Global Revolution Must Occur

Some are looking the phenomena occurring in the Middle East as if somehow it is unique to that region and we would like to believe it is related to monarchies or religion.  I assure you nothing would be further from the truth and the facts.  I just returned from the region.  I was in fact in the streets the night Mubarak stepped down.  It is about a dignified living.

Now, in the US we have stirrings in Wisconsin, Indiana, New York, and Ohio.  We witnessed the “in-your-face” fake David Koch call to Governor Walker of Wisconsin.  What is happening in Wisconsin will spread everywhere.  Governors are meeting in Washington today to discuss the overwhelming $175 Billion budget shortfalls collectively facing the states.

However, attempting to bust unions and collective bargaining in the face of the enormous tax cuts given to the ultra wealthy is just not going to sit here as it has not been accepted globally.  There is a moment when the masses do their own math and guess what doesn’t add up?  Distribution of wealth in the society is the problem.  It is that simple and it has reached the event horizon.

The PTB and their political hacks actually still believe they can maintain their power structure and as a result they move forward with the methodical destruction of the world’s middle class as the “cost” to maintain their position.  Their solution: just print more money everywhere! Consider this great reporting by Michael Snyder – BLN Contributing Writer.

“If the U.S. dollar is being devalued so rapidly, then why does it sometimes increase in value against other global currencies?  Well, it is because everybody is recklessly printing money now.  The 6 charts which you are about to see below prove this.  The truth is that it is not just the U.S. Federal Reserve which has been printing money like there is no tomorrow.  Out of control money printing has also been happening in the UK, in the EU, in Japan, in China and in India.  There are times when one particular global currency will fall faster than the others, but the reality is that they are all being rapidly devalued.  Unfortunately, this is a recipe for a global economic nightmare.

Right now you can almost smell the panic as it rises in global financial markets.  Investors all over the world are racing to get out of paper and to get into hard assets.  Just about anything that is “real” and “tangible” is hot right now.  Gold hit a record high last year and it is on the rise again.  In fact, it just hit a new five-week high.  Demand for silver is becoming absolutely ridiculous right now.  Oil is marching up towards $100 a barrel again.  Agricultural commodities have exploded in price over the past year.  Many investors are even gobbling up art and other collectibles.

Paper money is no longer considered to be safe.  All over the globe investors are watching all of the reckless money printing that has been going on and they are becoming alarmed.  An increasing number of investors and financial institutions are putting their wealth into hard assets that are real and tangible in an effort to preserve their wealth.

The other day, a reader of this column named James sent me some charts that he had put together.  I thought they were so good that I asked him if I could include them in an article.  These charts show how central banks all over the globe have been recklessly printing money.  Over the last 30 years virtually the entire world has developed a great love affair with fiat currency….

So is everyone printing money?

The U.S. is printing lots of money…..

Source, The St. Louis Fed

The Bank of England is printing lots of money…..


Source: The BoE

The EU is printing lots of money….

Source: The ECB

Japan is printing lots of money…..

Source: The BoJ

China is printing lots of money…..

Source: The People’s Bank of China

India is printing lots of money…..

Source: Reserve Bank of India

Of course anyone with half a brain can see where all of this is ultimately headed.  In the end, inflation is going to spiral out of control and we are going to witness financial implosion on a global scale. So why don’t these nations just adopt sound money?

Well, it turns out that if you are a member of the IMF, you are specifically prohibited from having gold-backed currency.  Yes, you read that correctly.

In fact, U.S. Representative Ron Paul once sent an open letter to the U.S. Treasury and the Federal Reserve asking about this and he received no response.  The following is the content of that letter….

Dear Sirs:

I am writing regarding Article 4, Section 2b of the International Monetary Fund (IMF)’s Articles of Agreement. As you may be aware, this language prohibits countries who are members of the IMF from linking their currency to gold. Thus, the IMF is forbidding countries suffering from an erratic monetary policy from adopting the most effective means of stabilizing their currency. This policy could delay a country’s recovery from an economic crisis and retard economic growth, thus furthering economic and political instability.

I would greatly appreciate an explanation from both the Treasury and the Federal Reserve of the reasons the United States has continued to acquiesce in this misguided policy. Please contact Mr. Norman Singleton, my legislative director, if you require any further information regarding this request. Thank you for your cooperation in this matter.

Ron Paul
U.S. House of Representatives

Sadly, the truth is that the global elite don’t want nations to start adopting gold-backed currencies.  They want countries to use fiat currencies that they can openly manipulate for their own benefit.

At this point, every nation on earth (to the best of my knowledge) uses a fiat currency.  All of the major global currencies are being continually devalued.  In fact, there are times when counties will purposely devalue their currencies even more rapidly in order to gain a competitive advantage in world trade.

This is why so many investors now have such an aversion to paper currency.  It starts losing value the moment you take possession of it.  In some areas of the world, “gold fever” is absolutely exploding.  For example, China imported five times as much gold in 2010 as it did in 2009.  On the Shanghai Gold Exchange, trading volume soared 43 percent during the first 10 months of 2010.

And while these reckless monetary policies continue, consider the fact that NOT ONE individual has faced any kind of criminal charges in the 2008 collapse, NOT ONE.  However, the “Baby Ruth” always floats to the top of the pool.  Consider this just out over at the Huffington Post.

Source: Huffington Post

Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.

The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account–as opposed to those of its clients or business partners– has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission.

The details underscore the degree to which Goldman–the most profitable securities firm in Wall Street history–benefited directly from the massive emergency bailout of the nation’s financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.

“If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders,” said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. “The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public.”

Goldman and AIG both declined to comment.

When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system. As the world’s largest insurance company, AIG’s inability to cover its outstanding obligations could have threatened the solvency of the institutions holding its policies, asserted the Federal Reserve Bank of New York, which oversaw the deal.

Goldman fended off claims that the arrangement amounted to a backdoor bailout by asserting that none of the money from the AIG rescue landed in its own coffers. Rather, those funds went to compensate clients or institutions on the other side of its trades, Goldman said.

Many times in past posts, I have both predicted and worried over what a violent reaction would look like in say the US or the UK.  Now more than ever, I see the kindling for such a fire is about to be lit.  I only hope that the people, when they do stand up, do so peacefully.  If there is any lesson we can learn from Tahrir Square was the dignified and resolute manner in which the people imposed their will.

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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?