Do We Understand How Far We Have Come?

As the issues of the world continue to unfold, it can look like a glass half empty or a glass half full.  I think we suffer from several classes of amnesia.  In its shortest frame it called the 30 second average attention span that many from marketing and politics count on, or it is generational type, where none of the current generation remember the JFK assassination or the Vietnam War or dial phones for that matter.  At the long end of the spectrum there is the ERA gap.  You have to be a scholar to appreciate where we are now as compared to say 18th or 19th century is any terms you would like to measure. I think we can all agree on these points.

However, events unfolding here and now globally are not entering our consciousness by deliberate efforts of MSM to not report them, as they faithfully obey orders.  The truth is people all over the world are beginning to free themselves from their economic bonds in the most miraculous ways.  Isn’t strange that you are not hearing what is transpiring in Iceland, and are barely aware of the importance of what has happened with the elections in Greece and France?

As we begin the political debates in the US, in the most generalized of terms, the debate seems to be the arguments of AUSTERITY vs. SOCIALISTIC government.  The inference is we need to cut deficits vs. spending on infrastructure and social programs that will generate jobs and much needed tax revenue.  On its surface, that seems to be a logical argument, but when examined closely it is somewhat comparing apples to oranges.  Isn’t it odd that you don’t seem at this moment to understand why not?

What has actually happened in the world after the 2008 crash was both philosophies were applied by various governments.  So it seems also logical to look at the results so far.  The EU and the UK applied severe austerity programs.  These programs brought Ireland, Greece, Spain, Italy and Portugal nearly to anarchy.  Unemployment sky-rocketed, growth stagnated and even went negative.  The austerity programs did not result in deficit reduction.  Quite the contrary, deficits increased because tax revenue contracted dramatically.  One only has to ask, who benefits from austerity programs?

Then, within the last year a revolution began. Not a revolution in the street, although riots in Greece, Spain, UK, Italy, Ireland, and the US with the Occupy Movement did occur, but within the political and governmental institutions.  Iceland led the way.

In Iceland, the people have made the government resign, the primary banks have been nationalized, and by referendum, it was decided to not pay the debt that these political criminals created with Great Britain and Holland due to their bad financial policies.  Further, a public assembly has been created to rewrite the constitution, and all of this was accomplished in a peaceful way. A whole country revolution against the powers that  created the current global crisis in the first place. This is why there hasn’t been any publicity concerning this during the last two years.

This was accomplished by 25 citizens being chosen, with no political affiliation, out of the 522 candidates. For candidacy all that was needed was to be an adult and have the support of 30 people. The constitutional assembly started in February of 2011 to present the ‘carta magna’ from the recommendations given by the different assemblies happening throughout the country. It must be approved by the current Parliament and by the one constituted through the next legislative elections.

So in summary here are the accomplishments of the Icelandic revolution:
-resignation of the whole government
-nationalization of the bank.
-referendum so that the people can make the economic decisions of the country.
-incarcerating the responsible parties
-rewriting of the constitution by its people

WOW! Isn’t strange you hear nothing of this?  Really if there is anything of reality left, one must at minimum begin to suspect we are “being managed”.  However, enough people were following what was happening in Iceland and these past elections in Greece and France, the “Managers” were handed their heads.  I think these ideas will spread to the rest of the EU and the UK this summer.

In the US, the debate seems more about empowering women and the LGBT population, or is that the distraction?  All freedom and opportunity extends from economic freedom.  THIS IS THEN THE DEBATE that needs to occur.  While the US response so far to the collapse has been a mixed bag of spending and austerity, the gains have been better than going the other direction, but they are far from being enough.

What the Austerity camp says we have to respond to the reality of debt versus federal income and they would show a chart like this:

What that really means is this trend continuing:

 Again, you have to ask the question “who benefits from federal deficits the most? You have to kind of link this concept to a seemingly disconnected reality.  That reality is the question of who did the banks lose all those trillions of dollars to that WE made good?  Who was the beneficiary of those loses? The money just doesn’t evaporate.  When a JPM Chase says it “lost” $3 trillion in 6 weeks, it means they had to PAY someone $3 trillion dollars.  Who was that?  Hmmm.

It is all a rathole that is siphoning our money.  We all know who the rats are and maybe it is time to look again at what has been accomplished in Iceland and adopt those kinds of approaches.

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 7th 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.

 

For the Sake of Kids Now!

We hear politicians hell bent on destroying any governmental “social” programs saying that we have to make these drastic cuts for the sake of our children or grandchildren.  Hinting that we are placing a burden on their future, “mortgaging” the future is the term most stated.

I think they and us need to be grounded to the reality of the “Right Now” when it comes to children in America.   Let us consider facts and not rhetoric.

There are 314 counties in the United States where at least 30% of the children are facing food insecurity.  Food insecurity is the household-level economic and social condition of limited or uncertain access to adequate food. Food insecurity rates among households with children are substantially higher than those found in the general population, reports Feeding America, which along with network members supplies food to more than 37 million Americans each year, including 14 million children and 3 million seniors.  In Washington D.C., the “child food insecurity rate” is 32.3%.

Children in the United States are three times more likely to be prescribed antidepressants than children in Europe are.

It is estimated that up to half a million children may currently be homeless in the United States.  Perhaps the greatest victims of the economic nightmare that is unfolding right in front of our eyes are our children.  The overall economic numbers are really bad, but when you examine the impact that this economy is having on children things get really horrifying.  Today, 1 in 5 American children live in poverty and 1 in 4 American children are on food stamps.  Experts tell us that about 50 percent of all U.S. children will be on food stamps at some point before they reach the age of 18.  Up to half a million American children are homeless even as you read this.  And yet we continue to insist that we are the wealthiest nation in the world.  Well, if we are so wealthy, then why are so many millions of our children suffering so desperately?  More than 20 million U.S. children rely on school meal programs to keep from going hungry.

There are more than 3 million reports of child abuse in the United States every single year.  A report of child abuse is made every ten seconds.  Almost five children die every day as a result of child abuse. More than three out of four are under the age of 4.  It is estimated that between 60-85% of child fatalities due to maltreatment are not recorded as such on death certificates.

90% of child sexual abuse victims know the perpetrator in some way; 68% are abused by family members.  Child abuse occurs at every socioeconomic level, across ethnic and cultural lines, within all religions and at all levels of education. 31% percent of women in prison in the United States were abused as children.  Over 60% of people in drug rehabilitation centers report being abused or neglected as a child.

About 30% of abused and neglected children will later abuse their own children, continuing the horrible cycle of abuse.  About 80% of 21 year olds that were abused as children met criteria for at least one psychological disorder.  The estimated annual cost of child abuse and neglect in the United States for 2007 is $104 billion.  Abused children are 25% more likely to experience teen pregnancy.  Abused teens are 3 times less likely to practice safe sex, putting them at greater risk for STDs.

How can we even consider ourselves “civilized”, let alone thinking we are the “best” in the world as a civilization when we currently face realities like we now face?    In fact, we should be doing the exact opposite of cutting programs, and instead should be heavily investing in our CHILDREN NOW!!

How long do we remain silent as the education system, Medicaid, and school nutritional programs are being slashed beyond bare bones?  How long do we allow the imbeciles to dictate the current and future course of the very foundations of the principles that made America…. America?

It is my strongest hope that the next election cycle, each and everyone of us will step up to the full responsibility of being a citizen.  That means we will all vote and we will all vote based on being truly informed.

Budgets Lies, Manipulation, and Other Criminal Distortions

As the US faces massive deficits and the wealthy continue to raid both the Federal and State coffers unchecked.  As the social “safety net” is ripped to shreds and the assault continues on the middle class globally.  The most defenseless and poor of the world are bearing the brunt of this unchecked greed, power, and hubris, the facts are most grossly distorted.

In the US, but in other countries as well, the mantra is the social programs will be the downfall of the fiscal equation and are the cause of the current financial crisis.  In the US, it is Social Security, Medicaid, and Medicare will be the ruin of life as we know it.  That is the biggest lie of all!

Consider this from Sherwood Ross who heads a public relations firm “for good causes” and also runs the Anti-War News Service.  You can reach him at sherwoodross10@gmail.com if you would like more details.

“As long as the $1.2-trillion annual budget for the military-security complex is off limits (to cutting), nothing can be done about the US budget deficit except to renege on obligations to the elderly, confiscate private assets (which includes the physical gold and silver hoarding that is afoot)or print enough money to inflate away all debts,” Paul Craig Roberts, former Assistant Treasury Secretary under President Reagan warns.

In an article titled “Stealing from Social Security to Pay for Wars and Bailouts,” published in the April issue of the “Rock Creek Free Press” of Washington, D.C., Roberts says that Republicans are calling Social Security and Medicare “entitlements”—making them sound like welfare—when, in fact, workers over their lifetimes have contributed 15 percent of all their earnings to the payroll tax that funds these benefits and have every right to them.

And far from Social Security being in the red, between 1984 and 2009, Roberts writes, “the American people contributed $2-trillion…more to Social Security and Medicare in payroll taxes than was paid out in benefits” but “the government stole” that sum to fund wars and pork-barrel projects!

What’s more, under one realistic estimate, far from crashing into the red, “Social Security (OASDI) will have produced surplus revenues of $31.6-trillion by 2085, Roberts says.

Americans, apparently, are unaware of how the federal government’s illegal, foreign wars sap the economy and rob every household. The Iraq war cost alone is 20 percent of the size of last year’s entire U.S. economy. Instead of investing that sum at home, “which would have produced income and jobs growth and solvency for state and local governments, the US government wasted the equivalent of 20% of the economy in 2010 in blowing up infrastructure and people in foreign lands,” Roberts says.

“The US government spent a huge sum of money committing war crimes, while millions of Americans were thrown out of their jobs and foreclosed out of their homes,” he added. Viewed another way, the Pentagon continues to expand and put people to work to modernize its 700-800 bases abroad in order to dominate every corner of the globe while public works and public employment in America are going into the toilet.

“When short-term and long-term discouraged workers are added …the US has an unemployment rate of 22%,” Robert says. A country with that large a percentage out of work “has a shrunken tax base and feeble consumer purchasing power.”

The U.S. media, he claims, is only reporting one-third of the real cost of the wars, leaving out the sums needed for “lifelong care for the wounded and maimed, the cost of lifelong military pensions of those who fought in the wars, the replacement costs of the destroyed equipment, the opportunity cost of the resources wasted in war, and other costs.”

President Obama’s budget, if passed, doesn’t reduce the deficit over the next 10 years by enough to cover the projected deficit in the fiscal year 2012 budget alone, the financial authority writes. “Indeed, the deficits are likely to be substantially larger than forecast,” as the military-industrial complex “is more powerful than ever and shows no inclination to halt the wars for US hegemony,” Roberts says.

Add to this the fact that the FED is sitting on its largest excess reserve in history Federal Reserve Aggregate Reserves, over $1.4 Trillion dollars and corporate cash reserves are at historical levels, one really must start questioning what is really afoot here.

Understanding this reality exposes the PTB and their political hacks for what they really are up to in this effort to strip governments and make them appear inept.  Don’t buy it.

If you look at the so-called “budget crisis” in Wisconsin, New Jersey, etc, these so-called large deficits are equal to the tax breaks passed into law for corporations and the wealthy.  Just do the math. Just do the math.

There is no question the US government will have ongoing deficits of $1.3 to $2.2 trillion annually for some time to come. If this is the case there is no chance of the debt of government ever being paid. That means official devaluation and default, although it will be done jointly by many countries. The US debt limit will be raised. The Republicans are playing politics and remember the same group of thieves overwhelmingly controls both parties. It will also be interesting to see how, before the end of the year, the Treasury places more than $2 trillion in bonds. We bet the Fed buys about $1.7 trillion. This has to push up real interest rates by ½% to ¾% by the end of the year and the same should happen in 2012. Foreigners and even PIMCO does not want to purchase Treasury bonds, notes and bills. In order to entice such buyers, yields will have to move up a point now and a point later. As part of that sequence of actions by buyers quantitative easing would have to end, as well as stimulus, and budget deficits would have to be cut realistically, not by $33 billion paltry dollars. Incidentally GDP growth under those circumstances would be minus 3 to minus 6 percent. The Fed has little trouble holding up and manipulating the short end of the bond market, but the long end is another matter. It is not only QE2 and manipulation, but also the Fed’s continuing to purchase CDO’s and MBS, which are toxic waste from banks to get the debt off of banks’ books and to liquefy them. The purchase of US dollar denominated bonds, especially Treasuries, is coming to an end. We cannot expect the Fed to continue indefinitely to do what it is doing. It can only end in hyperinflation. We might add that JPMorgan Chase soon will forge a civil settlement concerning fraud relating to CDOs and MBS. Again no jail time; it is a national disgrace. Those people should have been prosecuted criminally. As you can see money buys everything. If QE3 is implemented, and we believe it will be, classical economics says the result, hyperinflation, is inevitable.

I would contend hyperinflation is already here, given the price of oil and food commodities.  These are the factors that is flaming the fire of global revolution, which will soon be in a town near you.  There is an ancient saying that states, “if a man cannot choose the manner of his living, he will choose the manner and time of his death.”

There is time, very little time, but still time to wake up as a people and demand fiscal responsibility and regulations; time to legislate a re-distribution of the wealth that has been illegally taken from the people.  The time has come to begin the criminal investigation of those banksters, politicians and lobbyists who have perpetrated this fraud and corruption on the people of the world.

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.