NightBlogger

Source: Norwich Bulletin
TAUNTON, Mass. — A 53-year-old wife and mother fatally shot herself soon after faxing a letter to her mortgage company saying that by the time they foreclosed on her house that day, she would be dead. Police in Taunon say Carlene Balderrama used her husband’s high-powered rifle to kill herself Tuesday afternoon, 90 minutes before her foreclosed home was to be sold at auction. The mortgage company notified authorities, who found her body an hour later. Police say she left a note to her family telling them to take the life insurance money to pay for the house.

The Trumpet
“Time is short for making a course correction before this grand experiment in liberty goes into deep hibernation,” the U.S. Congress was told earlier this month. On July 9, Texas Rep. Ron Paul warned the House Financial Services Committee that “big events” were about to occur.

“… I have days, growing more frequent all the time, when I’m convinced the time is now upon us that some big events are about to occur,” he said. “These fast-approaching events … will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed” (emphasis ours throughout). Paul continued:

There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. …

The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical care costs; the collapse of the housing bubble; the bursting of the nasdaq bubble; stock markets plunging; unemployment rising; massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we’ll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?

Until recently, Mr. Paul endured a near constant barrage of criticism for his pessimistic views on the American economy. But nowadays he’s not alone in his fear of impending economic disaster. The New York Times agreed this past weekend that “big events” are indeed on the horizon:

Meanwhile, as American debts swell and foreigners hold more of it, nervousness grows that, some day, this arrangement will end badly. The dollar has been declining in value against other currencies. Some foreigners have begun to hedge their bets by buying more euros. “Obviously, this is going to come to an end,” [president of Euro Pacific Capital Inc. Peter] Schiff said. “Foreigners are not charitable organizations, and they’re going to demand that we pay them back.”

No single country owning large amounts of dollar-based investments is inclined to dump them abruptly; nobody aims to start a panic. But fears have begun to grow that one day a country may get spooked that another is about to dump its dollars—and that could trigger preemptive panic selling.

More

Locally grown produce is in vogue as even the biggest grocers try to appeal to shoppers and save on fuel costs. Among the big names selling homegrown food are Whole Foods Market, Safeway, Tesco, and Wal-Mart. As gas prices remain high and the popularity of local food grows—the number of local farmers markets has more than doubled in the past decade, the Department of Agriculture says—grocers are reviving the old practice of buying from smaller regional farms. More

Ford Motor Co. posted the worst quarterly performance in its history Thursday, losing $8.67 billion in the second quarter. The net loss includes $8.03 billion worth of write-offs because of a decline in value of North American assets and Ford Motor Credit Co.’s lease portfolio. Even excluding those items, Ford lost 62 cents per share, worse than Wall Street expected. Twelve analysts surveyed by Thomson Financial, on average, expected a 27 cent loss per share. More

Source: (Reuters) - The pace of existing home sales in the United States fell in June to a 4.86 million-unit annual rate, the National Association of Realtors said in a report on Thursday that saw the sales volume hit a 10-year low. Economists polled by Reuters were expecting home resales to fall to a 4.93 million-unit pace, from the 4.99 million rate initially reported for May. The June rate was the lowest since a 4.83 million rate in early 1998, the Realtors said. The inventory of homes for sale held steady at 4.49 million homes or an 11.1 months’ supply at the current sales pace. The median national home price declined 6.1 percent from a year ago to $215,100.

Fannie and Freddie own or guarantee nearly half of the nation’s $12 trillion worth of home mortgages. If they collapse, so may the whole system of finance for American housing, threatening a most unfortunate string of events: First, an already plummeting real estate market might crater. Then the banks that have sunk capital into American homes would slip deeper into trouble. And the virus might spread globally. The central banks of China and Japan are on the hook for hundreds of billions of dollars worth of Fannie’s and Freddie’s bonds - debts they took on assuming that the two companies enjoyed the backing of the American government, argues Brad Setser, an economist at the Council on Foreign Relations. Commercial banks from South Korea to Sweden hold investments linked to American mortgages. Their losses would mount if American homeowners suddenly couldn’t borrow. The global financial system could find itself short of capital and paralyzed by fear, hobbling economic growth in many lands. More

BILL MOYERS JOURNAL
Author Bill Greider explains to Moyers that the magic of the “free market” is coming to a close.

“This is a really perilous moment.” That’s how one top financier and former treasury official described our economic crisis on the NewsHour this week. Our banking system, he said, “is in worse shape than at any point since the 1930s. We’ve never seen such large losses so fast.”

As he was speaking, California’s big IndyMac Bank went down with a crash, the second worst collapse in U.S. history and sent thousands of depositors out looking for their money. The FDIC, the Federal Deposit Insurance Corporation, took over as reports circulated that the FBI is investigating IndyMac for mortgage fraud. Analysts are predicting that as many as 150 of the 7,500 banks in America may fail over the next 18 months, and one analyst even said that number might double over the next 3 years. More

UAL Corp.’s United Airlines, the world’s second-largest carrier, said it will cut 7,000 jobs after record fuel costs pushed the company to a quarterly loss of $2.73 billion. UAL’s results pushed the collective deficit among the three biggest U.S. carriers to $5.22 billion, following last week’s losses by AMR Corp.’s American Airlines and Delta Air Lines Inc. United’s jet-fuel expense climbed 53 percent from a year earlier to $1.85 billion, outpacing fare increases and new fees. More

…auto sales posted their biggest drop in more than two years…General Motors Corp said it would cut labor costs, sell assets and borrow at least $2 billion to bolster finances in the face of plummeting sales. The U.S. Labor Department said producer prices over the last 12 months jumped 9.2 percent, the biggest increase since a 10.4 percent gain in June 1981 when the United States was last mired in a stagflationary period of low growth and high inflation. A regional manufacturing survey showed factory activity in New York contracted for the fifth time in six months and data in the report suggested producers were passing on higher prices to consumers, which could add further fuel to inflation. More

This month, the Hayward, Calif.-based retailer stopped providing its financial information to at least two credit-monitoring firms — prompting some vendors to halt merchandise shipments and triggering speculation that the chain might file for bankruptcy. “I’m advising my clients to hold all shipments at this time due to a lack of communication from Mervyns management,” said Bob Carbonell, chief credit officer at Bernard Sands, a credit monitoring company. “To the best of my knowledge, virtually all of my clients have stopped shipping goods.” Mervyns operates 177 stores in seven states, with 129 locations in California. A shutdown of the privately held retailer would be another hit to the country’s struggling malls and could mean an influx of large, empty commercial spaces around the state. More

Wachovia Corp. announced a whopping second quarter loss of $8.9 billion this morning, with plans to shake up its mortgage unit, slash its dividend payout to shareholders, and cut thousands of jobs. Chief executive Bob Steel, hired less than two weeks ago to bring the struggling bank back to its former glory, had hinted that he envisioned a smaller, leaner Wachovia. Today, in his first earnings announcement, he kept his word, announcing numerous other plans to preserve capital. Things have gone from bad to worse for Wachovia in the past year. In the first quarter, the bank recorded its first trip into the red since 2001. But that was minuscule compared to today’s second-quarter loss, which is about 12 times as large. The bank’s $8.9 billion loss in the second quarter represents a loss of $4.20 per share. A year ago, the bank earned $2.3 billion, or $1.22 per share. More

Rita Braver interviews Peter Schiff on Charles Osgood’s Sunday Morning.

By. Peter Schiff
This week, with the nation’s financial infrastructure crumbling before our very eyes, the nation’s top two economic policy makers made their way to the Congress for an extraordinary episode of political theater. Fannie Mae and Freddie Mac, the quasi-government entities that form the backbone of America’s gargantuan mortgage market, appeared to be cracking. To the somewhat bewildered members of Congress, Ben Bernanke and Henry Paulson offered radical remedies to save the lenders. Despite the fact that the proposed policies would thoroughly redefine America’s supposedly capitalistic pedigree, the moves were presented as wholly inevitable, and in the end, benevolent and costless. If you are looking for a new chapter in American history, it has just begun. More

Ron Paul talks about Fed chairman Ben Bernanke’s testimony in front of the House Financial Services Committee yesterday. Our economy faces enormous difficulties and one of the biggest culprits is the inflation tax for which the (privately owned) Federal Reserve is largely responsible.

Median U.S. family income, adjusted for inflation, was $58,407 in 2006, according to the most recent Census Bureau data, down from $59,398 in 2000. Competition from low-wage countries such as China, combined with the waning power of organized labor, kept a lid on compensation during the latest expansion. Now, as prices pick up, the deterioration in income growth means households are likely to cut spending, restraining the economy. Economists don’t anticipate annualized growth to breach 2 percent until the third quarter of 2009, according to a monthly Bloomberg News survey. The Labor Department reported July 16 that consumer prices jumped 5 percent in the year to June, the most in 17 years. That pushed the so-called Misery Index, which adds inflation to the unemployment rate, to 10.5, a level unseen since 1993, the year Democrat Bill Clinton was inaugurated as president after campaigning on promises to revive the economy. More

US food companies are preparing another round of hefty price increases as soaring commodity costs force them to pass on rises to consumers. In June, meat prices surged to a 22-year high because of record costs for corn and soybean, food crops for livestock. The US Department of Agriculture expects pork production to fall 3 per cent in 2009, against a 1 per cent fall for chicken and beef. Bill Lapp of Advanced Economic Solutions, an agricultural consultancy in Omaha, said higher prices looked set to prompt the biggest decline in meat consumption for 27 years. More

Source: Mike “Mish” Shedlock
Last week all eyes were on the Short Squeeze In Financials, triggered by a SEC Order To Protect Those Most Responsible For Naked Shorting, and fueled by nearly everyone going ga-ga over fabricated earning reports at Wells Fargo and Citigroup. However, most missed the quiet but extremely important action in the corporate bond market. Please consider Bond Sales Slow to $5.3 Billion as Spreads Approach March Highs:

Corporate bond sales fell to $5.3 billion this week as the yield over benchmark rates that investors demand to own the debt approached the highest levels of the year. Sales compare with $11.7 billion last week, according to data compiled by Bloomberg.

Issuance slowed as the average spread on investment-grade bonds climbed to 7 basis points shy of its 2008 high and junk- bond spreads surpassed 800 basis points for the first time since March.

Overall corporate sales compare with a weekly average this year of $21.2 billion.

The extra yield investors demand to own investment-grade bonds rather than U.S. Treasuries climbed 9 basis points to 297 basis points as of yesterday, compared with 305 basis points reached on March 20, according to Merrill Lynch & Co.’s U.S. Corporate Master index.

The strong rally brought out bottom callers in financials who made an appearance for the umpteenth time. And if oil prices keep falling, perhaps the rally will continue for a bit more on the misguided notion that lower energy prices will help the economy. They won’t. Falling oil prices will be a result of falling demand and a weakening global economy. Weakening job prospects will come on on top of it.

The key point however, is the odds of a sustainable rally in the wake of such poor action in the corporate bond market is highly unlikely regardless of what oil prices do.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Gawker
Look, it’s Ron Paul! But what is he doing in New York, the fancy magazine for elites, alongside establishment finance types like a former Morgan Stanley economist and a famous investor? Isn’t he sort of “kooky?” Everyone (who didn’t live in a basement or wasn’t a furry) laughed at Paul’s quest for the 2008 Republican presidential nomination, especially since Paul wanted to get rid of the Federal Reserve and take America back to the gold standard, in which money is backed by something other than the worthless promises of filthy bankers and shiftless bureaucrats. But now it looks like the Fed’s board of governors may be leading us into depression, and even that capitalist bible the Wall Street Journal ran an article this weekend speculating that the thinking behind the gold standard, if not the standard itself, “will have its day again.” So Paul’s stock is rising! Let’s hear what terrible things he has to say about our future:

“I think we are maybe 10 percent into this crisis. The economic distortions have been building for longer than we’ve seen in the history of the world. Never have we had such confidence falsely placed in a reserve currency.”

Ha ha, you know what’s funny about that Ron Paul quote? It’s probably the least disturbing one in the entire New York article. The people from inside the financial system sound far more depressing. Here’s the former Morgan Stanley chief economist:

“The American consumer is toast. We’re talking a multiyear adjustment, at least two or three years, maybe more. Does that mean America is over? Does that mean we have a whole new world order? The jury’s out on that.”

If you really want to ruin your Monday, go ahead and click through and read the other two quotes. The short version is that you’ll soon be starving in the street, but in the meantime don’t stop reading, because there’s this new tapas place New York would like to tell you about! More

Ambrose Evans- Pritchard
It feels like the summer of 1931. The world’s two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution. The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a “chance of a global recession”. Plainly, the IMF cannot or will not offer any useful insights.

The eurozone is falling into recession before the US itself. Its level of credit stress is worse, if measured by Euribor or the iTraxx bond indexes. Core inflation has fallen over the last year from 1.9pc to 1.8pc. The US may soon tip into a second leg of this crisis as the fiscal package runs out and Americans lose jobs in earnest. US bank credit has contracted for three months. Real US wages fell at almost 10pc (annualised) over May and June. This is a ferocious squeeze for an economy already in the grip of the property and debt crunch. No doubt the rescue of Fannie Mae and Freddie Mac - $5.3 trillion pillars of America’s mortgage market - stinks of moral hazard. The Treasury is to buy shares: the Fed has opened its window yet wider. Risks have been socialised. Any rewards will go to capitalists. More

The nation’s second-largest bank by assets said Monday its profit fell 41 percent, as losses in its struggling mortgage operations were offset by business in other parts of the company. The company more than tripled the amount it set aside for bad loans to $5.83 billion, up from $1.81 billion a year ago, largely for consumer and commercial portfolios directly tied to the housing market, including home equity, residential mortgages and homebuilding. The figure surged to $6.01 billion in the first quarter. Net charge-offs, loans it doesn’t think are collectable, jumped to $3.62 billion, up from $1.5 billion a year ago, reflecting housing market deterioration and slowing economic conditions, the company said. Bank of America has said it plans to cut about 7,500 jobs as it integrates the company into its own operations. The job cuts amount to about 12.5 percent of the combined companies’ mortgage, home equity and insurance businesses. More

Danny Schechter
Instead of having a light at the end of the tunnel, we have another train. Brace yourselves for a wreck.

On Friday, July 11, as the world financial markets were quaking because of the threats to two government-linked companies with $5 trillion in mortgages, as the Senate rushed to complete a bailout bill for homeowners that may not bail anyone out, and as the Federal Reserve Bank announced tough new and perhaps irrelevant regulations on a subprime real estate market that has all but disappeared, news outlets were reporting the death of the owner of the Benihana restaurant chain and Larry King was doing another show about UFOs. With a distraction machine working overtime, we seem to be living in a permanent three-ring circus, with a constantly titillating sideshow often sucking up most of the airtime and attention. Britney Spears has replaced the bearded lady from days gone by as the iconic draw. In the central ring of this circus is the political campaign, with its focus only on the evolving Obama/McCain slugfest. Every sound bite, grimace, phrase and gasp is grist for endless punditizing with little in-depth analysis of the issues. More

“I think we are going into recession and we are probably in one right now,” Blanchflower told the Guardian. “We will probably have three or four quarters of negative growth, but the risks are to the downside. Blanchflower, an academic economist who lives in the United States, told the newspaper that the British economy could be in for a worse ride than even the American economy. Both countries, he said, were facing the “biggest economic problem since the Great Depression.” Blanchflower has said house prices in Britain could fall by as much as third. The recent rises in unemployment, he told the newspaper, were just the “tip of the iceberg” as job losses in house building combined with the financial sector and retail. More

A run on a California bank … while the nation’s two federally chartered mortgage giants turned up in need of a government rescue plan, a plan Treasury Secretary Henry Paulson described as being aimed at “supporting the stability of financial markets.” Stocks rallied, but only after weeks of losses. There was a new round of layoffs by General Motors. And even though oil prices fell a little, there was confirmation that inflation is on the rise. Consumer prices were up 1.1 % in June, while wages fell 2.4 percent over the past year. Art Cashin, director of floor operations for UBS Financial Services, says it’s been one of the most unstable periods he has seen in 45 years on the New York Stock Exchange.

A new CBS News/New York Times poll finds that 80% of Americans believe the condition of the economy is bad. The fallout continues. That once-booming housing market that we’ve all seen go bust … Says Mark Weisbrot, co-director of the non-partisan Center for Economic and Policy Research, “That’s the overwhelming cause of this recession. And that’s because we built up an enormous bubble in home prices from 1996 to 2006. It was over eight trillion dollars of bubble wealth.” Weisbrot says that only about 40% of that bubble has deflated so far. “So you’re going to have a lot more foreclosures, a lot more writedowns in banks, possible bankruptcies.” By some estimates, banks may need to write off up to one trillion dollars in bad loans. More

…the lucrative lending practices of America’s merchants of debt have led millions of Americans — young and old, native and immigrant, affluent and poor — to the brink. More and more, Americans can identify with miners of old: in debt to the company store with little chance of paying up. It is not just individuals but the entire economy that is now suffering. Practices that produced record profits for many banks have shaken the nation’s financial system to its foundation. As a growing number of Americans default, banks are recording hundreds of billions in losses, devastating their shareholders. More

WASHINGTON — Driven by a sour economy and skittish consumers, U.S. business bankruptcies saw their sharpest quarterly rise in two years, jumping 17 percent in the second quarter of 2008, according to an analysis by McClatchy. Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income. From April through June, 15,471 U.S. businesses called it quits, according to data from Automated Access to Court Electronic Records, an Oklahoma City bankruptcy management and data company. States that saw the biggest increase in filings were Delaware, Montana, Oregon, Maryland and Connecticut, suggesting that the economic gloom is spreading beyond large population centers. More

The Mexican restaurant chain Chachos is now charging a 7.5% inflation surcharge on all meals with cheese. Skyrocketing commodity prices present restaurants with a menu of unappetizing choices: raise prices, levy surcharges, reduce portions? How would you like your inflation served? Vote in our poll, after the jump. More

Source: Couriermail
CITIGROUP chief Win Bischoff has warned that house prices in Britain and the United States are likely to keep falling for two years. The chairman of one of the world’s most powerful banks told the BBC in an interview that he expects it will take two years for the markets to “stabilise.” He also said he expected the credit crunch could continue through until 2009. “At the end of last year people thought it might affect the first half of this year but that we would see some stabilisation in the second half,” he said. “I think that prognostication has now gone much more into 2009 … Most people think 2009 is still going to be quite a difficult year,” he added.

Mr Bischoff told the BBC that there would be redundancies at the bank, which employs 12,000 people in Britain, and warned that some of them would be compulsory. Commenting on the outlook for the US housing market, he said “I think it will take some time — two years perhaps — till the markets stabilise. We certainly think that in certain areas of the United States it will take that long.” As for Britain, he asked “How long will it take? Again I think two years might be an estimate. I don’t think it will be much quicker than that.”

MIKE WHITNEY
The Fed’s emergency rescue plan for the financial markets is hopelessly flawed. It’s a scattershot approach that doesn’t address the real source of the problem; an unregulated, unsustainable structured finance system that emerged in full-force after 2000 and spawned a shadow banking system that creates trillions of dollars of credit without sufficient capital reserves. This is the heart of the problem and it needs to be debated openly. The present system doesn’t work; it’s as simple as that. It makes no sense to provide trillions of dollars of taxpayer money to shore up a system that is essentially dysfunctional. It’s just throwing money down a rat-hole.

The Federal Reserve and US Treasury want a blank check to prop up Fannie Mae and Freddie Mac, the two war-horses of the mortgage industry, that currently underwrite nearly 80 per cent of all new mortgages in the US. But by any objective standard both of these GSEs are already insolvent. Thus, the taxpayer is being asked to rescue a failed industry that has been used for private gain so that speculators will not have to suffer the losses. Even worse, Fannie and Freddie have written hundreds of billions of dollars worth of mortgages that have not yet defaulted, but will certainly default within the next two years. This is bound to batter the already faltering economy.

The bad paper held by Fannie and Freddie are mortgages that were made to unqualified applicants who are presently losing their homes in record numbers. Their loans were approved because there was no functioning regulatory body to oversee their issuance and because the mortgages were transformed into complex securities that were sold to credulous investors around the world. The ratings were fixed to meet the requirements of their employers, the investment banks, which marketed these exotic bonds to foreign banks, insurance companies and hedge funds. That puts Fannie and Freddie at the center of a system that needs radical surgery to eradicate the bad paper. If this doesn’t happen in a timely fashion, then foreign investors will stop purchasing US debt and the dollar will crash. By creating a backstop for Fannie and Freddie, the Fed is linking US sovereign debt with mortgages and derivatives that are already known to be fraudulent. This is a big mistake. According to Merrill Lynch, the US is already facing a long-term “financing crisis” as the weakening US economy and sluggish consumer spending could signal an end to the $700 billion in foreign investment that covers America’s current account deficit. By assuming the GSE’s enormous debts, the Bush administration is just speeding this process along and inviting disaster. More

Market Oracle
What this USD (US Dollar) situation means today is that the US, with all of Bernanke’s willingness to use inflationary methods to combat debt deflation, is constrained by the problems that heavy inflationary methods will create for the USD going into 2009. Because the US economy is so central to the rest of the world, what limits the US limits the rest of the central banks and their economies. If the USD were not the world reserve currency, most of these problems would be confined to the US economy.

The USD is probably at a limit of stress at this moment, with interest rates at 2% and the ever present need for our trade partners to send about $700 billion a year to us to buy US bonds of all sorts. Bernanke will cut the ground from the USD if he tries any further rate cuts. Our trade partners who are basically subsidizing the USD for their own reasons will balk. Not only that, but inflation in the US in some areas in already more than 10%, such as in food and energy. Any further rate cuts to combat the present financial disaster in the US will only allow an inflation explosion. (Yes, the USD is indeed the world reserve currency, but now that seems funny. It wasn’t funny during and in the 50 years after WW2.)

If the US persists in trying to ‘bail out’ ‘everything’ the USD will collapse. Our treasury officials and the Fed are well aware of this fact. The USD is at an extremity, right now. We are at the limits of unlimited USD expansion since WW2. The US is at a crossroads with the USD system. If the US Treasury and Fed try to bail everything out, the 50 year world prosperity Jig since WW2 is up. I already heard talk by Bernanke that the Fannie Freddie mess might be nationalized.

The bailouts are not just the US. Now, every major economy is talking about massive bailouts. Their currencies will all suffer, and this post WW2 world prosperity boom is just about done for. They are going to bail out their banks, stock markets, bond markets, and economies by debasing all their currencies because they don’t have the political guts to endure a serious world recession. China too….the final result will be horrific. More

This Dobbs clip discusses the new North American common currency called the “Amero”. The NAU progress report claims everything is ontrack for the Union to go into effect in 2010. Dobbs reports that the North American union will be an Orwellian Brave New World. The fall of dollar will pave the way for the implementation of the Amero, resulting in the loss of sovereignty for three countries, and economic control and enslavement over its populations.

Kevin Depew
Chaos and fear doesn’t sleep. This morning the first news story I read was a piece from the Los Angeles Daily News about police threatening to beat down and arrest any “disorderlies” trying to get their money out of a failed IndyMac bank branch in Pasadena, CA. Apparently, after being turned away Monday, customers began lining up at 1:30 a.m. the next morning to take out any cash they had in excess of the $100,000 maximum insured by the Federal Deposit Insurance Corporation. The scene was reportedly emotional and tense. At another IndyMac branch in Encino, the police were called in after line jumpers threatened to turn an ordinary bank run into a full-on riot.

Yes, it’s here. Welcome to the Depression. No, don’t drop whatever it is you’re doing. Don’t get up. It’s not going anywhere. It will wait. It’s just going to sit over here in the corner and read a magazine while you do whatever it is you need to do. A Depression doesn’t run hot and fierce like some crazed meth burner. A Depression is methodical, purposeful, patient. It will build a shelter out of tree branches and newspaper, light a small, well-contained campfire and wait you out, brother. While you feed on the empty calories of denial and popcorn, it will quietly gather shards of broken dreams and fashion them into a terrible weapon of blunt force reality.

It’s a hell of a thing to call this day and age the next Depression. It’s dangerous tinfoil hat territory inhabited mostly by screeching lunatics and volatile nutjobs. But by the time they get squeezed out by reputable folks the whole gig will be up, the circus will have left town. But how can this be? To understand the mechanics of this, the nature of it, let’s look back at the last Great Depression.

Despite the seeming enormity of it in retrospect, the stock market crash of 1929 barely even registered for most Americans. The day before the crash, Time Magazine’s Oct. 28, 1929 issue was business as usual, national stories, Washington stories, a review of the newest plays opening in Manhattan, a piece on a cat washing contest in Kingston, NC. A week later, in the wake of the stock plunge, the cover story was as far from a piece on crashing share prices as you could 2get - a profile of a man named Samuel Insull, the “financial father of the Chicago opera.” The crash did make the magazine, of course, second billing in the Business section in a piece titled, “Bankers v. Panic.” The next piece, however, was about a $2.5 million investment by a Wall Street investment bank in orchids. “Last week, however, to the orchid industry went 2,500,000 Wall Street dollars, not squandered, but carefully invested.”

Heh. Yes, the dream dies hard, doesn’t it? More

Congressman Ron Paul confronts Federal Reserve Chairman Ben Bernanke on monetary policy and its consequences. 7/16/08

Ron Paul
There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. Instead of using globalism in a positive fashion, it’s been used to globalize all of the mistakes of the politicians, bureaucrats and central bankers. Printing dollars over long periods of time may not immediately push prices up–yet in time it always does. Now we’re seeing catch-up for past inflating of the monetary supply. As bad as it is today with $4 a gallon gasoline, this is just the beginning. It’s a gross distraction to hound away at “drill, drill, drill” as a solution to the dollar crisis and high gasoline prices. Its okay to let the market increase supplies and drill, but that issue is a gross distraction from the sins of deficits and Federal Reserve monetary shenanigans.

This bubble is different and bigger for another reason. The central banks of the world secretly collude to centrally plan the world economy. I’m convinced that agreements among central banks to “monetize” U.S. debt these past 15 years have existed, although secretly and out of the reach of any oversight of anyone–especially the U.S. Congress that doesn’t care, or just flat doesn’t understand. As this “gift” to us comes to an end, our problems worsen. The central banks and the various governments are very powerful, but eventually the markets overwhelm when the people who get stuck holding the bag (of bad dollars) catch on and spend the dollars into the economy with emotional zeal, thus igniting inflationary fever. This time–since there are so many dollars and so many countries involved–the Fed has been able to “paper” over every approaching crisis for the past 15 years, especially with Alan Greenspan as Chairman of the Federal Reserve Board, which has allowed the bubble to become history’s greatest.

The mistakes made with excessive credit at artificially low rates are huge, and the market is demanding a correction. This involves excessive debt, misdirected investments, over-investments, and all the other problems caused by the government when spending the money they should never have had. Foreign militarism, welfare handouts and $80 trillion entitlement promises are all coming to an end. We don’t have the money or the wealth-creating capacity to catch up and care for all the needs that now exist because we rejected the market economy, sound money, self reliance and the principles of liberty. Since the correction of all this misallocation of resources is necessary and must come, one can look for some good that may come as this “Big Event” unfolds. More

Glenn Beck
CNN
Professor Roubini recently laid out what he called the “12 steps to financial disaster.” Unfortunately, they were really complicated, and I have severe ADD, so I’ve boiled them down into five phases that even a rodeo clown like me can understand.

I think of these like our military’s “DEFCON” — or defense readiness condition — scale, except that this countdown could end in the meltdown of your bank account:

• DEFCONOMY FIVE

How you’ll know we’re here: The housing downturn turns into a free fall, making it the worst collapse in our country’s history. That not only triggers massive numbers of foreclosures and lost household wealth, but it also sets off another large wave of bank write-downs.

Odds we get here: Roubini told me that it’s “extremely likely, even unavoidable” that we hit this stage because “the excess supply of new homes in the market is like we’ve never seen before.” Prices, he believes, “need to fall another 10 to 20 percent before that clears.”

• DEFCONOMY FOUR

How you’ll know we’re here: Americans upside-down on their mortgages and unable to pay their home equity loans begin defaulting on other debt, like credit cards, car loans and student loans. In addition, bond insurance companies lose their perfect credit ratings, forcing already troubled banks to write down another $150 billion.

Odds we get here: High. Roubini says that 8 million households are already upside-down on their mortgages and he thinks we could see that number go to between 16 million and 24 million by the end of 2009. A lot of those people, he believes, will simply walk away from their homes and send their keys back to the bank.

• DEFCONOMY THREE

How you’ll know we’re here: Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.

Odds we get here: Very good. Roubini says that we’ll likely socialize the losses, “effectively nationalizing the mortgages or the banks.” It would be, he told me, “like Northern Rock (the large bank in England that was recently taken over by the British government) times three.” He thinks the stock market will head south throughout the year as fears about a severe recession are confirmed.

• DEFCONOMY TWO

How you’ll know we’re here: Most forms of credit (both to consumers and businesses) become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.

Odds we get here: Good. Roubini says that credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.

• DEFCONOMY ONE

How you’ll know we’re here: Welcome back to 1929. A full economic meltdown results in a complete failure of the underlying financial system. What will be known to future generations as “The Greater Depression” has arrived.

Odds we get here: Not likely. Roubini believes that this will be a “very painful and severe recession” that could last for 18 months or more, but it will be more like 1981 than 1929. Families may be eating soup again, but at least it’ll be in their own kitchens.

Now, do I think any of what you just read will happen?

I have no idea, and that’s exactly the problem. I’m not an economist or a stockbroker; I’m just a guy trying to make the best decisions I can, and picking the brains of real experts helps me do that.

But I do know one thing for sure: Depressions aren’t advertised in advance. Last time around we went from the Roaring ’20s to bread lines in a matter of just a few years.

Anyone who says that can’t happen again either doesn’t know history, doesn’t understand how interconnected the world’s economies have become, or is lying to you. While that doesn’t mean you should panic, it does mean you should prepare — something my grandfather would’ve done a long time ago. More

Gas lines are not hard to find. This fall, you will likely see them at your local gas station:

* There were spot shortages during the 2007 harvest in North and South Dakota.
* A home heating oil crisis will occur when cold weather forces empty tanks to be filled.
* Increasing mortgage foreclosures illustrate that people are choosing between their cost of
commuting to work and house payment.
* Fuel and food riots occur where people that cannot borrow or buy oil (examples):
June 13, 2008, 2 people killed in fuel riots in Spain and Portugal.
July 12, 2008, 13 people killed in fuel riots in Yemen.

The purpose of this essay is to highlight petroleum inventory issues likely to cause shortages this fall. Several events can create instant, grave shortages. Following is an incomplete list of known risks. There are still more unknown risks of unknown magnitude. As explained below, gas lines will be accompanied by a price jump of about $1.50 per gallon, even if crude oil does not increase in price. More

King said he expects the cost to fill a typical family’s heating oil storage tank in Maine could top $1,000 this winter, double last year’s cost, following a recent spike in heating oil prices above $4 a gallon. Other estimates put the cost at about $800, up 60 percent from last year. “Most people are going to have to fill up that tank six times,” said King. “How is somebody who is making $350 or $400 a week going to pay to fill up the tank to keep warm?” New England pays more for energy than the rest of the nation because of its reliance on fossil fuels such as oil and natural gas extracted from distant states and countries.

The Massachusetts Oilheat Council estimates that heating oil prices in New England are now around $4.65 a gallon, up 116 percent since 2005. It expects prices to keep rising as the market tracks record-high crude oil prices. Many homeowners are searching for alternatives to oil. Sales of wood-burning stoves — in use since before American independence from Britain — are brisk, even as customers don shorts and bask in summer weather outside. “Demand for wood pellet stoves has tripled. We’re pre-sold out until probably the New Year,” said Tim Bushey, manager at Frost & Flame in Gorham, Maine, which sells wood stoves and stoves that burn wood pellets. More
Also See: Heating oil prices at unprecedented levels

Matt Taibbi
“The middle class is disappearing,” says [Bernie] Sanders. “In real ways we’re becoming more like a third-world country.”

Here’s the thing: nobody needs me or Bernie Sanders to tell them that it sucks out there and that times are tougher economically in this country than perhaps they’ve been for quite a long time. We’ve all seen the stats — median income has declined by almost $2,500 over the past seven years, we have a zero personal savings rate in America for the first time since the Great Depression, and 5 million people have slipped below the poverty level since the beginning of the decade. And stats aside, most everyone out there knows what the deal is. If you’re reading this and you had to drive to work today or pay a credit card bill in the last few weeks you know better than I do for sure how fucked up things have gotten. I hear talk from people out on the campaign trail about mortgages and bankruptcies and bill collectors that are enough to make your ass clench with 100 percent pure panic.

None of this is a secret. Here, however, is something that is a secret: that this is a class issue that is being intentionally downplayed by a political/media consensus bent on selling the public a version of reality where class resentments, or class distinctions even, do not exist. Our “national debate” is always a thing where we do not talk about things like haves and have-nots, rich and poor, employers versus employees. But we increasingly live in a society where all the political action is happening on one side of the line separating all those groups, to the detriment of the people on the other side. More

Florida led the nation in lost jobs over the past year, with 78,100, according to figures released Friday by the U.S. Department of Labor. Florida’s rising cost of living has slowed the state’s growth. And the recent housing boom has left South Florida with a large inventory of empty homes and condos — and little call for construction workers to build more. Florida right now is even worse off than Michigan, that quintessential Rust Belt state, which lost only 48,600. The state’s problem remained the construction industry, which lost 81,600 jobs. That loss was partially offset by an increase in government and healthcare jobs. More