Massive solar flare narrowly misses Earth, EMP disaster barely avoided

The earth barely missed taking a massive solar punch in the teeth two weeks ago, an "electromagnetic pulse" so big that it could have knocked out power, cars and iPhones throughout the United States.

Two EMP experts told Secrets that the EMP flashed through earth's typical orbit around the sun about two weeks before the planet got there.

"The world escaped an EMP catastrophe," said Henry Cooper, who led strategic arms negotiations with the Soviet Union under President Reagan, and who now heads High Frontier, a group pushing for missile defense.

"There had been a near miss about two weeks ago, a Carrington-class coronal mass ejection crossed the orbit of the Earth and basically just missed us," said Peter Vincent Pry, who served on the Congressional EMP Threat Commission from 2001-2008. He was referring to the 1859 EMP named after astronomer Richard Carrington that melted telegraph lines in Europe and North America. Read more >>

Fiscal cliff negotiations reviving debate about screwing Retirees out of Social Security

Yes, we can fix Social Security (but it won't be pretty)
The fiscal cliff negotiations are reviving the debate about that other financial elephant in the room: Social Security. Under current government estimates, Social Security could face funding shortfalls in about two decades if nothing changes. That’s because the U.S. population is aging -- and generally living longer.

That sounds like a disheartening scenario for workers who are currently paying into Social Security and worry that they won’t get as much out of it once they retire.  About half of the Americans polled by Pew Research Center earlier this year believe it’s not likely there will be enough money in Social Security and Medicare to maintain current benefit levels into the future.

But experts say there are ways to fix Social Security. Politicians just may not like trying to sell those changes to the American people.

It has happened before, though. In the mid-1980s, none other than President Ronald Reagan, working with Democrats in Congress, oversaw a major overhaul of the nation’s retirement safety net.

That’s something many say seems less likely these days.

“There are politicians – and especially in the Senate but also in the House as well – who could work together and come to an agreement,” said Alan Auerbach, a professor of law and economics at the University of California, Berkeley. “But they’re not the majority of Congress.” Read more >>

Truth Has Fallen and Taken Liberty With It

PAUL CRAIG ROBERTS
There was a time when the pen was mightier than the sword. That was a time when people believed in truth and regarded truth as an independent power and not as an auxiliary for government, class, race, ideological, personal, or financial interest.

Today Americans are ruled by propaganda. Americans have little regard for truth, little access to it, and little ability to recognize it.

Truth is an unwelcome entity. It is disturbing. It is off limits. Those who speak it run the risk of being branded “anti-American,” “anti-semite” or “conspiracy theorist.”

Truth is an inconvenience for government and for the interest groups whose campaign contributions control government.

Truth is an inconvenience for prosecutors who want convictions, not the discovery of innocence or guilt.

Truth is inconvenient for ideologues.

Today many whose goal once was the discovery of truth are now paid handsomely to hide it. “Free market economists” are paid to sell offshoring to the American people. High-productivity, high value-added American jobs are denigrated as dirty, old industrial jobs. Relicts from long ago, we are best shed of them. Their place has been taken by “the New Economy,” a mythical economy that allegedly consists of high-tech white collar jobs in which Americans innovate and finance activities that occur offshore. All Americans need in order to participate in this “new economy” are finance degrees from Ivy League universities, and then they will work on Wall Street at million dollar jobs.

Economists who were once respectable took money to contribute to this myth of “the New Economy.”

And not only economists sell their souls for filthy lucre. Recently we have had reports of medical doctors who, for money, have published in peer-reviewed journals concocted “studies” that hype this or that new medicine produced by pharmaceutical companies that paid for the “studies.”

The Council of Europe is investigating the drug companies’ role in hyping a false swine flu pandemic in order to gain billions of dollars in sales of the vaccine.

The media helped the US military hype its recent Marja offensive in Afghanistan, describing Marja as a city of 80,000 under Taliban control. It turns out that Marja is not urban but a collection of village farms.

And there is the global warming scandal, in which NGOs. the UN, and the nuclear industry colluded in concocting a doomsday scenario in order to create profit in pollution.

Wherever one looks, truth has fallen to money.

Wherever money is insufficient to bury the truth, ignorance, propaganda, and short memories finish the job.

I remember when, following CIA director William Colby’s testimony before the Church Committee in the mid-1970s, presidents Gerald Ford and Ronald Reagan issued executive orders preventing the CIA and U.S. black-op groups from assassinating foreign leaders. In 2010 the US Congress was told by Dennis Blair, head of national intelligence, that the US now assassinates its own citizens in addition to foreign leaders.

When Blair told the House Intelligence Committee that US citizens no longer needed to be arrested, charged, tried, and convicted of a capital crime, just murdered on suspicion alone of being a “threat,” he wasn’t impeached. No investigation pursued. Nothing happened. There was no Church Committee. In the mid-1970s the CIA got into trouble for plots to kill Castro. Today it is American citizens who are on the hit list. Whatever objections there might be don’t carry any weight. No one in government is in any trouble over the assassination of U.S. citizens by the U.S. government.

As an economist, I am astonished that the American economics profession has no awareness whatsoever that the U.S. economy has been destroyed by the offshoring of U.S. GDP to overseas countries. U.S. corporations, in pursuit of absolute advantage or lowest labor costs and maximum CEO “performance bonuses,” have moved the production of goods and services marketed to Americans to China, India, and elsewhere abroad. When I read economists describe offshoring as free trade based on comparative advantage, I realize that there is no intelligence or integrity in the American economics profession.

Intelligence and integrity have been purchased by money. The transnational or global U.S. corporations pay multi-million dollar compensation packages to top managers, who achieve these “performance awards” by replacing U.S. labor with foreign labor. While Washington worries about “the Muslim threat,” Wall Street, U.S. corporations and “free market” shills destroy the U.S. economy and the prospects of tens of millions of Americans.

Americans, or most of them, have proved to be putty in the hands of the police state.

Americans have bought into the government’s claim that security requires the suspension of civil liberties and accountable government. Astonishingly, Americans, or most of them, believe that civil liberties, such as habeas corpus and due process, protect “terrorists,” and not themselves. Many also believe that the Constitution is a tired old document that prevents government from exercising the kind of police state powers necessary to keep Americans safe and free.

Most Americans are unlikely to hear from anyone who would tell them any different.

I was associate editor and columnist for the Wall Street Journal. I was Business Week’s first outside columnist, a position I held for 15 years. I was columnist for a decade for Scripps Howard News Service, carried in 300 newspapers. I was a columnist for the Washington Times and for newspapers in France and Italy and for a magazine in Germany. I was a contributor to the New York Times and a regular feature in the Los Angeles Times. Today I cannot publish in, or appear on, the American “mainstream media.”

For the last six years I have been banned from the “mainstream media.” My last column in the New York Times appeared in January, 2004, coauthored with Democratic U.S. Senator Charles Schumer representing New York. We addressed the offshoring of U.S. jobs. Our op-ed article produced a conference at the Brookings Institution in Washington, D.C. and live coverage by C-Span. A debate was launched. No such thing could happen today.

For years I was a mainstay at the Washington Times, producing credibility for the Moony newspaper as a Business Week columnist, former Wall Street Journal editor, and former Assistant Secretary of the U.S. Treasury. But when I began criticizing Bush’s wars of aggression, the order came down to Mary Lou Forbes to cancel my column.

The American corporate media does not serve the truth. It serves the government and the interest groups that empower the government.

America’s fate was sealed when the public and the anti-war movement bought the government’s 9/11 conspiracy theory. The government’s account of 9/11 is contradicted by much evidence. Nevertheless, this defining event of our time, which has launched the US on interminable wars of aggression and a domestic police state, is a taboo topic for investigation in the media. It is pointless to complain of war and a police state when one accepts the premise upon which they are based.

These trillion dollar wars have created financing problems for Washington’s deficits and threaten the U.S. dollar’s role as world reserve currency. The wars and the pressure that the budget deficits put on the dollar’s value have put Social Security and Medicare on the chopping block. Former Goldman Sachs chairman and U.S. Treasury Secretary Hank Paulson is after these protections for the elderly. Fed chairman Bernanke is also after them. The Republicans are after them as well. These protections are called “entitlements” as if they are some sort of welfare that people have not paid for in payroll taxes all their working lives.

With over 21 per cent unemployment as measured by the methodology of 1980, with American jobs, GDP, and technology having been given to China and India, with war being Washington’s greatest commitment, with the dollar over-burdened with debt, with civil liberty sacrificed to the “war on terror,” the liberty and prosperity of the American people have been thrown into the trash bin of history.

The militarism of the U.S. and Israeli states, and Wall Street and corporate greed, will now run their course. As the pen is censored and its might extinguished, I am signing off.

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com

Another toothless bank “reform” from Obama

Tom Eley and Barry Grey
Flanked by former Federal Reserve Chairman Paul Volcker, President Obama on Thursday announced new proposals that he claimed would limit the ability of the major banks to profit from risky speculative investments.

The brief appearance before the press corps, replete with bank-bashing demagogy, was a transparent effort to give his persona a populist gloss, two days after the Democrats suffered a humiliating defeat in the Massachusetts Senate election to fill the vacancy left by the death of Edward Kennedy.

Obama was vague on the precise content of the regulations he was proposing, which he said would complement the bank regulatory overhaul passed last December by the House of Representatives. That bill, drafted in close consultation between the White House, Congressional Democrats and Wall Street CEOs and further diluted after heavy lobbying by the banks, does nothing to limit, let alone end, the unregulated “shadow” banking system that played a major role in bringing the US and global financial system to the brink of collapse.

Obama specifically denounced commercial banks making use of government support to engage in speculative trading on their own behalf—a practice known as proprietary trading.

He suggested that he wanted to revive some aspects of the separation between commercial and investment banking that was a cornerstone of the bank reform laid down by the 1933 Glass-Steagall Act. The law was repealed in 1999 during the Clinton administration. Clinton’s treasury secretary at the time, Lawrence Summers, is now Obama’s chief economic adviser.

The announcement, hastily organized, was little more than a public relations stunt, designed to placate mounting popular anger over the administration’s subservience to Wall Street and its refusal to take any measures to address the jobs crisis and growing social distress. Obama is well aware that any measures that might seriously rein in the banks will be blocked in Congress or watered down to the point of irrelevance. He and his political advisers calculated that a populist gesture would, in practice, commit his administration to nothing.

He demonstratively did not call for breaking up the banking giants--such as JPMorgan and Goldman Sachs--which have grown bigger and more powerful as a result of the administration’s policies.

The presence of Volcker underscored the cynicism of the announcement. In recent months Volcker, the chairman of Obama’s Economic Recovery Advisory Board, has been publicly calling for measures to limit proprietary trading and other speculative practices by commercial banks, i.e., institutions that hold the deposits of ordinary people and are therefore afforded special protections by the Federal Reserve Board and the Federal Deposit Insurance Corporation. Of the major banks, these include JPMorgan Chase, Citigroup, Bank of America and Wells Fargo.

For months, Volcker has been ignored or ridiculed by Obama administration officials for suggesting even a partial return to the limits on bank speculation imposed under Glass-Steagall. Now, in the wake of the political disaster suffered by the Democrats in Massachusetts, he has been brought forward to demonstrate the supposed “toughness” of Obama toward Wall Street.

Volcker, however, is hardly a fortuitous choice to symbolize the administration’s newfound determination to defend the public against the bankers. As Fed chairman from 1979, under Jimmy Carter, to 1987, under Ronald Reagan, he engineered a deep recession by raising interest rates as high as 20 percent. This was the centerpiece of an offensive against the working class that employed mass unemployment to beat back its militant opposition and impose wage cuts, attacks on benefits and speedup across the economy.

Volcker publicly supported the unionbusting and strikebreaking that characterized the 1980s, carried out with the collusion of the AFL-CIO. He famously declared that Reagan’s busting of the 1981 PATCO air traffic controllers’ strike and outlawing of the union was his greatest contribution to reining in inflation.

Acknowledging that the financial system is “still operating under the same rules that led to its near-collapse,” Obama declared that “never again will the American taxpayer be held hostage by a bank that is too big to fail.”

He continued: “We simply cannot accept a system in which hedge funds or private equity firms inside banks can place huge, risky bets that are subsidized by taxpayers and that could pose a conflict of interest. And we cannot accept a system in which shareholders make money on these operations if the bank wins, but taxpayers foot the bill if the bank loses.”

Such statements have no credibility coming from a president who has presided over a vast expansion of the multi-trillion-dollar bailout of the banks and has opposed any restraints on bankers’ pay. If the banks are “still operating under the same rules” as before the crash of 2008, that is because his administration has refused to change the rules.

Obama’s phony bank-bashing was for public consumption. Next Tuesday, Treasury Secretary Timothy Geithner, who as president of the Federal Reserve Bank of New York played a key role in the bank bailout, will meet behind closed doors with more than 40 chief executives of financial institutions to reassure them and give them the real dope on Obama’s proposals.

Wall Street struck back at the mere suggestion of new regulations, driving down bank stocks and ending the trading day with the Dow down 213 points.

U.S. CRASHING INTO A BRICK WALL AT HIGH SPEED

Louis James
International Speculator
L: So, Ben Bernanke just got named “Person of the Year” by Time magazine. I know you must have some thoughts in response to this auspicious event?

Doug: I just don’t know where they find these people... On the other hand, Slime magazine has always said that those named Person of the Year are not necessarily the most laudable people, but those who’ve had the greatest impact on the events in a given year. That would explain Hitler’s achievement of the same honor, and Stalin getting the nod twice.

L: Not to mention Bin Laden.

Doug: Yes, let’s not mention him. This is different: Bernanke isn’t being held up as a villain, but as a hero.

L: The tagline Time puts on it is: “The story of the year was a weak economy that could have been much, much weaker. How the mild-mannered man who runs the Federal Reserve prevented an economic catastrophe.”

Doug: Right. And Bernanke is always presented as a Ph.D., a scholar of the Great Depression, its causes, and how to cure such an economic downturn. But he hasn’t prevented an economic catastrophe – he’s done just the opposite of what needs to be done, and there’s going to be hell to pay.

It’s quite perverse. Look at Alan Greenspan. In the 1960s, he was an acolyte of Ayn Rand and wrote a famous essay defending the gold standard, which I read in her book, Capitalism: The Unknown Ideal. And then he goes on to become the most inflationary Fed chairman in history – until Bernanke superseded him.

The really shameful thing about Greenspan is, not only were his policies the igniters of the giant bubbles we saw in the stock market and then in real estate, but since he was associated with pure capitalism through Rand, his failures through government intervention in the market have falsely discredited capitalism as a system in many people’s view.

L: The same could be said of Ronald Reagan. He got elected on a libertarian platform, speaking of free enterprise and getting the government off the back of the little guy. So now many people think that the chronic deficits and other problems of the Reagan years proved that limited government doesn’t work. It’s the same swindle you see in intro economics courses that teach young people that the Great Depression proved that laissez-faire capitalism doesn’t work – when it was, again, government intervention in the market that created the Great Depression.

Doug: That’s right. Reagan allowed Congress to run gigantic, greater-than-ever-seen-before deficits that still have to be paid for, either through higher taxes or debasing the currency, or both – or selling off the assets of the United States to foreign creditors. The Reagan deficits are nothing, of course, compared to the current ones.

L: I wonder how much we could get for the Statue of Liberty? She’s got to be feeling uncomfortable in a country that no longer wants anyone’s tired, poor, huddled masses, yearning to breathe free.

Doug: That’s a good question. The copper alone is worth a lot of money at this point.

L: A quick web search shows two frequently cited figures for Miss Liberty’s copper skin: one of about 60,000 pounds, the other 179,000 pounds. At three bucks a pound of copper, that’s either $180,000 or something over half a million bucks – a drop in the ocean of America’s national debt.

Doug: I would have thought it was more, but of course the dollar isn’t worth a damn anymore. The real value would be as a work of art, of course. Although it must be said that considerations like that didn’t stop peasants in the Middle Ages from melting down Roman bronzes and disassembling classical buildings because they needed the raw materials. I wonder what it would fetch at a Sotheby’s auction? I’d guess the Chinese might be willing to pay half a billion or even a billion dollars to take the lady home. It’d be a good deal, since the ideals behind the statue are as dead as the Constitution itself.

L: Yes… we’re not using the Constitution either, maybe we should sell that to them as well. But even a billion dollars would still be a drop in America’s ocean of debt.

Doug: A billion is only a thousandth of a trillion, and they’re now thinking in trillions. Obama may soon have to ask his science czar what comes after a trillion.

Getting back to Bernanke, the situation just shows one more time how corrupt the U.S. educational system is. That someone can get a Ph.D. and become known as a scholar of the depression era, and draw exactly the wrong conclusions about absolutely everything concerning it – what caused it, how to cure it – and then be held up as a model of relevant and useful academics… It just goes to show how utterly beyond hope the situation is.

L: Well, given what you’ve said about the education system teaching mostly worthless BS, especially when it comes to business and economics, why should we expect anything other than BS from someone who’s got it Piled High & Deep?

Doug: [Chuckles] Yes, that is what Ph.D. stands for, after all. In areas other than hard science, it has value mostly as a trade credential with the chattering classes. Its value in the real world is usually negative.

L: Is it possible that he actually does know what really caused the Great Depression and our current economic difficulties, but is caught by politics and can’t do or say anything other than what he is doing? Back in Greenspan’s day, there were people who thought Greenspan still believed everything he wrote in his essay on the gold standard and was trying to balance what was politically feasible with what he knew to be right – that he was doing things he knew were harmful because if he didn’t do them, someone worse would do much more harm.

Doug: I asked Barbara Branden that one time, and that was her opinion. She thought he still believed in the free market and gold money. But a person who believes one thing and does another is usually called a hypocrite.

L: I think it was Ron Paul who once told me that he’d asked Greenspan about his essay defending the gold standard, and that Greenspan had told him that he still believed everything he wrote in the essay.

Doug: I think I’ve heard that story too. It’s an interesting conundrum. I’ve thought about what I’d do if I were president of the United States, or chairman of the Fed, if my choices were limited to what’s politically possible. The right thing now, which is to bring on a deflationary collapse that would liquidate much of the malinvestment of recent decades, is not politically possible. With more than 50% of the people in the United States being net recipients of government largesse, no one can get elected, nor stay elected, who applies the breaks to the gravy train. The system is totally corrupt at this point.

I think I read the other day that something like 15% of the population is now on some level of food stamp subsidy, and another 15% are eligible but don’t know it, or are not yet willing to accept the stigma. In the face of these kinds of facts, if anyone in power did what was necessary to liquidate past mistakes and get the economy back on a sound and sustainable path upwards, it would probably bring on a social revolution.

We’re going to have a social revolution anyway, and it’s probably better to have it sooner rather than later. This whole house of cards should have been collapsed back in the ‘60s, as opposed to having been built 40 stories higher since then. That just means it’ll be an even bigger mess when it does collapse. But it would take immense courage to set that collapse off deliberately. Whoever did it might well end up dead. And the same people who are cheerleading the current leadership’s disastrous moves would blame that courageous person for bringing on the United States’ second and Greater Depression. So, from at least a personal point of view, there’s nothing to be gained by doing the right thing. Although history would vindicate you, you’d be ostracized now.

L: That just raises an already impossibly high bar. The U.S. won’t be able to pay, when the bill comes due.

Doug: Yes. One of the most distressing things about this whole debacle is the total lack of intellectual honesty among any of the participants and decision-makers responsible for what’s going on – with Bernanke being perhaps the worst of all.

On July 1, 2005, Bernanke stated with great confidence that the U.S. was not experiencing a housing bubble, saying: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”

L: Wow – could he possibly have been more wrong about anything more important?

Doug: In November of the same year, he talked about derivatives, saying, “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” He also said, “The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”

And a couple months after that, back on housing again, he said, “Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

L: So much for the wisdom of the expert…

Doug: Well, he’s not stupid, not in the sense of being unintelligent – he’s obviously very intelligent – but I would say he’s stupid in a better, more sophisticated sense of the word. One that I think is more useful, that being: an unwitting tendency towards self-destruction. And I’m afraid his stupidity is not just going to drag down the U.S. financial system, but the U.S. itself with it.

What he said about the housing and derivatives bubbles shows that he either has no idea what’s going on, or he’s a pathological liar. Reality was totally absent from those two statements.

And in February of 2008, he said, “I expect there will be some failures of smaller banks.” Bear Stearns collapsed just a couple weeks later…

L: You’re kidding!

Doug: I wish I were. I’d like to believe the second most powerful man in the world weren’t either a knave, or a fool, or both. Remember, this is the same guy who told the world that Fannie and Freddie were “adequately capitalized” and “in no danger of failing.”

Earlier this year he said, “Currently, we don’t think [the unemployment rate] will get to 10 percent." Wrong again – and if you actually count people who are out of work, rather than the government’s phony subset of that number, we already have over 17% unemployment.

This guy is truly pathetic – but nobody points any of this stuff out. That he can be so dead wrong about so many vital things and not get called on it is simply amazing to me – it makes me feel like I’m living in some sort of demented parallel universe.

L: This has to be the worst case of “the emperor’s new clothes” on record.

Doug: Quite possibly. After all, who can gainsay the word of the second most powerful man on the planet? And a Ph.D. expert on the Great Depression to boot. Which makes perverse sense, as only an expert can screw things up as royally as he has.

I’m afraid the U.S. dollar is going to be totally destroyed. The consequences of that are going to make everything that’s going on now pale by comparison. I mean, as bad as the consequences of propping up all these dinosaurs like General Motors and AIG – and General Electric and Goldman Sachs, among many others, might be next – through direct theft from the U.S. taxpayer are, that’s nothing compared to what will happen when things get really bad, which they haven’t yet.

It’s really going to be bad when they destroy the dollar – that’s when it’s really going to hit the fan. Runaway inflation is bad enough in a place like Zimbabwe, where most of the people are still living on a subsistence level. And it was bad enough in Germany in the 1920s, when most Germans were still living on farms or making things with their own hands. But in an advanced industrial society, as heavily urbanized as the U.S. is, runaway inflation is going to be unbelievably disastrous. As dim as the average American is, he’s bound to get perturbed when his quality of life nosedives, and who knows what the social consequences of that will be.

L: Social revolution… Massive social change.

Doug: Yes. Runaway inflation in the U.S. would be the ultimate disaster. Think about all those people who have dollars set aside, which is to say the prudent middle class; they’ll be totally wiped out. Even huge corporations that have massive cash reserves, like Microsoft and McDonald’s, if they don’t hedge that cash with the utmost skill, could find those hoards wiped out and themselves bankrupted as well. Remember that people all over the world are holding U.S. dollars. There’s far more U.S. currency outside the U.S. than there is inside the U.S., and all those foreigners are going to resent it personally and hold it against Americans when their U.S. dollars are wiped out. On top of that, most central banks around the world hold U.S. dollars as their main asset, and that will be wiped out as well. It’s going to be a complete, worldwide disaster.

It’s going to be much worse than what happened in Germany or Zimbabwe. This is a couple orders of magnitude greater seriousness – and it seems to me that this is almost certain to happen with a monumentally stupid person like Bernanke steering the ship of state into a reef.

L: Is there really any possible way he could not see the reef he’s got the U.S. pointed straight at?

Doug: Another interesting question, because, as I say, he’s not an unintelligent man but a stupid man, as I use the word.

L: But some people don’t see the world the way we do. Is it possible that he actually believes his own spin? Some people see price destruction and asset devaluation in some areas offsetting the inflation of the money supply, and believe there is some super-economic formula that really smart people like Bernanke can figure out, for the U.S. to spend its way back into prosperity.

Doug: I just don’t see how someone who’s studied the history of economics can so completely set aside its most pertinent lessons. It’s possible that he knows he’s caught between a rock and a hard place – in technical economic terms, that he knows he and the economy are totally screwed – and sees no choice but to carry on as long as he can and hope for a miracle. He probably knows that giving the economy the medicine it really needs would bring on a deflationary collapse, and losing his job would be the least of his worries.

As I’ve explained before, deflation is not only not a bad thing, it can be a very good thing. In a deflationary environment, the purchasing unit – the dollar – becomes worth more. That rewards people who have saved dollars, the prudent middle class upon which so much in modern society depends, and makes them prone to save more. Inflation makes people very loathe to save because what they’re saving is going down in value. And the solution to this depression we’re entering is not more spending, it’s not more consumption, it’s just the opposite of what these morons in Washington are saying: it’s less consumption and more savings. Savings are capital accumulation, and that’s what’s needed to start new businesses, create more jobs, and so forth in a sustainable way. Creating phony make-work jobs with more debt only serves to make things worse, come reckoning day.

So, switching from an inflationary policy to a deflationary one would be the right thing to do, but it would be such a sharp adjustment, this whiplash would hurt a huge number of people in the short term. And though most people don’t see it, the U.S. is on such a shaky political foundation at this point… It’s really become a question of “Do you want to die by fire or by ice?” Either way, the U.S. is going to crash into a brick wall at high speed.

L: So, caught between the rock and the hard place, maybe he doesn’t believe anything he’s saying – he’s just trying to hold off the noose as long as he can.

Doug: That’s a possibility. You and I will never get an interview with him, of course, and whoever does get an interview with him will get the kind of meaningless convoluted answers that Fed chairmen are notorious for giving. Answers so opaque as to be worthless. The only solution to this problem is, ultimately, to abolish the Federal Reserve. As we’ve argued many times in The Casey Report, it serves no useful purpose whatsoever – it’s nothing more than a convenient instrument for inflation, which is to say, indirect taxation. But is that going to happen? I don’t think so. And that’s why I think the whole socio-political system in the U.S. is on the ragged edge of being overturned at this point.

L: The hollow oak that looks so mighty to all but is so rotten through its core that it collapses in the next storm. Do you suppose Bernanke could be doing it on purpose? Could he and Greenspan before him (who apparently claims to still believe in the gold standard) be orchestrating this crash on purpose, deliberately doing everything opposite of what’s necessary, carefully postponing the catastrophe each time to make it bigger and bigger, so that when it finally does all come crashing down, it does so in such a spectacular way, it teaches the world an unforgettable lesson on why you should never ever use paper for money?

Doug: That might explain their actions, but the odds on that scenario are slim to none. And Slim is out of town. Besides, I’m not a fan of conspiracy theories. I don’t think anyone could pull such a scheme off… But the bankruptcy of the U.S. government is baked in the cake. And that’s a good thing, in that they’ll have less ability to intervene in everyone’s lives domestically and in foreign countries. The bad news is that the government may bankrupt the country in a vain effort to keep itself alive.

L: So… Investment implications?

Doug: Everything we’ve been saying for years now – and as Casey Report readers know, we did see and write about a credit crisis leading to a currency crisis before it happened – about rigging for stormy weather is all the more vital now that the storm is upon us.

What, specifically, does that mean?

First and foremost, all of your savings, money that you don’t want to lose but need in a liquid form, should be in gold or gold proxies. To a lesser degree, silver as well – silver being a sort of poor man’s gold. That’s number one. You should have a very large position in these two things.

Second, regarding the speculative funds that you have, remember how much money Washington is creating. That’s definitely going to inflate other speculative bubbles to be on the watch for. I think it’s possible to make serious money spotting these early and cashing in before they pop. That’s number two: position yourself for taking advantage of speculative opportunities.

Third – and I can’t emphasize this enough – is that since what we’re really looking at is a political disaster causing the economic disaster, you must diversify your assets politically. And since the epicenter of this meltdown is the U.S., it’s absolutely vital that you diversify your assets, including the gold and the speculative investments, outside the U.S. That’s number three, but not third in importance – there will be foreign exchange controls, and once we have those, your alternatives will be severely circumscribed.

These are the three most critical pieces of advice I can think of to give to anyone.

L: Heavy stuff, Doug – thanks for laying it out so clearly.

Doug: You’re welcome. I just hope our readers will actually act on this, because it can not only make the difference between going under and surviving, but this basic approach and the details we spell out in The Casey Report can help them to turn crisis into opportunity. Some people will prosper during these difficult times – I hope it’s our readers who do.

Old Saying: "A Good Handgun is Worth An Ounce of Gold" and still is

John Ittner, MarketWatch

Because it is basically unchanged after 136 years of continuous production and because there is a healthy, liquid market for it, a good example of this case can be made by tracing the price of "The Gun that Won the West," the Colt Single-action Army revolver. The venerable Peacemaker turns out to be a better gauge of inflation than gold is and a better investment. President Ronald Reagan even named a missile after it.

The correlation of gold and guns can be traced back at least to 1873 when Colt's Manufacturing Company of Hartford, Conn., introduced the most technologically advanced handgun of its time, a six-shot revolver that used metallic cartridges. The Army adopted it as its standard side arm, a position it held until 1892. The innovation of metallic cartridges made it easier to reload in a hurry. Reloading had always been an issue because it was slow, unwieldy and required some expertise. Now anybody could do it.

In 1873 the Colt SAA sold for $17.50. The complete kit with a holster and some ammunition could be covered by a $20 gold piece. The $20 Double Eagle of 1873 contained 0.9675 ounces of pure gold. Today an ounce of gold is about $1,090 and a new Colt SAA can be special ordered from Colt's custom shop for about $1,500.

As a collector's item the Colt fares even better. A recent check of Collectorsfirearms.com found scores of listings at a wide variety of prices from $1,699 at the bottom to $175,000 asked for a Colt "Pinch Frame" called "the Holy Grail of single action collecting." This gun carries the serial number 58. So your $20 gold piece spent on this gun in 1873 would have returned 874900%.

Gold Double Eagle $20 coins from that year can be found on line for $1500 to $5000 depending on condition about the same price as Colt SAA's of similar age and condition.

Gold's price is fixed

Gold was in the midst of one of its many upheavals when the Peacemaker arrived. In 1873, Congress put the United States on the gold standard with the Fourth Coinage Act, which de-monetized silver and made gold the only metal by which to fix currency. President Grant signed it into law in February of that year. Gold was set at $20.67 an ounce where it stayed until 1934 when President Franklin Roosevelt devalued the dollar to 1/35 of an ounce of gold. During this period gold lagged behind the handgun.

What To Do If the Fed's Wrong On Inflation

Jamie Cox of Harris Financial explains the apparent disconnect between the high price of gold and the Federal Reserve's lack of alarm about inflation. Interview with Simon Constable of "The News Hub."

The handgun/gold equation was introduced to me by Bob Taber in 1987 when he and I worked at The New York Post and an ounce of gold was worth about $370 and a Colt SAA had jumped to $763.

Bob did not specify a Colt Single Action Army. He merely said, "A damned good handgun is worth an ounce of gold. That's always been true."

Bob was a night-side copy reader at The New York Post and a fantastic character and a holdover from the days when The Post was considered a leftwing newspaper. He'd had a journalistic career that included following Fidel Castro and Che Guevara in the Cuban revolution from the mountains to Havana as a special correspondent for CBS television. He also wrote a book on guerrilla warfare, "The War of the Flea" that is still read by the military and intelligence services.

There is film of Bob interviewing Castro after the fall of Batista in 1959 that can be seen in the documentary "David Halberstam's the 50s". In it Bob holds a microphone and sports a beard even bigger than Castro's.

He had survivalist mentality, a guerrilla fighter's point of view. I generally believed what he said on matters dealing with firearms. More than 20 years later I put his statement to the test.

For the most part, it's still true. It does depend on the gun and what you consider to be "good." A Glock similar to the one Plaxico Burress was carrying when he accidentally shot himself in the thigh at a nightclub, can be found on line for a little over $500 and the gun that made Dirty Harry's day, the long-barreled .44 magnum Smith & Wesson 629, sells for about $825. The other gold-standard pistol, also made by Colt's, is the .45- cal. Colt Automatic Pistol. The Army bought about 2.7 million of these from 1911 to 1985 when it was replaced by the Italian-made Beretta 9-mm which can be bought for about $750.

The Colt .45 ACP could be called the standard now and it hits the price of an ounce of gold pretty close to the bull's eye if you go for a top of the line model, but don't go too crazy. A Web site sells the stainless steel Colt 1911 Gold Cup Trophy 45 for $1050 /quotes/comstock/13*!gld/quotes/nls/gld (GLD 109.81, +0.07, +0.06%) .

Gold and politics

Gold, despite its longevity as a trustworthy container of value, has proven more readily manipulated by the government than handgun prices. Congress was in inflation-fighting mode in 1873 when it voted to cease using silver to back paper money and established gold as the sole criteria. This act created a controversy that lasted for decades between those who were pro-inflation and those who were against it.

Silver had its own fanatical backers and they were for a bi-metallic standard that favored easy money. Farmers liked inflation because it raised the price of crops and lowered the cost of debt. Laborers and factory workers also wanted inflation to make it easier to pay off debts. Silver was favored by politicians from states producing silver and by many Democrats, and Southerners. The issue was embodied by William Jennings Bryan, who ran for president and lost on the Democratic ticket in 1896, 1900 and 1908. His acceptance speech at the Democratic National Convention of 1896 ended with the famous, "You shall not crucify mankind upon a cross of gold!"

The gold believers, sound money advocates, won the day. This victory kept the price of gold artificially low as evidenced by the 1956 price for the Colt Equalizer of about $125 when gold was still set at $35.

The victorious pro-gold standard bearers held sway until 1971 when President Richard Nixon took the U.S. off the gold standard altogether. He was concerned, among other things, that foreign governments held more U.S. currency than the $10.5 billion in gold the Treasury had on hand. A run on the bank was not out of the question. From then until now the dollar would float against other currencies on the open market.

The inflation that followed these policies would have done Williams Jennings Bryan proud -- from 4% in 1971 to 11% in 1973. And Nixon was a Republican!

Gold was traded freely again and rose quickly. But the Colt stayed ahead where it remains to this day. By 1980, gold had topped $600 an ounce as inflation headed to 14%. Today the standard, blued single-action Army six-shooter goes for $1290, or $1490 for the nickel-plated version. Can gold be far behind?

Thomas Greco’s “The End of Money and the Future of Civilization”: A Review by Richard C. Cook

Image via Wikipedia

Richard C. Cook

It’s too late for anyone to pretend that the U.S. government, whether under President Barack Obama or anyone else, can divert our nation from long-term economic decline. The U.S. is increasingly in a state of political, economic, and moral paralysis, caught as it were between the “rock” of protracted recession and the “hard place” of terminal government debt.

Even if the stock market can be shored up by more government borrowing for “stimulus” spending, it’s a temporary reprieve, because nothing can bring back the consumer purchasing power that was lost when the banks stopped pumping money into the economy through out-of-control mortgage lending. We simply no longer have the job base for people to earn the income they need to live.

The underlying cause of the crisis is in fact the debt-based monetary system, whereby the U.S. ruling class long ago sold out our nation and its people to the international banking cartel of which the Rockefeller and Morgan interests have been the chief representatives for over a century. It was lending on a previously unheard of scale for overpriced assets to people and businesses unable to repay that created the bubbles that burst in 2008, not only in the housing market but also in such areas as commercial real estate, equities, commodities, and derivatives. It was an explosion that reverberated throughout the world.

The Obama administration’s response to the crisis has been to print Treasury bonds both for the financial system bailouts and the sputtering Keynesian stimulus that so far has gone substantially into military infrastructure. This bond bubble is what I have referred to as “Obama’s Last Picture Show.” http://www.globalresearch.ca/index.php?context=va&aid=12512

Government debt is fundamentally inflationary. For a generation, the U.S. dollar has been inflating at an increasing rate, with the economy being kept in a growth posture by selling our debt instruments abroad or allowing foreigners holding dollars to purchase property and other assets on our own soil. The website EconomyinCrisis.org reports that in 2007, the most recent year for which data are available, “foreign entities spent $267.8 billion to acquire or establish U.S. businesses.” http://www.economyincrisis.org/articles/show/2801

Foreigners are spending their dollars as fast as possible, because they are now plummeting in value. It’s increasingly clear that sooner rather than later, the dollar will be dumped by foreign purchasers of bonds, particularly China, and possibly even the oil-producing nations.

These nations know full well that bonds denominated in dollars can never be completely repaid, even if the bonds can be rolled over into fresh debt. It’s this dynamic that is dragging the U.S. economy to the cliff, because real economic growth stopped long ago when our manufacturing jobs were exported. This is because most of the growth since Ronald Reagan was elected president in 1980 has been only on paper through financial bubbles. This included the dot.com bubble of the Clinton years that blew up in 2000-2001.

Now, after the Treasury bond bubble of 2009, there is nothing left in America to inflate. With so many jobs gone, the American family home was the last thing of value we owned.

So the air is going out of the tires. Americans who are struggling to work for a living are passive spectators as their jobs, savings, health insurance, pensions, and homes continue to erode in value or even disappear. Last Sunday the Washington Post reported a massive crisis in state and local government pensions. Reporter David Cho wrote, “The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.”

So what, if anything, can be done about it?

Well, the first thing an intelligent physician does is diagnose the disease. Thomas Greco, in his new book The End of Money and the Future of Civilization (Chelsea Green: 2009) , outlines the increasingly familiar story of how things got so bad, and he tells it as well as anyone has ever done. His style is precise and sometimes academic. Behind it, though, is a passion for truth and the type of rock-solid integrity that refuses to sugar-coat a very bitter pill.

More than that, Greco writes about how to change what has gone wrong. His credentials as an engineer, college professor, author, and consultant are impeccable. His book is among the most important written in this decade. It is truly a book that can alter the world and, if taken seriously, give large numbers of people a practical way to survive the gathering catastrophe.

But unlike most commentators, what Greco offers is not another phony prescription for what the financiers and government should do for us, whether through “restarting” lending or another round of stimulus spending. Rather it’s what we should do for ourselves, and could do much better, if we understood what to do and if big banking and big government just got out of the way.

As I said, at the root is the monetary system, whose failure cannot be understood without a history lesson. So Greco writes about the struggle between banking and democracy that took place in the 1790s when the ink on our new national constitution was barely dry.

It was Alexander Hamilton, the first secretary of the treasury, who compromised the new nation, through what he admitted was “corruption,” by giving the wealthy speculators in Revolutionary War bonds the benefit of federally-sponsored redemption and then by establishing the First Bank of the United States. This early drift toward elitist rule was opposed by Thomas Jefferson, James Madison, and others who figured in the creation of what later became the Democratic Party.

Greco writes: “While Jefferson favored a stronger union than that which emerged under the Articles of Confederation, he was vehemently opposed to the reconstruction of monarchic government on the American continent.” Hamilton had said frankly that the British monarchy was the best system of government known to man. Part of the monarchic system was the Bank of England, which Hamilton copied when setting up the First Bank.

But Jefferson, who repudiated Hamilton’s elitist platform, was elected president in what was then called “The Revolution of 1800.” Congress refused to renew the Bank’s charter by a single vote when it was up for renewal in 1811.

But the Second Bank of the United States was chartered in 1816 due to the government debt left behind from the War of 1812 against Great Britain. Thus was set up what became known as the “Bank War.”

It was President Andrew Jackson who dethroned the bankers from power by pulling government funds out of the Second Bank in 1833. Greco writes that in Jackson’s view: “The ‘Bank War’ was a contest for rulership—would the United States be governed by the people through their elected president and representatives, or by an unelected financial elite through their central bank instrument?”

The modern takeover began in earnest during the Civil War when Congress passed the National Banking Acts in 1863-64 which mandated use of government bonds as bank lending reserves, thereby creating a direct linkage between bank profits and the debt the government was starting to load on the shoulders of taxpayers.

The nation’s fate was sealed with the passage of the Federal Reserve Act in 1913. The deal was that the bankers would control the currency, and thereby the nation’s economy, while the government would be provided with an unlimited amount of inflated dollars to fight its wars.

The bookkeeper’s trick of creating money out of thin air, charging interest for its use, then forcing it down the throats of weaker nations by threat of violence, is what has allowed the Anglo-American empire, since the founding of the Bank of England in 1696, gradually to conquer the world. Though President Woodrow Wilson signed the Federal Reserve Act into law, he saw what that action meant. Greco cites Wilson as writing: “There has come about an extraordinary and very sinister concentration in the control of business in the country….The great monopoly in this country is the monopoly of big credits.”

Among other ill effects, the system has ruined the value of the currency. The inflation caused by large issues of bank-created loans is seized upon by the government which goes along because inflation reduces the cost of its deficits. Investors buy Treasury bonds denominated in Federal Reserve Notes then watch their value evaporate over time. In fact Federal Reserve Notes have lost over 95 percent of their value since they were first introduced.

Moreover, it’s additional inflation caused by bank-generated interest that drives up the costs of goods and services, forcing everyone in the economy to try to defend themselves by raising their prices to the max. Greco spells this out too, which almost every economist in the world, with the exception perhaps of Australia’s James Cumes, overlooks.

Bank interest has other tragic effects. It was high interest rates, for instance, that destroyed the Idaho potato industry. A farmer from that region told me at a conference a few years ago that when interest rates skyrocketed in the early 1980s, he asked the president of one of the Federal Reserve Banks why they did it. The answer was they were “ordered” to raise interest rates by the international banking system.

Make no mistake, it’s the banking system, facilitated by the Fed, not unwary borrowers, who brought on the collapse of 2008.

Now, in 2009, the bankers, mainly those in the U.S., have so shattered the world economy by debt mounted on debt that there may be no reprieve except the creation of a slave society based on rule by the rich over the masses of whatever peons should happen to survive the downturn and its tragic effects on employment, health, the food and water supply, and even our ability to cope with climate change.

The political establishment, expressing itself in pronouncements by organizations like the Council on Foreign Relations, see a future, not of economic democracy or increased financial pluralism, but consolidation of world currencies into a small number overseen at the top by the world’s financial oligarchy. Citing the writings of Benn Steil, the CFR’s Director of International Economics, Greco writes: “The ostensible plan is to reduce global exchange media to three—one each for Europe, the Americas, and Asia. One might reasonably suppose that at a later stage, those three would be combined into one currency also under the control of the global banking elite.”

Greco concludes: “The New World Order is upon us.”

But is it really the end, or is there a new world waiting to be born? Greco thinks so. He speaks of the end of an era when unlimited economic growth fed by massive influxes of debt-based money is no longer sustainable. He writes: “That our global civilization cannot continue on its current path seems evident….But I think our collective consciousness is beginning to change. We are becoming aware of limits and are reaching that part of our evolutionary program that says, ‘Stop!’” More...

Unemployed Rate for Young Explodes to 52%

Richard Wilner with the NYPost:

The unemployment rate for young Americans has exploded to 52.2 percent -- a post-World War II high, according to the Labor Dept. -- meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.

And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults -- aged 16 to 24, excluding students -- getting a job and moving out of their parents' houses are long. Young workers have been among the hardest hit during the current recession -- in which a total of 9.5 million jobs have been lost.

Al Angrisani, the former assistant Labor Department secretary under President Reagan, doesn't see a turnaround in the jobs picture for entry-level workers and places the blame squarely on the Obama administration and the construction of its stimulus bill.

"There is no assistance provided for the development of job growth through small businesses, which create 70 percent of the jobs in the country," Angrisani said in an interview last week. "All those [unemployed young people] should be getting hired by small businesses."

There are six million small businesses in the country, those that employ less than 100 people, and a jobs stimulus bill should include tax credits to give incentives to those businesses to hire people, the former Labor official said.

"If each of the businesses hired just one person, we would go a long way in growing ourselves back to where we were before the recession," Angrisani noted.

A study from the National Longitudinal Survey of Youth, a government database, said the damage to a new career by a recession can last 15 years. And if young Americans are not working and becoming productive members of society, they are less likely to make major purchases -- from cars to homes -- thus putting the US economy further behind the eight ball.