Bob Chapman The Fallen Natures of Men…
A lower interest rate penalizes savers and producers. Low interest rates and major creation of money and credit eventually kill an economy. There is no incentive to save and produce. Our new president will provide what is needed with the help of Congress during this process to create a welfare state, where the state will provide. That is not difficult when control of banking, Wall Street, money and a great part of major corporations are nationalized. Government will distribute and redistribute money and credit as the new one world government is created.
A reflection of dollar creation was that foreign official purchases of US Treasuries fell from $10.1 billion in July to $4.8 billion in August. Even Japan sold $7.5 billion worth. It was 4 years ago we forecast $750 billion in homeowner losses. Now Bloomberg is talking about $855 billion. Where were they four years ago? Subscribers who wanted to sell should have done so 3 to 3-1/2 years ago. The Bloombergs of this world and the rest of the mainline media missed it all. And, that wasn’t coincidence, it was deliberate, the people who run things knew what was coming.
Yes, inflation has temporarily eased from 13-5/8% to 12-1/2%, but wait a few months. It will move back up again. Inflation isn’t going to slow down – how can it with the tremendous flow of liquidity. In the third quarter federal spending grew at 13.8% to help inflation along. Considering all this Mr. Obama has promised us the process of redistributing income. He has said he will propose a tax on worldwide income of American multi-nationals who are hiding their wealth offshore at 35% the world’s second highest. He would institute a windfall profits tax on oil companies and would increase capital gains taxes to 20% next year. There is plenty of reason for the stock and bond markets to react in fear with the VIX at an all-time high of 89.5. The VIX is a contrarian indicator. When it is where it is today it is telling you the markets are headed down. Don’t get fooled by historic averages and declines. This bear market stands alone by itself as some thing very special. The Dow could easily fall over 70% this time from its high of 14,100 into the 3,800 to 4,200 zone. The 8 cartel banks cannot keep on engineering recovery rallies.
It is impossible to keep this balancing act going indefinitely. Home prices still have a long way to go on the downside and the correction will probably overshoot to the downside. This, of course, will add more and more foreclosures. In addition, the industrial sector is collapsing simultaneously. Factory activity has fallen 20% over the past two months, the lowest since 1982, and factory orders are the lowest since 1980. Vehicle sales have collapsed and that sector makes up 13% of America’s payroll. We are looking at prolonged stagnation and the demise of GM, Ford and Chrysler. What else could you expect of the American economy? Free trade, globalization, offshoring and outsourcing have stolen five million American jobs and it still continues to do so. The Fed and our banks along with Wall Street have destroyed our financial system, what else would you expect to happen? Just to show you the affect of all the US slowdown, Japan a big exporter to the US showed a 37.5 down from 45.4 in September, the lowest on record, after contracting for nine straight months. Toyota’s US sales fell 23% and Honda’s 26%. Not to be left out China’s manufacturing index is off to 45.2, the lowest level since its inception in June 2004. Manufacturing accounts for 42% of GDP. It is no wonder China is going to inject $586 billion into its economy. 67,000 Chinese factories have already been shut down in just the first half of the year. It looks like 100,000 will bite the dust by the end of the year.
London’s interest rates already at 3% are headed to 2% by February. That would be the lowest interest rate since 1694. Bank of England governor Mervyn King sees the economy entering waters that haven’t been seen since Charles Dickens. October house prices fell 2.2% mom, the 9th successive decline and off 15.75% yoy. In the last four months Brits saw homeowners with negative equity rise to 335,000 from 250,000. By 2010, one million could be in that boat. The UK has the same problem as the US, Spain and Ireland, plunging home prices and a credit crisis. Even though the pound has fallen 24% versus the dollar, their export orders fell to 43.5, the lowest since September 2001. When you see numbers like that you know imports and exports are freezing up. Now you can see why we again see war on the horizon. The third quarter showed us that disposable income dropped at an 8.7% rate, the steepest on record dating from 1947. Consumer spending fell 3.1%, the first drop since the last quarter of 1991. Durable goods spending fell at the sharpest rate since 1991. Spending on non-durables fell at the sharpest rate since 1950. Wait until the 4th quarter figures are released in late January.
What is really disturbing is that credit default swaps in US Treasuries have risen almost 40% since the Fannie/Freddie bailouts. They are now equal to the debt of Thailand and Mexico. It shows you how out of control the Fed and the Treasury are. The big question is when will the foreigners finally see the light and stop buying dollars? It will happen, but we do not know when and neither does anyone else. The US Treasury says it needs $2 trillion this year, which means another increase in the federal debt ceiling. More
Douglas A. McIntyre 24/7 Wall Street
The lame duck members of Congress are trying to get out of town. Their boxes are packed and they are leaving to join law firms in their old districts. Other members of the House just want a month or two off. The legislative leadership wants everyone to stay around for hearings and a vote on a $25 billion bailout of Detroit. After a lot of hard work, President Bush will veto the legislation. He has already signaled that the car industry is on its own. Paulson could have made the loans. The fact that they did not shows that the administration is not willing to get involved. Bush is heading back to Texas to run his old ball team, the Rangers. He will be driving a Honda.
(Bloomberg) — Almost 300 companies are asking Congress, as part of any economic stimulus legislation, to suspend a requirement that they pay more into their pension funds, saying it may force them to cut jobs. Pfizer Inc., Boeing Co., Chrysler LLC, Verizon Communications Inc., Kraft Foods Inc. and Cigna Corp. are among the companies that signed a letter to lawmakers saying the economic slowdown has slashed the value of their pension assets, forcing them to make potentially “huge” contributions to the pension plans to meet requirements imposed by Congress in 2006. More
Ron Paul Lew Rockwell.com
With news this week that Congress is poised to consider a new stimulus package, I am forced to again ask a question that seems silly in Washington: How will we pay for this? While a few Members of Congress have raised the issue, it certainly was not the primary concern of the House Budget Committee when they interviewed Ben Bernanke on Monday. And, when they did direct this question to the Chairman of the Federal Reserve, his answer was the standard rhetoric about how Congress needed to make tough choices. Needless to say, not many specifics were discussed.
One of the most liberal members of the House, Barney Frank, has at least volunteered something of a suggestion: “We can let Iraq take care of itself.” This, of course, goes in the right direction, but hardly far enough. We need to declare the facts and their obvious consequences. The deficit of the United States is now spiraling out of control, and the recent bailout package has only made it worse. Our crushing federal debt is one key reason behind our current economic turbulence.
As Congress begins to consider the third “stimulus package” of the year, we need to realize it is time to start setting priorities. Priority number one should be cutting spending in foreign countries. This does not simply mean Iraq, but everywhere. The next stimulus package is likely to include money for infrastructure. While these investments are, constitutionally speaking, supposed to be made by state and local governments, it is not likely that Congress will suddenly begin to pay heed to the document we are all sworn to uphold. Still, we need to acknowledge the fact that the current Congress and Administration are rushing the nation toward bankruptcy.
This being the case, we could hope they would at least come to their senses regarding our debt and foreign spending sprees. Our nation’s foreign-held debt is at record highs and moving ever higher. Continuing to borrow money from Red China and others in order to pay “dues” to the United Nations and run “Plan Colombia” makes no sense at all. Our whole carrot-and-stick approach to foreign policy makes no sense. The US government simultaneously gives money to Israel, and to Egypt. We send AIDS money to Africa while AIDS clinics in America shut down. “Millennium challenge” funding goes to countries which enact “market-based reforms” as we push our own country further and further into a centrally planned economy.
Economic recovery will only come through financial prudence, savings, and getting back to producing things of value again. But it seems to be a foregone conclusion that we are about to enact another government initiative to “stimulate the economy.” Instead, there should be some serious talk about cutting all of these foreign giveaway programs. But, alas and again, we should not hold our breath. Congress is still not close to being serious about ending its addiction to debt and spending, and is again faced with the deadly temptation to attempt to spend us out of a recession. We should not forget that in the 1930’s those types of efforts gave us the Great Depression.
Anthony M. Freed
Your Mortgage or Your Life
We are all familiar with a Ponzi scheme. The basic principle is to promise investors that money put into control of the operators will return high interest on the principal invested. Unfortunately, the confidence game promises to pay more interest than the principal generates, if the scheme generates any interest or gain whatsoever. The scheme will last as long as more investors are found whose invested principal will pay for the inflated interest due and payable to earlier investors.
The Federal Reserve operates a Ponzi scheme. Congress can pay for federal expenses with funds collected from taxes, imposts, and duties, but congress is never satisfied with this amount. The desire to buy votes from special interest groups, and financially assist politically connected friends (or is this redundant?), compels congress-critters to spend more, and this is identified as deficit spending. To finance this deficit, the Federal Reserve will create on their accounting books a line of credit equal in the amount of the bills, bonds, or notes the congress will authorize; i.e., the Fed receives the interest-bearing obligation on the full faith and credit of the United States and in return checks written by government agencies will be honored by the banking system. The accumulated deficits are identified as the national debt…More
Mish
Global Economic Analysis
We need to man the phones and start targeting EVERYONE in Congress. Phone every legislative representative in your state. If those fill up, pick another state, even a small one. Tell them it is still no deal, Leave a short message so others can leave one. Fill every in box in the country.
This is the correct message now.
“If you vote for this Bailout Bill I will vote against you. I will do more than that, I will work actively for your opponent, no matter who that person is, doing everything in my power to contribute to your defeat. I will contributing my time, energy and money to your opponent, whoever that may be. I will talk to my friends, my family and my co-workers and urge them to do the same. I have contacted my friends already and asked them to do the same.”
Do not use that exactly. Make your own variations but make it short. I want the most messages possible and I want every box in the country full. More
c-span: Rep. Marcy Kaptur D-Ohio 9th District Toledo
Rep. Marcy Kaptur D-Ohio 9th District Toledo
“I feel sorry for our country, I feel sorry for this Congress, that we can’t do a better job of standing up for the people today. Where’s the Federal Reserve, Where’s the Treasury? Why do they only help the rich people? What about the rest of the people who have to work for a living? Wake Up America. Wake Up America. Contact your member of Congress.”
Think Progress.org
This morning, Treasury Secretary Henry Paulson testified before the Senate Banking Committee on the current financial crisis. Nearly every senator on the panel criticized the $700 billion bailout plan Paulson proposed this weekend, with many calling for stronger oversight.
In his opening statement, Paulson struck a defensive tone, blaming Congress for misunderstanding him in thinking he didn’t want robust oversight. He just didn’t want to be “presumptuous,” he explained:
We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress, that’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight: I believe we need oversight. We need oversight.
(MarketWatch) — The U.S. Congress is likely to raise the cost of a $700 billion rescue deal for U.S. markets by adding a new economic stimulus plan to [appease and blackmail] benefit taxpayers, according to Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee. Further, the cost of the latest government plan to stabilize the credit and lending market could cost up to $1 trillion dollars, said Sen. Richard Shelby, R-Ala., ranking member of the Senate Committee on Banking, Housing & Urban Affairs. That raises the specter of higher taxes under the next presidential administration. More
Paulson, Bernanke, and Congress are conspiring to make the US taxpayer the fall guy for financial stupidity by banks and brokers. Congress is now willing to ram through legislation at the last moment, even though Senate Majority Leader Reid Says “No One Knows What to Do”. More
WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke will meet with congressional leaders late on Thursday, according to congressional aides. One aide said the topic is expected to be “how to get us out of this financial mess.” Another aide said Bernanke and Paulson requested the briefing. The briefing comes amid speculation the Bush administration is looking at a Wall Street rescue package.
“This is not about benefiting Wall Street,” said Ford Motor Co.’s President of the Americas Mark Fields, referencing recent federal support for the investment firm Bear Stearns and troubled mortgage companies Fannie Mae and Freddie Mac. “This is benefiting Main Street, the working men and women. The auto industry is part of the backbone of the U.S. economy.”
GERALD P. O’DRISCOLL JR.
The markets have long assessed the debt of Fannie and Freddie at AAA because of the Treasury’s guarantee, now explicit. But no one has ever seriously assessed the Treasury’s creditworthiness with Fannie and Freddie on its books. The public guarantee is entirely open-ended and unbounded. The appetite of the two companies to balloon their balance sheets and take on risk has not been curtailed. Meanwhile, Congress spends apace with new programs for constituents in an election year.
We are at a Smithian moment, in which the temptation for the Fed to spend its last dime of credibility may prove irresistible. Investors are already being taxed by inflation and can rationally expect that tax rate (the inflation rate) to be raised going forward. Wages are not keeping up. Main Street is being taxed to fund Wall Street excess. Anyone who works, saves and invests is exposed to confiscation of his capital and earnings through inflation. More
Joseph Y. Calhoun, III
Over the last 50 years (at least) but especially the last 30, every economic problem has been buried under another layer of credit and government intervention. The Federal Reserve and Congress have worked together to promote an economic environment where failure is deemed a threat to the “system” and all economic ills are “solved” by reducing the cost of credit. The result is plain for all to see. The US has moved from creditor to debtor nation. Debtors are bailed out through the tax code while savers are consigned to a prison of low interest rates. It is no surprise that we must import capital to cover our debts when we encourage debt and discourage saving.
The long term problems facing our economy will not be solved painlessly. Nor will they be solved by providing more of the same policies that got us to this point. While the Federal Reserve sits at the center of our problems the institution itself is not at fault. They have been given an impossible dual mission to maintain economic growth and to limit inflation. Having control only over the money supply, it is beyond the capabilities of the Fed to create growth. Inflation and credit expansion do not add anything to the amount of resources available or the capital stock. The Fed cannot create universal prosperity by creating more money. Inflation consumes precious capital by misdirecting resources into non economic investments. If you have any doubts about that, think of all the empty houses sitting around the country which attracted so much investment over the last decade. The capital devoted to housing was diverted from more productive uses and is now being destroyed as banks are forced to write off the bad loans.
The villains in this story are the inhabitants of our political institutions. They seek to buy our votes with our own money and when they find that is not enough, they turn to the Federal Reserve and the banking system to create more. Rather than raise taxes to pay for the goodies they promise or the wars they deem necessary, they depend on debt and inflation. They do not create jobs, but destroy them. They do not create equality but exacerbate the divide between the haves and have nots and manipulate the divide to accrue more power. They do not create capital but rather destroy it. They are not special but mere mortals susceptible to the same failings as all men. They are self interested actors acting on a stage of their own design in a play written for their own benefit. More
Of Two Minds.com
Every once in awhile it pays to stand back and locate one’s position in reality, by dead reckoning if no better tools are at hand. With all the financial legerdemain in our system–bogus unemployment and CPI numbers, Level 3 assets held safely off balance sheet, and innumerable other financial rats scurrying for cover–we have no choice but dead reckoning. And by my reckoning, our financial system is dead. Right now, Bernanke and Paulson and Congress and the rest of the power elite have the shock paddles frantically pressed to the chest of the American financial system, hitting the erratic heart of our Debt Empire with shock after shock, hoping and praying the debt bubble of the past 25 years can somehow be extended.
Alas, the patient is already dead. But with reporters’ noses pressed against the window a few feet away, the stalwart crew around the corpse is making a heroic show of lying: “The patient is stabilizing,” “the patient is recovering nicely,” and so on, and by artificially stimulating the heart to keep producing a weak but visible pulse for all to see. But rather than be reassured, we are disgusted by the lies, for we have seen the patient bloat up and sicken and then weaken unto death for years. Rather than try to describe the Empire’s plight in words alone, here are some graphic illustrations for your review. Let’s start with the housing bubble: More
Christopher King
As provocation, I would have thought that a much better example was the approval recently given by the US Congress for a USD 400 million package for clandestine operations against Iran. More an act of war, really. Clandestine operations apparently means supporting terrorist groups, subversion, sabotage, kidnapping and assassination within Iranian territory. What would be the USA’s reaction if, say, China were to openly allocate similar funds and undertake similar activities against the USA? After years of American intervention in its affairs, sponsored war against it together with current lies and threats, Iran’s missile test seems a very sensible and modest defensive measure.
This is reminiscent of the USA’s attitude to water-boarding. It’s merely “enhanced interrogation” when the USA does it but if anyone else waterboards a US citizen, President Bush will seek the death penalty. Surely, this says something about the president’s mentality and American ethics.
Still considering provocation, however, wasn’t Israel’s recent rehearsal of an attack on Iran provocative? No? Or the USA’s agreement with the Czech Republic for the installation of a missile system component on Russia’s border? Condoleeza Rice says that these missiles won’t be aimed at Russia and I think that she’s right. The purpose of this missile system is puzzling because Condoleeza’s statement that it protects the US and European Union from Iran and other rogue states is obviously nonsense. Militarily, it’s useless. However, if it can irritate Russia into retaliatory missile deployment and cold-war rhetoric, this gives multiple perceived benefits for the USA:
► Ability to blame Russia for more military spending, giving profits for firms such as Haliburton
► Ability to sour relations between the EU and Russia and disrupt further rapproachment
► Distract from US violence in the Middle East by giving Europeans problems nearer home to worry about Read More
Infowars—Congressman Ron Paul has warned millions of radio listeners that the US is heading into a deadly confrontation with Iran, revealing his disbelief at members of Congress who have openly voiced support for a pre-emptive nuclear strike on the country. “If we do (attack) it is going to be a disaster,” the Congressman told the Alex Jones show this Thursday. “I was astounded to see on one of the networks the other day that the debate was not are we going to attack? but are we going to attack before or after the election?” Paul continued. The Congressman recently voiced his concern over House Congressional Resolution 362 which he has dubbed a ‘Virtual Iran War Resolution’. “If that comes up it is demanding that the President put on an absolute blockade of the entire country of Iran, and punish any country or any business group around the world if they trade with Iran.” Paul told listeners. More
New York Times
When Congress started fashioning a sweeping rescue package for struggling homeowners earlier this year, 2.6 million loans were in trouble. But the problem has grown considerably in just six months and is continuing to worsen. More than three million borrowers are in distress, and analysts are forecasting a couple of million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.
Those stark numbers not only illustrate the challenges for the lawmakers trying to provide some relief to their constituents but also hint at what the next administration will be facing after the election. While the proposed program would help some homeowners, analysts say it would touch only a small fraction of those in trouble — the Congressional Budget Office estimates it would be used by 400,000 borrowers — and would do little to bolster the housing market. More
Truthout.org
For those who thought Tom Delay’s departure would really change anything in Congress, this past week was a strong cup of coffee. On Capitol Hill, politics and greed still trump the good of the nation, still trump the Constitution, still trump all. While nothing that happened in Washington this past week was new or should have surprised anyone, we were nonetheless served clear notice, anew, that this is a democracy under siege. In one week, Congress authorized one hundred and sixty two billion US taxpayer dollars to extend for another year the illegal and immoral occupation of Iraq, and rewrote federal law to specifically pardon criminal actions by the nation’s largest telecommunications companies. No one really noticed that a retired US general bluntly accused the Bush administration of war crimes. He could just as easily have accused Congress of the same. They are just as guilty. More
Bill Van Auken
In an across-the-board capitulation to the Bush White House, the House of Representatives voted at the end of this week to approve another $162 billion to fund the US wars in Iraq and Afghanistan while also passing legislation that legalizes the administration’s domestic spying program. President George W. Bush appeared in the White House Rose Garden Friday morning to praise the Democratic House leadership for supporting these two prongs of Washington’s so-called war on terror: military aggression abroad and an assault on basic democratic rights at home.
Bush credited “bipartisan cooperation” for a war-funding vote that would give “our troops the funds they need to prevail without tying the hands of our commanders in the field or imposing artificial timetables for withdrawal.” The surveillance law, he added, would “help our intelligence professionals learn our enemies’ plans for new attacks.” In the war-funding package, the Democratic leadership crafted legislation that will pay for the present level of killing in Iraq and Afghanistan through June 2009—six months after the next administration takes office. More
David Paul Kuhn
Only 12 percent of Americans now have confidence in Congress, the lowest percentage in the 35 years that the Gallup Poll has tracked the number. Americans now view Congress less favorably any of the 14 other American institutions tracked by Gallup, including big business, newspapers and health maintenance organizations. Even as President Bush’s approval rating languishes at a record low, more than twice as many Americans have confidence in the presidency — 26 percent — than have confidence in Congress. More
Purely cosmetic “…Senate Democrats have said they won’t try and force their Republican colleagues to consider the House legislation.” There you have it. Americans screwed by both parties who are bought and sold to the highest corporate bidder.
WASHINGTON (AP) — The House on Thursday approved an extra three months of jobless benefits for all unemployed Americans, knowing the plan’s chances are slight in the Senate and almost nonexistent at the White House. After failing to get a veto-proof two-thirds margin Wednesday, Democrats said they pushed the legislation through to the Senate anyway, on a 274-137 vote, because Americans need help in a slumping economy.
The Labor Department reported Thursday that the number of people filing new claims for unemployment benefits last week increased by 25,000 from the week before. The unemployment rate in May jumped to 5.5 percent, up from 5 percent in April. It was the biggest one-month gain in 22 years. “The American people are waiting to see if Congress is going to help them,” House Speaker Nancy Pelosi, D-Calif., said. But the White House already has threatened to veto the bill, and Senate Democrats have said they won’t try and force their Republican colleagues to consider the House legislation. More
This week, members of the House Judiciary Committee introduced the “Prioritizing Resources and Organization for Intellectual Property (PRO IP) Act of 2007,” a bill that ratchets up the federal government’s role in dealing with intellectual property infringement. While portions of the bill seem legitimately targeted at combating mass, commercial counterfeiting operations, other parts are devoted to little more than protecting the entertainment industry’s obsolete business models.
Going after commercial pirates is a good idea, but copyright law often fails to distinguish between commercial counterfeiters and regular folks — like those caught up in the RIAA’s anti-downloading litigation dragnet. More
Glenn Greenwald Salon
Just in the first three months of 2008, recent lobbyist disclosure statements reveal that AT&T spent $5.2 million in lobbyist fees (putting it well ahead of its 2007 pace, when it spent just over $17 million). In the first quarter of 2008, Verizon spent $4.8 million on lobbyist fees, while Comcast spent $2.6 million. So in the first three months of this year, those three telecoms — which would be among the biggest beneficiaries of telecom amnesty (right after the White House) — spent a combined total of almost $13 million on lobbyists. They’re on pace to spend more than $50 million on lobbying this year — just those three companies. Let’s pause for a brief minute to reflect on how ludicrous and deceptive — laughably so — are some of the main FISA/telecom claims that are being advanced. Read more
John Byrne The Raw Story
“Sen. McCain’s support of regulating global-warming gases like carbon dioxide — the biggest environmental issue before Congress — more closely resembles the stance of his Democratic rivals, Sens. Barack Obama and Hillary Clinton [than President Bush], though he disagrees with them on how such regulations should be structured,” writes Monday’s Wall Street Journal.
“Besides championing legislation to regulate greenhouse-gas emissions,” the Journal adds, “Sen. McCain has opposed the administration’s call to open parts of the Arctic National Wildlife Refuge to oil and gas drilling, citing the refuge as a natural treasure on par with the Florida Everglades and the Grand Canyon in his home state of Arizona.” Read more
Pic courtesy of Will Palmer Lawmakers Say Contaminated Blood Thinner Illuminates Problems With Drug Supply
Under the cloud of contaminated heparin deaths, Food and Drug Administration Commissioner Andrew von Eschenbach received a rude welcome from Congress Tuesday, accused by Rep. John Dingell, D-Mich., of “carrying the water” for the Bush administration, “toe-dancing around the hard facts,” and making promises that turn out to be nothing more than “hooey.”
Read more
