Monday, August 10, 2009
Roubini: Reduced Selling of Gold by Central Banks Should Support Gold Prices
Nouriel Roubini writes:
Reduced central-bank gold selling and increased investor buying may have been helping to underpin high prices in 2008 at a time of turmoil in financial markets. The renewal of the central-bank gold selling agreement with a lower threshold suggests that gold sales by central banks will be lower in the next five years, a move the could support gold prices...
In August 2009, the central banks party to the central bank gold agreement (CBGA), which collectively have a gold share of just under 60% in their reserves, agreed to renew the treaty but with a lower maximum sales threshold. Analysts suggest that the marginally lower threshold could provide a "mild support" for gold. (See Javier Blas, Financial Times, August 7 2009)
The annual sales by the central banks party to the treaty will be less than 400 tons. The previous agreement had a cap of 500 tons per years. The IMF's planned sales of 403 tons are included in the overall cap of 2000 tons from 2009-2014...
In 2008, European central banks sold the lowest levels of gold in about decade, reversing the practice of recent years whereby official sales helped depress gold prices. Banks bound by the central bank gold agreement (most of the European central banks) sold about 343 tons of gold, the lowest since the first agreement was signed in 1999, and well under the 500 ton annual limit...
The IMF, the third-largest official holder of gold, intends to sell 403 tons (12%) of its 3217 tons of gold, pending approval from 85% of its members which will likely be given in the fall. Any sales are likely be gradual and may be sold to central banks. John Reade, UBS: IMF gold sales are unlikely to be disruptive for the gold market and could be positive if the gold is purchased by other official investors (like central banks). (June 2009)
Note: I am not an investment advisor and this should not be taken as investment advice.
Even Krugman Says that the Dip in Unemployment Was a Statistical Fluke
The mainstream media portrays the dip in unemployment figures as proof that the recession is over and the economy is recovering.
Buy many alternative news sites have said that the dip in unemployment figures was due to a fluke of some kind or another.
Some say it is because auto workers who would normally be laid off this time of year have been retained because of changes to the auto industry from the auto bailouts.
Others say that more people are giving up looking for work, and so the U-3 unemployment figures (but not U-6) are down.
Now, even Krugman says:
That slight dip in the measured unemployment rate last month was probably a statistical fluke.
Sunday, August 9, 2009
The State of Civil Disobedience on the Left and the Right
In an article entitled "Stop Complaining About Right-Wing Protests! The Left Should Be (Re)Learning How It's Done", progressive writer Dave Lindorff says:
The real question is why is the left in the US so goddamned polite and domesticated...And in a new article published in The Nation entitled "We Need More Protest to Make Reform Possible", professor of politics Peter Dreier shows that change cannot happen unless people engage in civil disobedience:
Back in the late 1950s and the 1960s, the Civil Rights movement wasn't polite and domesticated. It brought activists to events in the Deep South all the way from New York and Boston. Its members rallied in the thousands to shut down segregated public and even private institutions. Its activists occupied buildings on university campuses, boldly confronting police and police dogs and armed men in white robes.In the late 1960s and early 1970s, anti-war protesters in turn shut down recruiting and induction centers, destroyed draft board records, tried to close down Washington, DC, got arrested in the hundreds, incited soldiers to desert and then helped hide them from the law, exposed the 1968 Democratic Convention as a farce, and faced down armed police and soldiers repeatedly, at one point in 1970 closing down the nation's campuses in a national student strike when soldiers shot and killed four unarmed students at Kent State University.
Years earlier, when workers were being abused, they occupied factories, forcibly shutting them down with sit-down strikes, battled Pinkerton detectives and armed National Guard forces, and set up tent cities in Washington to make themselves heard.
And they won great victories.
Where is that passion today? For the most part, the left, in all its various guises--environmentalists, labor unions, civil rights advocates, health care reform advocates, anti-war activists--have become neutered office-chair potatoes, sending canned emails to their elected representatives or to the White House, occasionally marching politely inside of pre-approved, permitted and police-prescribed routes, and attending sponsored events like the current round of town meetings, perhaps to raise polite objections to aspects of a proposed piece of legislation.
The agenda of the left in today's America is being written not by uncompromising radicals in the street as in earlier decades of struggle, but by the bought-and-paid Democrats in Washington...Where is the passion and commitment we once had?
It all seems to be on the Right these days.
Why is there so little protest in response to these hard economic times? ...So - according to Lindorff and Professor Dreier - if progressives want the Obama administration to stop acting George Bush - carrying water for the giant banks, defense contractors and other powers-that-be - liberals have to stop being so "polite" in their protests. I'm sorry to tell my friends on the left, but - according to Lindorff and Professor Dreier - Obama is not going to be progressive unless he is forced to do so by less-than-polite means.Public opinion polls reveal that Americans are angry ... And to be effective politically, that hope has to be mobilized through collective action--in elections, meetings with elected officials, petitions, e-mail campaigns, rallies, demonstrations and even, at times, civil disobedience...
Since Obama took office, there have been very few public expressions of discontent. We've heard very little about everyday Americans--workers facing layoffs and the loss of health insurance, jobless Americans exhausting their unemployment insurance, renters facing eviction, homeowners facing foreclosures, farmers losing their farms, high school students facing cuts in school programs and college students facing rising tuition--mobilizing to demand immediate action to end their hardship and suffering...
Lobbying and meetings with members of Congress. E-mails to politicians ... purchasing TV and radio ads ... occasional rallies and public forums ... bloggers and supporters [are not enough].
These polite activities are necessary, but they don't create a sense of urgency or crisis. With some exceptions, they don't generate TV stories and newspaper headlines. They don't put pressure on Congressional fence-sitters to fear a groundswell of negative publicity or a threat to their re-election chances. They are not sufficient to balance the influence of corporate campaign contributions...
The protests that occurred after FDR was elected, and that accelerated after he took office, were not spontaneous bursts of action by angry people. They were organized by people who were willing to take risks, acting somewhat on faith and suspecting that if they acted courageously, others would follow.
As Marshall Ganz points out in Why David Sometimes Wins, a brilliant new book that focuses on Cesar Chavez and the farmworkers movement, the instigators of social movements don't wait for the time to be "ripe." They find people and invent or reinvent tactics to help them make the most out of what is typically an awful situation. They make their own opportunities, hoping, almost as a matter of faith, that at some point the crack will open wider and they will be able to take advantage of it. Often they fail and are thus lost to history. But as Ganz says, sometimes they win. And small victories whet their appetite for further change. If they have the skills, persistence and imagination, initial gains can become steppingstones to bigger victories as more people get involved.
At the core of an effective social movement, Ganz explains, is a diverse group of leaders with a variety of skills, a deep commitment to their cause and a willingness to take chances without being foolhardy...
FDR was initially ambivalent about protest and about radicals. For example, he wasn't happy about the pressure exerted by Upton Sinclair--the muckraking journalist, novelist and onetime Socialist--to endorse him after Sinclair shocked everyone by winning the Democratic Party nomination for governor of California in 1934 on a platform to "end poverty in California." But FDR understood that Sinclair's primary victory, and his impressive campaign and narrow loss in the runoff, helped change the nation's political climate and made his own success more likely, since he could be seen as more moderate.
Likewise, FDR wasn't enthusiastic about the mounting protests by farmers, workers, veterans, community groups and the advocates of the Townsend Plan (for old-age insurance), but he understood their utility.
FDR once met with a group of activists who sought his support for legislation. He listened to their arguments for some time and then said, "You've convinced me. Now go out and make me do it."
He understood that the more effectively people created a sense of urgency and crisis, the easier it would be for him to push for progressive legislation.
Indeed, even Deputy White House Press Secretary Bill Burton said:
I think there’s actually a pretty long tradition of people shouting at politicians in America.He also said that "spirited debate” and “vigorous conversation” is only natural.
On the other hand, conservatives have to guard against being co-opted by people who don't have the best interests of the American people in mind. For example, I hate to tell my friends on the right, but - according to Rachel Maddow - the town hall protests were organized by the same people who organized the "Brooks Brothers" riots who stopped the Bush-Gore recount in Florida. And according to a former high-level health insurance lobbyist, the insurance industry has a big hand in the protests.
And I'd like to remind my friends on both the left and the right that the powers-that-be are always trying to divide and conquer the American people by creating a fake democrat versus republican dichotomy. Don't fall for the old divide and conquer trick.
The enemy is not the guy on the other side of the aisle. We all have to remember that the enemy is giant financial corporation, defense contractor or other powerful player trying to manipulate the system and subvert the rule of law.
Saturday, August 8, 2009
The Use of Geo-Engineering to Slow Global Warming May Increase the Risk of Drought, According to a Paper in Science Journal
As I have repeatedly pointed out, geoengineering the Earth's climate could cause a lot more problems than it solves.
Now, the prestigious Science journal has published a report showing that geoengineering could cause droughts.
As the BBC writes:
Gabriele Hegerl of the Grant Institute at University of Edinburgh and Susan Solomon of National Oceanic and Atmospheric Administration (NOAA) at Boulder, Colorado, write that "if geo-engineering studies focus too heavily on warming, critical risks associated with such possible "cures" will not be evaluated appropriately".
They argue that climate change is about much more than changes in temperature. So using temperature alone to monitor the effects of geo-engineering could be dangerous..
They cite the powerful effects on rainfall of volcanic eruptions which also prevent solar radiation reaching the Earth's surface, albeit by throwing up dust rather than reflecting the radiation back into space.
For example in 1991, the eruption of Mount Pinatubo not only reduced global temperatures but also led to increases in drought...
The article warns that geo-engineering of this type, combined with the effects of global warming could produce reductions in regional rainfall that could rival those of past major droughts, leading to winners and losers among the human population and possible conflicts over water.
They conclude: "optimism about a geo-engineered 'easy way out' should be tempered by examination of currently observed climate changes."
Let's not destroy the planet by ignoring the law of unintended consequences.
California Raids City Funds
The mayor and city manager of Lafayette, California, have spilled the beans about how California balanced its budget.
It was not done through aggressive cost-cutting alone, but by raiding city funds:
Given that California is a bellweather state, and the richest state in the nation, I predict that other states will follow suit by raiding city funds.Last week, the state Legislature passed a devastating take of $2.05 billion from
In total, the budget deal amounts to nothing less than an unwanted and aggressive molestation of California's already- suffering cities...
local redevelopment agencies as part of a 30- bill package that purports to
close most of the state's current budget deficit. Because the state is too broke
to meet its Prop. 98 obligations to schools, the Legislature chose to hijack
redevelopment funds from cities and use them to pay the state's bills instead.
The Legislature also voted to "borrow" $1.9 billion from cities' property
tax revenues...We don't recall being asked by the state to borrow our money, and we've yet to meet another mayor or city manager who believes the state will make good on their debt within three years.In 2004, 84 percent of California's voters passed Proposition 1A, which sought to prohibit the Legislature from raiding local funds. Since 84 percent of Californian's can't typically agree on the color of an orange, that passage should have sent an
Local officials now believe that cities, counties, school districts and special districts must chart a radical path that makes them fiscally independent from state government. There have been too many raids for too many years by the too-dysfunctional state Legislature.Total and complete fiscal independence appears to be the only way to avoid future molestations by an unfettered and irresponsible state government.
crystal clear message to the state that local governments should be left untouched. Yet, not even five years later, state lawmakers are at it again, disregarding the clear direction of voters while picking local pockets to bail themselves out from their own irresponsible actions. Democrat and Republican lawmakers are equally guilty. It's no wonder that legislators are held in such low esteem...
And note that Lafayette's mayor and city manager seem to almost be talking about secession when they mention "a radical path that makes [cities] fiscally independent from state government" and "total and complete fiscal independence".
As I wrote in December:
One precipitating factor in the [potential] break up of the U.S. may be the bankruptcy of the states. California, Connecticut, Florida, Hawaii, Illinois, Massachusetts, Michigan, Nevada, New Jersey, Ohio and Wisconsin are all in really big trouble, and on the verge of defaulting. The rest of the states won't be that far behind as the financial crisis intensifies. If the federal government isn't helping them in their most dire crises since the founding of the country, and if the feds impose the heavy hand of martial law without any benefit to the states, they will have less incentive to remain a part of the union.I was discussing the Federal government failing to help the states, but California's raiding of city funds - is the same idea, and the town of Lafayette does not seem to be taking it lying down.
Thursday, August 6, 2009
Well-Known Lawyer Discusses Justice Department Shenanigans
Jon Eisenberg is a very well-known California lawyer. Eisenberg literally wrote the book on California appellate practice.
In a new interview, Eisenberg says that Bush is a felon, and reveals the games played by the Department of Justice:
[Interviewer] You have written "effectively ... President George W. Bush is a felon." Why, and do you ever think he'll be brought to justice?
[Eisenberg] President Bush has freely admitted that his administration committed warrantless electronic surveillance, violating the Foreign Intelligence Surveillance Act of 1978. That's a felony, according to title 50, section 1809 of the United States Code. So President Bush is a felon. It's that simple.
Will he ever be brought to justice? Evidently not by a criminal prosecution, in which the Obama administration seems to have little interest...
[Interviewer] During [a lawsuit against the Bush administration concerning illegal spying,] you wrote a response to a government brief that you were not allowed to see. How does one go about doing that?
[Eisenberg] It was quite a challenge. It wasn't just that we had to speculate as to what might be in the secret DOJ brief; the conditions under which we wrote our secret response were onerous, approaching the bizarre: We were required to write the brief under guard in the U.S. Attorney's office in San Francisco; we were forbidden from preparing any notes for the brief-writing session; the DOJ retained sole possession of the brief we produced; and the DOJ has refused to allow us to review the brief since we wrote it. Litigation doesn't get any weirder than that.
There is no justifiable reason why the Department of Justice would refuse to allow the opposing counsel to see DOJ's brief, force the attorney to write his response brief under armed guard and without being able to use any notes, and then bury that brief without even letting the attorney who wrote it have a copy.
Unfortunately, things aren't getting much better under Obama. See this, this and this.
We Can NOT Inflate Our Way Out of The Debt Trap
UBS economist Paul Donovan shows that governments can't inflate their way out of debt traps:
Inflation pessimists cling resolutely to the belief that inflation will inevitably return. “Fiscal deficits are rising dramatically” goes the argument. “Governments will have to create inflation to reduce debt: GDP ratios, as they have done in the past.”So if inflation isn't the ticket out of the debt trap, what is?
The problem with the idea of governments inflating their way out of a debt burden is that it does not work. Absent episodes of hyper-inflation, it is a strategy that has never worked. Government debt: GDP burdens tend to be positively correlated with inflation. Market mythology has created the idea that inflation will help reduce government debt ratios. The facts do not support the myth. [G]overnment debt rises as inflation rises. Meaningful reductions in government debt will require a low inflation future...
The higher debt service cost becomes a problem for a government that is pursuing an inflation strategy because government debt does have to be rolled over. Unless a government is willing to pursue hyper-inflation as a strategy, raising inflation will not reduce the government debt burden. Indeed, history indicates that the reverse result will be achieved.
According to Ellen Brown, even countries which are so deep in debt that they are bankrupt have regained prosperity by taking over the money and credit creation functions from private banks. See this and this.
Abolishing the Fed and the other private central banks and reclaiming the sovereign power to create money may be the only way out of the debt trap.
The Banks Own the Fed, and the Central Banks Own BIS
You know that the 12 Federal Reserve Banks are owned by private banksters.
And you've heard of the Bank of International Settlements (BIS), which is the "Central Banks' Central Bank".
But you probably don't know who owns BIS or how it is regulated.
Spiegel provided the answer last month:
The BIS is a closed organization owned by the 55 central banks. The heads of these central banks travel to the Basel headquarters once every two months, and the General Meeting, the BIS's supreme executive body, takes place once a year.So the private banks own the Fed (and other central banks), and the central banks, in turn, own BIS.
Interestingly, Spiegel points out that BIS is largely immune from regulation, oversight or taxes:
Formally registered as a stock corporation, it is recognized as an international organization and, therefore, is not subject to any jurisdiction other than international law.It does not need to pay tax, and its members and employees enjoy extensive immunity. No other institution regulates the BIS, despite the fact that it manages about 4 percent of the world's total currency reserves, or €217 trillion ($304 trillion), as well as 120 tons of gold...
Central bankers are not elected by the people but are appointed by their governments. Nevertheless, they wield power that exceeds that of many political leaders. Their decisions affect entire economies, and a single word from their lips is capable of moving financial markets. They set interest rates, thereby determining the cost of borrowing and the speed of global financial currents.
Wednesday, August 5, 2009
Prominent Financial Writer: The Big Money Boys Call the Shots, The President is Just a "Figurehead" and All Politicians "Mere Pawns"
Long-time MarketWatch writer Paul Farrell explains in a new essay that the big money boys call the shots, and that one of their basic strategies for maintaining control is to use the president as a "figurehead" and politicians as "mere pawns":
Always elect a figurehead president.
Putin skirted term limits by getting Medvedev elected president. Then Putin was appointed party leader and prime minister, the real power behind the throne. That's one way power stays in power playing the game. Wall Street is a master at playing this game, as the single largest money donor to political campaigns. Donations assure continued control behind an illusion of democracy, where all politicians are mere pawns.
Children and Siblings of Soldiers and Police Officers: Its Up To YOU
Alex Jones recently shared two important stories about police officers who are taking their duty to uphold the Constitution seriously.
One of the officers said that his brother had sent him videos and information about the threats to the Constitution and the need for law enforcement to protect the American people against those who would take away our liberty.
Because family members usually have more access than outsiders to members of their family, it is up to the sons, daughters, brothers, sisters, fathers, mothers and grandparents of everyone related to law enforcement or military service to remind them that they serve the American people and the Constitution, and not a particular political party or politician.
Of course, people in the same sports league, congregation, or other frequent social gathering place must also remind their "team mate" about their primary duty to protect the people, and not the powers-that-be.
Poll: Who Do You Trust More - Prostitutes or Elected Officials?
A survey shows that Chinese people trust prostitutes more than elected officials.
I'm curious what Americans think, so I've posted a new poll (on the right under "Followers").
The poll asks:
Who Do You Trust More - Prostitutes or Elected Officials?Here are the final results:
1. Prostitutes. | 133 (46%) |
2. Elected Officials. | 2 (0%) |
3. It depends on whether the prostitutes are in a state which has legalized - and regulates - prostitution. | 19 (6%) |
4. There's a difference? | 129 (45%) |
Do We Really NEED The Giant Banks?
Bernanke, Summers and Geithner say that we can't let the giant banks fail, because - without them - the economy will be starved of credit and we will be plunged into a depression.
This isn't true.
Says Who?
If we really needed the giant banks, the following top economists and financial experts wouldn't have said that the economy can only recover if the insolvent "too big to fails" are broken up:
- Nobel prize-winning economist Jospeph Stiglitz, MIT economics professor Simon Johnson and Federal Reserve Bank of Kansas City President Thomas Hoenig (and see this)
- The head of the FDIC, Sheila Bair
- The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
- Economics professor and senior regulator during the S & L crisis, William K. Black
- Leading economist, Nouriel Roubini
- Well-known economist, Marc Faber
- Nobel economist, Ed Prescott
- Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard, and Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
- Economics professor Thomas F. Cooley
The above-described leading economists wouldn't have recommended breaking up the banking giants if they thought that their survival was necessary for an economic recovery. Other lending institutions can step up to the plate to make loans.
Small Banks Can Fill Big Shoes
Fortune pointed out in February that smaller banks are stepping in to fill the lending void left by the giant banks' current hesitancy to make loans. Indeed, the article points out that the only reason that smaller banks haven't been able to expand and thrive is that the too-big-to-fails have decreased competition:
Growth for the nation's smaller banks represents a reversal of trends from the last twenty years, when the biggest banks got much bigger and many of the smallest players were gobbled up or driven under...
As big banks struggle to find a way forward and rising loan losses threaten to punish poorly run banks of all sizes, smaller but well capitalized institutions have a long-awaited chance to expand.
BusinessWeek noted in January:
As big banks struggle, community banks are stepping in to offer loans and lines of credit to small business owners...
At a congressional hearing on small business and the economic recovery earlier this month, economist Paul Merski, of the Independent Community Bankers of America, a Washington (D.C.) trade group, told lawmakers that community banks make 20% of all small-business loans, even though they represent only about 12% of all bank assets. Furthermore, he said that about 50% of all small-business loans under $100,000 are made by community banks...
Indeed, for the past two years, small-business lending among community banks has grown at a faster rate than from larger institutions, according to Aite Group, a Boston banking consultancy. "Community banks are quickly taking on more market share not only from the top five banks but from some of the regional banks," says Christine Barry, Aite's research director. "They are focusing more attention on small businesses than before. They are seeing revenue opportunities and deploying the right solutions in place to serve these customers."
And Fed Governor Daniel K. Tarullo said in June:
The importance of traditional financial intermediation services, and hence of the smaller banks that typically specialize in providing those services, tends to increase during times of financial stress. Indeed, the crisis has highlighted the important continuing role of community banks...
For example, while the number of credit unions has declined by 42 percent since 1989, credit union deposits have more than quadrupled, and credit unions have increased their share of national deposits from 4.7 percent to 8.5 percent. In addition, some credit unions have shifted from the traditional membership based on a common interest to membership that encompasses anyone who lives or works within one or more local banking markets. In the last few years, some credit unions have also moved beyond their traditional focus on consumer services to provide services to small businesses, increasing the extent to which they compete with community banks.
Big Banks Aren't Really Focusing On the Lending Business Anyway
Since Glass-Steagal (the law saying banks couldn't use their customer's deposits to make speculative investments) was repealed in 1999, the giant banks have made most of their money in trading assets, securities, derivatives and other speculative bets, the banks' own paper and securities, and in other money-making activities which have nothing to do with traditional depository functions.
Now that the economy has crashed, the big banks are making very few loans to consumers or small businesses because they still have trillions in bad derivatives gambling debts to pay off, and so they are only loaning to the biggest players and those who don't really need credit in the first place. See this and this.
So we don't need these giant gamblers. We don't need JP Morgan, Citi, Bank of America, Goldman Sachs or Morgan Stanley. What we need are lenders.
Small Banks Can Do Things Better Than Giants
The above-described Fortune article also points out that the banking giants are not necessarily more efficient than smaller banks:
The largest banks often don't show the greatest efficiency. This now seems unsurprising given the deep problems that the biggest institutions have faced over the past year.
"They actually experience diseconomies of scale," Narter wrote of the biggest banks. "There are so many large autonomous divisions of the bank that the complexity of connecting them overwhelms the advantage of size."
And Governor Tarullo points out some of the benefits of small community banks over the giant banks:
Many community banks have thrived, in large part because their local presence and personal interactions give them an advantage in meeting the financial needs of many households, small businesses, and agricultural firms. Their business model is based on an important economic explanation of the role of financial intermediaries--to develop and apply expertise that allows a lender to make better judgments about the creditworthiness of potential borrowers than could be made by a potential lender with less information about the borrowers.
A small, but growing, body of research suggests that the financial services provided by large banks are less-than-perfect substitutes for those provided by community banks.
It is simply not true that we need the mega-banks. In fact, as many top economists and financial analysts have said, the "too big to fails" are actually stifling competition from smaller lenders and credit unions, and dragging the entire economy down into a black hole.
Of course, if banks were public utilities, there would be enough credit for everyone.
Tuesday, August 4, 2009
What the Fed is REALLY Trying to Hide In Fighting an Audit
75% of Americans and at least 276 Congress members and 19 Senators want to audit the Fed, but the Fed is fighting tooth and nail to keep everything hidden.
Most people assume that the Fed wants to keep secret the list of banks which received bailout money. You know, something along the lines of "we gave Goldman Sachs $100 billion".
But what the Fed is really struggling to keep hidden is the fact that the entire financial system is based on massive manipulation and fraud by the Fed and its primary dealers.
Specifically, the Fed is desperately trying to hide that many trillions of the government's bailouts have gone to inflating the stock market, buying up the U.S. government's own treasuries, and gaming the currency and gold markets.
Of course, when the New York Federal Reserve's "primary dealers" (the dealers through which the Fed carries out its open market operations in general, and its PPT, ESF, and other schemes through) get the huge sums of cash from the Fed, they place bets based on inside knowledge of where the money flows are going (they also, supposedly, skim off part of the cash, but that's for another essay).
In other words, the Fed's primary dealers engage in insider trading and frontrunning on a scale which would make your normal white collar felons look like a silver nanoparticle.
Finally, the Fed is not the only central bank engaging in manipulation. An audit would show how the Fed is playing footsie with other private central banks in an international con game.
Don't believe me? Show me the books and prove me wrong.
The Real Economy Versus the Make-Believe World of the Government and Financial Giants
In the real economy, unemployment is at Depression-era levels (see this, this and this).
In the real economy, bank loan loss rates will be higher than the Depression.
In the real economy, government revenue is at its lowest level since the Depression, and most states are on the verge of bankruptcy.
In the real economy, the world economy is crashing faster than during the Depression (and see this).
But in the make-believe world of the government and the financial giants, the recession is over.
How do they do it?
Well, as I noted a couple of days ago, the boys use:
- High-frequency trading, program trading-based frontrunning, and other computer-based manipulation of the markets
- Creation and manipulation of bubbles
- The Plunge Protection Team
- Intervention in the gold, currency markets, and bond markets
- Bear raids, naked short selling, and credit default swap holders driving companies into bankruptcy
In addition:
- Years ago, the government reporting some basic economic indicators like M3, and moved away from real economic indicators like U-6 unemployment and inflation and substituted economic indicators like "U-3" and "core inflation" to cover up what is really happening
- Normal accounting and reporting rules have been suspended, so that companies can pretend that worthless derivatives, CDOs, subprime mortgages and other "toxic assets" are worth perhaps time times more than they are really worth. Indeed, as of 2006, "President George W. Bush has bestowed on his intelligence czar ... broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations." One or more treasury department officials also actively allowed banks to "cook their books"
- Bernanke is apparently almost single-handedly responsible (using the Fed's network of primary dealers) for the current rise in the stock market
- The government also uses its preferred dealers to launder money through the Exchange Stabilizion Fund (ESF), to prop up the dollar or otherwise game currencies (see this and this)
- The largest derivatives holders use their Counterparty Risk Management Policy Group (CRMPG) to literally collude - exchange secret information and formulate coordinated mutually beneficial actions - all with the government's blessings
- Wall Street analysts just ignore fines, penalties and expenses in earnings projections (in the words of a Bloomberg commentary, they "Keep Telling Big Earnings Lie")
- The sales of U.S. Treasury bonds are heavily gamed. Indeed, as Rob Kirby and Ellen Brown point out, Bernanke and the boys apparently use hedge funds in the Cayman Islands to launder huge sums of dollars printed by the Fed to secretly buy U.S. treasuries:
In 2005, ... this scheme evidently went into high gear, when China and Japan, the two largest purchasers of U.S. federal debt, cut back on their purchases of U.S. securities. Market "bears" had long warned that when foreign creditors quit rolling over their U.S. bonds, the U.S. economy would collapse. They were therefore predicting the worst; but somehow, no disaster resulted. The bonds were still getting sold. The question was, to whom? The Fed identified the buyers as a mysterious new U.S. creditor group called "Caribbean banks." The financial press said they were offshore hedge funds. But Canadian analyst Rob Kirby, writing in March 2005, said that if they were hedge funds, they must have performed extremely poorly for their investors, raking in losses of 40 percent in January 2005 alone; and no such losses were reported by the hedge fund community. He wrote:The foregoing suggests that hedge funds categorically did not buy these securities. The explanations being offered up as plausible by officialdom and fed to us by the main stream financial press are not consistent with empirical facts or market observations. There are no wide spread or significant losses being reported by the hedge fund community from ill gotten losses in the Treasury market. . . . [W]ho else in the world has pockets that deep, to buy 23 billion bucks worth of securities in a single month? One might surmise that a printing press would be required to come up with that kind of cash on such short notice.4In September 2005, this bit of wizardry happened again, after Venezuela liquidated roughly $20 billion in U.S. Treasury securities following U.S. threats to that country. Again the anticipated response was a plunge in the dollar, and again no disaster ensued. Other buyers had stepped in to take up the slack, and chief among them were the mysterious "Caribbean banking centers." Rob Kirby wrote:
I wonder who really bought Venezuela's 20 or so billion they "pitched." Whoever it was, perhaps their last name ends with Snow [referring to then-Treasury Secretary John Snow] or Greenspan.Those incidents were apparently just dress rehearsals for bigger things to come. In late 2005, the Federal Reserve (or "Fed") announced that beginning in March 2006, it would no longer be publishing figures for M3 (the largest measure of the money supply). M3 has been the main staple of money supply measurement and transparent disclosure for the last half-century, the figure on which the world has relied in determining the soundness of the dollar. But the curtain was now to drop. What was it that we weren't supposed to know? March 2006 was also the month Iran announced it would begin selling oil in Euros. Some observers suspected that the Fed was gearing up to use newly-printed dollars to buy back a flood of U.S. securities dumped by foreign central banks. Another possibility was that the Fed had already been engaging in massive dollar printing to conceal a major derivatives default and was hiding the evidence. [See this and this.]
But the problem isn't just that the government and financial giants are hiding the bad news in the real economy.
The bigger problem is that the government has been strengthening the parasite - the fake economy of derivatives and securitization and leverage and cut-outs and front men and cooked books - and poisoning the real economy.
Monday, August 3, 2009
Harvard Medical School: Deep Relaxation Can Have a Profound Effect on a Wide Range of Medical Conditions
The Independent writes:
Researchers at Harvard Medical School discovered is that, in long-term practitioners of relaxation methods such as yoga and meditation, far more "disease-fighting genes" were active, compared to those who practised no form of relaxation.
In particular, they found genes that protect from disorders such as pain, infertility, high blood pressure and even rheumatoid arthritis were switched on. The changes, say the researchers, were induced by what they call "the relaxation effect", a phenomenon that could be just as powerful as any medical drug but without the side-effects.
"We found that a range of disease-fighting genes were active in the relaxation practitioners that were not active in the control group," explains Dr Herbert Benson, associate professor of medicine at Harvard Medical School, who led the research...
More encouraging still, the benefits of the relaxation effect were found to increase with regular practice – the more people practised relaxation methods such as meditation or deep breathing, the greater their chances of remaining free of arthritis and joint pain with stronger immunity, healthier hormone levels and lower blood pressure...
"After two months, their bodies began to change – the genes that help fight inflammation, kill diseased cells and protect the body from cancer, all began to switch on."...
Because regular practice of the relaxation response can boost immunity, it is actually a good preventative measure to reduce the odds of catching diseases, including the swine flu (remember to wash your hands, get enough sleep and take vitamin D as well).
One traditional yoga method for inducing the relaxation response is by doing the flat-on-your-back pose (the "corpse pose"). See this, this, this and this.
But - as the Independent points out - there are many ways to create the relaxation response (and as I point out below, it doesn't have to be cult-like or effeminate):
In addition to the relaxation response, I am convinced that active exercise is also very important for health.So how can you access relaxation's healing powers? Harvard researchers found that yoga, meditation and even repetitive prayer and mantras all induced the relaxation effect. "The more regularly these techniques are practised, the more deeply-rooted the benefits will be," says Jake Toby. Have a go at one or more of the following for 15 minutes once or twice a day.
Body scan
Starting with your head and working down to your arms and feet, notice how you feel in your body. Taking in your head and neck, simply notice if you feel tense, relaxed, calm or anxious. See how much you can spread any sensations of softness and relaxation to areas of your body that feel tense. Once your reach your feet, work back up your body.
Breath focus
Sitting comfortably, become aware of your breath, following the sensation of inhaling from your nose down to your abdomen and out again. As you follow your breath, notice your whole body and let tension go with each exhalation. Whenever you notice your mind wandering, come back to your breath.
Mantra repetition
The relaxation response can be evoked by sitting quietly with eyes closed for 15 minutes twice a day, and mentally repeating a simple word or sound such as 'Om'. [My comment: you can repeat a nonsense word or something like "The Three Stooges Are Funny" or "Kobe Bryant is the best!" as your mantra; it doesn't have to be religious or feminine to create the relaxation response.]
Guided imagery
Imagine the most wonderfully relaxing light, or a soothing waterfall washing away any tension or worries from your body and mind. Make your image as vivid as possible, imagining the texture, colour and any fragrance as the image washes over or through you.
Fear is Not a Christian Value
If you are Christian, the importance of the Bible is obvious to you.
If you are an atheist or a person of a different faith, please note that 76% of Americans identify themselves as Christians. Therefore, if you are trying to reach Americans with the truth, it might help to know a little about the Bible. If you can quote scripture, you may more easily reach people who might not otherwise listen.
The government has done everything it could to scare the daylights out of the American public in order to promote its political agenda.
The government has used fear as an excuse to torture, spy on Americans, deny rights to those accused of crimes, deny free speech to government critics, and otherwise ignore large portions of the Bill of Rights and of international treaties like the Geneva convention.
But as former high-level CIA officer (and Catholic) Ray McGovern wrote Saturday:
[A poll shows that church-goers support torture more than non church-goers].
I am not a psychologist or sociologist. But I recall that one of the first things Hitler did on assuming power was to ensure there was a pastor in every Lutheran and Catholic parish in Germany. Why? Because he calculated, correctly, that this would be a force for stability for his regime. Thus began horrid chapter in the history of those who profess to be followers of Jesus of Nazareth but forget his repeated admonition, Do not be afraid.A mere seven decades after the utter failure of most church leaders in Germany, their current American counterparts have again yielded to fear, and have condoned evils like torture by their deafening silence.
Indeed, Jesus repeatedly told his disciples and other people not to be afraid. For example, in the Gospel of Matthew, Jesus:
- Speaks these words to the disciples during a storm (14:27)
- To Peter, James and John during the Transfiguration (17:7)
- To the women outside the empty tomb (28:10)
- To the disciples he is about to send out to teach, preach and heal, he says, "Have no fear" of those who have called the master of the house Beelzebul and will surely also malign those of his household (10:25)
- "Do not be afraid," Jesus says, reminding those he is sending out of the One whose eye is on the sparrow. "You are of more value than many sparrows" (10:31)
(In other sections of the Bible, Jesus said do not be afraid another 10 times.)
Jesus told his flock not to be afraid. Christians that succumb to fear are not following Christ's teachings. Those of us who succumb to fear are following those who would manipulate - instead of free - us.
To have courage for whatever comes in life - everything lies in that.
- Mother Teresa
Mr. Panetta Needs a History Lesson
CIA director Leon Panetta implied Sunday that the "reality of 9/11" excused the unconstitutional and criminal acts of the Bush administration:
The country was frightened, and political leaders were trying to respond as best they could. Judgments were made. Some of them were wrong.
Panetta makes it sound like all of the illegal decisions were made after 9/11, in response to that horrific event.
But as I've previously pointed out:
- The government's spying on Americans began before 9/11 (confirmed here and here)
- The Patriot Act was written before 9/11
- The Afghanistan war was planned before 9/11
- The decision to launch the Iraq war was made before 9/11
- The decision to launch a war against Iran was made before 9/11
- Cheney advocated strengthening the powers of the White House to the point of monarchy before 9/11
In addition, while the decision to torture appears to have been made after 9/11, it appears to have been made for the purpose of creating a false linkage between Iraq and 9/11 in order to justify the Iraq war. In other words, the post-9/11 decision to torture appears to have been made to rationalize the pre-9/11 decision to invade Iraq.
Moreover, it was known long before 9/11 that torture doesn't work to produce accurate intelligence.
Double Dip Still in the Cards
In May, CNBC wrote that we are in danger of a double-dip recession.
Hasn't that risk passed?
No. According to a lot of top economists and financial analysts, the risk is still very real:
- Martin Feldstein, professor of economics at Harvard University.
- The chief economist for MarketWatch, distinguished scholar of economics at Dowling College, Irwin Kellner
- And many others
Comparison of the current situation with the Great Depression provides important food for thought. And the demographic trends and crash in commercial real estate (and see this) both argue for another crash.
Indeed, it is not just the U.S.
For example, some analysts think that even China may head into a double dip downturn:
Andy Xie, a Sino-bear and commentator for Caijing, said Western analysts are in for a rude shock if they think that China's surging demand for raw materials implies genuine recovery...
Mr Xie thinks the spring recovery is an inventory spike, to be followed a double-dip downturn into next year as stimulus wears off.
Sunday, August 2, 2009
World's Top Energy Economist: Peak Oil in 2020
Dr. Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries, told the Independent:
The public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated...
Oil production has already peaked in non-Opec countries and the era of cheap oil has come to an end, it warned...
The International Energy Agency believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier "oil crunch" because demand after 2010 is likely to exceed dwindling supplies.
Birol thinks that peak oil could drive gas prices at the pump much higher and destroy economic recovery efforts of fragile economies.
He thinks that the pressures could come sooner than 2019 because:
There is now a real risk of a crunch in the oil supply after next year when demand picks up because not enough is being done to build up new supplies of oil to compensate for the rapid decline in existing fields.Birol also things the Middle Eastern oil producers will be economically strengthened by scarce oil:
The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future.
Interestingly, Birol advocates developing alternative forms of energy now:
One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day," Dr Birol said. "The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously," he said.For background, see this and this.
The Independent gives a caveat to the projections:
The amount of oil recoverable is always going to be an assessment subject to the vagaries of economics – which determines the price of the oil and whether it is worth the costs of pumping it out –and technology, which determines how easy it is to discover and recover.
All numbers tend to be informed estimates. Different experts make different assumptions so it is under- standable that they can come to different conclusions. Some countries see the size of their oilfields as a national security issue and do not want to provide accurate information. Another problem concerns how fast oil production is declining in fields that are past their peak production. The rate of decline can vary from field to field and this affects calculations on the size of the reserves. A further factor is the expected size of future demand for oil.
Saturday, August 1, 2009
BIS Slammed Federal Reserve and Other Central Banks for Blowing Bubbles and then "Using Gimmicks and Palliatives" which "Will Only Make Things Worse"
If you have any doubt that the Fed and other central banks should have known that a crash was coming, all you have to do is look at this June 2007 article from the Telegraph:
The Bank for International Settlements, the world's most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood...
The BIS, the ultimate bank of central bankers, pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system...
The bank said it was far from clear whether the US would be able to shrug off the consequences of its latest imbalances ...
"Sooner or later the credit cycle will turn and default rates will begin to rise," said the bank.
A year later, in June 2008, the Telegraph wrote:
A year ago, the Bank for International Settlements startled the financial world by warning that we might soon face challenges last seen during the onset of the Great Depression. This has proved frighteningly accurate...
[BIS economist] Dr White says the US sub-prime crisis was the "trigger", not the cause of the disaster.
Indeed, BIS slammed the Fed and other central banks for blowing the bubble, failing to regulate the shadow banking system, and then using gimmicks which will only make things worse. As the 2008 Telegraph article notes:
In a pointed attack on the US Federal Reserve, it said central banks would not find it easy to "clean up" once property bubbles have burst...
Nor does it exonerate the watchdogs. "How could such a huge shadow banking system emerge without provoking clear statements of official concern?"
"The fundamental cause of today's emerging problems was excessive and imprudent credit growth over a long period. Policy interest rates in the advanced industrial countries have been unusually low," he said.
The Fed and fellow central banks instinctively cut rates lower with each cycle to avoid facing the pain. The effect has been to put off the day of reckoning...
"Should governments feel it necessary to take direct actions to alleviate debt burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high, they must fall. If savings rates are unrealistically low, they must rise. If debts cannot be serviced, they must be written off.
"To deny this through the use of gimmicks and palliatives will only make things worse in the end," he said.
In other words, BIS slammed the easy credit policy of the Fed and other central banks, and the failure to regulate the shadow banking system.
More dramatically, BIS slammed "the use of gimmicks and palliatives", and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts "will only make things worse".
This is, of course, what Marc Faber and many other economists have said for years.
But Bernanke and the other central bankers (as well as Treasury and the Council of Economic Advisors and Barney Frank and Chris Dodd and the others in control of American and British and French and Japanese and German and virtually every other country's economic policy) ignored BIS' advice in 2007 and 2008, and they are still ignoring it today.
Instead, they are doing everything they can to (2) prop up asset prices by trying to blow a new bubble by giving banks trillions, (2) re-write accounting and reporting rules to let the big banks and other giants keep bad debts on their books (or in sivs or other "second sets of books") and to hide the fact that they are bad debts, and (3) encourage consumers to spend spend spend!
"The world's most prestigious financial body", "the ultimate bank of central bankers" has condemned Bernanke and all of the other G-8 central banks, and stripped bare their false claims that the crash wasn't their fault or that they are now doing the right thing to turn the economy around.
Update: As Spiegel wrote in July of this year:
White and his team of experts observed the real estate bubble developing in the United States. They criticized the increasingly impenetrable securitization business, vehemently pointed out the perils of risky loans and provided evidence of the lack of credibility of the rating agencies. In their view, the reason for the lack of restraint in the financial markets was that there was simply too much cheap money available on the market...
As far back as 2003, White implored central bankers to rethink their strategies, noting that instability in the financial markets had triggered inflation, the "villain" in the global economy...
In the restrained world of central bankers, it would have been difficult for White to express himself more clearly...
It was probably the biggest failure of the world's central bankers since the founding of the BIS in 1930. They knew everything and did nothing. Their gigantic machinery of analysis kept spitting out new scenarios of doom, but they might as well have been transmitted directly into space...In their report, the BIS experts derisively described the techniques of rating agencies like Moody's and Standard & Poor's as "relatively crude" and noted that "some caution is in order in relation to the reliability of the results."...
In January 2005, the BIS's Committee on the Global Financial System sounded the alarm once again, noting that the risks associated with structured financial products were not being "fully appreciated by market participants." Extreme market events, the experts argued, could "have unanticipated systemic consequences."
They also cautioned against putting too much faith in the rating agencies, which suffered from a fatal flaw. Because the rating agencies were being paid by the companies they rated, the committee argued, there was a risk that they might rate some companies too highly and be reluctant to lower the ratings of others that should have been downgraded.
These comments show that the central bankers knew exactly what was going on, a full two-and-a-half years before the big bang. All the ingredients of the looming disaster had been neatly laid out on the table in front of them: defective rating agencies, loans repackaged to the point of being unrecognizable, dubious practices of American mortgage lenders, the risks of low-interest policies. But no action was taken. Meanwhile, the Fed continued to raise interest rates in nothing more than tiny increments...
The Fed chairman was not even impressed by a letter the Mortgage Insurance Companies of America (MICA), a trade association of US mortgage providers, sent to the Fed on Sept. 23, 2005. In the letter, MICA warned that it was "very concerned" about some of the risky lending practices being applied in the US real estate market. The experts even speculated that the Fed might be operating on the basis of incorrect data. Despite a sharp increase in mortgages being approved for low-income borrowers, most banks were reporting to the Fed that they had not lowered their lending standards. According to a study MICA cited entitled "This Powder Keg Is Going to Blow," there was no secondary market for these "nuclear mortgages."...
William White and his Basel team were dumbstruck. The central bankers were simply ignoring their warnings. Didn't they understand what they were being told? Or was it that they simply didn't want to understand?
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