Keepin’ Myself Honest

Beginning last June or so, I began focusing my blog on the economy, solar activity, natural disasters, and political instability on a global basis.  I tried to understand and focus current events to understand what the near future may hold for us all.  While I don’t try to make predictions, I do try to give people heads up on what I think is coming.I fully understand that there are thousands of sites, threads, and forums dedicated to these “ so-called” alternative news “outlets”.  However, I have no agenda or need for recognition nor any desire for monetary gain, just a desire to share my knowledge and experience, along with my daily efforts to monitor the WORLD events around us.However, such efforts must be evaluated by the facts to insure we are “seeing” the real important issues, and NOT the     and disinformation.  So how did we do?

Thanks to a wonderful article in Homeland Survival I will let you be the judge by evaluating what is considered 32 most important events of the year so far.

January:

New Year’s Eve, 2010 more than 5,000 dead red-winged blackbirds and starlings were found in Beebe, Arkansas.

3rd-5th) 100 tons of dead fish washed ashore the Brazilian coast, near the port of Paranagua. 2 million fish died in Chesapeake Bay, Maryland, thousands of dead turtle doves were found in Faenza, Italy.

Egypt, the most populous country in the Arab world, erupted in mass protests.

10th) At least 8 people are dead and over 70 missing after massive flooding ravages Brisbane, Australia.

Feburary:

14th) Unrest in Middle East Spreads to Bahrain

14th) Sun Erupts With Most Powerful Solar Flare in Four Years

22nd) A 6.3-magnitude earthquake hits Christchurch, New Zealand, killing at least 75 people.

March:

19th) No-Fly Zone is Imposed in Libya

11th) Massive 9.0 Magnitude Earthquake and Tsunami Devastate Japan

April:

1st) Possible Shutdown of Federal Government Goes Down-to-the-Wire

27th) Series of Tornadoes Devastate Southern States. In one of the worst U.S. tornado seasons, 137 reported tornadoes sweep through the south, killing nearly 300 people in six states.

May:

5th) Floods Force Evacuations along the Ohio and Mississippi Rivers

22nd) One of the Deadliest Tornados in U.S. History Hits Joplin, Mo.

June:

1st) Tornados Continue to Strike in the U.S. For the first time in three years, seven tornadoes touch down in Massachusetts.

3rd) Unemployment Rises as Job Growth Slows

5th) Toxic E. Coli Outbreak Linked to German Sprouts

6th) Flooding in Iowa Forces Hundreds to Flee

11th) Wildfires Rage Through East Arizona. Two fires in Arizona merge into one runaway 600-square-mile blaze becoming the largest fire in Arizona’s history.

July:

1st) Minnesota Government Shuts Down

1st) New Mexico Wildfire Rages On

22nd) Two Related Terrorist Attacks Shock Norway

August:

1st) Last Minute Deal Reached to End Debt Crisis

5th) Standard & Poor’s Lowers the U.S. Credit Rating

6th) Violent Riots Spread Throughout Britain

8th) Stocks Nosedive After U.S. Credit Rating Is Lowered

8th) Mystery orange goo invades Alaska village

11th) East Africa Hit with Worst Drought in 60 Years

Heat wave in Texas grips state with 100 degree temperatures for over a month

23rd)  5.8 Virginia earthquake shakes east coast

26th) Hurricane Irene hits the east coast, millions lose power.

September:

Texas Wildfires destroy 1554 homes

8th) Power outage leaves 1.5 million in the dark in California, Arizona and Mexico

*9th) Four Major Solar CMEs and X-Ray events with more predicted in the next four to six days.

*11th) President Obama gives an almost cryptic warning in his 9/11 address.  Everyone should re-listen to that address in context to what you just reviewed.  * added by this editor since article was published.

Natural disasters, unexplained events, historic drought and flooding, economic uncertainty, civil unrest, and terrorism are the things we may face at anytime. You may not have been directly affected by the events listed here but events around the world can quickly change our daily life. We don’t know what tomorrow will bring but as we have seen so far this year, it might be a good idea to be prepared for whatever tomorrow brings.

Given the predictions for the increase in solar activity and the almost certain collapse of the EU within the next month I would hope we are ready.  On the financial side, I hope you are all sitting on the sidelines with your popcorn watching the show.  The markets are no place for arm chair investors right now.  Hell, it’s no place for pros either right now.

On the survival side, simply think what you need to do if you have no power for say 2 weeks and prepare for that contingency.  I think we have more than a 60% chance of that happening in the next thirty days.

However, even more important than all these things, I think you should not believe your lyin’ eyes as you watch the news for the next 30 days.  As political and financial system begin this final collapse phase of business as usual, in the PTB circles, things are beginning to be a bit frantic.  Just remember desperate people do desperate things.

Ultimately though, take care of each other.  We all act as one in face of challenges and disasters.  This must now, unfortunately, become daily habit.  We are all really in this together.  Live peacefully in love and compassion.  It really is the most important contribution you can make to getting things “right”.

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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.

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.

The Holidays Are Not So Rosy in Europe

This is the final update from the currency war front for this year.  For my many readers in Europe, I am sad to say it will not be considered a good year by any stretch.  However, as we have been warning in this series of articles, 2011 looks more like the year the Euro was assassinated.   As we commented in previous articles, the banksters mode of operation now is to break sovereign funds and they are doing a great job at achieving those goals and they are doing it right out in the open in front of us all.  Here’s how it works.  First you force the sovereign to accept severe austerity programs, including raiding pension funds using the IMF and ECB, then you require them to accept “bailout money” and then you use the rating agencies(who you own and control) to downgrade the sovereign’s bonds.  Think I am wrong?  Then read the following with what I just said in mind.

Source: The Economic Collapse

What in the world is happening over in Europe?  Well, it is actually quite simple.  We are witnessing the slow motion collapse of the euro and of the European financial system.  At this point, many analysts are convinced that a full-blown financial implosion in Europe has become inevitable.  Ireland, Spain, Portugal, Italy, France and Belgium are all drowning in an ocean of unsustainable debt.  Meanwhile, Germany and the few other “healthy” members of the EU continue to try to keep all of the balls in the air by bailing everyone out.  But can Germany keep bailing the rest of the EU out indefinitely?  Are the German people going to continue to be willing to hand out gigantic sacks of cash to fix the problems of other EU nations?  The Irish were just bailed out, but their problems are far from over.  There are rumors that Greece will soon need another bailout.  Spain, Portugal, Italy and France have all entered crisis territory.  At the same time, there are a whole host of nations in eastern Europe that are also on the verge of financial collapse.  So is there any hope that a major sovereign debt crisis can be averted at this point?

One would like to think that there is always hope, but each month things just seem to keep getting worse.  Confidence in European government debt continues to plummet.  The yield on 10-year Irish bonds is up to 8.97%.  The yield on 10-year Greek bonds is up to an astounding 12.01%.  The cost of insuring French debt hit a new record high on December 20th.

Bond ratings all over Europe are being slashed or are being threatened with being slashed.  For example, Moody’s Investors Service recently cut Ireland’s bond rating by five levels.  Now there is talk that Spain, Belgium and even France could soon all have their debt significantly downgraded as well. But if the borrowing costs for these troubled nations keep going up, that is just going to add to their financial problems and swell their budget deficits.  In turn, larger budget deficits will cause investors to lose even more confidence.

So how far are we away from a major crisis point? Professor Willem Buiter, the chief economist at Citibank, is warning that quite a few EU nations could financially collapse in the next few months if they are not quickly bailed out….

“The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual.”

Many analysts are even calling for some of these troubled nations to stop using the euro for a while so that they can recover.  In fact, Andrew Bosomworth, the head of portfolio management for Pimco in Europe says that Greece, Ireland and Portugal must all quit the euro at least for a little while if they expect to survive….

“Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments.”

Sadly, most Americans don’t realize just how bad the situation in Europe is becoming.  This is truly a historic crisis that is unfolding, just as we predicted it would and just in the manner we predicted it would.

However, since the euro seems at this point to be a “exploit accompli”, the next target is the US Dollar and not necessarily treasury bonds at first.  There are so many state and local governments on the verge of bankruptcy.  This makes the municipal bond market the next “soft” target.  Indeed, a bloodbath in the municipal bond market has already started.

The reason for delay the assault on treasury bonds is the effects that could happen that would careen out of the control of the banksters.  For example, if rates on U.S. government debt eventually hit 8 or 12 percent it will literally be financial Armageddon in this country.  The U.S. government has piled up the biggest mountain of debt in the history of the world, and if we continue piling up debt at the pace that we are, then it will only be a matter of time before the IMF is demanding that we implement our own “austerity measures”.

Many readers recently have commented that I may be over reacting and in fact there are positive things happening in both the economies of the US and Europe.  I do not deny these facts.  However, they are simply dwarfed in scale by these facts.  This blog simply aggregates the facts and from those FACTS draws conclusion as to what might happen next.  I do not gain any pleasure or profit for my efforts, I am simply reporting in detail and opining what may happen next.  I really don’t like what I see happening next.  I believe we may be very close to sound the alarm for general quarters, if you get my drift.

See you next year.

The Fox is in the Henhouse, Right on Schedule.

I have written in previous articles concerning how big finance is now hunting to raid pension funds, especially large state based funds.  That was back in November of last year I believe.

In April the corruption scandal at New York State’s public pension fund had broke and has now tainted multimillion-dollar investment deals in at least two other states – California and New Mexico. Pension systems are reacting with changes meant to cast sunlight on a shadowy system, particularly on the role of investment middlemen called “placement agents.” The agents work for a variety of investment management firms, large and small, that seek to manage a slice of the assets held by big pension funds. The agents’ fees can run into the millions of dollars and are usually not disclosed.

Who are the players?

Pension systems –Public retirement systems are some of the country’s biggest investors. The top three alone have combined assets of around $400 billion. They collect money from public employees – such as teachers, firefighters and police – as well as contributions from their employers, and invest that money with the aim of being able to pay for those employees’ retirement and other benefits.  Professional staffers at the largest funds are typically overseen by a board that signs off on investment decisions and is often composed of elected politicians or political appointees.

Investment firms –The pension systems look to earn strong returns on their money while minimizing risk, and there are many investment-management firms that want their business. Some money-management firms emphasize traditional stocks and bonds, while others concentrate in real estate. Some are hedge funds, meaning they embrace a wide number of investment opportunities, including short sales, which involve selling borrowed stock with the expectation that its price will decline. Some are “private-equity” firms that raise money to buy undervalued businesses they can improve and resell at a profit.

Private equity boomed in the last 10 years, and many public pension funds pumped billions of dollars into these unregulated, opaque firms. The advantage to the pension funds was threefold: They liked being able to put money in investments that, supposedly, weren’t vulnerable to volatility in the stock market. The funds also liked the high returns many of these firms delivered – though performance has been affected by the global financial crisis. Finally, many public pension funds set aside money to invest in start-ups and investment-management firms owned by women and minorities.

Placement agents –Placement agents are the middlemen between the pension systems and the investment firms. Placement agents help investment firms pitch projects in return for large fees. Many placement agents are small boutique shops, but major investment firms and banking conglomerates also provide placement services.

What happened in New York? –New York Attorney General Andrew Cuomo alleges in an indictment that Hank Morris, a longtime political consultant, set up a pay-to-play scheme at New York state’s pension fund, which has assets worth $122 billion, according to the most recent data.  Morris was an adviser to former state Comptroller Alan Hevesi. In New York, the comptroller has nearly unfettered control over investment decisions at the fund.  Morris set up shop as a placement agent, working with a Connecticut firm, Searle & Co. In that role, he essentially was able to charge a commission for bringing clients to Hevesi

What does a placement agent normally do?

Placement agents help investment firms target funds that are likely to be interested in financial products the firm is offering, set up meetings with key decision makers and help craft marketing materials to sell the project.  Many large financial institutions offer placement services. Morgan Stanley, for example, calls its service “Capital Introductions” and says it provides “strategic positioning” and “support throughout the process” of pitching a deal. The company boasts of “long-standing relationships” with hundreds of large investors, including pension funds.

How much do placement agents earn?

Typically, fees are between 1 percent and 2 percent of the total value of the investment. So if a client wins a $100 million commitment from a fund, the placement agent can pocket between $1 million and $2 million in fees, which are often undisclosed.

Are placement agents really necessary?

Many people have asked why good investment firms would ever need a placement agent. After all, shouldn’t professional pension fund staffers be able to size up potential investments themselves? What does a placement agent add?

Chris Ailman, the chief investment officer at one of the largest pension funds – the California State Teachers’ Retirement System (CalSTRS) – said placement agents can be helpful to smaller firms that don’t have a marketing staff or the time to spend promoting deals on the road.  Ailman said the placement agents can be useful by steering investment opportunities to funds most likely to be interested: “Instead of getting 40 pitches from people where there’s no interest, you just get the projects that are likely to work.”

So, what’s the problem with placement agents?

The industry has suffered a series of corruption scandals. Experts cite two key factors: lack of transparency and the role of campaign contributions.  Because placement agents are not hired directly by the pension funds, there has been limited disclosure of who is involved, fees they charge and what is done to earn them.

In 2006, CalSTRS, widely viewed as a model of transparency, began requiring investment firms to disclose the names of placement agents and fees they were paid. The information must be submitted before the system considers a proposed investment.  Then, after reports that it did business with Morris and another firm named in the New York indictment, the California Public Employees Retirement System said it will draft new disclosure rules .  CalPERS is the nation’s biggest public pension system.

How are New York, California and New Mexico connected?

Several of the players named in the New York indictment have done business in California and New Mexico. ProPublica reported that Wetherly Capital Management – a Los Angeles placement firm – split fees in New York and California with Morris

Two New Mexico funds have suspended their relationships with another fund manager, Aldus Equity, after it was cited in the Morris indictment.  Meanwhile , investigators and law enforcement agencies from other states also expanded new joint efforts as the pay-to-play scandal continued to broaden.

Saul M. Meyer was arrested in New York and later released on bail, said Linda Lacewell, the lead New York prosecutor on the case. Meyer owns an investment management and advisory firm called Aldus Equity, which operates in multiple states, including New York, New Mexico, Oklahoma and Louisiana. It has $6 billion under management, according to a new Securities and Exchange Commission complaint filed today .

Meyer is alleged to have paid $300,000 in bribes to the man at the center of the scandal, Hank Morris, who was a political adviser to the former New York state comptroller, Alan Hevesi. Morris helped Meyer obtain a $375 million investment from the New York pension system, Cuomo said.   Under the deal, Meyer agreed to kick back 35 percent of the fees he earned to a shell company owned by Morris, according to the Attorney General’s complaint. Morris would then split that money with a third party – another placement agent not named in the complaint.

The Securities and Exchange Commission took a step toward cracking down on “pay to play” schemes, barring investment advisers who want to manage public pension funds from donating to politicians who oversee the funds.  The 5-0 decision by the SEC’s commissioners followed scandals in New York state and elsewhere in which investment advisers were accused of making political payments to help themselves get government business.

The agency backed off a related proposal that would have banned investment advisers from hiring so-called placement agents to help them secure pension-fund business.

In August, the Securities and Exchange Commission opened an “informal inquiry ” into the millions paid to placement agents who helped drum up business for investment funds hoping to manage Kentucky’s pension fund for state and county retirees.

The U.S. Securities and Exchange Commission, which regulates investment markets, has opened “an informal inquiry” into the Kentucky Retirement Systems’ use of middlemen known as placement agents.

The SEC’s Division of Enforcement in New York on Thursday sent a letter asking for documents from KRS, which oversees the $12.5 billion fund that provides benefits to state and county retirees.

Specifically, the SEC asked for a copy of an internal audit conducted this year that identified nearly $15 million in fees paid to placement agents, the middlemen who help private investment companies sell their products to KRS. The fees are paid by the investment companies, who then are paid by KRS.
Trustees of the Kentucky Employees Retirement System were shocked to discover that money managers paid $12 million to middle men to line up their fund as a client, it was revealed Thursday.

The public disclosure of the $12 million in payments over five years, including $5 million to a lone middleman, were made with results of a fund audit during a meeting of the $14 billion (assets) Kentucky Employees Retirement System’s investment committee.

This is the last bastion of America’s middle class nest egg.  My question is that if these guys are this unscrupulous in just obtaining the business, then how are they managing the monies placed under their trust.  I suspect nothing has changed since 2008 and quite frankly given the current market conditions, pension funds should weigh investments less and and look at innovative ways these funds could help stimulate growth and maybe participate in improving our education system and direct investments into businesses to stimulate growth. The next time you hear a politician carping that we don’t need more regulation in the financial community, remember the fox in the henhouse.  Then tell him or her to get back to Washington and make sure the SEC does its complete job.

Happy Talk and Real Facts

As I continue report the facts on what is really going on in relationship to the economy, the happy talk continues.  We have reached the point of recovery and the recession is over according to some.  Really? The facts do not seem to support that conclusion, at least at the street level.

We have watched the markets expand consistently over the last month with bad metrics being reported from almost every important element of the economy.  At the same time gold and silver is reaching record highs.  This is just counter-intuitive to decades of financial history.

A number of economists would argue that the stimulus was simply not enough to accomplish the twin mission of preventing global financial systems from collapsing and kick starting the economy at the same time.  How much of a boost to the U.S. recovery could another trillion dollars or two buy?

To battle the financial crisis, the Fed bought $1.7 trillion of longer-term Treasury and mortgage-related bonds, supplementing its pledge to keep interest rates near zero for a long time. All told, it helped stabilize a collapsing financial system and to avert what could have been a second Great Depression.

At the Fed’s August meeting it decided to reinvest maturing mortgage-debt in Treasuries to keep its balance sheet steady, a move many analysts saw as a precursor to more easing. Proponents of a re-launch of large-scale bond-buying say it will help prevent inflation expectations from falling and spur growth by further reducing borrowing costs for consumers and businesses.

According to Michael Feroli, Chief U.S. Economist, JPMorgan,” Skeptics say the economic recovery has just hit a weak patch. They argue that more easing could be ineffective in helping the economy, potentially damaging Fed credibility. An incremental drop in long-term yields may not be enough to force banks to stop hoarding safe-haven Treasuries and make loans to businesses instead, some analysts warn. Some policy-makers worry that more easing could fuel market imbalances or sow the seeds of sky-high inflation ahead.”

“My own view is that any radical balance sheet program would be seen by many as an act of desperation which would dampen business sentiment and depress non-financial borrowing even more,” said Wrightson ICAP Chief Economist Lou Crandall.

Fed bond purchases can have two effects. They can increase liquidity in strained markets and, by lowering yields, force investors to look for returns in riskier asset classes, helping to boost the supply of credit in the economy. In addition, some officials believe bond buying helps solidify trust among investors that the Fed will keep policy easy for longer, further helping to lower borrowing costs.

“If you show up and purchase assets when markets are stressed, you are not pushing back against much conviction so you can move prices more easily,” said Reinhart, the former Fed staffer.  To get a significant effect in the Treasury market—where any new round of purchases would likely be centered—could be harder, says Mark Gertler, a professor at New York University.

“Evidence suggests it would take a huge purchase of long-term government bonds, maybe the whole market, to really have any effect, and the effect would be quite uncertain.”  Rather than announcing such an eye-popping amount upfront, the Fed could decide to buy Treasuries in smaller steps, calibrated to the economic outlook at each meeting.

Forecasting firm Macroeconomic Advisors estimates each $100 billion in asset buys could lower the yield on the 10-year Treasury note by 0.03 percentage point. That is a marginal move that could go unnoticed, though if Fed buying helped nudge up the inflation rate it could get a bit more of a bang for its buck on real rates. Even a small amount of easing is not to be sneezed at, says Michael Feroli, chief U.S. economist at JPMorgan Chase.

What all of these experts seem to have failed to see is that they have gone too far.  They have stalled the economic engine and all the maneuvering in the world they do in the bond markets will not do anything to jump start the economy.  They are talking about tightening non-financial credit.  We have nearly zero lending to small business now, how tight can get it get beyond zero.

The FACTS are that consumer credit card debt continues to shrink and consider this from Reuters.

WASHINGTON | Fri Sep 17, 2010 1:45pm EDT, – U.S. household wealth fell by $1.5 trillion in the second quarter, according to Federal Reserve data on Friday that showed the strain a slow-paced recovery and high unemployment are putting on Americans.

Household net worth fell to $53.5 trillion, well below the $64.2 trillion it had reached at the end of 2007 when the recession officially began, according to the central bank’s quarterly flow of funds report. Declines in the value of financial assets — especially in stocks and mutual funds — accounted for much of the decline in second-quarter net worth. Stocks alone were down $1.9 trillion to $14.9 trillion, more than offsetting small gains in other areas like state and local government retirement funds.

Consumers pared debt at a seasonally adjusted annual rate of 2.3 percent, the ninth consecutive quarter in which they did so. Home mortgage debt fell at an annual rate of 2-1/4 percent after a 4-1/4 percent drop in the first three months this year. During the financial crisis that wracked the country from 2007 to 2009, trillions of dollars in housing and financial market wealth was wiped out and heavy household and financial sector indebtedness was exposed.

The government has stepped in with increased spending and stimulus programs to try to spur recovery but the unemployment rate in August edged up to 9.6 percent and housing markets are still in distress.

Federal government debt expanded during the second quarter at a hefty 24.4 percent annual rate after a 20.5 percent increase in the first quarter. By contrast, state and local government debt shrank 1.3 percent during the second quarter.  THE actual figure of the US’ national debt is much higher than the official sum of $US13.4 trillion ($14.3 trillion) given by the Congressional Budget Office, according to analysts cited on Sunday by the New York Post.

“The Government is lying about the amount of debt. It is engaging in Enron accounting,” said Laurence Kotlikoff, an economist at Boston University and co-author of The Coming Generational Storm: What You Need to Know about America’s Economic Future.

“The problem is we’re seeing an explosion in spending,” added Andrew Moylan, director of government affairs for the National Taxpayers Union.  In 1980, the debt – the accumulated red ink incurred by the Federal Government – was $US909 billion. This represented some 33 per cent of gross domestic product, according to the Congressional Budget Office (CBO).

Thirty years later, based on this year’s second-quarter numbers, the CBO said the debt was $US13.4 trillion, or 92 per cent of GDP.  The CBO estimates the debt will be at $US16.5 trillion in two years, or 100.6 per cent of GDP. But these numbers are incomplete.

They do not count off-budget obligations such as required spending for Social Security and Medicare, whose programs represent a balloon payment for the Government as more Americans retire and collect benefits. In the case of Social Security, beginning in 2016, the US Government will be paying out more than it is collecting in taxes.

Mr Kotlikoff and Mr Moylan agree US national debt is much more than the official $US13.4 trillion number, but they disagree over how to add up the exact number.  Mr Kotlikoff says the debt is actually $US200 trillion.  Mr Moylan says the number is likely about $US60 trillion. That is close to the figure quoted by David Walker, the US Comptroller General from 1998 to 2008.

Business debt excluding financial companies was up a slim 0.1 percent following a 0.5 percent rise in the first quarter.  Data issued on Thursday by the U.S. Census Bureau similarly underlined the extent to which the financial crisis and ensuing recession has hurt household incomes.

But to me the most worrisome “Bad Number” is related to the impact of “hollow pension plans” on the growing population of baby boomers hitting retirement age.  Consider this from MARY WILLIAMS WALSH, published: September 17, 2010.

Earlier this year, Illinois said it had found a way to save billions of dollars. It would slash the pensions of workers it had not yet hired. The real-world savings would not materialize for decades, of course, but thanks to an actuarial trick, the state could start counting the savings this year and use it to help balance its budget.

Gov. Pat Quinn of Illinois approved a plan in April that seemed to help balance the budget, but it may imperil the pension fund.  Actuaries, including some who serve on the profession’s governing boards, got wind of what Illinois was doing and began to look more closely. Many thought Illinois was using an unorthodox maneuver to starve its pension fund of billions of dollars, while papering over a widening gap between what it owed and how much it had. Alarmed, they began looking for a way to discourage Illinois’s method before other states could adopt it.

They are too late. The maneuver, and techniques that have similar effects, are already in use in Rhode Island, Texas, Ohio, Arkansas and a number of other places, allowing those states to harvest savings today by imposing cuts on workers in the future.

Texas saved millions of dollars this year after raising its retirement age for future hires and barring them from counting unused sick leave in their pensions. More savings will appear in coming years. Rhode Island also raised its retirement age for future retirees last year, after being told it could save $90 million in the first year alone.

Actuaries have been using the method for years, it turns out, but nobody noticed, in part because official documents usually describe it in language few can understand.  The technique is fairly innocuous in normal times, allowing governments to smooth out their labor costs over many years. But it becomes much riskier when pension funds have big shortfalls, when they need several decades to pay down their losses and when they are cutting benefits for future workers — precisely the conditions that exist today.

Dubious pension numbers in Illinois are not easily shrugged off after a warning shot fired by the Securities and Exchange Commission in August. The S.E.C. accused New Jersey of securities fraud, saying the state had manipulated its pension numbers to look like a better credit risk, while selling some $26 billion worth of bonds. The S.E.C. had never before taken action against a state. Now the commission is flexing its muscles, unleashing a team of specialized enforcement officials to look for more misleading public pension numbers.  The same type of conditions exist in large corporate pension funds as well.

It is the compilation of these facts that has me continuing to be concerned that we really haven’t seen the worst of this depression.  It’s election time and we are hearing all kinds of outrageous promises and assessments of where we are in relation to the economy.  However, to me, the facts I have just laid here say it all.  The contraction continues at the street level, unemployment rose in August, and we haven’t even discussed the potential global impacts such as the potential collapse of sovereign funds such as Greece, Spain or Portugal that could occur at any moment.

To me, staying the course, tightening business credit and mortgages at this point, along with no further stimulus is exactly the wrong thing to do.  But alas, it is the course so I would suggest you get ready to hunker down…. oh say about NOW.