What Goes Up….! Where is the Down?

A lot of people lament the lack of upward mobility in the U.S. right now and I share those sentiments. However, equally important is downward mobility. What makes the concept of America unique is not merely the concept that the poor can become rich but that the rich can become poor. It is this second part that is the most dangerous to social cohesion when it disappears. Unfortunately, the system that we have today of an unholy alliance between Wall Street, Washington D.C. and the multi-national corporations (including the military industrial complex of course) stands there holding onto all the levers of power to serve as gatekeepers of their own empires.

Consider this when we think about how the game is “rigged” right now.  From Matthew Cardinale of the
Inter Press Service on  28 Aug 2011.

Atlanta, Georga: The first-ever audit of the U.S. Federal Reserve has revealed 16 trillion dollars in secret bank bailouts and has raised more questions about the quasi-private agency’s opaque operations.   “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else,” U.S. Senator Bernie Sanders, an Independent from Vermont, said in a statement.   The majority of loans were issues by the Federal Reserve Bank of New York (FRBNY).

“From late 2007 through mid-2010, Reserve Banks provided more than a trillion dollars… in emergency loans to the financial sector to address strains in credit markets and to avert failures of individual institutions believed to be a threat to the stability of the financial system,” the audit report states.  “The scale and nature of this assistance amounted to an unprecedented expansion of the Federal Reserve System’s traditional role as lender-of-last-resort to depository institutions,” according to the report.   The report notes that all the short-term, emergency loans were repaid, or are expected to be repaid.

The emergency loans included eight broad-based programs, and also provided assistance for certain individual financial institutions. The Fed provided loans to JP Morgan Chase bank to acquire Bear Stearns, a failed investment firm; provided loans to keep American International Group (AIG), a multinational insurance corporation, afloat; extended lending commitments to Bank of America and Citigroup; and purchased risky mortgage-backed securities to get them off private banks’ books.

Overall, the greatest borrowing was done by a small number of institutions. Over the three years, Citigroup borrowed a total of 2.5 trillion dollars, Morgan Stanley borrowed two trillion; Merryll Lynch, which was acquired by Bank of America, borrowed 1.9 trillion; and Bank of America borrowed 1.3 trillion.  Banks based in counties other than the U.S. also received money from the Fed, including Barclays of the United Kingdom, the Royal Bank of Scotland Group (UK), Deutsche Bank (Germany), UBS (Switzerland), Credit Suisse Group (Switzerland), Bank of Scotland (UK), BNP Paribas (France), Dexia (Belgium), Dresdner Bank (Germany), and Societe General (France).

“No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the President,” Sanders wrote.   In recent days, Bloomberg News obtained 29,346 pages of documentation from the Federal Reserve about some of these secret loans, after months of fighting in court for access to the records under the Freedom of Information Act.  Some of the financial institutions secretly receiving loans were meanwhile claiming in their public reports to have ample cash reserves, Bloomberg noted.   The Federal Reserve has neither explained how they legally justified several of the emergency loans, nor how they decided to provide assistance to certain firms but not others.

“The main problem is the lack of Congressional oversight, and the way the Fed seemed to pick winners who would be protected at any cost,” Randall Wray, professor of economics at University of Missouri- Kansas City, told IPS.   ”If such lending is not illegal, it should be. Our nation really did go through a liquidity crisis – a run on the short-term liabilities of financial institutions. There is only one way to stop a run: lend reserves without limit to all qualifying institutions. The Fed bumbled around before it finally sort of did that,” Wray said.

“But then it turned to phase two, which was to try to resolve problems of insolvency by increasing Uncle Sam’s stake in the banksters’ fiasco. That never should have been done. You close down fraudsters, period. The Fed and FDIC (Federal Deposit Insurance Commission) should have gone into the biggest banks immediately, replaced all top management, and should have started to resolve them,” Wray said.

For many years conventional wisdom has said that the whole world is controlled by the monied elite, or more recently by the huge multi-national corporations that seem to sometime control the very air we breathe. Now, new research by a team based in ETH-Zurich, Switzerland, has shown that what we’ve suspected all along, is apparently true. The team has uploaded their results onto the preprint server arXiv.

Using data obtained (circa 2007) from the Orbis database (a global database containing financial information on public and private companies) the team, in what is being heralded as the first of its kind, analyzed data from over 43,000 corporations, looking at both upstream and downstream connections between them all and found that when graphed, the data represented a bowtie of sorts, with the knot, or core representing just 147 entities who control nearly 40 percent of all of monetary value of transnational corporations (TNCs).

When we look to the East and watch our Arab brothers struggle against tyranny, I don’t think we connect their struggle to us.  However, I assure you that the roots of that struggle was economic slavery, not unlike we, both in the US and the EU, are rapidly marching (or is it being herded?) toward at this very minute.

As we awaken to these facts, it is apparent that the PTB, who wish to continue their “project”, are having more and more of a difficult time unfolding “their solutions” to our problems.  You know “solutions’ like raiding retirement and pension funds, eliminating worker’s unions, ending any “social programs” of any kind.

Probably the most important news story of September 7^th won’t be reported by International MSM.  No, it won’t be Obama’s speech on Jobs, nor will it be the outcome of the first games in the NFL.  It will be this.

Seething discontent in Germany over Europe’s debt crisis has spread to all the key institutions.  German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe’s revamped rescue machinery, threatening a constitutional crisis in Germany and a fresh eruption of the euro debt saga.

Mrs. Merkel has cancelled a high-profile trip to Russia on September 7, the crucial day when the package goes to the Bundestag and the country’s constitutional court rules on the legality of the EU’s bail-out machinery.   If the court rules that the €440bn rescue fund (EFSF) breaches Treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union.

The seething discontent in Germany over Europe’s debt crisis has spread to all the key institutions of the state. “Hysteria is sweeping Germany ” said Klaus Regling, the EFSF’s director.  German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel’s own coalition plan to vote against the package, including twelve of the 44 members of Bavaria’s Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse.

Christian Wulff, Germany’s president, stunned the country last week by accusing the European Central Bank of going “far beyond its mandate” with mass purchases of Spanish and Italian debt, and warning that the Europe’s headlong rush towards fiscal union strikes at the “very core” of democracy. “Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies,” he said.

A day earlier the Bundesbank had fired its own volley, condemning the ECB’s bond purchases and warning the EU is drifting towards debt union without “democratic legitimacy” or treaty backing.  Joahannes Singhammer, leader of the CSU’s Bundestag group, accused the ECB of acting “dangerously” by jumping the gun before parliaments had voted. The ECB is implicitly acting on behalf of the rescue fund until it is ratified.

Mrs. Merkel faces mutiny even within her own Christian Democrat (CDU) family. Wolfgang Bossbach, the spokesman for internal affairs, said he would oppose the package. “I can’t vote against my own conviction,” he said.   The Bundestag is expected to decide late next month on the package, which empowers the EFSF to buy bonds pre-emptively and recapitalize banks. While the bill is likely to pass, the furious debate leaves no doubt that Germany will resist moves to boost the EFSF’s firepower yet further. Most City banks say the fund needs €2 trillion to stop the crisis engulfing Spain and Italy.   Mrs. Merkel’s aides say she is facing “war on every front”. The next month will decide her future, Germany’s destiny, and the fate of monetary union.

I make all these points because we must think clearly and precisely now.  No politics, nor economic religion, just fix this now, and we can.  We start by taking some people DOWN.  Start to put some balance back into the equation.  I think the audit of the FED would be an excellent place to start that quest.

Secondly, we must be informed voters and place candidates that understand clearly the goals of restoring balance into our global economy through prudent but thorough regulatory changes.  That must, by its nature, start with the political process elements of our societies.   I cannot think of anything more important to you on a personal basis than this.

 

Some Points You May Want to Consider!

As we watch the current economic situation, there are several questions that surface.  Are we headed for another dip recession (I personally believe a double dip recession is crap, as we are in the second depression)? Is there going to be any improvement of the economic crisis or is it getting worse?  However, I think the most important question that most of us face is should I do something with my investments, especially 401Ks?

I am NOT a financial professional, although I do have degree in International Finance.  This is NOT to be considered in any way as financial advice, but I feel compelled to point out some activities that are currently afoot in the financial markets that you should 1). Watch closely and 2). You may want to consider taking some actions to protect what little investment you may still have.

If you watched the markets last week globally, you saw some real ugly volatility in the markets across the board.  Markets moving wildly up and down in the range of 2-5% daily!  That is NOT normal even in an uncertain market place and is indicative of some real anxiety among professional traders.

You and I do NOT spending our every waking hour to watch and act on our investments, so we are the sheep in this market.  So what should we do.  I don’t know about you, but I have become a real bear.  Most of us don’t make “short” plays nor does our 401Ks allow us to participate in some more of the sophisticated “hedging” strategies.  So what can we do?

The simple answer is above all else, don’t  watch the value of our portfolios get any worse.  I think any of us that have “skin” in the markets are teetering on a cliff.  Get out, park everything in money markets and let the dust settle.  Consider these “experts” thoughts of the few days.

Consider this excellent article by By Andrea Coombes, MarketWatch

More retirement advice
• The 10 worst states for retirees
• Tax mistakes to avoid in your retirement plan
• Eight retirement resolutions
• Seven steps to a sound retirement
Investing in retirement
• What to ask before buying an annuity
• Special Report: Retirement income for life
• Retirement products’ rising prices
• Four Medicare myths
• Hike your Social Security benefits
• Figuring your Social Security benefits
• Social Security: What couples should know
• Timing your Social Security benefits
• Fix Social Security by hiking retirement age
• Delaying benefits can pay off on Social Security

This doesn’t mean you must throw 70% of your retirement-plan assets into stocks. Your precise allocation will depend on how many years out you are from retirement, your ability to ignore the daily headlines and focus on the long term, and other factors. What’s most important is diversifying across a broad array of asset classes, rebalancing regularly and controlling your expenses.

Getting out while getting’s good

Maybe you’re envying your neighbor who moved all his money into cash in July or early August, before the Dow Jones Industrial Average DJIA +1.90%  fell a gut-wrenching 635 points on Monday, Aug. 8, then proceeded to seesaw, closing up 430 points on Tuesday, down 520 points Wednesday, and up 423 points on Thursday, closing out the week down just 1.5%.

Certainly, your neighbor was not alone. The U.S. debt-limit debacle, Europe’s debt crisis, ongoing fears of the dreaded double-dip recession and a general crisis of confidence prompted plenty of people to jump out of stocks in recent months.

Investors pulled a net $13 billion out of equity mutual funds in the week ending Aug. 3 (the most recent data available) — that’s the week before those four massive DJIA moves — up from the net $9.3 billion investors withdrew a week earlier and the less than $4 billion pulled out in each of the first two weeks of July, according to the Investment Company Institute, a mutual-fund company trade group. See the ICI mutual-fund outflow data.

Sure, your neighbor seems prescient. But does he know when to get back in? “Markets go up just as precipitously and as fast as they go down,” Evensky said. Read how the DJIA notched a gain of more than 7% in the three trading sessions through Monday, Aug. 15.

Retail investors like you and me are known for pulling out of the market — and then missing the rebound. From 1991 through 2010, the average annual return of the S&P 500 SPX +2.18%  was 9.1%, but the average equity investor return was a measly 3.8%, according to Dalbar, a financial-services market research firm.

Why? Because investors bought when stocks were on a tear, and sold when they fell in value. “It’s not because they owned the wrong investment,” said Scott Thoma, CFA, member of the investment policy committee at investment firm Edward Jones, in St. Louis, Mo. “It’s because they bought high, and they sold low.”

Focus on what you can control

Plenty of regular investors fear the system is rigged against them — that big-money investors with sophisticated trading software are stacking the deck against the little guy. But even the sophisticates fell hard “during the tech crash, during the last crash and probably during this one,” Evensky said.

Instead of worrying about them, Evensky said, focus on what you can control. For one, mutual-fund expenses.

David Swensen, chief investment officer at Yale University, said in a recent opinion piece in the New York Times that “even Morningstar concludes … that low costs do a better job of predicting superior performance than do the firm’s own five-star ratings.” Read Swensen’s piece on mutual funds.

While 401(k)s and other defined-contribution plans are far from perfect, most offer access to cheap index funds.

You also have some ability to diversify your holdings. In addition to U.S. stocks and bonds, consider emerging-market stocks and bonds, commodities, Treasury Inflation Protected Securities (TIPS) and real-estate investment trusts (REITs), among other options. Get ideas by looking at how the Lazy Portfolios are invested.

If you don’t have access to much variety in your 401(k), consider investing in that plan up to the full employer match, and then investing some money through an IRA to get access to more investment options.

You’re also in control of rebalancing. Once you’ve decided what percentage of your portfolio to invest in each asset class, revisit your portfolio quarterly. If necessary, sell investments that have grown beyond your target allocation, and buy more of those that have dropped below your target.

Understand risk

Investors tend to focus on market swoons, but that’s not the only risk you face. “In our definition, risk is not reaching your long-term goal,” Thoma said.

And don’t confuse certainty with safety. “Putting your money in CDs may feel very certain — you know you’ll get every penny back — but it’s very unlikely to be safe for most investors because there’s not going to be enough money to pay the bills after you factor in inflation,” Evensky said.

Another risk: Taxes. You’ll owe income tax on that 401(k) nest egg when you start pulling the money out. Read more: Higher tax rates loom for 401(k) savers.

And keep in mind, that “lost decade” wasn’t so for everyone. If you put $10,000 into the S&P 500 in 2000, you’d have about the same amount in 2010, Thoma said. But investors who put in $10,000 over time in regular monthly installments? “Their money would have grown to over $14,000 during that timeframe, if you were in a 65/35 portfolio,” Thoma said.

“It’s because you invested over time,” he said. “A lot of your money was invested lower and benefited from that recovery. That’s where people have to focus more often than not.”

So, the bottom line is pay attention, be sure you have the flexibility to move in and out of the stock market and mutual funds without penalty and fees.  Since we are now at point where we are at what is called a “Death Cross” in the markets (that is where the 50 day moving average is crossing over the 200 day moving average, it is a bear market). So it is a time to be a bear!   Your broker may say otherwise, but he or she has “skin” in your game either way!  It’s your money and you should call the shots!

A Warning to Those Who Have Been Investing in Gold and Silver

I have written several articles on how tightly held the REAL trading in gold and silver really is, and how the small investors don’t have a chance to “move” in the market.  I am sure a lot of my readers have been investing in gold and silver, and why not look where the market is going.  But Caveat Emptor!

If you do not have PHYSICAL possession of the gold and silver you think you have invested in, you may have already been screwed big time.  If you google “gold and silver oversubscription” today, you will get over 66,000 “hits”.  Almost every gold and silver commodities vessels are grossly oversold.  What that means in very simple terms, the “certificate” you are holding that says you own “X” amount of gold or silver may NOT be redeemable in physical gold and silver if you demand it.

When we hit the hyperinflation panic point, and that is say oh RIGHT NOW!, then everyone will scramble to get their gold and silver that is NOT there.  If you have been paying to “STORE” your gold and silver with the brokerage firm, you are still in that boat.  You guys are the real smucks to these slick trading firms because not only did you pay in advance for your “bullion”, you also paid “storage fees” for stuff that doesn’t really exist!

If you think I am kidding, try and get physical delivery of your gold or silver and see what happens next.  I want you to consider what some of the biggest Hedge Fund Investors are quietly doing behind your backs and how the MSM is complicit in keeping everything on the “QT”.  The following move was made today by The University of Texas Investment Management Co., the second-largest U.S. academic endowment.

They took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.  The fund, whose $19.9 billion in assets ranked it only behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.

The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

Also consider this: Belarus’ central bank has stopped selling gold to local retail customers for Belarussian roubles, it said on Friday, after demand for precious metals soared due to expectations of a currency devaluation.  The bank did not explain its decision.  Belarus is in talks with Russia on a $3 billion bailout package that Minsk hopes will help it avoid a painful devaluation of the rouble and offset the large current account deficit.

Belarussians bought 470 kilograms of gold from the central bank last month, up from 209 kilograms in January and February together, as they sought to protect their savings. Analysts say that Belarus will have to eventually devalue the rouble by about 20-30 percent even if it receives aid from Moscow. However, the central bank has said it would not make any such moves until late April.

What this means is we have reached the tipping point, I believe, that I have been warning everyone about for weeks now.  Because the central banks are trying to print their way out of the crisis we are in, currencies around the world are headed for huge devaluations and within, I think, a matter of days.  I am not talking about some small corrections in currency valuations, but more in the range of 20 or 30%!

So my good friends, I would advise( friendly advice, not investment advice, as I am not an investment professional) you to really pay attention and if you are exposed here, get your gold or silver in your own hands.  The value of these commodities could go up even higher, but if you don’t physically possess them you are a lamb ready for slaughter.  I also wouldn’t be surprised if governments globally don’t start trying to confiscate privately held gold and silver in the near future.  It has happened before and it can happen again.  As I said Caveat Emptor!

Finally A Step in the Right Direction

As a followup to my previous post calling out the fact that not one single bankster or Wall Street financial thug has been prosecuted for the giant fraud and ponzi schemes foisted on the world’s economy, it now appears that at least some in CONgress are beginning to fear the wrath of the people.  This is a start, but I suspect it will still be a long time before any of these crooks actually see jail time.  We all can help the process a bit by letting our Representatives and Senators that we demand justice.  They either do the right thing or we will do the right thing come next election.

This just released:

“They clearly misled their clients and they misled the Congress,”  Senator Levin added, announcing that he will recommend that his panel refer all of the Goldman executives who testified before the committee for criminal prosecution by the Justice Department and for sanctions by the SEC for violations of securities laws.

This is a fairly detailed and lengthy piece by Shahien Nasiripour.  It is worth reading in full at its source.  The only thing missing from Levin’s report is a perjury recommendation for Henry Paulson who lied before Congress repeatedly during various testimony given in 2007 and 2008 – see the right column of this website to watch his lies for yourself. Here’s the link: http://www.huffingtonpost.com/2011/04/14/goldman-financial-crisis-prosecution_n_848994.html

Huff Po

WASHINGTON — Goldman Sachs executives deceived clients in order to profit off the brewing financial crisis and then misled Congress when asked to explain their actions, concluded a top lawmaker who led a two-year investigation into Wall Street’s role in the meltdown.

Carl Levin, chair of the Senate Permanent Subcommittee on Investigations, will recommend that Goldman executives who testified before his panel, including chairman and chief executive Lloyd Blankfein, be referred to the Justice Department for possible criminal prosecution, the Michigan Democrat announced Wednesday. Members of the subcommittee will now deliberate Levin’s proposal.

A Goldman spokesman said its executives were truthful in their testimony, adding that the firm disagreed with many of the panel’s conclusions.

Two and a half years after a historic crisis that has yielded not a single criminal conviction of anyone who played a leading role in causing it, the prosecution of such a high-profile Wall Street executive may satisfy the public’s desire to see culprits brought to justice. Last year, the Securities and Exchange Commission settled a lawsuit it had brought against Goldman.

But the firm was just one target of a sweeping, 639-page report by the Senate panel into the causes of the crisis. Hardly a fluke occurrence, the meltdown was the product of a deeply corrupt financial system, one fueled by profit-hungry banks that deceived their clients, and overseen by lax regulators who were complicit in the firms’ chronic abuse of the most fundamental rules of the game, the report concludes.

The investigation found a “financial snake pit rife with greed, conflicts of interest, and wrongdoing,” Levin said.

More than any other government report produced in the wake of the crisis, this account names names, blaming specific people and institutions: Goldman Sachs, Washington Mutual, Moody’s Investors Service, Standard & Poor’s, the Office of Thrift Supervision and others. It targets four types of institutions, all of which it says played key roles in causing the crisis: mortgage lenders that offered prospective homeowners booby-trapped loans; regulators that were paid by the institutions they were regulating and cooperated in widespread deception; rating agencies that gave seals of approval to products they knew to be especially risky, all in the pursuit of market share; and Wall Street banks that duped investors into buying securities that only the insiders knew were destined to go bad.

“They clearly misled their clients and they misled the Congress,” he added, announcing that he will recommend that his panel refer all of the Goldman executives who testified before the committee for possible criminal prosecution by the Justice Department and for sanctions by the SEC for violations of securities laws.

This is a very rare time when YOU can really make a difference in the world.  Everybody call, write, email your Representatives and Senators and demand that they not only support the committee on this effort, but that they also continue hound the Justice Department to fully, completely, and swiftly investigate and prosecute these crooks.  These crooks have all but destroyed our future with their greed.  WE WANT OUR MONEY BACK!!!!

The Realities of the “Budget Crisis” Hidden by Both Sides

As the budget debate continues, the American people are being fed BS from both parties.  This is especially true when it comes to the facts about tax revenues, Medicare, Medicaid, and Social Security.  In my last previous article, I presented some of the facts especially about Social Security.  Now it is time to reveal the truth about income taxes and corporate income taxes, and how they relate to job creation in America.  Keep in mind, I only try to present the facts and NOT opinion.

I trust that if the “Common Folk” can see the real balance sheets, they can read and understand it just like they understand their own checkbook or bank statement.  It just ain’t that difficult.  The problem we have is that those facts are hidden deep in some reports and disclosure statements by the IRS  and the Department of Labor that are not publically released, at least not in the Main Stream Media.  Also, Main Stream Media is controlled by the very corporations that benefit from us not knowing, so any hope of true journalistic work coming from them is a pipe dream.  Even if they have hired good honest journalist, they are quickly either gagged or if they have the courage to try and report anyway, their job security evaporates and they are out of the mainstream.  Just ask the likes of Keith Olbermann and those of such integrity.  Their access to us is diminished to a point they can not effectively reach the mass of audience to really effect change and inform the masses.

OK, lets talk taxes and who is paying what.  I warn you that the chart I am about to present will make you blood boil, and quite frankly, I hope it will.  This chart is just one month’s tax receipts (March 2011) but is reflective of what is really going all.  I think we all feel or have a sense that corporations are not paying their fair share, but this will reveal something quite beyond that.  The Republicans are arguing that raising taxes on corporations will kill jobs in the US.  Well, I will show you a second chart to reveal the reality of why corporations, with their sweetheart tax deals haven’t created a single job in the US since 2004!

Here’s the first chart, remeber this is ACTUAL IRS data For March 2011:

What this chart shows that we, the honest taxpayers paid in more than $91 billion in taxes, received almost $58 billion in refunds, with net receipts to the IRS of nearly $38 billion. Great, huh?  Now look at what our fat cat corporations paid.  They paid in $4.5 billion, got refunds of nearly $6 billion, and the IRS PAID THEM $1.3 billion!!! What this really shows is not only did corporations pay $0 in taxes, WE PAID them a bonus of $1.3 billion.  Are you catching on here?  I know, you want to pinch yourself and say this isn’t so, but facts are facts.

OK, now let’s address the argument that corporations shouldn’t pay any taxes because after all it is corporations that generate the jobs in America and if they were given free tax breaks , they would solve the economic crisis by creating full employment and job growth.  This is the talking points of donkeys and lackeys such as Mitch McConnel, Kantor, and Boner(misspelled on purpose).

OK, lets again look at the facts as presented by the Department of Labor.  Facts, just the facts, ma’am.  The following table show the total of jobs in the US by month.  OK?

So, adjust for population growth during that period, NOT A SINGLE JOB has been created since 2004!  Facts, just the facts, as presented by our own government that they hoped you would never see!

I will let you all reach your own conclusions.  I have my opinion that I have reached by just looking at facts and not paying attention at all to either side’s rhetoric.  It’s time to do a triple rinse in Washington and Wall Street and start all over again.  I hope this will help us all make some decisions that are really informed come next election.

 

 

 

 

 

From the Currency Warfront; A Major Battle May Be Brewing!

There are several events that seem to be merging over the next two weeks that point to the world economy teetering over the edge.  Last article I posted  a clearly illustrated piece that the world’s major governments are printing money willy-nilly. This can do nothing but push hyperinflation, or one would think.  Indeed world food prices are skyrocketing.

Then we hear that Bernanke et all have announced QE3.  This is another push to hyperinflation.  However, the most dangerous events unfolding are related to world’s oil prices, which are pushing $115.00/Barrel.

Lastly, the Federal Government, although they kicked the can down the road for two weeks, will face the harsh realities related to the Federal Government’s budget and deficit.  All these elements coming together within the next two weeks are the ingredients for the perfect storm in currency markets.

According to Gonzalo Lira today—Wednesday, March 2, 2011—is a key date: Over the next eight trading days, we will see if the dollar rebounds above 77 on the index, or if it bounces back up.  If it bounces back up, we’ve kicked the can down the road a bit.  But if it breaks lower, then this is the beginning of the death-slide of the dollar.

These events are not factored by the obvious natural incidents that are occurring in the US, Australia, Bangladesh, and New Zealand, just to name a few.  These add up to billions of dollars of damages that governments did not factor at all in their budgets.

Also not factored is the number of planned job cuts announced by U.S.-based companies increased for the second consecutive month in February, rising to 50,702, the highest total since March 2010, according to the latest report on monthly job cuts released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc. The 50,702 job cuts announced last month was up 32 percent from January’s 38,519. It was 20 percent higher than the 42,090 planned layoffs announced in February 2010.

Those of you in large market positions better pay attention on an hourly basis for the next 14 days.  The rest of us poor smucks just have to figure out how we get to work for the week when gas hits $5 bucks a gallon and it will within the next 45 days.  Sooner, if things go to hell in a hand basket in the ME.    So far, The Saudi’s have stepped production to try and keep a cap on oil prices, but if the planned demonstrations go off in Saudi next week as rumors have it, then all bets are off as to how high oil prices could go.

So check the supplies one more time and let’s hope I am absolutely screwed up and too pessimistic.  However, like the farmer, I smell a bad storm acoming.

Is Hyperinflation Just Around the Corner? Update from the Currency Wars

As I have provided many times in this blog, one of the key factors to preventing a full economic collapse in the US has been the fact that the US Dollar has been the world’s reserve currency.  The impacts of the dollar NOT being the world’s reserve currency has impacts world-wide, but nowhere more significant than in the US itself.

This fact (dollar is world’s reserve currency) has allowed the FED to continue with its “quantitative easing” (QE) policies unabated (read print more money).   Indeed the Fed has ignored warnings from financial experts world-wide that if the FED continued these policies, they would be jeopardizing the entire financial stability of global trade and could set off hyperinflation which could kill any hopes of recovery.

This QE policy combined with the US government’s lack of control of the deficit spending (now over $14 Trillion) could trigger a global collapse.  Both the FED and the US Congress have down played the impacts of the QE1,2,3 citing the very fact that the Dollar was the world’s reserve currency and therefore, the impacts of both spending and printing money was not going to significantly impact world economics and in fact, they contend that getting the US Economy going was the most import element of stabilizing the world’s economy.

This may be reasonable IF the US Dollar remains the world’s reserve currency, but I also have stated that recent efforts by both Russia and China to push the dollar off the world reserve status could have a disastrous effect both in the US and the world.  My concerns centered on the hyperinflation effect that would be created both domestically in the US and the effects on most of the world’s economy as well.

It appears that my fears for a world-wide push to “bump” the US Dollar as the world’s reserve currency are now being manifested in fact and ahead of the timeline I though it may happen. Consider this article that appeared in CNN Money yesterday.

NEW YORK (CNNMoney) — The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world’s reserve currency. The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.

SDRs represent potential claims on the currencies of IMF members. They were created by the IMF in 1969 and can be converted into whatever currency a borrower requires at exchange rates based on a weighted basket of international currencies. The IMF typically lends countries funds denominated in SDRs

While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.  Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some “technical hurdles” involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system. “Over time, there may also be a role for the SDR to contribute to a more stable international monetary system,” he said.

The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.  In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks’ dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs.

Oil prices usually go up when the dollar depreciates. Supporters say using SDRs to price oil on the global market could help prevent spikes in energy prices that often occur when the dollar weakens significantly.

The dollar alternatives

Fred Bergsten, director of the Peterson Institute for International Economics, said at a conference in Washington that IMF member nations should agree to create $2 trillion worth of SDRs over the next few years.  SDRs, he said, “will further diversify the system.”

Dollar firms after starting 2011 weak

The dollar has been drifting lower so far this year as the global economy improves and investors regain their appetite for more risky assets such as stocks and commodities.  After rising above 81 in early January, the dollar index, which measures the U.S. currency against a basket of other international currencies, eased below 77 earlier this week.

However, the dollar was higher Thursday against the euro, pound and yen as disappointing corporate results weighed on stock prices following several days of gains on Wall Street. The rally in the commodities market also cooled, with the price of oil and metals backing off recent highs.

0:00 /4:40Bernanke vs. Ryan: Inflation wars

In addition, renewed concerns about the debt problems facing troubled European economies put pressure on the euro and supported the dollar. The yield on Portugal’s benchmark bond rose to a record high Wednesday, and borrowing costs for Ireland, Spain and Greece remain elevated.

“The market is shedding risk, with equities and commodities weakening and the U.S. dollar broadly stronger” said Camilla Sutton, currency strategist at Scotia Capital.

Traders were also digesting comments from Federal Reserve chairman Ben Bernanke, who told Congress Wednesday that despite a strengthening economic recovery, the unemployment rate remains high while inflation is “still quite low.”

Those remarks reaffirmed the view that “the Fed would be very slow to tighten policy given its dual mandate of price stability and employment,” analysts at Sucden Financial wrote in a research report.  Bernanke also urged lawmakers to come up with a “credible plan” to bring down “unsustainable” federal budget deficits.

“We expect that the outlook for the U.S. fiscal position will weigh heavily on the U.S. dollar in the quarters ahead,” said Sutton. In the near-term, however, she said “a strengthening growth profile” could help provide “a temporary period of dollar strength.”

As we have watched middle eastern  governments implode over the last few weeks, primarily due to inflation of basic commodity prices and large percentages of unemployment, we see the harbinger of days to come in the EU, Russia, and yes the US.  If we stay on this same course the effects of hyperinflation, followed by significant deflation would end the world’s economic system as we know it. Does that sound like an over reaction?  We will see, we will see.  How’s your food stocks?  Judging from Egypt, it looks like you need a minimum of 18 days, no?

The Next Big Haul

As I have written in previous articles, there is a significant amount of evidence that bankers have not altered their practices in any meaningful manner, except being less transparent than in 2007 and 2008, when they were more deceptive with a drape of transparency.  In that previous article I opined that the bankers would soon attack sovereign treasure next.  One only has to follow what one can related to sovereign debt and CDS activity to understand “the boys” are about to bring the hammer down on the EU.

Because of the recent actions of the banker controlled rating agencies, these beleaguered countries, Greece, Ireland, Portugal, and Spain have seen their bond rates escalate beyond any hope of recovery.  Combining the dual failures of this week of the G20 basically falling apart and the strained US-China  monetary relations, the situation in the EU has just gone to DEFCON3.  This week we saw basically the final battle plan being brought out in the light.  Consider these facts below in toto.  The targets are Greece, Portugal, and Spain.

In Greece

Six months after Athens received €110bn (£93bn) in emergency loans from EU nations and the International Monetary Fund to prop up its near-bankrupt economy, Eurostat revealed that Greece’s budget deficit reached 15.4% of GDP last year, substantially higher than its previous estimate of 13.6%. Greece’s poor bookkeeping was blamed for the budget black holes.

As a team of visiting inspectors from the IMF, the European commission and the European Central Bank arrived in Athens, there was widespread acceptance that the new figures would throw out the fiscal and structural reform program the socialist government has agreed to in return for the loans, the biggest bailout in history. “We will face a profound strategic issue of how to repay €70bn-€80bn when redemption of the rescue loans comes,” a senior government aide told the Guardian. “There will have to be some disguised rescheduling of the time frame in which we repay the money.”

Prime Minister George Papandreou’s administration had previously insisted it would slash the deficit to 8.1% of GDP by the end of the year before lowering it to the permissible EU level of 3% in 2013 when the rescue program expires.

In government for 13 months, the socialists have been heavily criticized by Greeks for their austerity policies. But in an interview at the weekend, Papandreou admitted for the first time that Athens may have to seek an extension of the repayment deadline. He also conceded that the revision could mean further cost-cutting.

The centre-left administration has already imposed tax hikes and wage and pension reductions that have triggered violent street protests. One well-placed insider said that, with an extra €7bn-€8bn needed by the end of the year, it was “very likely” the government would press ahead with plans to shut down parts of the bloated public sector.

Unionists backed by the Communist party have warned that further measures could prove the tipping point where popular opposition turns into explosive social unrest. Mass demonstrations and strikes are planned in the coming weeks.

Greece was compelled to accept the rescue package after it was effectively locked out of capital markets because of prohibitively high borrowing costs earlier in the year.

Since then, the country’s public finances have been closely monitored by visiting inspectors from the European Commission, ECB and IMF. So far Athens has received two installments of aid with a third expected later this month amounting to a total of €38bn. But the three organizations have made it clear that further handouts depend on the country staying the course and making fiscal progress.

In Spain and Ireland

Spain’s central bank governor, Miguel Angel Ordonez, lashed out at Dublin on Monday, calling on the Irish government to halt the panic and take the “proper decision” of activating the EU-IMF bail-out mechanism.  ”The situation in the markets has been very negative due to the lack of a final decision by Ireland. It is up to Ireland to take that decision, and I hope it does,” he said.

The outburst reflected suspicion at the European Central Bank that Dublin is holding the eurozone to ransom, allowing the crisis to fester until it extracts a pledge from EU officials that it will not suffer a loss of economic sovereignty or be forced to give up its 12.5pc corporate tax rate under any deal.

Simon Derrick from the Bank of New York Mellon said the negotiations over Ireland’s bail-out have been astonishing. “The creditors say please take the money, and the debtor says ‘we don’t want it’. It’s very odd.”  ”Still, the EU is doing the right thing to try to create a fire-wall as quickly as possible. They learned from Greece that once bond yields reach this level they have 10 trading days left to avoid a self-feeding crisis. They cannot allow this to spread to a large country because at that point contagion would become uncontainable,” he said.

In Portugal

Contagion has already pushed Portugal to the brink, pushing yields on 10-year bonds to the danger level above 6.5pc. Finance Minister Fernado Teixeira dos Santos said the country was at the mercy of global forces and may be forced to call for help.

“The risk is high because we are not only facing a national or country problem. It is the problems of Greece, Portugal, and Ireland. Markets look at these economies because we are all in this together in the eurozone. Suppose we were not in the eurozone, the risk of contagion could be lower,” he told the Financial Times.

Mr Teixeira made a thinly veiled attack on Germany’s Angela Merkel and France’s Nicolas Sarkozy, who precipitated the latest crisis by opening the door to sovereign defaults and bondholder “haircuts” for eurozone states in trouble. (here read Credit Derivatives and it makes a whole lot of sense huh?).  “We were like the soccer player running to the goal and ready to kick for the goal, and then someone fouls us, but this time there was no penalty.”

A simultaneous bail-out for both Ireland and Portugal might run to €200bn, depleting much of the EU rescue line. The European Financial Stability Facility (EFSF) can raise up to €440bn on the bond markets but only two thirds of this would be available. The IMF is expected to loan a further €3 for every €8 from the EU under the bail-out formula.

The great concern is that the crisis could spread to Spain, which has a far bigger economy that Greece, Portugal, and Ireland combined. Foreign banks have €850bn of exposure to Spanish debt.  David Schautz, credit strategist at Commerzbank, said the EU bail-out fund would come under “severe strain” if Spain needed a rescue. Yet this remains a serious risk since Spain must roll over or raise €175bn of debt next year.

Angela Merkel, the German Chancellor, raised the spectre of the euro collapsing as she warned: “If the euro fails, then Europe fails.” European finance ministers will meet in Brussels on Tuesday to begin discussions over a new European stability plan that is expected to result in billions of pounds being offered to Ireland, Portugal and possibly even Spain.

Greece’s prime minister lashed out Monday at Germany—its chief euro-zone benefactor—for tough talk on government-debt defaults, making clear the widening strains inside the 16-member euro-zone as the currency bloc wrestles with a teeming sovereign-debt crisis.

Greek Prime Minister George Papandreou said the spiral of higher interest rates could ‘force economies toward bankruptcy.’  Addressing reporters in Paris, George Papandreou said the Germans’ view—long-held, but recently reiterated—that private bondholders could suffer losses as part of a future bailout was intensifying government-debt woes.

The German position “created a spiral of higher interest rates for countries that seemed to be in a difficult position, such as Ireland or Portugal,” Mr. Papandreou said. He added that the spiral could “break backs” and “force economies toward bankruptcy.”

While the US has decided it will print its way out of the current crisis and the world be damned, and China refuses to get real about the proper market place for the Yuan, and none of those involved sovereign nations getting anywhere serious with the bankers pushing the buttons here, it is only a matter of weeks before it all unravels.

What is happening in the EU right now is a macroscopic view of the near future in the US.  First there is severe austerity and further erosion of the economy which shows up with her twin sister, hyperinflation and then the civil unrest.  There is little coverage in the US about this, but this is something everyone should watch very closely.

Here Comes the Currency Wars! Is It What Kicks Off the Final Crash?

Regardless of all of the happy talk, I have continued to insist that firstly, this is the second great depression.  It is definitely global and extended. Secondly, we haven’t seen the bottom yet and I believe we will be dealing with this economic crisis for at least another 5-10 years.  I have contended that the real numbers and facts that count have NOT improved and to say the recovery has begun and more outrageous to say that it started in June of last year is mind-boggling.

There is no more vulnerable area to precipitating the “second leg” down than a global currency war.  The impacts of such wars are never anything good for struggling economies.  It seems that is exactly what is beginning to happen.  Consider this from Peter Simpson in Beijing for VOAnews.com

http://www.voanews.com/english/news/China-Warns-US-Yuan-Bill-Could-Damage-Ties-104071274.html

China Thursday expressed its anger at legislation in the United States aimed at punishing Beijing for not letting its currency rise in value and failing to address trade imbalances.  Foreign Ministry spokeswoman Jiang Yu says the United States should avoid steps that could damage relations. She says her government opposes what she says is Congress using the currency issue to launch protectionist measures against China.

On Wednesday, the U.S. House of Representatives passed legislation that would allow Washington to treat what the bill describes as fundamentally undervalued currencies as an illegal export subsidy.  Jiang says the bill would harm commercial relations between China and the U.S., and says it could affect the economies of both countries, and the world.

The bill is primarily aimed at China. The U.S. and other countries say it keeps its currency, the yuan, artificially low to give its exports an unfair advantage. Many U.S. politicians, businesses and labor groups say this has contributed to the United States’ massive trade deficit with China. Congress says the deficit causes jobs losses in the U.S.  The bill would allow the U.S. to set tariffs to offset China’s price advantages.

It must be passed by the Senate and signed by President Barack Obama to become law, and neither is certain. But the latest move has rattled China.  State media quoted the Commerce Ministry as saying the bill contravenes World Trade Organization rules.  Jiang, the Foreign Ministry spokeswoman, would not say if Beijing will seek to retaliate.  But Beijing is not alone in its opposition to the bill.

The American Chamber of Commerce in China on Thursday said the bill would not achieve its objectives and would not create significant U.S. job growth.  Chairman John Watkins Jr. says the group opposes the bill because it will make the trade deficit worse, and will likely shift some China production to other low-cost countries.

“We believe that it will actually reduce exports and thereby good jobs,” Watkins says. “I think it will add further tension to the U.S.-China relationship. We think that Congress would be better focused and better advised coming up with a response to deal with China’s web of indigenous innovation policies, weak intellectual property protection, and tightening market access for foreign firms here.”  Any vote on the bill in the U.S. Senate will not come until after congressional elections on November 2.

If this was the only issue, it may be manageable, but the focus is just not on the US and China, although these countries are 1 and 2 respectfully economically.  There is a great concern on how the EU is going to manage its joint austerity programs.

Russian President Dmitri Medvedev has urged the European Union to stabilize its common currency, saying a stable euro is important for EU trade partners, including Russia. Mr. Medvedev told reporters in Germany Saturday that Russia is not indifferent to the fate of the European single currency, because it keeps part of its foreign currency reserves in euros.

The Russian president arrived in Germany Friday to discuss global and bilateral issues with German Chancellor Angela Merkel.   After speaking with the German leader, Mr. Medvedev expressed confidence that a package of EU measures put in place to help stabilize the euro will work.  Later this month, leaders from top 20 economies will meet in Canada to discuss ways of stabilizing the world economy and financial system.

This comes at the same time as we are seeing the working classes of the EU countries most affected take to the streets en masse.  Workers across Europe took part in coordinated actions to protest government austerity measures, shutting down much transport in Spain and filling the streets of Brussels with tens of thousands of marchers.

Spain’s first general strike in eight years left few buses running in Madrid and about half of underground trains out of service, Reuters said. The government said an agreement with unions guaranteed minimum service. Sky News reported that Iberia, Spain’s largest airline, expected only a third of its scheduled flights to take place.  Unions claimed that more than half of the Spanish work force, or about 10 million people, were on strike, Reuters reported, though the government downplayed any problems.  “So far the strike is taking place with normality and without incidents,” said Celestino Corbacho, the Spanish labor minister, The New York Times reported. “Citizens are fulfilling both their right to strike and work.”

The day of labor action across Europe was led by the European Trade Union Confederation. The group represents trade unions from 36 European countries and claims 60 million members, CNN reported.  “Cutting in a recession is crazy, and we must fight it,” John Monks, European Trade Union Confederation’s general secretary, told CNN.  In Brussels, union organizers said they had achieved their goal of drawing 100,000 people to march on European Union buildings, The Associated Press reported. Union workers are rallying against higher taxes, a delayed retirement age and longer work day, the Times said.

In Greece, which has been trying to fight off bankruptcy, some transportation workers had walked off the job, national rail workers were stopping work later, and hospital doctors were on strike for 24 hours, AP reported.

Irish police arrested a 41-year-old man after he drove a cement-mixer emblazoned with the words “toxic bank” to the gates of the Irish parliament in Dublin, which is due to authorize billions of dollars of further funding to bolster Anglo Irish Bank, which was nationalized last year. Authorities took more than two hours to remove the truck, according to the Irish Times, because the protester had taken measures to immobilize it.  CNN said protests are also planned in Portugal, Italy, Latvia, Lithuania, the Czech Republic, Cyprus, Serbia, Romania, Poland, Ireland and France.

Although the UK seems aloof from the EU, it cannot escape the reality of mandatory “austerity” measures, but like the US the new government seems reluctant to tell the public the truth of the nature and depth of the austerity programs.  The point of all of this is that we are not immune from these wars and in fact we are already engaged fully in the “prosecution” of this war.  I, for one, am very concerned that these tensions will build and the resultant tariff wars that will be imposed because of a lack of response from country X or Y to valuation demands will set off hyperinflation and more unemployment globally.  This may well be the biggest story of the year and few media outlets are putting in front of us.  Hmmmmmmmmm.

The Sad Decline of America or is it?

As I have written several times in this blog, the current economic “recession” is no such thing.  This is a great depression, as bad as the first, and in many ways it may be worse.  As long as we continue to believe the “happy talk” we will not demand the focus on the real issues that are at the center of the current problems.

We have seen the largest transfer of wealth to the top 1% than in any other time in our history.  The middle class has lost $10 Trillion in wealth in just 24 months!  The top 1% now control 43% of the personal wealth in this country.  Financial reforms have been a joke, not attacking the instruments of this war, credit derivatives, Repos, and High Frequency Trading (HFT’s).  Clearly, the banksters and big oil, healthcare and pharmas don’t seem to see any need to change their modus operandi in a compassionate response to the fact they just fleeced the middle class to death.

Mostly by accident, the tea party express has at least shown us that we DO HAVE the ultimate power and that is our vote.  While big business can easily buy votes on the hill doesn’t mean they can buy the votes on the street and it is the vote on the street that trumps the vote on the hill.  What it illustrates to us all is that even whacky activism can “shake things up” a bit.

We do need to wake and begin to shake up our leaders.  In fact, we should rough them up a little as well.  Before anyone starts calling me a radical, let me clearly what I mean by “rough them up”.  I mean we should all be calling or writing our representatives.  We should all turn out to their “town hall” meetings and local offices to let them know we are watching and we are informed and we are not whackos, but the very middle class of this country.  We are the ones who built this nation with our sweat and we are the very same grunts who bought all the big companies’ stuff and invested in their little scams and we ARE THE ONES IN CHARGE HERE.

If you need to get fired up a bit consider this:

15 Shocking Facts About Poverty In America

1.  45 million Americans were living in poverty in 2009

2.  2009 saw the largest single year increase in the U.S. poverty rate since the U.S. government began calculating poverty figures back in 1959.

3.  The U.S. poverty rate is now the third worst among the developed nations tracked by the OECD.

4.  Household participation in the food stamp program has increased 20.28% since last year.

5.  The number of Americans on food stamps surpassed 41 million for the first time ever in June

6.  As of June, the number of Americans on food stamps had set a new all-time record for 19 consecutive months.

7.  One out of every six Americans is now being served by at least one government anti-poverty program.

8.  More than 50 million Americans are now on Medicaid, the U.S. government health care program designed principally to help the poor.

9.  One out of every seven mortgages in the United States was either delinquent or in foreclosure during the first quarter of 2010.

10.  Nearly 10 million Americans now receive unemployment insurance, which is almost four times as many as in 2007.

11.  The number of Americans receiving long-term unemployment benefits has risen over 60 percent in just the past year.

12.  28% of all U.S. households have at least one member that is looking for a full-time job.

13.  Nationwide bankruptcy filings rose 20 percent in the 12 month period ending June 30^th.

14.  More than 25 percent of all Americans now have a credit score below 599.

15.  One out of every five children in the United States is now living in poverty.

What we need really now is a tea party type movement, but with sanity and reality at its core.  The PTB are counting on that not happening.  While the Republicans are worried in the short term because of their association with the psycho-babblers, they feel in the long run, they will regain control of the far right within the party.  The Democrats are thankful for the tea party because in the mid-term elections, they will help Democrats minimize the damage.

The reality though is that only 8% of ALL voters actually support or believe the tea party agenda!  So it seems to me to be a no-brainer to form an active bloc of the “Silent and Sane Majority”.  We don’t talk much, but when we do everyone will listen.  It is time to put the kids and fools in their place. Look around, who else is going to do it.