign leaders on US Corp and to convince them to get on board with our system. Or more importantly, it was his job to make sure that they were forever caught up in our system and that they did not attempt to leave our company.

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Financial Crisis Called Off

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Financial Crisis Called Off
by James Howard Kunstler
Posted The Daily Reckoning August 27, 2009
Saratoga Springs, New York
Whew, what a relief! Everybody from Ben Bernanke and a Who’s Who of banking poobahs schmoozing it up in the heady vapors of Jackson Hole, Wyoming, to the dull scribes at The New York Times, toiling in their MC Escher hall of mirrors, to poor dim James Surowiecki over at The New Yorker, to – wonder of wonders! – the Green Shoots claque at the cable networks, to the assorted quants, grinds, nerds, pimps, factotums, catamites, and cretins in every office from the Bureau of Labor Statistics to the International Monetary Fund – every man-Jack and woman-Jill around the levers of power and opinion weighed in last week with glad tidings that the world’s capital finance system survived what turned out to be a mere protracted bout of heartburn and has been reborn as the Miracle Bull economy. Our worries over. If you believe the claptrap. Which I don’t.
All this goes to show is how completely the people in charge of things in the United States have lost their minds. They seem to think this mass exercise in pretend will resurrect the great march to the Wal- Marts, to the new car showrooms, and the cul-de-sac model houses, reignite another round of furious sprawl-building, salad-shooter importing, and no-doc liar-lending, not to mention the pawning off of innovative, securitized stinking-carp debt paper onto credulous pension funds in foreign lands where due diligence has never been heard of, renew the leveraged buying-out of zippy-looking businesses by smoothies who have no idea how to run them (and no real intention of doing it, anyway), resuscitate the construction of additional strip malls, new office park “capacity” and Big Box “power centers,” restart the trade in granite countertops and home theaters, and pack the turnstiles of Walt Disney world – all this while turning Afghanistan into a neighborhood that Beaver Cleaver would be proud to call home.
“The key to the current madness, of course, is this expectation that all the rackets, games, dodges, scams, and workarounds that American banking, business, and government devised over the past thirty years will just magically return to full throttle, like a machine that has spent a few weeks in the repair shop.”
America loves the word “recovery” as only a catastrophically sick society can. “In recovery” is the new universal mantra of loser individuals and loser nations. Everybody in the USA is in recovery. Even Michael Jackson (he may have given up on somatic activity but, on the plus side, as the Rotarians love to say, he’s quit using drugs for once and for all, and the magazines have stopped publishing photos of him taken after 1990, when he turned himself into something out of the Hammer Films catalog).
To sum it all up, the US economy is in recovery. Paul Krugman says that we’ll soon realize that Gross Domestic Product (GDP) is growing. He actually said that on the Sunday TV chat circuit. Not to put too fine a point on it, but I would really like to know what you mean by that Paul? Do you mean that the Atlanta homebuilders are going to open up a new suburban frontier down in Twiggs County so that commuters can enjoy driving Chrysler Crossfires a hundred and sixty miles a day to new jobs as flash traders in the Peachtree Plaza? Do you mean that the Home Equity Fairy is going to wade into the sea of foreclosure and save twenty million mortgage holders currently sojourning in the fathomless depths with the anglerfish? Do you mean that all the bales of deliquescing, toxic “assets” hidden in the vaults of Citibank, JP Morgan, Bank of America, et al, (not to mention on the books of every pension fund in the USA, and not a few elsewhere) will magically turn into Little Debbie Snack Cakes on Labor Day weekend? Do you mean that American Express and Master Card are about to declare a jubilee on accounts in default everywhere? Do you mean that General Motors will produce a car that a.) anyone really wants to buy and b.) that the company can sell at a profit? Are you saying we get a do-over, going back to, say, 1981? Did we win some cosmic lottery that hasn’t been announced yet? What’s growing in this country besides unemployment, bankruptcy, repossession, liquidation, gun ownership, and suicidal despair? In short, are you out of your mind, Paul Krugman?
The key to the current madness, of course, is this expectation, this wish, really, that all the rackets, games, dodges, scams, and workarounds that American banking, business, and government devised over the past thirty years – to cover up the dismal fact that we produce so little of real value­ these days – will just magically return to full throttle, like a machine that has spent a few weeks in the repair shop.
This is not going to happen, of course. It is permanently and irredeemably broken – this Rube Goldberg contraption of swindles all based on the idea that it’s possible to get something for nothing. And more to the point, we’re really doing nothing to reconstruct our economy along lines that are consistent with the realities of energy, geopolitics, or resource scarcity. So far, our notions about a “green” economy amount to little more than blowing green smoke up our collective behind. We think we’re going to build “green” skyscrapers! We’re too dumb to see what a contradiction in terms this is. The architects are completely uninterested in the one thing that really is “green” – traditional urban design – and most particularly the walkable neighborhood. That’s just too conventional, not special enough, lacking in star power, not enough of a statement, boring, tedious, so not cutting edge! We blather about high-speed rail, but you can’t even get from Cleveland to Cincinnati on a regular train – and what’s more amazing, nobody is really interested in making this happen. All we really care about is finding some miracle method to keep all the cars running.
What we’ve been seeing is nothing more than a massive pump-and-dump operation in the stock markets, most of it executed by programmed robot traders, with the trading nut provided by taxpayers current and future. These shenanigans add up to new risks and fragilities so extreme that the next time a grain of sand catches in the exquisite machinery they will sink the USA as a viable enterprise. We will end up discrediting not just capitalism, but also the idea of capital per se, that is, of deployable acquired wealth. As this occurs, of course, events on the ground will give new meaning to the term “reality television.”
Regards,
James Howard Kunstler
for The Daily Reckoning

by James Howard Kunstler
Posted on The Daily Reckoning, August 27, 2009

WHEW, WHAT A RELIEF! Everybody from Ben Bernanke and a Who’s Who of banking poobahs schmoozing it up in the heady vapors of Jackson Hole, Wyoming, to the dull scribes at The New York Times, toiling in their MC Escher hall of mirrors, to poor dim James Surowiecki over at The New Yorker, to – wonder of wonders! – the Green Shoots claque at the cable networks, to the assorted quants, grinds, nerds, pimps, factotums, catamites, and cretins in every office from the Bureau of Labor Statistics to the International Monetary Fund – every man-Jack and woman-Jill around the levers of power and opinion weighed in last week with glad tidings that the world’s capital finance system survived what turned out to be a mere protracted bout of heartburn and has been reborn as the Miracle Bull economy. Our worries over. If you believe the claptrap. Which I don’t.

All this goes to show is how completely the people in charge of things in the United States have lost their minds.

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Illumination of The Idiots (Part II)

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Illumination of The Idiots (Part II)
By Roger Wiegand        
Aug 17 2009 3:24PM
A list of ultra-stupid moves and counter moves destroying the economies and consumers world-wide collected and remarked upon by Traderrog
Health Care: Ignoring and insulting elderly voter’s at the most recent town hall meetings on health care discussions created anger and confusion. Sharp observers who have taken the time to read proposals see nothing but disaster. The worst features are: (1) Robbing 500mm from Medicare in a triage move to lessen care for the oldest based upon cost and, (2) Moving to a single payer system destroying 85% of the coverage for recipients now being covered by private insurance (3) Adding 50mm new participants from the lowest income sector (non-payers) overwhelming the system with demand as there are not enough medical staff to cope. Our forecast says the graybeards will vote out many of those up for re-election in fall 2010 in a massive backlash. Further, this fall, when the bill comes up for a vote, the markets will have crashed and this bill could be buried for good. This is the reason those in charge are pushing so hard to pass it quickly. After September 15th it’s too late. Rationing health care using bureaurats to decide who lives and who dies will not fly with voters-consumers.
Consumers Are Broke: Since consumers earn the money and pay the taxes to support all governments, when they are broken, their ability to support the bureaurats is broken, too. They can be overly taxed and abused to most any extent but when they are jobless and their employers are shut-down so are revenue streams to all governments. Central governments can last longer as they manufacture currencies and bonds out of thin air not having to balance budgets. On the more local level of states, counties, cities, towns and villages, by their law’s they have to balance budgets and they simply cannot.  Obviously some are in much worst shape than others like California, Nevada, and certain cities, but a tidal wave of failures is sweeping America drowning employment with remarkable and horrible speed. Those with cash and credit are saving for rainy days ahead. Credit is going nowhere as banks are afraid to lend and consumers-businesses (qualified) are afraid to borrow. Hunkering down and saving is the plan for most in an effort to survive. This is killing any growth and promoting further deterioration.
Cap ‘N’ Trade: Is another flagrantly stupid idea that increases the cost of energy, particularly electricity. It off-loads alleged carbon footprints via trading from one user to another creating a nightmare of abuses in the middle. The ignorant congress instead of dreaming-up new economy wrecking ideas to milk the system and steal more from the Sheeple should bend to the wishes of voting constituents and use some common sense. They will not and voters will respond at the polls. We expect Cap ‘N’ Trade to fail.
Global Warming: Our experienced Northern weather Advisor told me there are signs we enter the next ice age in 2040. The Midwestern US this summer has been extraordinarily cool. Other normally cooler places are warmer. Studies allegedly proving the onset of global warming are fraught with mistakes. Recently, we saw a report showing the Warming Idiots who wrote about this stuff have “missed” seeing an iceberg the size of Greenland (Brilliant!) in their computations. This is another scam to make money and buy votes while getting full control of the Sheeple. Expect much more ridiculous non-sense. Millionaire politicians like Al Gore shall remain busy seeking more scams to promote their phony agendas.
Corn Ethanol: Well, this one sure worked out well didn’t it? The corn-to-ethanol plants are going bankrupt, and that fuel has created untold amounts of damage in filling station pumps and certain cars as it wasted precious corn reserves and billions of gallons of precious clean water. Corn ethanol is just another government boondoggle gone wrong. Further, the economics do not work and it must be taxpayer subsidized to balance production budgets. Other water problems in California are destroying farms equal in size to the state of Rhode Island. This in an effort to save a non-descript 2 inch minnow fish. Millions of dollars of lost wages and grower damage ensue.
US Energy Drilling Denied: Shortages of energy; specifically oil and gas would be alleviated but not eliminated if offshore drilling and some banned onshore efforts were permitted. California could probably solve its budget crisis (at least temporarily until it wasted more new income) by allowing nearby ocean drilling for oil and gas. The greens are in charge so the state goes down the economic tubes with a huge smash. Similar opportunities exist for New Jersey, Florida and some other coastal states. We say no offshore drilling will be allowed until oil and gas goes critical. Then it takes ten more years to explore, drill and produce new reserves.
TARP Funding: Has been spent to repair bank balance sheets not lend for growth.  Global investment banks lost trillions with reckless lending (illegal?) practices and then got billions more in free TARP cash to replenish balance sheets. The taxpayers were hit twice. (1) First they are stuck with the aftermath of the messes from the reckless lending and, (2) They got robbed again with the TARP takings. This is why former Treasury Secretary Hank Paulson insisted on bullet-proof legal documents in advance of handing out the money. Mr. Paulson is a crook acting as a shill for big bankers and most know it for sure. Some are now investigating.
Buying Way Out Of Deflation-Depression: Historically, no nation has been able to buy its way out of a depression. A critical assessment of FDR’s performance in the 1930’s proves this beyond a doubt. Further, others have written in depth about this problem-alleged solution and agree. The current administration continues down the same tried and true policy path to failure, replicating the 1930’s all over again.
Government Motors: With years to go in a depression and little or no consumer buying power do you really think GM also known as Government Motors can survive and sell cars? Will this work under the leadership thumb of government bureaurats? We say they sink into oblivion with Chrysler. We are hoping Ford can make it but they must sell cars to enable a viable company to continue. Who will buy the cars? Competition is fierce and competitors have the best products and no major overhang of debt as Ford does.
Tax Increases: We see new tax increases flying in from all sides. The over-spending government entities thinking good times roll forever spent the higher tax revenues from the inflated good times (cheap interest rates and bad lending) and now cannot cope with drastically lower tax payments from broken consumers and corporations.
Falling Tax Receipts: We’ve seen revenue reports saying tax payments fell 22% to 34% depending upon whether the discussion is federal taxes or others. California is a leading example with Jefferson County (City of Birmingham) Alabama being another. This cascades through America being more visible-critical in July, 2010.
California & States’ Bailouts: Are going critical. As states’ cascade into failures, they are reaching the tipping point. The president has said he will not help them. State employee lay-offs have begun in earnest as funds dry-up and the first waves of non-essential and some essential services are denied. Jefferson County Alabama including the large southern city of Birmingham are now at great risk. Authorities are expecting to call in the National Guard as fire and police are laid-off with no pay. Now, California is saying they will pay back their IOU’s due this fall. Where did the money come from all of a sudden?
Off-Shoring Manufacturing: Manufacturing, mostly shifted to Asia has contributed to 33% of USA manufacturing sitting idle. We see more dead and dying companies with jobless employees in the millions.
Social Help Too Slow: Food stamps are now provided for over 34mm Americans. As fast as the government is trying to provide help, the needy are demanding ever more. Food stamps are only one part of the equation. The next one is soaring utilities with consumers freezing to death this winter. There is also a chance of them suffering a killer heat wave yet this summer as when Chicago had over 700 heat-related deaths some years ago. It can happen again when the elderly cannot afford to run air conditioners.
Stock Market Is Not The Economy: The stock market has turned into giant crap game, for the most part manipulated by a few major hedge funds and global banks for their own ill-gotten gains and amusement. This fall, the Sheeple will once again be left holding an empty bag after the crash. Prior to, the pros will be out with their profits. Meanwhile, the economy must run on genuine credit and production. Both are sorely lacking.
Bonds & US Dollar: Are critical to America’s credit and potential economic resurrection. If the dollar crashes (and it will by at least 50%) most of the world is pegged to that currency and will collapse. Monetization of bonds and dollars (creation of credit out of thin air) is catching up to the administration. Somewhere ahead the buyers will stop buying valueless paper and then we sink into a larger collapse. The first stages could come this fall and one top analyst forecasts a bank run later this August when a new larger list of US bank failures is posted.
Other Currencies:  Have been proposed by Russia, and Middle Eastern oil producers. So far this has not worked as the US Dollar pool and bond markets are so incredibly large relative to other currencies. Escape from the clutches of American credit instruments and currency has failed. Hints of moving to the gold standard by several of these nations are interesting. But, we cannot understand how it can help despite, perhaps, having some very long term merit with no immediate healing results. Debts must be marked down to reality first and consumers need jobs and realistically priced house sales prices. This cannot happen for years.
Asian Stock Markets: And their economies are running on fumes. Shorting the Shanghai Index SSEC might be a good trade with stocks up nearly 80% this year and the PE’s reportedly running at 35, which is outrageous.
Unemployment in Europe: Is officially matching the USA with various jobless numbers between 9-10%. As we’ve reported before, if you double the official jobless stats you are closer to the real truth. Spain is very bad and the UK and Ireland are next in line with more of Eastern Europe going idle at a rapid clip.
Higher US Debt Limits: Are being considered, increasing them to new highs as requested by Geitner. These efforts are futile and merely add to the immensity of both current and forthcoming destruction.
Financials crashed in fall 2008 with Lehman. Recovery began with TARP May, 2009: During this month of August we have more of a dead cat bounce ahead with a big smash in Mid-September. While precious metals and their shares are off this August 17, 2009, for the intermediate term (next 90 days) the trend reverses and moves to rallies.
Keep in mind, if you own paid for stuff it will most likely remain in your hands; not in somebody else’s. That includes gold and silver.
Do not get tangled-up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction. Headwinds are building into an economic hurricane. Take care of business right now. My dire fall prediction might surprise us and arrive earlier. Time is short.
Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. – Traderrog

by Roger Wiegand
Posted originally Aug 17 2009
www.webeatthestreet.com

A LIST OF ULTRA-STUPID MOVES and counter moves destroying the economies and consumers world-wide collected and remarked upon by Traderrog.

Health Care: Ignoring and insulting elderly voter’s at the most recent town hall meetings on health care discussions created anger and confusion. Sharp observers who have taken the time to read proposals see nothing but disaster.

The worst features are: (1) Robbing 50m from Medicare in a triage move to lessen care for the oldest based upon cost and, (2) Moving to a single payer system destroying 85% of the coverage for recipients now being covered by private insurance. (3) Adding 50m new participants from the lowest income sector (non-payers) overwhelming the system with demand as there are not enough medical staff to cope. Our forecast says the graybeards will vote out many of those up for re-election in fall 2010 in a massive backlash.

Further, this fall, when the bill comes up for a vote, the markets will have crashed and this bill could be buried for good. This is the reason those in charge are pushing so hard to pass it quickly. After September 15th it’s too late. Rationing health care using bureaurats to decide who lives and who dies will not fly with voters-consumers.

Consumers Are Broke: Since consumers earn the money and pay the taxes to support all governments, when they are broken, their ability to support the bureaurats is broken, too. They can be overly taxed and abused to most any extent but when they are jobless and their employers are shut-down so are revenue streams to all governments. Central governments can last longer as they manufacture currencies and bonds out of thin air not having to balance budgets. On the more local level of states, counties, cities, towns and villages have to balance budgets and they simply cannot.

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The First Die-off

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The First Die-off
By : James Howard Kunstler
For those of you already acquainted with some of the classic “doomer” themes, one of the first “die-offs” of The Long Emergency will not be one of human beings but of our beloved automobiles.  Personally, I think the car die-off will come on with stunning rapidity as a combination of factors merge to make these colossal traffic jams staples of nostalgia in decades to come.  As usual, the public is clueless about this, gulled by a cretinous news media into the earnest expectation of endless techno-miracles.
The funniest of these lately are the glad tidings from (“The New” ) General Motors. They came out last week with a laughable hype-fest for their proposed electric car, the “Volt,” scheduled to arrive in the showrooms around 2011 (about the same time that all the mortgage-backed-securities sitting in Wall Street’s vaults melt into a monumental puddle of radioactive goo). We’re told the Volt will get the equivalent of over 200 miles-per-gallon, at less than 25 cents a charge from the plug on your garage wall, blah blah.  They estimate that it’ll cost about $40,000.  Do we detect a little problem right there?  Like, the whole adult US population is going to rush out and buy new cars priced the same as today’s Mercedes Benz?  Good luck with that, GM, especially when money for car loans will be about as easy to get as a royal flush in online poker.  And good luck with changing out the battery for ten grand a couple of years down the road, so to speak. And good luck also with your expectation that the roads and bridges will remain drivable in the years ahead, as every municipality, and county, and state slides into bankruptcy and the paving machines sit rusting in the DOT marshaling yards.

What is wrong with our brains?  Are they turning to yeast?

And even if it were possible to continue torturing ourselves in three-hour traffic jams, is that something we would want to do?

I’m serenely confident that we’re in the twilight of Happy Motoring now.  Without debt service there is no auto industry, and we’re toast where debt service is concerned.  All we can do now is give cars away, or give US citizens free money to buy them — which we are obviously already doing with “Cash for Clunkers” — which is additionally hilarious in the same nation that is deeply paranoid about the government giving anybody free health care.  What a nation of morons we have become.

Then, of course, there is the political problem that nobody is thinking about, namely, what happens when a substantial portion of the public is permanently foreclosed from motoring because they’ve lost jobs and incomes and positions and vocations that they will never get back — ?  Do you think they’ll just hike down the breakdown lanes with colorful bundles on their heads like the impoverished folk in other lands?  Or will they put all those home arsenals to work?  I can’t wait to find out.
James Howard Kunstler

by James Howard Kunstler
www.kunstler.com

This is an excerpt from a longer article posted mid-August on http://www.kunstler.com

FOR THOSE OF YOU ALREADY acquainted with some of the classic “doomer” themes, one of the first “die-offs” of The Long Emergency will not be one of human beings but of our beloved automobiles. Personally, I think the car die-off will come on with stunning rapidity as a combination of factors merge to make these colossal traffic jams staples of nostalgia in decades to come. As usual, the public is clueless about this, gulled by a cretinous news media into the earnest expectation of endless techno-miracles.

The funniest of these lately are the glad tidings from (“The New” ) General Motors. They came out last week with a laughable hype-fest for their proposed electric car, the “Volt,” scheduled to arrive in the showrooms around 2011 (about the same time that all the mortgage-backed-securities sitting in Wall Street’s vaults melt into a monumental puddle of radioactive goo).

We’re told the Volt will get the equivalent of over 200 miles-per-gallon, at less than 25 cents a charge from the plug on your garage wall, blah blah. They estimate that it’ll cost about $40,000. Do we detect a little problem right there?

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The die is cast in bronze: Plan for war and extreme economic hardship

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Roger Wiegand, Posted http://www.kitco.com May 22 2009
The Die Is Cast In Bronze-Plan For War And Extreme Economic Hardship
Our 2003 forecast said Ford Motor Company would go bankrupt. We hold to this forecast but its obvious GM and Chrysler beat them to it. Also per our predictions, GM has announced they might leave Detroit probably citing affordability of their monster headquarters building. The real reasons are to exit the USA’s failed auto market, and dump all health care and pensions on the US taxpayers. We think they move to Germany using Opel as the new GM base for a corporate headquarters and European operations. Buick stays in China and very few US plants and facilities remain. The US car market is dead for a decade. And, the United States as a world class manufacturer is down the drain. The steady off-shoring of American manufacturing for cheap labor has gutted the US’s ability to provide for itself in many key markets. We think this comes back to haunt.
“General Motors is considering moving its headquarters from Detroit, selling-off U.S. plants and even renegotiating parts of its restructuring plan with its major union, the new chief executive said Monday. A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler and a sharp downturn in auto manufacturing. GM purchased its glass-towered headquarters building known as Detroit’s Renaissance Center in 1996 for $625 million. GM’s current restructuring plan, which is supported by the U.S. autos task force is headed by former investment banker Steve Rattner, would cut about 21,000 more U.S. factory jobs.”- Reuters & CNBC
US autos are literally crashing as Chrysler buyers stay away in droves due to the company’s bankruptcy, lack of dealer credit and no confidence in the job market. Would you buy a car from  a manufacturer in bankruptcy owned and operated by the UAW and US Government?
Largely unnoticed in the auto news is the demise of dealers. An auto dealership surprisingly employs more people than you would think. The National Automobile Dealers Association says 3,000 dealers will close and that could only be the beginning. They tell us each of those dealers employs an average of 53 people so 159,000 jobs in this sector could be lost. The Detroit News says that’s more than GM and Chrysler’s (domestic) workforces combined. And, this does not include 6-10 parts supplier jobs for each manufacturing position. If 50,000 GM and Chrysler employees are laid-off this could mean 300,000 to 500,000 more auto parts suppliers’ jobs are eliminated. This is shaping-up to be an unbelievable disaster.
The cost to various local communities is staggering. Taxes will not be incurred nor paid. Those huge dealership lots would be a blight on the suburban landscape encouraging crime, stealing store metals and fixtures. Further, those facilities would probably remain empty for many years.
The U.K. has announced they plan to hike taxes for the wealthy to 50% of income. With other province and local taxes, the total take should round out at a nice 75% of gross income. Anyone with a brain and the ability to leave England for greener more friendly pastures will do so. That is beyond socialism. We think it is criminal.
The United States is next. New tax policy is to tax anything that moves as 800 new tax employees seek to grab more from overseas. Domestically, the president will increase taxes everywhere in a strain for more government income. This kills the source of most tax funding; the dominant small businesses.
The state’s are in much worse trouble as they have to balance their budgets by law. Almost all of the 50 states in our union have some problems with many having disasters. California is toast but will be re-funded with big Obama checks. My state of Michigan is now seeing a shortfall for fiscal 2009-2010 of $1.4 Billion. Naturally, instead of cutting-back state expenditures, new state employee raises are proposed and the grabby-grab for more taxes to cover prevails. One of our favorites, Rick Santelli of CNBC asked, How about a federal government pay cut of 20% to match other comparable industry norms? Sorry Rick; they get raises and the Sheeple get nothing.
All governments should have taken a clue from the Teabaggers demonstrationsbut instead they laughed and ridiculed them. What happens when the Teabaggers have an empty bag? More and more we see this while administrations across the land are clueless. The ending will not be pretty as taxpayers no longer pay as they cannot pay. Watch for massive municipal bond defaults with California leading states down the fiscal drain.
Consumers have been the engine of prosperity in America but are tapped out. The savings rates by consumers recently rose by 4% from next to nothing. They are not spending but are now saving out of fear. The big banks have been recapitalized from TARP money but few are lending. They need their capital to keep loan-capital ratios intact. The silly Stress Tests were nothing but a public relations ploy to calm the herd. So far it’s working but underneath this facade of “all is well” lurks trillions in derivatives. Consumers have no remaining credit. Even the upper class has cut-back on spending. In tony Bloomfield Hills, The Corporate Auto Address, a huge mansion of 22,000 square feet offered at $15mm is being auctioned this week end with opening bids at $2.5mm!
Smaller banks not participating in this reckless lending are caught between the Big Boyz who got loads of TARP cash and a skidding local or regional lending market. They are solvent but have no new business and cannot earn money or, even maintain a neutral posture. As Great Depression II grinds on more banks fail.
Commodity inflation signals have popped-up but could wane on the short term cycle of “Sell in May.” This cycle might have begun yesterday. China is buying replenishment copper but in reality their manufacturing continues to sink as Western buyers are absent. China’s stimulus money was formidable but has failed to expand as expected with no buyers for Chinese exports. Those expecting domestic Chinese buying to cover losses are misguided. New reports from China indicate markets and the economy is worse than expected.
Precious metals, grain, and other food-related commodities should continue to do well over the longer cycle. Soybeans remain strong on fundamentals and food prices continue to rise; particularly in those categories related to basic foods. We wonder how well the luxury prepared frozen foods are doing. We know for example, restaurants are suffering with the exception of very inexpensive fast food stores. McDonald’s is fine as are a few others who can deliver in that price category. Diners have down-scaled and are cooking at home.
Housing has actually bottomed and is finding new buying in the worst of the worst markets like Detroit. For example in the up-scale village of Gross Pointe east of Detroit, it was reported by The Detroit News, that a 24 year-old landscaper was able to buy a little bungalow for $92,000 from the previous owner who paid $165,000 only 4 years ago. In my beaten down local market, they are about $30,000 cheaper for a similar product. A decent Michigan home can be purchased for the price of a new car. Yet uncontrolled utility bills are up 35%.
Unemployment nationally is now a true 20%+ but is reported at 8.9%. In Michigan, the official report says it’s near 12% but reality is 25%. Within 2-3 years at the height of our economic problems, we think the US will unofficially post 33% jobless with Michigan near or above 40%; both exceeding the 1930’s Great Depression number of 25%.
New social problems abound. Tent cities have sprung-up in parks and other places across America. The hungry are multiplying by the hundreds of thousands as officials cannot understand the depth of these troubles, or have a real plan to contend with them. There is money, food and resources available but governments cannot deliver and are not organized to distribute to the needy. We will all pay the price in pandemic malnutrition and starvation, particularly among the retired elderly and very young. Food related crimes will skyrocket. People must eat. Milk, butter and cheese will be 34% higher later this year.
On the brighter side in Michigan, the agriculture community is working harder and planting more. California  will lose roughly 1/3rd of its massive vegetable crop in a no-planting situation as irrigation water was cut-off.  In Michigan, food related employment is 500,000 and 65,000 of those are directly related to farm work or food processing in factories. The last sales report from the Agriculture Department reported 2006 revenue of $4 billion for Michigan. This is mostly from beans, blueberries, cherries, cucumbers, pumpkins, pickles, apples, asparagus, sugar beets and milk cow products. There is also some corn. Michigan also has some excellent vineyards.
Newest growth industries are national government make-work jobs and crime.
Those without work and no education in particular, are turning to many forms of crime. Sadly, many folks doing this are participating out of emergency need and were not formerly criminals. Meanwhile, overcrowding in jails in several states causes politicians to free prisoners early as they lack funds and resources to contain them in jails. Add this group to the newly desperate and we expect a massive and continuous crime wave for years.
This is not a hard recession. This is A Greater Depression II Disaster
Those pundits, analysts and over-paid bureaurats are constantly telling us a new economic base is established and we will rebound to old new highs in late 2009-2010. In our view, they don’t get it. We forecast a bottom before the next major war in 2012. If you count and compare the 1930’s six dead cat bounces to today’s situation, we are in bounce number two; soon to end with the Sell in May cycle.
Should this be true, we’ve four more bottom-to-top-to-bottom cycles to endure taking many years. I don’t see any recovery for ten years. Further, with the over-indebted nations competing for crumbs as domestic and international violence escalates, how much longer do you think the cycle extends? No one knows for sure but the old paradigms and “good old days” are gone for good. Deal with it by purchasing, investing and trading gold and silver.
Weekly gold produced a new breakout on 5-21-09. Goal is double top of $1,007.
Support and three resistance points for shares index (XAU) is nearby 150.00 price.
Dollar reached our goal 80.50 support. Next major support is 80.00, plus or minus .50.
We are nearing a peak in precious metals shares that generally follow the primary stock indexes. When the current stock market peaking descends into Sell in May, PM shares will follow. With each cycle we think they might sell less with higher lows. This will be decided by how far down the S&P selling might go. We expect 800 to 850 with 800 S&P’s more probable.
Do not get tangled up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction.
Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. – Traderrog

by Roger Wiegand
Posted http://www.kitco.com May 22 2009

OUR 2003 FORECAST SAID Ford Motor Company would go bankrupt. We hold to this forecast but its obvious GM and Chrysler beat them to it. Also per our predictions, GM has announced they might leave Detroit probably citing affordability of their monster headquarters building. The real reasons are to exit the USA’s failed auto market, and dump all health care and pensions on the US taxpayers. We think they will move to Germany using Opel as the new GM base for a corporate headquarters and European operations. Buick stays in China and very few US plants and facilities remain. The US car market is dead for a decade. And, the United States as a world class manufacturer is down the drain. The steady off-shoring of American manufacturing for cheap labor has gutted the US’s ability to provide for itself in many key markets. We think this comes back to haunt.

“General Motors is considering moving its headquarters from Detroit, selling-off U.S. plants and even renegotiating parts of its restructuring plan with its major union, the new chief executive said Monday. A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler and a sharp downturn in auto manufacturing. GM purchased its glass-towered headquarters building known as Detroit’s Renaissance Center in 1996 for $625 million. GM’s current restructuring plan, which is supported by the U.S. autos task force is headed by former investment banker Steve Rattner, would cut about 21,000 more U.S. factory jobs.”- Reuters & CNBC

US autos are literally crashing as Chrysler buyers stay away in droves due to the company’s bankruptcy, lack of dealer credit and no confidence in the job market. Would you buy a car from  a manufacturer in bankruptcy owned and operated by the UAW and U.S. Government?

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Written by aurick

29/05/2009 at 4:15 pm

Reality Bites

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by Michael E. Lewitt       From: The HCM Market Letter

“So long as risk is effectively concealed from borrowers and lenders or actually shifted to others, risk-taking will be excessive. The initial phase of excessive risk-taking will manifest itself as an economic boom, but eventually, when actual losses begin to change the perceptions of borrowers and lenders and begin to impinge upon unsuspecting others, the boom will give way to a bust….[A] market system whose credit markets involve risks that are partially concealed from the lender and partially shifted to others will be biased in the direction of excessive risk-taking. And excessive risks are converted in time into excessive losses.” –Roger Garrison

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