The World is Reordering and What It Means for the US

For years literally, we have been chronicling the demise of the US’ power in the world as it has been wrought by the FED. We have witnessed the systemic theft of the wealth of the US by the bankers. Most think that is not a reality. They are all consumers of the “blue pill”. Trillions of dollars have been siphoned from our economy, our infrastructure is crumbling, our CONgress is a joke run by paid clowns, and we have been saddled with the debt of conflict after conflict.

Now, as they say, the final shoe is dropping, and here are a few examples of why is not being covered in our so-called media, which is also a sham. For many months we have been following the actions of the BRICS as they methodically are re-organizing the way the world’s financial markets operate, and the associated trade that will be conducted. Many scoffed at these efforts with the rationale even if the BRICS (Brazil, Russia, India, China, and South Africa) were to be successful, they still wouldn’t be large enough to effect any change.

The FED continued to print money with no asset backing and shipped it to the EU banks to continue the façade that all is well, and the economies of the US and the EU were great, when in fact they were collapsing. Literally the US taxpayers have been indentured to the tune of several trillions of dollars. Here we are seven years later, and even with the draconian measures meted out by the IMF and World Bank on it’s member nation governments in the form of austerity programs, the economies of those nations continues to collapse.

It is not a surprise that these same elite in the US are banging the war drums once again and this time the Russians are once again the bad guys. However, you must put everything in its true context and look at what has happened in Iceland, who now says joining the EU is out of the question or watch what is going on in Greece as they begin to “buck” their bondage.

Panos Kammenos, Greece’s defense minister, spoke to German newspaper “Bild” on Saturday, saying his country’s leaving the euro could precede an exit by Italy and Spain, followed by Germany in the future. “If Greece explodes, Spain and Italy will be next and then at some point, Germany. We therefore need to find a way within the eurozone, but this way cannot be that the Greeks keep on having to pay,” Kammenos told Bild.

Instead of a bailout, Greece needed a debt “haircut” like the one Germany’s creditors had to accept in 1953, Kammenos proposed. He also argued that Berlin should pay World War II reparations to Athens. “All European countries have been compensated for crimes committed by Nazis, except for Greece,” Kammenos said, referring to the gold Nazi soldiers brought back from Athens during the war.

The defense minister also accused Germany of “interfering” in its domestic affairs. His criticism was aimed at German Finance Minister Schäuble, who earlier warned of a “Grexident” which could push Athens out of the euro. “I don’t understand why he turns against Greece every day in new statements. It’s like a psychological war and Schäuble is poisoning the relationship between the two countries through that,” he said.

Meanwhile Germany and France are on a sinking ship, and for all intent and purpose are looking to bail as well. The head of the private intelligence agency Stratfor has for the first time publicly said that the US government considers it to be its overriding strategic objective to work on the prevention of a German-Russian alliance. Blocking that alliance is the only way to prevent an alternative world power capable of challenging extension of the American position of being the world’s lone superpower. He says that the U.S. will fail in that overriding objective; German technology and capital will combine with Russian natural resources and “land-power,” to produce a truly bipolar world: U.S. v. Eurasia. So: he sees the U.S. strategy as being to block that, by weakening both Germany and Russia. That strategy would explain what Obama is doing in Ukraine, and the sanctions that are hurting both Russia and Germany, but Friedman thinks that nothing can work.

On the Asian front, consolidation is also occurring, again without US involvement. Although the US is desperately trying to “fast track” a trade program (TPP), it is not happening. This program is a desperate move executed way too late and would have a devastatingly negative effect on the US economy. In the meantime, Russia and China announced this week that as of today, 17 March, the Moscow Exchange has started trading in a futures contract on the currency pair Chinese Renminbi — Russian Rouble.

The launch has been driven by a substantially increasing Renminbi turnover on the Exchange, growing volume of settlement in the currency between Russia and China as well as newly arising demand for hedging of such transactions. Andrey Shemetov, First Deputy CEO of Moscow Exchange, said: “The launch of the CNY/RUB futures is the next step made by the Moscow Exchange to offer a full range of Renminbi instruments and hedging tools to participants. We expect that the new contract will be liquid and in-demand as other Exchange’s derivatives, and facilitate the trade turnover between China and Russia”.

The contract is cash-settled against the Moscow Exchange CNY/RUB fixing. The contract’s expiry dates are every 15th day of March, June, September and December. IM size is 12%. Metallinvestbank will act as the market maker for the contract. Moscow Exchange’s turnover in the Chinese Renminbi grew 700% in 2014 to RUB 395 bln (CNY 48 bln). The record average daily trading volume of CNY 541 mln was seen in October. Currently, the Moscow Exchange’s derivatives market offerings include nine FX futures: USD/RUB, EUR/RUB, EUR/USD, AUD/USD, GBP/USD, USD/JPY, USD/CHF, USD/UAH, USD/CAD, and USD/TRY, as well as three options: USD/RUB, EUR/USD, and EUR/RUB.

The dominoes are falling fast now. UK, Australia, New Zealand, Singapore and India All Sign On … South Korea Next? The Financial Times now reports that France, Germany and Italy have all agreed to join the China-led international development bank as well, “delivering a blow to US efforts to keep leading western countries out of the new institution.”

This week, 2 major U.S. allies – 2 of the “Five Eyes” – have disregarded American pleas and joined China’s new development bank … alternative to the US-dominated IMF and World Bank lending order. (A third member of the Five Eyes – New Zealand – previously signed onto the Chinese bank.). Specifically, the UK and Australia signed on this week.

The Financial Times reports, quoting a senior US Official: The decision of the UK to join the Chinese development bank was made with virtually no consultation with the US. We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.

The New York Times reported last week: Fundamentally, Washington views the Chinese venture as a deliberate challenge to those postwar institutions, which are led by the United States and, to a lesser extent, Japan, and the Obama administration has put pressure on allies not to participate.

Zero Hedge predicted last week: In short order Australia and South Korea will likely be on board and at that point, the stigma the US has created around membership will have completely disappeared (if it hasn’t already), opening the door for other US “allies” to join ….

An Op-Ed in The Australian argues: The decision by the Abbott government to sign on for negotiations to join China’s regional bank … represents another defeat for Barack Obama’s diplomacy in Asia. Canberra’s move follows similar decisions by Britain, Singapore, India and New Zealand.

If there is anyone out there who still honestly believes we are not in for a huge devaluation of the dollar and the devastating blows to our world economic position, they are delusional. All we can say at this point is two things. 1). Why do we still continue to allow the FED to establish our monetary policy? And 2). Brace for impact, this is going to be real ugly.

Second Update on Typhoons Fitow and Danas –Deadly Storms

The southwest eyewall of Typhoon Danas ripped across the northern tip of Okinawa earlier today. The western Pacific typhoon had peak winds of close to 140 mph, the equivalent of a category 4 hurricane as it battered the Japanese island. Danas will move in a northwesterly direction as it departs the Ryukyu Islands Monday night before then taking a turn toward the north and eventually northeast Tuesday into Wednesday.

danas cat 4

This track will take the center of Danas very close to western Kyushu Tuesday into Tuesday night. During this time the center is expected to remain over water as it passes between Japan and South Korea.

danas Track

Danas will begin to weaken Tuesday into Wednesday as it is pulled north and northeastward by a frontal boundary. This frontal boundary will cause Danas to transition into an extra-tropical system over the Sea of Japan before making a landfall in northern Japan on Wednesday.

Danas will still produce locally damaging winds along with the threat for flooding rainfall and mudslides as it moves across northern Honshu Wednesday into Wednesday night. While Tokyo will dodge the worst of Danas, wind gusts on Wednesday could still top out between 50-65 kph (30-40 mph). Danas will then race east-northeastward away from Japan on Thursday, allowing the country to dry out and recover from any adverse impacts.

Typhoon Fitow has proven deadly as five people were killed and hundreds of thousands evacuated after Typhoon Fitow hit eastern China, destroying houses and farmlands and closing ports and airports. Packing winds up to 151 kms (94 miles) per hour, Fitow hit Fuding city in Fujian province early on Monday before weakening into a tropical storm later in the day, the official Xinhua news agency reported. At least five people have been killed and four others were still missing, Xinhua said on Tuesday. Flight and train services in Zhejiang province, south of Shanghai, were suspended on Monday. In Wenzhou city in Zhejiang province, the storm destroyed over 1,700 houses and 46,800 hectares of crop land, the report said.

fitow track2

So, there is still at least two more days of danger for our Eastern Friends.

Do You Really Understand What the FED Has Committed on Your Behalf?

When you look at the breakdown of the bailouts and QE programs as below, it becomes quite apparent how really insane this monetary policy really is.  What’s more frightening is that the EU’s policies are WORSE! The FED is printing money willy-nilly and the ECB is slowly sucking the economic viability out of the EU economy with nihilistic austerity programs, and even in the light of real evidence of the damage, they continue to enact these insane policies.

monetary policyrecap

To put in perspective the size of just the US money printing operation, consider that the “net” figure of $863 billion represents the total face value of Federal Reserve Notes in circulation, or, it represents nearly 50% of the GDP. To put it another way, you via congressional monetary policy delegated to the FED’s monetary policy has taken actions that put every man, woman, and child in this country in debt to the tune of $237,500! Translated to a family of four that’s a cool 950 LARGE!

While the FED speeds down the road to a hyperinflationary crash, and the EU is looking at a third round of recession and might even be looking at the “D” word, deflation, China is creating gold backed ETFs and is entering market places globally, the rise of the Red Dragon. The monetary policies of Russia, China, and most of the so called BRIC nations seem to be adapting more correctly to world markets and demands.

I don’t remember us being asked to comment or god-forbid assent to such policies. But hey, according to Jamie Dimon in Davos Switzerland  explaining why people don’t need to know what’s going on in the banking world. It’s too “complex.” Just know that their fee comes from managing this ball of financial confusion. And that’s all you need to know. Really? How about what I understand, that this is a house of cards game being played in an unregulated casino and that it will collapse without any question and therefore by definition is insane.  I know that’s complex but I’m just an ordinary guy.

U.S. President Barack Obama on Thursday nominated Mary Jo White, a former U.S. attorney who built a reputation prosecuting white-collar criminals, terrorists and mobsters, to lead the Securities and Exchange Commission.  The agency has a lead role in implementing changes on Wall Street.

White spent nearly a decade as the U.S. attorney in Manhattan, handling an array of white-collar crimes and complex securities and financial fraud cases. She brought down mobster John Gotti and won convictions in the 1993 World Trade Center bombing and the 1998 bombings of two U.S. embassies in Africa.

Obama said that experience makes White well-suited to implement legislation he championed to change the behavior on Wall Street. “I’d say that’s a pretty good run. You don’t want to mess with Mary Jo,” Obama said at the White House. “As one former SEC chairman said, Mary Jo does not intimidate easily, and that’s important because she has a big job ahead of her.

That’s the positive “spin”. The negative side of this is that White also represented JPMC, and others as defense attorney in SEC inquiries. So in a sense, White knows where the bones are buried.  The Wall Street Pit bulls aren’t barking so it is hard to read what is next.  Certainly, in spite of the magnitude of evidence of felonies being committed by the Wall Street Boys, no one has gone to jail. Is that about to change? Only time will tell.  Oh yeah and one other thing, you writing the new head of the SEC and after you have congratulated her on her significant appoint, urge her to begin immediately to vigorously prosecute those where the evidence is certain.

You know we do not need to understand what an ETF is or what a credit default swap is, because in the end it is just this simple.  These ego-maniacs have bet the farm and put up the family as collateral. It really is that real. So do you have anything to say about that?

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Making Sense of the Events in The Middle East

MSM tends to report the events in Egypt, Yemen, Tunsia, Bahrain, Syria, and Libya as if they were all the same.  The same MSM, both western and Arab tend to paint the involvement of the EU, UK, and the US as purely self interests related to oil.  In both cases to do so does not create an understanding of the real complex and in all cases, country specific issues.  Nor does these same western countries relate the events in the region to events at home in their own countries.

Let’s address the “oil” issue first. The truth is that the entire global economy, including the side-liners like Russia, China, and India economies,  must have a SECURE supply of oil.  If anyone of these nations were really “after the oil”, Kuwait would be a US territory as well as Iraq.  That is not the case in either country and the US pays MARKET price to these countries for their oil, just like everyone else.  The same could be said of the european countries as related to Libya.  So from my perspective and vantage point, the oil imperialism argument, primarily kept in the mainstream by Iran, is just a red herring argument.

When we look at the divisions within the Arab countries, Iran is the nation, fomenting the issues.  What most Westerners fail to grasp is the fact that while Iran is primarily a Shia nation, they are NOT Arabs!  Iran is Persian.  One only has to look deeply at how Iran has constantly be meddling in the affairs of Iraq to understand why there is more concern in the Arab world over the activities of Iran than there are concerns about Western interference.

That is not to say that the Arab countries are all that secure with their relationships with the US and EU, but these concerns are more related to the consistency that may be demonstrated by the US and the EU and NATO related to assisting in the security and protection of Arab countries in relationship to Iran.  these concerns are well founded and have resulted from the fickle manner in which both the US and NATO have acted in the past.  These concerns were voiced again when US Secretary Gates visited Saudi Arabia last week.

The GCC countries are especially worried about the Iranians , their aggressiveness in the region, and their ability to disrupt the flow of oil to the world.  GCC foreign ministers on Sunday condemned Iran’s “blatant” interference in the State of Kuwait’s internal affairs, accusing Iran of “planting espionage networks on [Kuwait’s] territory” to undermine the country’s security and stability and the interests of its citizens. In a statement issued at the conclusion of their extraordinary one-day meeting, the foreign ministers commended Kuwait’s security bodies for uncovering the sleeper cell of spies believed to be working covertly on Iran’s behalf. The ministers also affirmed their support for all the measures taken by the State of Kuwait to protect its national security.

The statement further noted that the senior government officials had expressed concern at what they called “continuous Iranian interference in the domestic affairs of the GCC countries, by conspiring against those nations’ national security … and instigating sectarian sedition between their GCC countries’ citizens, independence, principles of good neighborliness, international laws, the Charter of the UN and OIC.” The foreign ministers also welcomed the return of calm and stability to the Kingdom of Bahrain, praising the spirit of the Bahraini people who it said had sought the country’s higher interests.

Bahrain has the capabilities and wisdom to dealing with its internal affairs, said the ministers, whilst stressing that they “strongly condemn the Iranian interference” in Bahrain’s affairs. The senior government officials also stressed the legitimacy of the deployment of Peninsula Shield forces in Bahrain, which they indicated was compliant with an earlier defense agreement binding the six GCC countries – Kuwait, Saudi Arabia, Bahrain, Oman, Qatar and UAE.

The GCC ministers further condemned the Iranian Shura Council’s national security and foreign affairs committee’s statement which claimed that Saudi Arabia’s policy was “playing with fire.” The Iranian statement, which also called on Saudi Arabia to pull out forces from Bahrain, “is a hostile position and is a provocative interference in the internal affairs of the GCC countries,” the ministers warned.

On Yemen, the foreign ministers voiced great concern over the deterioration of security and the growing divisions in the country, a matter that would undermine interests of citizens and economy as a whole. They called on all parties in Yemen to launch dialogue to ultimately reach reform and bring about social stability. The ministers said they respected the wishes and choices of the Yemeni people, adding that they would be establishing contact with the Yemeni government and opposition to address the conflict

Also on Sunday, the UAE’s Foreign Minister Sheikh Abdullah bin Zayed Al-Nuhayyan said that there is a “huge contradiction” between Iran’s words and its deeds towards the GCC countries. “The espionage networks that were arrested in the State of Kuwait are strange [things to] happen from a neighboring country that always claims to have good neighborly relations with us,” Sheikh Abdullah told a joint news conference with GCC Secretary General Abdullatif Al-Zayyani that followed the ministers’ meeting.

The Gulf Cooperation Council (GCC) countries are firmly behind the Bahraini King’s request to send Peninsula Shield forces to the Kingdom, he reiterated. Concerning events in Yemen, meanwhile, Sheikh Abdullah said the GCC countries would be contacting the government and opposition parties there in a bid to resolve their conflict. Al-Zayyani on his part said that there are currently numerous challenges facing the GCC countries, further reiterating the member states demand for “other countries not to interfere in the GCC countries’ affairs.

Meanwhile, Kuwait’s caretaker foreign minister Sheikh Dr. Mohammad Al-Sabah told a Kuwaiti daily Al-Qabas via phone following the meeting that the talks, as well as the concluding statement, “reflect the collective spirit of the GCC,” indicating that “GCC Foreign Ministers insisted on the common united fate of GCC countries,” whilst also noting that the Bahraini subject and current events in Kuwait were equally addressed during the meeting and stressing the cohesion of the GCC as a single unit. “The GCC proved to be capable of meeting its responsibilities, and showed that to the security of member states…meaning a threat to any GCC state is regarded as a threat to all countries of the region”.

Meanwhile, in the same article, Al-Qabas, also quoted GCC insiders as saying that the foreign ministers had agreed during the meeting that all the member states’ capabilities would be utilized to confront any potential threats against any member state. The sources further indicated that the senior government officials agreed on the principal measures that should be taken to face any Iranian threats, adding that an agreement was also reached to hold further top-level GCC meetings featuring senior security and defense personalities within the next couple of days to discuss the type of measures to be taken and the strategies to be utilized for their implementation.  The insiders further asserted that the GCC foreign ministers were unanimous in stressing the importance of eliminating “suspicious individuals” in member states, while ensuring that this process is not based on group identity. Other sources also revealed that an agreement was reached to “reinforce internal fronts” in the member states in order to confront any attempts to incite sectarianism.

Given these issues and the economic situations in each of the countries now experiencing internal conflicts it is crucial for the US, the EU, and NATO to develop a consistent and strong policy to support it’s vital Arab partners.  Players like Russia, China, and India are sitting on the sidelines looking for opportunities to exploit the failures of the US and EU policy in the region.  So far, their decision to remain on the sidelines, and even tacitily support Iran seems to have traction.  The politicians in the US and EU better get their act together before oil goes to $200 or $300 per barrel.  Commit to their Arab partners and support them unconditionally.

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.

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?

Why 2011 Could Be the Year of Economic Collapse

What could cause an economic collapse in 2011? Well, unfortunately there are quite a few “nightmare scenarios” that could plunge the entire globe into another massive financial crisis.  The United States, Japan and most of the nations in Europe are absolutely drowning in debt.  The Federal Reserve continues to play reckless games with the U.S. dollar.  The price of oil is skyrocketing and the global price of food just hit a new record high.  Food riots are already breaking out all over the world.  Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time.  Most Americans have no idea that a horrific economic collapse could happen at literally any time.  There is no way that all of this debt and all of this financial corruption is sustainable.  At some point we are going to reach a moment of “total system failure”.

The whole system is currently standing on one wobbly leg, China’s willingness to buy paper.  If we do not consider the lesson we were just exposed to of when is big too big, then we are doomed to repeat the lesson.  China has become too big of a financial partner.  Consider this:

Source: BBC

Two Chinese state controlled banks have lent more to developing countries than the World Bank, according to a report.

The China Development Bank and the China Export Import Bank offered loans of at least $110 bn (£69.2 bn) to governments and firms in developing countries in 2009 and 2010.  The research was undertaken by the Financial Times newspaper.  Between mid-2008 and mid-2010, the World Bank’s lending arm issued loans of just over $100bn (£63bn).

The two Chinese banks do not publish a detailed breakdown of their overseas loans, so this research is based on public announcements about specific deals from them, their borrowers or the Chinese government. That means the figure arrived at for the amount of Chinese lending is more likely an underestimate than an overestimate because some – more sensitive – loans will not have been made public.

The Chinese lenders are so-called policy banks – they have a mandate to further whatever Beijing sees as its national interest. One of China Development Bank’s specific tasks is to try to alleviate and, where possible, eliminate bottlenecks in supplies of raw materials or land for China’s economy.

It also tries to open up foreign markets for Chinese companies. The period looked at by the researchers included the worst of the global financial crisis. Chinese banks were offering loans to producers of raw materials at a time when it was hard for them to attract financing from elsewhere.

That helped secure long-term energy deals, including oil supplies from Russia, Venezuela and Brazil. The Chinese government, which is sitting on $2 trillion (£1.26 trillion) of foreign exchange reserves, has ample amounts of cash to fund loans which help promote its strategic objectives.

But what is interesting is that in the private sector, it is a different story.  Outward Foreign Direct Investment (FDI) by Chinese companies (not including banks) was around $50bn (£31.5bn) last year – around half the FDI that flowed from foreign companies into China.

As Niall Ferguson, MA, D.Phil., who is Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor of Business Administration at Harvard Business School warned us.  The collapse of an empire can come suddenly and is almost always related to financial crises that occur when debt service exceeds 50% of tax revenue.

Consider this report by  Emily Flitter of Reuters.

NEW YORK (Reuters) – When borrowing money it’s always good to have a Plan B in case a big creditor pulls the plug. That should be true whether the sum is a few thousand dollars or about a trillion, the size of the United States government’s debt to China.

China is officially the United States’ biggest foreign creditor, with roughly $900 billion in Treasury holdings — or over $1 trillion with Hong Kong’s holdings included.  That means it could do severe damage to U.S. debt markets if it suddenly started selling large amounts.

Most experts say if there were signs of this happening, the U.S. government would go for a combination of persuading Americans to buy more U.S. debt, the same way they did in World War II, and finding friendly foreign governments to make additional purchases.

Banks could be called on to increase their holdings of treasuries, and as a last resort, the Federal Reserve could also be called on to fill the gap, though this could risk turning any dollar weakness into a slump.

“The U.S. government should have and maybe still could call on the people of the U.S. to invest in U.S. debt,” said David Walker, a former U.S. comptroller general who heads an advocacy group calling on the government to curb the U.S. budget deficit and borrowings.

To be sure, the idea that China would suddenly sell its U.S. debt holdings is almost unimaginable to some.  After all, any weakening in the U.S. debt markets and the resulting global markets turmoil, including likely weakness in the dollar, would bounce back on China and could hurt its economy badly, especially as the United States is such a huge Chinese export market.

It likely would take something like a massive rise in tensions over an issue like Taiwan or oil exploration in disputed areas of the South China Sea, including possible military confrontation between the two nations. Such a confrontation would also make it easier for Washington to appeal to the American public to buy its debt for patriotic reasons.

But Beijing could also justify pulling back sharply from U.S. Treasuries if the dollar were to plunge, perhaps because of Washington’s failure to curb its budget deficit and debt. “I worry that we could be at a tipping point,” said Eswar Prasad, a Brookings Institution economist and former International Monetary Fund official with responsibility for China.

“If the Chinese say ‘We’re not buying any more Treasuries,’ this could act as a trigger around which nervous market sentiment coalesces,” he said. “People could start wondering how the U.S. is going to finance its deficit.”

So we had all better be getting prepared for hard times.  The following are 12 economic collapse scenarios that we could potentially see in 2011….

Source: The Economic Collapse

#1 U.S. debt could become a massive crisis at any moment.  China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated.  Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates.  If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial system.

#2 Speaking of threats to the global financial system, it turns out that “quantitative easing 2″ has had the exact opposite effect that Ben Bernanke planned for it to have.  Bernanke insisted that the main goal of QE2 was to lower interest rates, but instead all it has done is cause interest rates to go up substantially.  Is Bernanke this incompetent or is he trying to mess everything up on purpose?

#3 The debt bubble that the entire global economy is based on could burst at any time and throw the whole planet into chaos.  According to a new report from the World Economic Forum, the total amount of credit in the world increased from $57 trillion in 2000 to $109 trillion in 2009.  The WEF says that now the world is going to need another $100 trillion in credit to support projected “economic growth” over the next decade.  So is this how the new “global economy” works?  We just keep doubling the total amount of debt every decade?

#4 As the U.S. government and the Federal Reserve continue to pump massive amounts of new dollars into the system, the floor could fall out from underneath the U.S. dollar at any time.  The truth is that we are already starting to see inflation really accelerate and everyone pretty much acknowledges that official U.S. governments figures for inflation are an absolute joke.  According to one new study, the cost of college tuition has risen 286% over the last 20 years, and the cost of “hospital, nursing-home and adult-day-care services” rose 269% during those same two decades.  All of this happened during a period of supposedly “low” inflation.  So what are price increases going to look like when we actually have “high” inflation?

#5 One of the primary drivers of global inflation during 2011 could be the price of oil.  A large number of economists are now projecting that the price of oil could surge well past $100 dollars a barrel in 2011.  If that happens, it is going to put significant pressure on the price of almost everything else in the entire global economy.  In fact, as I have explained previously, the higher the price of oil goes, the faster the U.S. economy will decline.

#6 Food inflation is already so bad in some areas of the globe that it is setting off massive food riots in nations such as Tunisia and Algeria.  In fact, there have been reports of people setting themselves on fire all over the Middle East as a way to draw attention to how desperate they are.  So what is going to happen if global food prices go up another 10 or 20 percent and food riots spread literally all over the globe during 2011?

#7 There are persistent rumors that simply will not go away of massive physical gold and silver shortages.  Demand for precious metals has never been higher.  So what is going to happen when many investors begin to absolutely insist on physical delivery of their precious metals?  What is going to happen when the fact that far, far, far more “paper gold” and “paper silver” has been sold than has ever actually physically existed in the history of the planet starts to come out?  What would that do to the price of gold and silver?

#8 The U.S. housing industry could plunge the U.S. economy into another recession at any time.  The real estate market is absolutely flooded with homes and virtually nobody is buying.  This massive oversupply of homes means that the construction of new homes has fallen off a cliff.  In 2010, only 703,000 single family, multi-family and manufactured homes were completed.  This was a new record low, and it was down 17% from the previous all-time record which had just been set in 2009.

#9 A combination of extreme weather and disease could make this an absolutely brutal year for U.S. farmers.  This winter we have already seen thousands of new cold weather and snowfall records set across the United States.  Now there is some very disturbing news emerging out of Florida of an “incurable bacteria” that is ravaging citrus crops all over Florida.  Is there a reason why so many bad things are happening all of a sudden?

#10 The municipal bond crisis could go “supernova” at any time.  Already, investors are bailing out of bonds at a frightening pace.  State and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP.  According to Meredith Whitney, the municipal bond crisis that we are facing is a gigantic threat to our financial system….

“It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the U.S. economy.”

Former Los Angeles mayor Richard Riordan is convinced that things are so bad that literally 90% of our states and cities could go bankrupt over the next five years.

So do not buy the “Happy Talk” that is flying around.  The financial facts and realities simply do not support it.  In fact, it already appears that 2011 is going to be much worse than 2010.  In the US I think this will primarily be set off by the financial crisis facing municipalities, counties, and states.  The reality is the collapse will be caused by some small event that creates a panic perception in the financial markets or the social condition.

I am not saying this is inevitable, in 2011, but I am suggesting you might want to go over those survival plans one more time to make sure everything is up to snuff.