Saturday, October 3, 2009
Anti-Obama Billboard on Interstate 70
This is yet another illustration of the blood boiling discontent festering among Americans across the country. The collective citizen anger reaches far beyond Obama to Wall Street oligarchs their Congress lapdogs, and smacks of the atmosphere among the poor Parisians prior to the French Revolution.
A local in Blue Springs, MO. (Kansas City Area) has advertised his feelings towards President Obama by renting a billboard. The billboard is located along I-70 between the Adams Dairy Parkway and the Grain Valley exits. The billboard reads, "How do you like your change now? Obama Nation. They are coming for you! The Taxpayer. First and Second Amendments are in jeopardy. Live free or Die." There is also a hammer and sickle on the sign.
You can bet whoever rented the sign is now on a US Secret Service list. According to a local Kansas city news station, KCTV Channel 5, a pastor who drives by the sign during his daily commute to his church said he lived in England for years and he agreed with the message. "We lived in a socialist society and I guess what I am seeing in America is that we are pushing to some of those ways now," he said. "Especially the hospitalization. It's taken away some of our freedoms as Americans."
Thud, Dud, and Crud
"Orders/inventory ration tumbled to 1.43 from 1.89 in August. Folks, that is the largest one-month decline in the ISM orders/inventory ratio since December 1980! The ISM was 53 that month – the next month it went to 49.2 (is that in the market?) and seven months later, we were in the early stages of the famed double-dip recession (which nobody saw coming at the time). Food for thought."
Lunch With Dave 100209
Lunch With Dave 100209
Toyota ‘grasping for salvation'
HANS GREIMEL, AUTOMOTIVE NEWS
Toyota Motor Corp. President Akio Toyoda said his money-losing automaker is “grasping for salvation” as it struggles to return to profit.
The world's largest car company was once targeting annual sales of 10 million vehicles but now expects sales of 7.3 million this year, down from 8.97 million in 2008, Toyoda said today at a news conference.
Citing the five stages of corporate decline outlined by Jim Collins, author of How the Mighty Fall, the Toyota chief warned that his company has slumped to stage four, which Collins calls “grasping for salvation.”
“We are grasping for salvation,” Toyoda said, adding that the company already has spiraled through the first three stages: (1) hubris born of success, (2) undisciplined pursuit of more and (3) denial of risk and peril. His self-admonitions echoed the apologies commonly made by Japanese executives who take responsibility for financial turmoil or corporate scandal.
Grim assessment
While Toyota is far from entering the fifth stage--capitulation to irrelevance or death--Toyoda's grim assessment was clearly meant to underscore the challenges he faces after only three months as president. They also seemed aimed at ensuring customers that he grasped the severity of the situation and was committed to reversing Toyota's malaise.
“Toyota has become too big and distant from its customers,” the grandson of the automaker's founder said as he prepares for a second-straight year of substantial financial and unit-sale decreases.
In the United States, Toyota's sales fell 13 percent in September from a year earlier as the market suffered a sharp letdown after the government-funded cash-for-clunkers program ran out. Total U.S. sales tumbled 23 percent. Toyota is down 28 percent for the year.
Separately, Toyoda called the current dollar-yen rate "very tough," saying the weak U.S. currency made it difficult to return to profit on an unconsolidated level.
"When you get to this level, it makes it difficult to return to profit on sales growth alone," he said.
Toyoda repeated Toyota's aim to return to profit at the parent level "as soon as possible," even as it expects global sales to fall 18 percent from 2008 to 7.34 million vehicles this year. That would leave about 30 percent of the company's production capacity unused.
Toyoda took the helm in June as the world's biggest automaker faced one of its biggest crises in history amid a global credit crunch and an industrywide sales slump that forced General Motors and Chrysler into bankruptcy.
For the financial year to March, Toyota has projected a consolidated operating loss of ¥750 billion ($8.4 billion), assuming a dollar rate of ¥92. It has forecast a parent-only operating loss of ¥600 billion.
Toyota Motor Corp. President Akio Toyoda said his money-losing automaker is “grasping for salvation” as it struggles to return to profit.
The world's largest car company was once targeting annual sales of 10 million vehicles but now expects sales of 7.3 million this year, down from 8.97 million in 2008, Toyoda said today at a news conference.
Citing the five stages of corporate decline outlined by Jim Collins, author of How the Mighty Fall, the Toyota chief warned that his company has slumped to stage four, which Collins calls “grasping for salvation.”
“We are grasping for salvation,” Toyoda said, adding that the company already has spiraled through the first three stages: (1) hubris born of success, (2) undisciplined pursuit of more and (3) denial of risk and peril. His self-admonitions echoed the apologies commonly made by Japanese executives who take responsibility for financial turmoil or corporate scandal.
Grim assessment
While Toyota is far from entering the fifth stage--capitulation to irrelevance or death--Toyoda's grim assessment was clearly meant to underscore the challenges he faces after only three months as president. They also seemed aimed at ensuring customers that he grasped the severity of the situation and was committed to reversing Toyota's malaise.
“Toyota has become too big and distant from its customers,” the grandson of the automaker's founder said as he prepares for a second-straight year of substantial financial and unit-sale decreases.
In the United States, Toyota's sales fell 13 percent in September from a year earlier as the market suffered a sharp letdown after the government-funded cash-for-clunkers program ran out. Total U.S. sales tumbled 23 percent. Toyota is down 28 percent for the year.
Separately, Toyoda called the current dollar-yen rate "very tough," saying the weak U.S. currency made it difficult to return to profit on an unconsolidated level.
"When you get to this level, it makes it difficult to return to profit on sales growth alone," he said.
Toyoda repeated Toyota's aim to return to profit at the parent level "as soon as possible," even as it expects global sales to fall 18 percent from 2008 to 7.34 million vehicles this year. That would leave about 30 percent of the company's production capacity unused.
Toyoda took the helm in June as the world's biggest automaker faced one of its biggest crises in history amid a global credit crunch and an industrywide sales slump that forced General Motors and Chrysler into bankruptcy.
For the financial year to March, Toyota has projected a consolidated operating loss of ¥750 billion ($8.4 billion), assuming a dollar rate of ¥92. It has forecast a parent-only operating loss of ¥600 billion.
Systemic Failure Dead Ahead
Image via Wikipedia
Debate stirs on whether the financial structure of the USEconomy is broken irreparably. Debate stirs on whether actions taken in the last year or two have put the nation on a path that can even achieve stability, let alone recovery. Debate stirs on whether a pernicious and not so secret syndicate has taken control of the USGovt financial ministries, let alone be removed. Debate stirs on whether lack of US Federal Reserve audits and disclosure of their accounting is integral to sustaining the syndicate control as well as its probable egregious fraud. Debate stirs whether the nationalizations have actually enabled adoption of wrecked assets, have concealed executive ransacking, and have buried massive counterfeit of bonds. Debate stirs whether the mountainous federal deficits, the nationalizations of essentially Black Holes, and the endless war spending make deficit reduction a distant dream. Debate stirs on whether the gargantuan accumulation of USFed reserves will spill over to produce widespread price inflation. Debate stirs on why after causing the foundation failure of the US financial structure from Wall Street and the USFed offices, these institutions not only remain in power but demand greater power.
It is my contention that the US financial structures broke without any remote potential for repair and revival in the summer of 2007. The symptoms became obvious in the summer of 2008 to the slower observers with visible shock waves bathed in crisis. The reactions from shock waves have come since the autumn months of 2008. The system has broken, but the syndicate in control wishes to keep the music going, keep the machinery turning, keep the money flowing, so that they can continue the massive rackets, bury the frauds & counterfeit, cover their tracks, process the bad paper into USGovt coffers, continue to corner the printing press operations, continue to con the USCongress into granting more funds for Goldman Sachs to dictate dispensation secretly, and to continue the endless war whose rivers of blood are matched only by rivers of redirected private contractor fraudulent payments. Nobody seeks justice and prosecution for over $1 trillion in mortgage bond fraud. Nobody seeks to remove Goldman Sachs and JPMorgan from control posts at the USDept Treasury and USFed respectively. Nobody seeks even to locate the missing $50 billion from the Iraq Reconstruction Fund, or to announce the known location of the stolen $100 billion from the Madoff Ponzi Scheme (it aint $50B and they know its exact hiding place). Foreigners have been very busy since the autumn 2008, as they dismantle the levers, knock down the pillars, block the escape routes, yank the collateral from the paper marketplaces, and otherwise thwart the US-UK schemes.
To claim that the system can be put on proper stable footing is lunatic. To expect that the nation can be recalibrated so as to return to the Good Ole Days of US global dominance and leadership is lunatic. To urge that the economic signposts, megaphones, and billboards be once again guided by policies best described as Bubbly Economic Mythology is lunatic. Yet delusional Americans actually believe the dominant ship at sea can lead as flagship, when it has taken on more water than the Titanic. Since the autumn months of 2008, marred by the Lehman Brothers failure, marred by the Fannie Mae adoption, marred by the AIG adoption, punctuated by a shameful 0% interest rate policy (ZIRP) and a green light for limitless money creation (QE), the United States has lost any semblance of leadership. Instead, its leadership has earned scorn, criticism, and disrespect. The last people on the globe to comprehend the American condition of failure, corruption, and military aggression seem to be the Americans themselves, who live within the USDome of Perception. They suffer from perhaps the worst education levels in the industrialized world, coupled with a co-opted national news media network, clouded by the grandest drugstore medication in history. Debate stirs on whether the US actually controls its own news media. The US does not cover the global Paradigm Shift underway that will change its landscape radically.
The clearest conclusions center on almost nothing put on a sustainable viable course for the nation. Amplification and widened breadth of all that failed cannot serve as the core for revival or recovery, let alone stability. Yet such policies seem the only ones our hapless bank leaders are able to execute. It is a dog returning to gobble his vomit. It is akin to managers urging their worst workers to intensify their efforts, and to join the ranks of management. These Keynesians cannot admit that the central bank franchise model has failed, not to be resurrected. In my view, the debates, the foundations, and the reactions scream two major messages. 1) The system is out of control, with the drivers ramming down the accelerator for even more of everything that failed, for a locomotive within a monetary system based upon illegitimate money. 2) The USGovt finances are heading toward a recognized failure, identified by both a banking system bankrupt seizure and a USTreasury default. The nation cannot come to grips with the bold stark notion that foreigners control our fate, from their revolt against the USDollar as a global reserve currency, from their revolt in supplying additional credit to the USGovt and USEconomy. The reaction so far to crisis has been to rely more heavily upon the Printing Pre$, to monetize the debts, and to conceal such operations, all while permitting syndicates to operate with impunity. The revolving doors spin freely that fill job posts at the USDept Treasury, Wall Street firms, USGovt regulatory bodies, and key foundations, warranting charges of incest at best and corruption at worst. Things are out of control!
In fact, my forecast is for systemic failure. Its primary elements will be a failed US banking system (as in seizure) and a USTreasury Bond default (as in coerced restructure). Again, martial law and declaration of economic emergency will be the final solution. The prison camps will become debtor prisons and warehouses for illegals, maybe a processing plant for those who refuse virus vaccination. They are already constructed with over 200 ready for occupancy. Those in denial might become residents. They could also feature some dissidents, along with some writer analysts. Two years ago, my analysis regularly mentioned martial law and imposed order to handle the chaos from a disintegrated economy and insolvent dysfunctional banking system. Here we are in the present, when such forecasts do not sound so outrageous anymore. The Jackass has featured a string of seemingly outrageous forecasts that have come true. The US system is credit dependent, and credit will soon be cut off, in the next chapter of isolation. The Printing Pre$ is a temporary solution, en route to a failed state. The US leaders and citizens do not learn from history. They defy history amidst delusions of omnipotent power. See the Weimar Republic, which has gone global! Even Gore Vidal expects recognition of the Untied States having adopted communism. Even the World Bank led by yet another Goldman Sachs pupil warns the Untied States not to assume the USDollar will remain the unchallenged global reserve currency.
ABSENT A STRONG FOUNDATION
Widespread Insolvency is a major theme of the broken condition. The banks have assets and income grossly below their debts and liabilities. They must rely upon phony FASB accounting, which was the basis of the stock recovery beginning in April. They must bring fresh capital, lost as fast as it arrives. They now tell the public what their assets are worth, backwards to any market concept. The households are suffering from mortgage obligations even as housing prices continue to slide lower. With almost one third of American homeowners who hold mortgages operating with an underwater status, whereby their home loans exceed the home value, the army of consumers is more than hampered. Unlike the bankers, the households of America cannot just pound the table, engineer an absurd Stress Test, and declare they are solvent enough for equity extensions. The households line up for defaults and foreclosures instead. The smart ones demand that the bankers prove clear certified title of their property. See the Kansas MERS case that might serve as precedent to jam the gears of the bankers intending to seize homes in foreclosure. The bankers cannot prove they hold clear title. Such is the vagary of mortgage bond fraud, as it seeps to the surface.
The USGovt finances are in shambles, with $1800 billion in fiscal 2009 deficits, and easily $1300 billion to come in the next year. Take away the Printing Pre$ from the desperate delinquent devils running the USGovt finance ministries, and national debt default would take place within 60 days. The nation does not even contemplate budget surplus, but rather justifies yawning deficits and lies using lunatic forecasts. The industrial base is also largely depleted. The Chinese Most Favored Nation granted in 1999 set the stage for shipment of much of the US factories to China. In the process, the USEconomy replaced income with debt, all in the name of ‘Low Cost Solutions’ moronically. Corporate leaders in America reacted to heavy burdens of government regulations and higher taxes, even to rugged labor unions. Maybe their relocation decisions constituted betrayal, or maybe just reaction to onerous conditions that evolved over decades.
The Albatross of falling property prices, both residential and commercial, continues to hang around the neck of the USEconomy. The full impact of the commercial property decline has yet to be felt, more in delayed reaction. A queer factor comes into play with commercial mortgages and loans. Even if the majority of payments are current, even if most tenants pay rent on time, the loans tend not to be viable for refinance and rollover. The Loan-to-Value ratios are all horrible after a broad 30% to 40% property price decline. Banks require more equity. On the residential side, the Prime Option ARMortgages are lined up for the kill. It seems that payment of less than the required interest was not a good idea after all. It seems that leaving homeowners the option to build their loan balance when property prices fell was not a good idea after all. Now they face 100% to 200% monthly loan payment increases, all in the fine print unread years back. So liquidations and foreclosures will continue to come, complete with outsized bank losses. The Perpetuation of Loss is ensured by continued property foreclosures and liquidation. Despite all talk, the process continues. Despite the pain, the statistics continue to be mangled with a purposeful motive.
The Accounting Fraud for bank balance sheets and stock valuation runs like a cancerous streak throughout the financial sector. The best way to cover up fraud is with more fraud. The best way to cover up accounting chicanery is to have the USCongress bless it as legal, vital, and essential. Once the stock market rose for consecutive months, talk of phony accounting rules is forgotten, SINCE IT SUCCEEDED, even served as proof of recovery. What nonsense! A moral depravity has permeated not just the financial sector, but the public as well. They cry out from the corners laden with pain, but without specific targets. The end of the FASB relaxed rules is scheduled for January 1st. Let’s see if a compromised USCongress and corrupt Wall Street demand its extension. They obviously will. Furthermore, both Basel 2 and Basel 3 guidelines are ignored, since from outsiders. Ignore them at one’s own peril, as they gather as Enemies at the Gate among the USGovt creditors. Theirs might turn into an angry lynch mob. Foreign creditors are the #1 adversary to all things American right here, right now.
SUSTAINING FORCES
Numerous hidden forces sustain the current breakdown and hamper anything remotely resembling a recovery. The only thing in recovery is the banter, billboards, and propaganda. In fact, most praise of success comes from people who praise their own efforts, like USFed Chairman Bernhacky. His predecessor was also very accomplished at praising his own craft and alchemy. Sir Alan Greenspasm left the national banking system hanging over the precipice, from where it fell in a short time after passage of the mantle at his retirement. He believed his housing bubble saved America from disaster. He believed that credit derivatives offloaded risk. Little did he realize that the next disaster is always much greater than the saved previous one, when amplified credit and monetary ease are the solutions relied upon, all pure heresy. He lives now in London, and spends much time in Switzerland. These nations paid his secretive other paychecks. These nations are where his loyalty and all directives came from in my opinion. Many hidden forces will work to undermine the current efforts to instill a recovery to the USEconomy and a resuscitation of the US banking system. Bernhacky will soon realize that reliance upon the same toxin and formaldehyde to course through the increasingly cancerous bodies will produce even worse problems during the next crisis phase. It comes.
Numerous sustaining forces will contribute toward the inexorable path to systemic failure. It will begin with the relapse failure of the US banking system. Citigroup is facing real bankruptcy, whose numerous segments are underwater and growing worse. Bank of America is in a death spiral, whose CEO Ken Lewis departs amidst political and shareholder legal pressures. Wells Fargo is so dead that its true balance sheet makes a skeleton come to life, whose prime Option ARM and second mortgage exposure is monumental. Maybe Citigroup, BOA, and Wells will use USFed funds to acquire the entire US banking system and subject it to their brilliant acumen, leadership, and access to the corrupt money pits. Lock in those executive bonuses!
The hidden housing inventory will ensure that housing prices continue down for a couple more years. At best they will stabilize somewhat, but only if a monumental hidden housing inventory is permitted to accumulate. The big banks, the very same that abused mortgage bonds with leveraged instruments, own an outsized supply of foreclosed homes. What a fitting reward! They tend to release only a portion of this home supply, so as to permit some price stability as demand catches up. Lenders are reluctant to lend though, even while the foreclosure process continues. Job loss is the main driving factor, amidst household insolvency.
The Zero Interest Rate Policy is worn as a badge of shame to reflect central bank failure. It rewards savings not at all. It encourages the same speculation that produced bubbles to kill the banks and households. It encourages a Dollar Carry Trade, which ensures a pressured decline in the USDollar itself. The October Hat Trick Letter will discuss additional risks and dangerous consequences from the Dollar Carry Trade. Remember, Bernhacky assured the USCongress, the US conferences of economists, and the US people that the USFed would not resort to 0% rates. He did just that. In addition to powering with leverage the US$ exchange rate downward, this carry trade takes away a viable Exit Strategy for the USFed. Imagine Wall Street leveraged speculative machinery interrupting any potential lift in the official US interest rate! Recall that the USFed does take orders from the Wall Street syndicate. They selected him. They hired him. His job is to run the Printing Pre$ day and night, to invent new liquidity facilities, to preach solutions to the USCongress, to shut up, and to follow orders. In the last year, the USFed has acted like it is the entire banking system. What exactly is the exit doorway to take from that strategy?
Without hesitation, one can claim that No Meaningful Reform or Restructure has occurred. The US financial and economic structures continue to suffer from precisely the same problems that resulted in systemic breakdown in the autumn months of 2008. The difference now is that the previous high volume of acidic money is exceeded with higher volumes now. USGovt debts are now much higher. Lending institutions are less prone to lend now than one or two years ago. Commercial paper used not to flow at all, and now flows but with less volume and from fewer channels and with more USFed assistance than ever before. Innovative thought is totally suppressed, if not crushed. Advocates for a reformed system without paper fiat money are dismissed. The syndicate continues to ply its trade and to control the levers. But their work is frenzied, and they are sure to lose control.
No meaningful reform comes even to the hundreds of thousands of mortgage loans that undergo Home Loan Modification. They cannot alter the loan balances, since that would require alteration of the associated mortgage loans that rely upon income stream from loan payments. This is not acceptable, since it would reveal the pervasive bond fraud, the counterfeit bonds, and the duplicate usage of home loans in multiple mortgage bonds. So solutions come to toss billion$ at the big banks, without solution, an assuredly failed Top-Down approach that appeals to Wall Street. The extort the money and hide the paths of funds. Also, on the small business front, the restructure of the Small Business lender & insurer CIT failed to produce any meaningful revitalization. Its June debt restructure agreement with bond holders failed to stick. It now seeks a $5 billion loan as debtor in possession. A million businesses would be affected if CIT folded and was liquidated. We are told of a recovery in progress. Its roots are in propaganda, crowd control, and shaping of public opinion. George Orwell would smile and smirk from his 1984 address on Cemetery Lane.
No national initiative has come to bring back US industry to the US shores. No national initiative has come to retain businesses by means of reduced taxation and reduced regulatory burdens. No national initiative has come to remove from power those responsible for Wall Street bond fraud. No national initiative has come to even force a proper accounting to Wall Street firms or Fannie Mae or AIG. No national initiative has come to conduct a true autopsy of Lehman Brothers, like to see what assets they held, what hedge funds they sponsored, what counterfeit Fannie Mae bonds they were soon to toss onto the table, and whether JPMorgan did indeed pay off private Lehman accounts with the $138 billion in slush funds. The booty was handed to them at a bankruptcy court meeting held before dawn on an September Saturday morning. No national initiative has come to force disclosure of the TARP fund distribution, or to reveal what the USFed does with its trillion$ of created money. They destroyed the USDollar, and the victims enduring the crisis from inside the USDome need to know. Without hesitation, one can claim that all attempts to shine light on the financial sector and its ivory towers have been obstructed.
Two further factors ensure the sustained crisis in the USGovt finances, with certain continued contagion to the financial sector and the tangible economy. The Endless War with its increasingly less credible banter against terrorism drains the United States of funds, saps its national spirit, cripples its soldiers, and extends risk in countless ways. The USDollar and USTreasury Bond suffer from lost foreign confidence and faith. The real threat to national security lies in the finance sector rooted in Wall Street. Almost all talk about foreign threat is a grand distraction from the internal threat, even as incredibly grand fraud is committed in the name of patriotism. The Entrenched Financial Syndicate remains in power, controls all financial policy, directs funds from the Printing Pre$, influences the USCongress with slush contributions, controls regulatory body heads, engineers nationalizations of fraud-ridden financial firms, interferes with FBI investigations (see the GSax trading software), integrates with foreign policy, and provides segments to the US press networks. Fully 70% of US press network content comes from the USGovt and its myriad agencies with spokesmen and public relations offices.
FAILURE & DEFAULT ON THE HORIZON
Going hand in hand with the destructive 0% policy is the Hidden Monetization of USGovt Debt, clearly. The zero rate encourages new asset bubbles, like the historically unprecedented spectacular USTreasury bubble. USTBONDS MAKE THE FINAL BUBBLE. The zero rate enables new carry trades with no cost. The zero rate permits a private banker party to engage in their own corner carry trade, buying long-dated USTreasurys with free money while shorting the short-term USTBills. This acts like a money machine for bankers to restore their balance sheets. The only trouble is their balance sheets have a hemorrhage at work, with additional ongoing relentless credit portfolio losses. The accounting fraud can only mask the problem, which happens to grow worse with each passing month. With lost integrity from the 0% rate comes disdain for the monetary system generally and for the USDollar specifically, along with other major currencies locked near 0% also.
While the 0% official rate creates problems much like those that erupted in a crisis, the monetization of debt issuance signals to the entire world to abandon the USDollar. The monetization assures the death of the USDollar. It is Weimar revisited, but with more military might and far more arrogance. Megalomania gone awry results in catastrophe. Monetization represents back-door devious measures to stave off the disaster of bond auction failures. Monetization is a broken promise made to creditors, who must feel betrayed. Monetization is a vast undermine to the validity, value, and very authenticity of a currency. The government debt for the custodian to the global reserve currency is being monetized, thereby creating gigantic air pockets, and funding a carry trade. The most dangerous asset bubble on the planet right now is the USTreasury. It pays 0% on short maturities. What is next? The forced USGovt worker pension contribution to USTreasurys? How about all state workers too, in their pensions? Maybe eventually all 401k and IRA and Keough pension plans as well, in their pensions? Every citizen maybe support the USTreasurys in pensions, out of patriotism, for national security? With lost integrity from the monetization patterned schemes, comes fear of a repeated Weimar hyper-inflation episode.
What comes is the US bank system failure. The endless rounds of bank credit portfolio losses dictate it. The Stress Tests are soon to be discredited, less than one year after their farcical production. The leading losers will be commercial mortgages, prime Option ARMortgages, and credit card losses. Banks are not prepared, having inadequate Loan Loss Reserves, guarding their profits, denying their reserves, managing their stock prices. They deceive their share holders on continued portfolio risk. They try to shove all their garbage assets on the USFed and to Fannie Mae under the USGovt roof, amidst the shrill cries of ‘Too Big To Fail’ nonsense. A US bank system failure is coming. With lost integrity from the banking system, insolvent in its own core, supplanted in function by the USFed itself, lending so little as to force declines in the consumer credit funds, comes distrust of financial institutions generally.
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a Ph.D. in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials.
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Sudden Stop Event
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Alice Schroeder wrote a great column for Bloomberg yesterday that I’m just getting to. The best stuff comes at the end, where she describes why some people are buying gold even though inflation doesn’t seem to be a big risk. (Apologies in advance for block-quoting lots of stuff in this post, but I think it’s worth it…)
[Gold bugs] aren’t just betting on inflation, as is the conventional wisdom. Gold has a wicked history of being an unreliable inflation hedge. It has, though, at times been a haven against sudden currency depreciation.
In all the talk of inflation because the Treasury is printing so much money versus deflation because it may not print enough, there is one type of inflation that is rarely discussed. This is the mega-inflation caused by a sudden currency devaluation. Currency is like any financial innovation, an obligation secured by assets. When the obligation is perceived to have increased far beyond the level justifiable by the assets, which in this case make up a country’s economy, a bubble has formed.
Schroeder is describing, in much simpler terms, what economist William Buiter has called a “sudden stop” event. (I’m having trouble logging on to FT to find the right link, but the guys at Baseline Scenario have a good one here.) Let’s take a quick detour to Buiter then, writing early this year:
But as the recession deepens, and as discretionary fiscal measures in the US produce 12% to 14% of GDP general government financial deficits – figures associated historically not even with most emerging markets, but just with the basket cases among them, and with banana republics – I expect that US sovereign bond yields will begin to reflect expected inflation premia (if the markets believe that the Fed will be forced to inflate the sovereign’s way out of an unsustainable debt burden) or default risk premia….
The US is helped by the absence of ‘original sin’ – its ability to borrow abroad in securities denominated in its own currency – and the closely related status of the US dollar as the world’s leading reserve currency. But this elastic cannot be stretched indefinitely….
The only element of a classical emerging market crisis that is missing from the US and UK experiences since August 2007 is the ’sudden stop’ – the cessation of capital inflows to both the private and public sectors. . . . But that should not be taken for granted, even for the US with its extra protection layer from the status of the US dollar as the world’s leading reserve currency. A large fiscal stimulus from a government without fiscal credibility could be the trigger for a ’sudden stop’.
Most economists, using their conventional models, are looking at things like “output gaps” to rationalize additional borrowing to stimulate the economy. So long as people and capital are unemployed, cost-push inflation isn’t seen as a threat so stimulus is believed to be cost-free. The risk, of course, is that we can’t borrow to infinity. At a certain point — tough to say when — we’ll tap out the national credit line. Where economists get in trouble, IMHO, is they envision this nebulous period in the “medium term” when the economy will be growing again and debt can be paid back. As I argued in my column yesterday, this ignores the fact that growth, which is to say growth in spending, is no longer possible without incremental borrowing. We’ve gotten ourselves into a cycle of perpetual borrowing to, in Schroeder’s words, “pump the economy back to a high-water mark that was phony to begin with.”
To Schroeder’s conclusion:
As in any bubble, those who recognize this need to act well in advance. Historically, governments have taken action to prevent currency flight when the owners of a severely overvalued medium of exchange start selling so much that it adds to the pressure on its price. They make private purchases of gold illegal, or tax the exchange of currency.
Right now, the American economy is worth less than the value implied by the market value of its obligations. How much less, no one knows. But gold bugs will tell you, privately, that this is why they are buyers. Might as well stock up, they say, before gold becomes a controlled substance.
The bolded section is why I haven’t touched stocks in two years and don’t plan to for some time: The U.S. economy is underwater. The value of our obligations is greater than the value of our assets, which is to say the equity value of the economy is negative. The best proxy for that is the stock market.
Stocks aren’t going to zero. They have option value. But a 90% fall from the peak is what I see happening eventually. Either explicitly or priced in gold. Over what time frame, I haven’t a clue.
But that’s what happened during the Depression. Today we’re far more leveraged…
Friday, October 2, 2009
Max Keiser on Derivative Monopolists
Wealth transfer via derivatives governed by the derivative monopolists.
Mad Max in Detroit - Pastors Wear Handguns in Pulpit
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The Rev. Lawrence Adams teaches his flock at the Westside Bible Church to turn the other cheek. Just in case, though, the 54-year-old retired police lieutenant also wears a handgun under his robe.
Adams is one of several Detroit clergymen who have taken to packing heat in the pulpit. They have committed their lives to a man who preached nonviolence and told followers to love their enemies. But they also say it's up to them to protect their parishioners in church.
"As a pastor, I'm referred to as a shepherd," Adams said. "Shepherds have the responsibility of watching over their flock. Do I want to hurt somebody? Absolutely not!"
Responding to a break-in at his church Sunday evening, Adams surprised a burglar carrying out a bag of loot and shot the man in the abdomen after the man swung the bag at him.
The burglar survived — for which Adams is grateful — but the reverend said he could have been hurt or killed if he had not been armed.
Detroit had the nation's highest homicide rate last year among cities of at least 500,000 residents. The city has been losing manufacturing jobs for decades, and these days about one in four working-age residents is without a job.
The northwest Detroit neighborhood surrounding Adams' church isn't one of the city's most dangerous. But there have been many recent reports of crimes in the area, including four burglaries, three auto thefts, one armed robbery and four assaults, including one with intent to murder.
"It's getting worse because of the economy," Adams said. "People are out of work and feel they have to provide for their families."
Prior to 2000, anyone who wanted to carry a concealed weapon in Michigan had to show a need to do so. Now, gun owners simply have to pass a stringent background check and complete eight hours of handgun training.
"I get people from all walks of life, including pastors," said Rick Ector, owner of Rick's Firearm Academy in Detroit. "But it's not anything specific to pastors. Detroit is not a very safe place."
Michigan allows pastors to decide if someone registered to carry a handgun can do so for protection inside churches.
The clergy in Detroit who arm themselves say they do so because of the high overall crime rate. But churchgoers elsewhere have been the target of violent attacks several times in recent years:
Last year in a New Jersey church, a man fatally shot his estranged wife and a man who intervened in the attack.
A pastor was found stabbed to death in August in an Oklahoma church.
A Maryville, Ill., preacher was gunned down during his Sunday sermon in March.
In December 2007, a gunman killed two people at a Christian youth mission center near Denver and two others at a megachurch in Colorado Springs.
Near Detroit, a man was shot to death in 2003 while worshipping in a Catholic church. And an attacker fatally shot a woman and wounded a child inside another Detroit church three years ago because of a domestic dispute.
"I don't know what kind of issues people are bringing with them. You could be running from estranged husband, boyfriend," said Bishop Charles Ellis III, pastor of the 6,500-member Greater Grace Temple in Detroit.
Ellis said he sometimes carries a gun, but never in the pulpit. His church has a "ministry of defense" for Sunday services made up of about 18 armed congregants who are off-duty law enforcement officers.
Clergy are adjusting to society, said the Rev. Kenneth J. Flowers, pastor of Greater New Mt. Moriah Baptist Church in Detroit.
"In addition to their faith, they are carrying weapons," said Flowers, who does not carry a gun. "There used to be a time when everybody respected a pastor. Even a drunk would straighten up if a preacher came by."
Many people are uncomfortable with the idea of an armed clergy, because Christ preached against violence and taught people they should love their enemies.
"But the scriptures also are clear that civil authority is part of God's plan," said Claude Wiggins, a former pastor and current assistant at the Detroit Baptist Theological Seminary.
"In our country, it says in due process that you may bear arms to protect yourself. While we should be committed to trusting God, that doesn't prevent us or command us to be totally passive," Wiggins said.
Al Meredith, pastor of the Wedgwood church in Fort Worth, said some off-duty police officers who are deacons at his church carry guns, but he's uncomfortable with the idea of an armed congregation.
"It discourages the crazies from acts of violence if they see uniforms around, but I don't want everybody bringing guns," Meredith said. "My ultimate conviction is what does the word of God say and what would Jesus do? Can you in your wildest imagination ever see Jesus packing a .38? I can't imagine Peter and Paul carrying .45s."
The Rev. William Revely, who sometimes wears his .357-caliber handgun while preaching at the Holy Hope Heritage Church in Detroit, does not worry whether it might be wrong for a man of God to carry a firearm in church.
"I've always felt that the only way to handle a bear in a bear meeting is to have something you can handle a bear with," said the 68-year-old pastor, who practices at a gun range with another pastor. "We have to be realistic. I know too many people who've been shot, carjacked."
Adams said most — if not all — of Westside's 50 members have supported his actions after encountering the burglar.
"People want to look at Christians and the church as believers in God and ask 'Why doesn't God protect you?" Adams said. "The reality is God has given man free will. We have to use our God-given talents and protect ourselves."
Director of market intelligence cracks the code of "Fed Speak"
Jim Rickards, director of market intelligence for scientific consulting firm Omnis, shares his outlook for the dollar. Jim cracks the code of "Fed Speak" to tell us what is really going on with the Global Banking Elite and their plans for the future.
GM Sales Nosedive - volumes nearly halved
In the first month after the end of the "cash-for-clunkers" program, automakers on Thursday are reporting virtually across-the-board sales declines with Chrysler and General Motors seeing volumes nearly halved. General Motors sold some 156,673 vehicles in September, a slump of 45% with retail sales off 46% and fleet sales dropping 43%. Car sales were down 43% and total truck sales -- light and heavy -- plummeted 47%.
On a percentage basis, Cadillac saw the smallest dip, down 9% to 11,339 vehicles, with the largest decline in the soon-to-be-wound-down Saturn division, which posted a 84% drop in sales to 2,993 units. GM's best-selling Chevrolet division posted a 41% decline for the month to 102,538 vehicles.
"September was a tough transitional month for the industry, and a difficult year-over-year comparison for GM," said Mark LaNeve, vice president of U.S. sales, in the report. "Fortunately, the fourth quarter looks brighter and our year-over-year comparisons should look more favorable."
Journalist Throws Shoe at IMF Director During Speech
A protester threw a shoe at the director of the International Monetary Fund at the end of his speech at a university on Thursday in the prelude to I.M.F. and World Bank meetings in Istanbul. Another illustration of the brewing anger over elitist global banking policies, and ominous signs of things to come.
G20 Summit - Casino Capitalism as Usual
Image by International Monetary Fund via Flickr
With only piecemeal reforms to the financial system made at the G20 summit in Pittsburgh, the key tenets of market fundamentalist economic policies still prevail. Not until the global economic system is democratised will the world’s poor be given priority over the wealthy few, argues Mark Engler.
1st October 2009 - Published by Foreign Policy in Focus
Last week's Group of 20 (G20) meeting in Pittsburgh brought together leaders from the most significant players in the global economy and charged them with renovating the financial system at the heart of the economic crisis. Change was on the agenda, and the heads of state claimed to deliver. As the summit concluded, The New York Times hailed the meeting's final statement as a momentous shift, reporting that "Leaders of G20 Vow to Reshape Global Economy."
Unfortunately, the changes left off the table at the summit were far more significant than the modest reforms actually debated, and the few alterations that did make it into the final agreement are likely to be further watered down in implementation. Even the most common-sense reforms are being met with determined corporate opposition. Indeed, given the depths of the collapse one year ago and the volume of public outcry for change, the real surprise is how little transformation has yet taken place.
Late and Little
Many of the items on the Pittsburgh agenda were not bad in themselves. They were merely limited in scope and under siege by lobbyists. The G20 moved in the right direction by announcing that it would require banks and other financial institutions to have greater capital reserves. Mandating that a bank keep more in reserve for every dollar it lends out makes it less likely that the institution will be caught short and need a bailout. While such a change may sound arcane, it could mark a significant break from the past if done right and made part of broader regulations. After all, leveraging assets in order to obtain greater profits — whereby overextended firms made high-risk wagers with ever-greater amounts other people's money — went far in provoking the crisis.
While higher capital ratios and greater oversight would limit this kind of wanton speculation, the G20 statement is short on specifics about the actual requirements that financial institutions would be made to respect. And, sadly, the determined opposition of European bankers will likely keep changes to minimal levels. The difficulty with implementing even this most minor and reasonable of reforms shows how entrenched corporate power remains in post-crisis policymaking.
This bodes ill for the prospects of other heralded changes. On Wall Street's behalf, the Obama administration worked to curtail a French and German push for caps on executive pay — specifically controls on the outrageous bonuses given to top bankers whose institutions have lost billions. As a result, the G20 agreement forgoes any hard limits on compensation. It instead promotes guidelines that would somewhat delay when bankers receive their multi-million dollar payouts. Ostensibly designed to focus executives on long-term performance, this substitute measure is a far weaker alternative.
Why is the Obama administration going to bat for Wall Street firms at international meetings? It's hard to say, especially since this has not produced any apparent goodwill at home. Despite the White House's efforts on their behalf, the financial industry is fervently opposing the president's proposed Consumer Financial Protection Agency, which would protect Americans from predatory lending by credit card and mortgage companies. A representative of the U.S. Chamber of Commerce's Center for Capital Markets recently explained to McClatchy that the Chamber is "spending about $2 million on ads, educational efforts, and a grassroots campaign to kill the agency."
Such backlash against reform suggests that the global economy is still being run like a gambling hall. The betting limits at some tables may be modestly reduced and payouts to the highest of high-rollers slightly reined in, but we have not strayed far from Harrah's or the MGM Grand.
The Muscle Behind Market Fundamentalism
The G20 is only one component of the global economy's management. As it turns out, the activities of other bodies compromise the G20's declarations of reform. While agreements at the G20 are notoriously lacking in enforcement, financial institutions that can discipline and punish — such as the International Monetary Fund (IMF) and World Trade Organization (WTO) — appear notably unreformed and unrepentant.
After a previous meeting of the G20 in London last April, British Prime Minister Gordon Brown announced, "the old Washington consensus is over." However, key tenets of market fundamentalist economic policy that defined this consensus — including fiscal austerity and pro-corporate deregulation — still prevail.
At the April G20 meeting, world leaders vowed to provide as much as $1.1 trillion in new resources to the developing world to blunt the impact of economic downturn. However, much of this funding has yet to materialize, and only a fraction of it is slated to go to low-income countries (rather than middle-income states). Moreover, the bulk of these resources are to be channeled through the IMF, which has typically demanded that recipients of its loans accept harsh neoliberal polices as a condition of receiving money. While Fund officials claim to have changed with the times by relaxing "conditionality" and easing their previously stern attitudes toward countries that dare to buck the neoliberal Washington Consensus, many of their recent loans suggest that, in practice, their conversion has been quite limited.
A recent report from the Center for Economic Policy Research indicates that the IMF "has tied pro-cyclical, contractionary economic conditions on Eastern European countries to sorely needed loans." While struggling economies are desperately in need of government social spending and monetary stimulus, IMF agreements with Latvia, Hungary, and Ukraine demand slashed budgets and policy restrictions that look a lot like the "structural adjustment" of old. In advance of the April G20 summit, Gordon Brown had admitted, "Too often our responses to past crises have been inadequate or misdirected, promoting economic orthodoxies that we ourselves have not followed and that have condemned the world's poorest to a deepening crisis of poverty." Sadly, the IMF has yet to demonstrate that it is truly breaking from this established pattern.
The WTO is not helping things either, especially when it comes to reviving financial regulation that can protect the public good. As Lori Wallach, director of Public Citizen's Global Trade Watch Division, observed last week, "the G20 leaders have announced a very perplexing plan of action that calls for reregulation of the financial sector to try to avoid the next economic crisis while simultaneously calling for completion of the WTO Doha Round, which would require additional financial deregulation, including new WTO limits on accounting standards through a text the disgraced Arthur Andersen firm had a hand in formulating." New "free trade" rules may prohibit countries from shielding themselves from exotic derivates such as credit default swaps or from capping the size of mega-banks that threaten to take down the entire system when they fail.
Left Off The Table
That the G20 is not undertaking a more serious transformation of global financial structures might reflect the power of continued corporate lobbying. It does not, however, reflect a lack of good ideas. A broad array of financial experts and civil society organizations — ranging from the Stiglitz Commission tasked with making recommendations to the UN, to grassroots coalitions such as Put People First, the Citizens' Trade Campaign, and the labor network Global Unions — have advocated for sensible and needed reforms that could be easily enacted if the political will existed.
One example is the "Tobin Tax" — a small tax on international financial transfers first advocated in the 1970s by Nobel economist James Tobin as a way of cooling speculation on foreign currencies. ATTAC (the Association for the Taxation of financial Transactions for the Aid of Citizens), a leading organization for globalization activism in many parts of Europe, takes its name from this proposal and has pushed for it for over a decade. A version of the tax recently gained an even higher profile in Europe owing to the support of Adair Turner, the head of the British Financial Services Authority, which regulates UK banking. Oxfam argues that, beyond discouraging short-term gambling on currencies, a tax as small as 0.005% could raise between $33 billion and $50 billion per year. This pool of money could support sustainable development in places where the majority of people are still living on less than $2 per day.
Reform proposals also include debt cancellation for countries in the global South. Many poorer nations must spend substantial portions of their budgets on interest payments to the North rather than serve populations hit hard by the crisis. Often, their debts were unjust to begin with, accumulated by dictators who have since been thrown out of power. In most cases the countries' citizens have already sent back payments that dwarf the original loans. Rather than having to submit to the IMF to receive new loans, poorer countries should be allowed to keep their own resources as part of a just stimulus program.
Reflecting the widespread agreement that no corporation should be "too big to fail," citizen advocates have pushed for a much more aggressive application of antitrust and anti-monopoly laws. In this vein, the Stiglitz Commission recommended the creation of a "Global Competition Authority" to provide "adequate oversight of these large institutions" and to "limit their size and the extent of their interactions." These suggestions have a strong grounding in the public interest but are of course anathema to corporate chiefs. Accordingly, they have thus far remained off the table at the G20.
A Democratic Economy
A final demand is that real steps be taken to make the global economic system more democratic. Although leaders at the Pittsburgh summit lauded themselves for moving key discussions from the G8 to the larger G20 — which includes regional powers such as China, India, and Brazil — the international financial institutions with real muscle remain woefully undemocratic. The IMF is a perfect example. The United States, with a 17% voting share, retains the ability to veto all key decisions, because these require an 85% majority. In recent years the IMF has made high-profile announcements of changes to its voting structure. These changes, however, amount to token shifts of a few percentage points from still-dominant wealthy nations to countries such as China.
Ultimately, the goal of economic reforms must not merely be to revive a system that, until its bubbles burst, produced extraordinary wealth for a fortunate few. Rather, it must be to create living wage jobs and slash inequality. Yet that end is unlikely to be achieved if control of economic decision-making remains forever in the hands of the privileged. While the G20 has invited some new members into the club, decisions about the global economy are still made in elite and exclusive venues, where bailed-out executives still matter far more than the world's poor. In changing this, democracy will have to be a means as well as an end. For as long as the bankers rule, we will have little chance of breaking from a dispiriting state of affairs: casino capitalism as usual.
Mark Engler, a writer based in New York City, is a senior analyst with Foreign Policy In Focus.
Thursday, October 1, 2009
Dead Bodies Pile Up in L.A., Detroit; families, counties broke
Image via Wikipedia
Inside the Wayne County morgue in midtown Detroit, 67 bodies are piled up, unclaimed, in the freezing temperatures. Neither the families nor the county can afford to bury the corpses. So they stack up inside the freezer.
Albert Samuels, chief investigator for the morgue, said he has never seen anything like it during his 13 years on the job. "Some people don't come forward even though they know the people are here," said the former Detroit cop. "They don't have the money."
Lifelong Detroit residents Darrell and Cheryl Vickers understand this firsthand. On a chilly September morning they had to visit the freezer to identify the body of Darrell's aunt, Nancy Graham -- and say their goodbyes.
The couple, already financially strained, don't have the $695 needed to cremate her. Other family members, mostly in Florida, don't have the means to contribute, either. In fact, when Darrell's grandmother passed recently, his father paid for the cremation on a credit card -- at 21% interest.
So the Vickers had to leave their aunt behind. Body number 67.
"It's devastating to a family not to be able to take care of their own," said Darrell. "But there's really no way to come up with that kind of cash in today's society. There's just no way."
The number of unclaimed corpses at the Wayne County morgue is at a record high, having tripled since 2000. The reason for the pile-up is twofold: One, unemployment in the area is approaching 28%, and many people, like the Vickers, can't afford last rites; two, the county's $21,000 annual budget to bury unclaimed bodies ran out in June.
"One way we look back at a culture is how they dispose of their dead," said the county's chief medical examiner, Carl Schmidt, who has been in his position for 15 years. "We see people here that society was not taking care of before they died -- and society is having difficulty taking care of them after they are dead."
Detroit is not alone. The Los Angeles coroner's office said it, too, has seen an increase in the number of bodies abandoned. That's not surprising at a time when unemployment tops 10% in many cities and the median cost of a funeral in America hovers around $7,000. Cremation can cost $2,000.
Little help available
This is an issue of concern, said the Detroit mayor's office, but the city can't afford to offer any assistance. "The failure, through inability or choice, to bury the deceased is a reflection of the economic conditions that have arrested this region, where people are now forced to make emotionally compromised choices," said a spokesman in a prepared statement.
The state, however, does have some funds available to assist with burial costs. For fiscal year 2009, Michigan allocated $4.9 million for assistance, and of that, approximately $135,500 remains. Those in need of assistance can find grant applications at Michigan Department of Human Services offices, most funeral homes, and at Michigan.gov/dhs.
The Vickers did not know about the funds until CNNMoney notified them. But, fortunately, they were eventually able to scrape together the $695 and will be able to cremate their aunt with help from Social Security, social services and their aunt's church.
The way Darrell sees it, the stimulus package should have helped people in situations like this, rather than to "spark the economy and sell cars. We can't take care of our own when it comes to laying them to rest and letting them rest in peace."
'Reflection of the economy'
Believe it or not, the Vickers are among the fortunate.
Dozens of other bodies remain, some never identified. And they can't be disposed of until their families come forward or the county's burial fund is replenished when the 2010 budget is approved. There were 66 bodies before Aunt Nancy's, and they'll be interred on a first-arrived-first-buried basis.
"There are many people with sad lives," said Schmidt. "But it is even sadder when even after you are dead, there is no one to pick you up."
And in a town with so much need, Schmidt noted one more cause for concern: The increase in unclaimed bodies is not due to an increase in murders -- though the rate remains high -- but due to natural causes. Schmidt speculated that many of the deceased didn't have health insurance or could no longer afford medication for the chronic medical conditions.
"If anything is a reflection of the economy, that is a reflection of the economy," he said.
But this messy reality is shielded behind the Wayne County morgue's perfectly trimmed hedges and pristine brick walls.
"I feel sadness because I can recall when it [Detroit] was really booming," said investigator Samuels. "I don't think a lot of people are really aware that these types of things are happening in such a wide area."FED Appeals Court Order to Identify Banks Receiving Loans
Image by r0b0r0b via Flickr
The central bank refused to divulge details about the companies participating in its 10 remaining lending programs, saying that doing so might set off a run by depositors. The Fed had until today to seek a reversal of the Aug. 24 decision by Manhattan Chief U.S. District Judge Loretta Preska, who ruled the Fed must release the identities, as well as disclose loan amounts and the assets put up as collateral.
Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, filed suit against the Fed on Nov. 7 on behalf of its Bloomberg News unit. Scott Rose, a lawyer with New York-based Willkie Farr & Gallagher LLP, who represents Bloomberg, said the appeal is being filed with the U.S. Court of Appeals in New York. The filing couldn’t be immediately confirmed in court records.
Romanian Government Collapses
Wall Street Journal
Romania's coalition government collapsed Thursday after Social Democratic ministers quit in protest at the firing of the interior minister.
Social Democratic Party leader Mircea Geoana said the nine ministers resigned "in solidarity" with Dan Nica, a party member who was fired by Prime Minister Emil Boc on Monday over comments the interior minister made about potential fraud in elections scheduled for Nov. 22.
The comments were widely interpreted as an accusation that Mr. Boc's Liberal Democrats might try to cheat to get President Traian Basescu re-elected.
The coalition collapse goes far beyond the nine ministers. Thousands of Social Democrats will lose their jobs and positions in the ministries and local administration throughout Romania.
"Throwing Romania in this political crisis will have grave effects," said Mr. Nica, who was also deputy prime minister, as he stood with the ministers who resigned. "Each minister tried to do their duty," He vowed the party would return to the government after presidential elections.
Mr. Geoana blamed Mr. Basescu for instigating the political crisis ahead of elections, saying that it created further uncertainty in Romania. The country is mired in a deep recession, and is dependent on a loan from the International Monetary Fund to pay state sector salaries. In recent weeks there have been protests and strikes by railway workers, magistrates and some public workers.
Liberal Democrat Adriean Videanu, who is economy minister, said the Social Democrats were to blame for the crisis and called the party "hypocritical" for walking out.
Mr. Basescu called the two parties to mediate on Tuesday and suggested that a politically independent minister or a minister from an opposition party be named. The Social Democrats refused. According to a coalition agreement between the two parties, the interior ministry is led by the Social Democrats.
Mr. Boc named Vasile Blaga, a Liberal Democrat who is close to Mr. Basescu, as the interim interior minister Tuesday. The ministry is one of the country's most powerful because it controls a controversial domestic intelligence agency and has almost 200,000 employees. Both Messrs. Basescu and Geoana are expected to run in the presidential elections.
Romania's coalition government collapsed Thursday after Social Democratic ministers quit in protest at the firing of the interior minister.
Social Democratic Party leader Mircea Geoana said the nine ministers resigned "in solidarity" with Dan Nica, a party member who was fired by Prime Minister Emil Boc on Monday over comments the interior minister made about potential fraud in elections scheduled for Nov. 22.
The comments were widely interpreted as an accusation that Mr. Boc's Liberal Democrats might try to cheat to get President Traian Basescu re-elected.
The coalition collapse goes far beyond the nine ministers. Thousands of Social Democrats will lose their jobs and positions in the ministries and local administration throughout Romania.
"Throwing Romania in this political crisis will have grave effects," said Mr. Nica, who was also deputy prime minister, as he stood with the ministers who resigned. "Each minister tried to do their duty," He vowed the party would return to the government after presidential elections.
Mr. Geoana blamed Mr. Basescu for instigating the political crisis ahead of elections, saying that it created further uncertainty in Romania. The country is mired in a deep recession, and is dependent on a loan from the International Monetary Fund to pay state sector salaries. In recent weeks there have been protests and strikes by railway workers, magistrates and some public workers.
Liberal Democrat Adriean Videanu, who is economy minister, said the Social Democrats were to blame for the crisis and called the party "hypocritical" for walking out.
Mr. Basescu called the two parties to mediate on Tuesday and suggested that a politically independent minister or a minister from an opposition party be named. The Social Democrats refused. According to a coalition agreement between the two parties, the interior ministry is led by the Social Democrats.
Mr. Boc named Vasile Blaga, a Liberal Democrat who is close to Mr. Basescu, as the interim interior minister Tuesday. The ministry is one of the country's most powerful because it controls a controversial domestic intelligence agency and has almost 200,000 employees. Both Messrs. Basescu and Geoana are expected to run in the presidential elections.
U.S. Beefs up Pre-Attack Media Blitz Vilifying Iran
Image via Wikipedia
The story line that dominated media coverage of the second Iranian uranium enrichment facility last week was the official assertion that U.S. intelligence had caught Iran trying to conceal a "secret" nuclear facility.
Analysis by Gareth Porter
But an analysis of the transcript of that briefing by senior administration officials that was the sole basis for the news stories and other evidence reveals damaging admissions, conflicts with the facts and unanswered questions that undermine its credibility.
Iran's notification to the International Atomic Energy Agency (IAEA) of the second enrichment facility in a letter on Sep. 21 was buried deep in most of the news stories and explained as a response to being detected by U.S. intelligence. In reporting the story in that way, journalists were relying entirely on the testimony of "senior administration officials" who briefed them at the G20 summit in Pittsburgh Friday.
U.S. intelligence had "learned that the Iranians learned that the secrecy of the facility was compromised", one of the officials said, according to the White House transcript. The Iranians had informed the IAEA, he asserted, because "they came to believe that the value of the facility as a secret facility was no longer valid..."
Later in the briefing, however, the official said "we believe", rather than "we learned", in referring to that claim, indicating that it is only an inference rather than being based on hard intelligence.
The official refused to explain how U.S. analysts had arrived at that conclusion, but an analysis by the defence intelligence consulting firm IHS Jane's of a satellite photo of the site taken Saturday said there is a surface-to-air missile system located at the site.
Since surface-to-air missiles protect many Iranian military sites, however, their presence at the Qom site doesn't necessarily mean that Iran believed that Washington had just discovered the enrichment plant.
The official said the administration had organised an intelligence briefing on the facility for the IAEA during the summer on the assumption that the Iranians might "choose to disclose the facility themselves". But he offered no explanation for the fact that there had been no briefing given to the IAEA or anyone else until Sep. 24 - three days after the Iranians disclosed the existence of the facility.
A major question surrounding the official story is why the Barack Obama administration had not done anything – and apparently had no plans to do anything - with its intelligence on the Iranian facility at Qom prior to the Iranian letter to the IAEA. When asked whether the administration had intended to keep the information in its intelligence briefing secret even after the meeting with the Iranians on Oct. 1, the senior official answered obliquely but revealingly, "I think it's impossible to turn back the clock and say what might have been otherwise."
In effect, the answer was no, there had been no plan for briefing the IAEA or anyone.
News media played up the statement by the senior administration official that U.S. intelligence had been "aware of this facility for years".
But what was not reported was that he meant only that the U.S. was aware of a possible nuclear site, not one whose function was known.
The official in question acknowledged the analysts had not been able to identify it as an enrichment facility for a long time. In the "very early stage of construction," said the official, "a facility like this could have multiple uses." Intelligence analysts had to "wait until the facility had reached the stage of construction where it was undeniably intended for use as a centrifuge facility," he explained.
The fact that the administration had made no move to brief the IAEA or other governments on the site before Iran revealed its existence suggests that site had not yet reached that stage where the evidence was unambiguous.
A former U.S. official who has seen the summary of the administration's intelligence used to brief foreign governments told IPS he doubts the intelligence community had hard evidence that the Qom site was an enrichment plant. "I think they didn't have the goods on them," he said.
Also misleading was the official briefing's characterisation of the intelligence assessment on the purpose of the enrichment plant. The briefing concluded that the Qom facility must be for production of weapons-grade enriched uranium, because it will accommodate only 3,000 centrifuges, which would be too few to provide fuel for a nuclear power plant.
According to the former U.S. official who has read the briefing paper on the intelligence assessment, however, the paper says explicitly that the Qom facility is "a possible military facility". That language indicates that intelligence analysts have suggested that the facility may be for making low-enriched rather than for high-enriched, bomb-grade uranium.
It also implies that the senior administration official briefing the press was deliberately portraying the new enrichment facility in more menacing terms than the actual intelligence assessment.
Iranian President Mahmoud Ahmadinejad's offer the day after the denunciation of the site by U.S., British and French leaders to allow IAEA monitoring of the plant will make it far more difficult to argue that it was meant to serve military purposes.
The circumstantial evidence suggests that Iran never intended to keep the Qom facility secret from the IAEA but was waiting to make it public at a moment that served its political-diplomatic objectives.
The Iranian government is well aware of U.S. capabilities for monitoring from satellite photographs any site in Iran that exhibits certain characteristics.
Iran obviously wanted to make the existence of the Qom site public before construction on the site would clearly indicate an enrichment purpose. But it gave the IAEA no details in its initial announcement, evidently hoping to find out whether and how much the United States already knew about it.
The specific timing of the Iranian letter, however, appears to be related to the upcoming talks between Iran and the P5+1 - China, France, Britain, Russia, the United States and Germany - and an emerging Iranian strategy of smaller back-up nuclear facilities that would assure continuity if Natanz were attacked.
The Iranian announcement of that decision on Sep. 14 coincided with a statement by the head of Iran's atomic energy organisation, Ali Akbar Salehi, warning against preemptive strikes against the country's nuclear facilities.
The day after the United States, Britain and France denounced the Qom facility as part of a deception, Salehi said, "Considering the threats, our organisation decided to do what is necessary to preserve and continue our nuclear activities. So we decided to build new installations which will guarantee the continuation of our nuclear activities which will never stop at any cost."
As satellite photos of the site show, the enrichment facility at Qom is being built into the side of a mountain, making it less vulnerable to destruction, even with the latest bunker-busting U.S. bombs.
The pro-administration newspaper Kayhan quoted an "informed official" as saying that Iran had told the IAEA in 2004 that it had to do something about the threat of attack on its nuclear facilities "repeatedly posed by the western countries".
The government newspaper called the existence of the second uranium enrichment plan "a winning card" that would increase Iran's bargaining power in the talks. That presumably referred to neutralising the ultimate coercive threat against Iran by the United States.
*Gareth Porter is an investigative historian and journalist specialising in U.S. national security policy. The paperback edition of his latest book, "Perils of Dominance: Imbalance of Power and the Road to War in Vietnam", was published in 2006.
Wednesday, September 30, 2009
Gore Vidal blames coming US dictatorship on Bush; thinks Obama may be assassinated
I have always admired Gore Vidal's intellect and political insight. Who can forget Vidal's run-in with that pseudo intellectual phony William F. Buckley?
Then I read this from Timesonline:
“One thing I have hated all my life are LIARS and I live in a nation of them. It was not always the case. I don’t demand honour, that can be lies too. I don’t say there was a golden age, but there was an age of general intelligence. We had a watchdog, the media. Would that it was. They’re busy preparing us for an Iranian war.”Say again! How can a man of Vidal's intellectual stature be so blind to Obama's devotion to Wall Street oligarchs, and his administration's never ending stream of lies and deception? Vidal goes on to portray Obama as a victim, a man whose decisions are controlled by domineering generals, a man who has squandered his potential, a man with no vision. One could almost confuse Vidal's characterization of Obama with a Manchurian Candidate, to which I might agree.
Gore Vidal says of Obama “because he doesn’t lie. We know the fool from Arizona [as he calls John McCain] is a liar. We never got the real story of how McCain crashed his plane [in 1967 near Hanoi, North Vietnam] and was held captive.”
Vidal predicts dictatorship in the U.S. and blames it on Bush and the stupidity of the American people:
“We’ll have a military dictatorship fairly soon, on the basis that nobody else can hold everything together. Obama would have been better off focusing on educating the American people. His problem is being over-educated. He doesn’t realize how dim-witted and ignorant his audience is. Benjamin Franklin said that the system would fail because of the corruption of the people and that happened under Bush.”Gore Vidal's belief in party politics is a huge flaw, especially considering that it's painfully clear the U.S. political landscape is and has been dominated by a two-party monopoly system in which both parties are bought and sold to the highest corporate bidder.
writes: Has [Vidal] met Obama? “No,” he says quietly, “I’ve had my time with presidents.” Vidal raises his fingers to signify a gun and mutters: “Bang bang.” He is referring to the possibility of Obama being assassinated. “Just a mysterious lone gunman lurking in the shadows of the capital,” he says in a wry, dreamy way.
24th Employee Commits Suicide at Troubled French Firm
Sky NewsFrance Telecom chief executive Didier Lombard holds a press conference
A 24th France Telecom employee has killed himself in what the company says is a "suicide spiral". The 51-year-old father-of-two hurled himself to his death from a bridge onto a busy road in the Haute-Savoie region of the country. In a letter to his wife, he blamed the unbearable "atmosphere" at his workplace.
France Telecom has been dogged by an series of suicides in the last 18 months. The deaths include a woman who jumped from her office window in the summer, while another man survived stabbing himself in the stomach during a work meeting. Unions say a drive to restructure the company in the face of the global recession is behind the deaths.
A French Telecom worker explains why he stabbed himself.I decided to do it just at the moment when they told me I was good for nothing.
The company laid off 22,000 workers between 2006 and 2008 while staff say changing working practices and poor management have placed intolerable pressure on workers. Labour minister Xavier Darcos this month ordered an official to monitor France Telecom's health and safety meetings.
The company has also been told to delay any relocation plans until October 31. France Telecom employs around 100,000 people in France and insists the number of suicides is in line with the national average. It said some of the deaths were down to copycat behaviour. But one union official said workers had been treated like "sausage meat".
Tuesday, September 29, 2009
CDC Drafts “Isolation Order” for H1N1
Kurt Nimmo
PrisonPlanet.com
September 29, 2009
The following draft of an “isolation order” was discovered on the CDC’s website. It is a template for state and local officials to impose quarantines and what would effectively be martial law.
“Your illness [as determined by state and local officials] requires that you be isolated and requires further public health investigation and monitoring.”
Failure to obey will result in imprisonment without bail prior to trial and the possiblity of a two year prison term.
In other words, according to this document, officials can impose quarantine without evidence that somebody is actually infected with a virus that is now negligible at best. It may also be used to quarantine potentially millions of people suffering from any number of illnesses — or not suffering from any disease at the discretion of the state — that have nothing to do with H1N1. It is basically a carte blanche for martial law under the cover of protecting the public from a communicable disease that is demonstrably a manufactured and weaponized threat.
Buy Health Insurance or Go To Jail
Image by sean dreilinger via Flickr
Rhetorical Tax Evasion
The IRS says it will fine or jail you for not paying Obama's mandate levy.
President Obama's effort to deny that his mandate to buy insurance is a tax has taken another thumping, this time from fellow Democrats in the Senate Finance Committee.
Chairman Max Baucus's bill includes the so-called individual mandate, along with what he calls a $1,900 "excise tax" if you don't buy health insurance. (It had been as much as $3,800 but Democrats reduced the amount last week to minimize the political sticker shock.) And, lo, it turns out that if you don't pay that tax, the IRS could punish you with a $25,000 fine or up to a year in jail, or both.
Under questioning last week, Tom Barthold, the chief of staff of the Joint Committee on Taxation, admitted that the individual mandate would become a part of the Internal Revenue Code and that failing to comply "could be criminal, yes, if it were considered an attempt to defraud." Mr. Barthold noted in a follow-up letter that the willful failure to file would be a simple misdemeanor, punishable by the $25,000 fine or jail time under Section 7203.
So failure to pay the mandate would be enforced like tax evasion, but Mr. Obama still claims it isn't a tax. "You can't just make up that language and decide that that's called a tax increase," Mr. Obama insisted last week to ABC interviewer George Stephanopoulos. Accusing critics of dishonesty is becoming this President's default argument, but is Mr. Barthold also part of the plot?
In the 1994 health-care debate, the Congressional Budget Office called the individual mandate "an unprecedented form of federal action." This is because "The government has never required people to buy any good or service as a condition of lawful residence in the United States."
This coercion will be even more onerous today because everyone will be forced to buy insurance that the new taxes and regulations of ObamaCare will make far more expensive. Too bad Mr. Obama's rhetorical tax evasion can't be punished by the IRS.
FDIC Fund Is Now Negative
In an unprecedented disclosure, the FDIC has highlighted that it expects the DIF reserve ratio to be negative as of September 30. As there are a whopping 48 hours before that deadline, one can safely assume that the DIF is now well into negative territory: as of today depositors have no insurance courtesy of a banking system that has leeched out all the capital of the Federal Deposit Insurance Corporation. Let's pray there is no run on the bank soon.
Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative. This reflects, in part, an increase in provisioning for anticipated failures. In contrast, cash and marketable securities available to resolve failed institutions remain positive.
Additionally, the FDIC has now raised its expectation for bank failure costs from $70 billion $100 billion. Feel free to expect this number to continue growing.
Staff has also projected the Fund balance and reserve ratio for each quarter over the next several years using the most recently available information on expected failures and loss rates and statistical analyses of trends in CAMELS downgrades, failure rates and loss rates. Staff projects that, over the period 2009 through 2013, the Fund could incur approximately $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010. Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009. Staff projects that most of these costs will occur in 2009 and 2010.
First Mary Schapiro has failed at her task of "regulating" anything on Wall Street, and now Sheila Bair presides over a newly insolvent institution. Chalk one up to Washington's success at "containing" the crisis. Zero Hedge wishes Ms. Bair all the luck in the world in returning the DIF to its statutory minimum requirement of 1.15% of all insured deposits (a shortfall of a mere hundred billion or so). Maybe she can convert the FDIC to a REIT and have Merrill Lynch do a concurrent IPO and follow-on offering (while Goldman raises it to a Conviction Buy which incorporates the firm's expectations for 10% GDP growth in 2010 coupled with projections for $1,000 per barrel of crude)?
FDIC's full memorandum outlining its failure can be found here.
Monday, September 28, 2009
Retail Stores Closing Doors
Image via Wikipedia
From Blockbuster to Payless, this updated 2009 roundup has the latest news from the third quarter. See which retailers are closing (at least some) of their doors.
Saudis Give Israel Green Light to Strike Iran
Image via Wikipedia
Israeli fighter jets have been allowed to use Saudi airspace to launch go-it-alone air strikes on Iranian nuclear installations, says a recent report. The issue ahs been discussed in a closed-door meeting in London, where British Intelligence Chief Sir John Scarlett his Israeli counterpart, Meir Dagan, and Saudi official have been present Daily Express.
According to the report Scarlett has been told that Saudi airspace would be at Israel's disposal should Tel Aviv decide to move forward with his military plans against Iran. The British daily added the likelihood of an Israeli attack against Iran has increased significantly after the country announced plans to launch its second enrichment facility in the central city of Qom.
In line with its policy of nuclear transparency, Iran announced the construction of a second enrichment plant in a letter to the UN nuclear watchdog on September 21. The new plant is due to produce enriched uranium up to 5 percent. The letter was sent 12 months before the agency's regulations oblige its members states to inform of new developments.
With eyes firmly fixed on Iran's nuclear progressions, the right-wing government of Israeli Prime Minister Benjamin Netanyahu has repeatedly threatened to bomb the country's enrichment facilities out of existence. Tel Aviv accuses Tehran of nuclear weapons development - a charge rejected by both Iran and the UN nuclear watchdog, which has so far made "21 unannounced inspections" of the country's nuclear facilities.
The UN nuclear watchdog in its previous reports has confirmed that Iran only enriches uranium-235 to a level of "less than 5 percent." Uranium, which fuels a nuclear power plant, can be used for military purposes only if enriched to high levels of above 90 percent.
Details of the controversial Israeli plans to attack Iran emerged after John Bolton, the former US ambassador to the United Nations, recently told a group of intelligence analysts that “Riyadh certainly approves” of Israel's use of Saudi airspace in the event of war with Iran.
Bolton, had previously said he had discussed the possibility with Saudi officials in closed-door meetings. “None of them would say anything about it publicly but they would certainly acquiesce in an overflight if the Israelis didn't trumpet it as a big success.”
The recent revelations follow a flurry of media reports in July, which suggested the Saudi government had approved the use of its airspace for an attack. While Saudi officials deny having diplomatic ties with Tel Aviv, an Israeli defense source has confirmed that the Mossad spy agency maintained “working relations” with the kingdom.
According to a study published bythe Center for Strategic and International Studies, a military exchange between Iran and Israel could result in the death of as many as 6 million people.
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