NightBlogger

Congressman Paul gives his thoughts on the testimony of Paulson and Bernanke, the New International Reserve Currency; the failure of the dollar standard, gold and where the global economy could go from here.

Thom Calandra says,
U.S. is on a path of quantitative easing that the world has never seen. All economies will super ease. But the U.S. will be the worst. It is amazing to me that this is not issue No. 1 in financial markets. The hedge funds and investment banks have all gone super bullish on the dollar. This is just another hedge fund investment bank craze with a lot of herding and manipulation. They keep talking about a shortage of dollars when the U.S. is the world’s mega debtor and the world’s mega current account deficit economy. They keep talking about the dollar as a safe haven when the locus of economic weakness and financial crisis is here and the Federal Reserve is clearly on a path to debase the dollar because of the debt deflation here.

And finally: “It’s as crazy as the case they made for commodities in the first half, when the world economy was weakening, supply and demand responses were well under way and prices had gone higher in real terms than in any prior cycle in history. This is the last desperate bubble for this failing crowd. And when they are exhausted the dollar will fall very hard and gold will be released to the upside. That is all I know,” Mr. Veneroso says.

This is all we know and all we need to know. More

As deleveraging occurs and debt is destroyed, prices of commodities and other assets will fall in terms of real money, which is gold and other precious metals. The price of oil, for example, will continue to fall in terms of gold. (Investors need to start thinking of values in terms of ounces of gold instead of dollars, because that is where we are headed) What this means is that, while it is possible that the price of oil could still increase in terms of dollars, the price of gold will increase to an even greater degree. There will be no deflation in terms of dollars Right now, everyone is buying dollars and US treasuries based on the idea of price deflation in terms of dollars. More

The Congressman discusses the G-20 summit taking place in Washington this weekend that will address the global monetary system. “What’s coming up is the internationalization of a central bank. They would like to come up with one central bank for the world to replace the dollar standard. The dollar standard is coming to an end. The Chinese and even the British now are getting together with the Europeans and saying what we need is new reserve currency….”

Related:
Adirondack Daily Enterprise.com
Top international military officials meet in Adirondacks
POSTED: October 18, 2008
SARANAC LAKE - Powerful generals and admirals from some of the most powerful nations on Earth are reportedly meeting somewhere in the local area this weekend after flying into the Adirondack Regional Airport in Lake Clear on Friday.

Among the passengers of a large Boeing 757 airplane with “United States of America” printed on its fuselage were top members of the U.S. Joint Chiefs of Staff and their counterparts from France, Germany and another country, possibly Great Britain, according to Barry DeFuria, a town of Harrietstown councilman and Airport Committee member who was there when the plane landed. A top military delegation from Italy flew in on a separate Falcon airplane, DeFuria said.

Town Supervisor Larry Miller, also on the Airport Committee, was also there and confirmed which nations’ officials were on which planes, but he said he did not know what kind of officials they were or where they were going from the airport. He said he and DeFuria had to get security clearances to be present and that soldiers were guarding the 757 around the clock at the airport.

The Joint Chiefs of Staff is the leadership council of the U.S. military, comprised of the top general or admiral of each branch of the armed services. Its current chairman is Admiral Michael Mullen.

Also See:
So What Were Top Military Commanders From The US and Europe Doing at the Trudeau Institute?

Dead Scientists DO Tell Tales

CNBC just did a segment on this weekend’s G-20 conference. Not one word about Sarkozy’s call to end the USDollar as the world reserve currency was mentioned, even though his stunning comment — printed in both Forbes and Reuters — has historic implications.

Paul Joseph Watson
Prison Planet.com
G20 To Begin Implementation Of Global Financial Dictatorship
Powerbrokers attending this weekend’s watershed G-20 conference will set in motion plans for a new world economic order, the end of the dollar as the world reserve currency, and the centralization of financial power into an internationalist inner circle of regulators completely above oversight or accountability. French President Nicolas Sarkozy has already fired the opening salvo before the meeting even begins, with his call for the dollar to be demoted as the world reserve currency.

“I am leaving tomorrow for Washington to explain that the dollar cannot claim to be the only currency in the world…, that what was true in 1945 can no longer be true today,” Sarkozy stated yesterday. Economy Minister Christine Lagarde echoed the call and suggested that the Euro could replace the dollar, but that the changeover would have to be gradual so as to reduce volatility. More

Jim Willie:

The G-20 Meeting will serve to be a sideshow, populated by clowns. To an absurd degree, the United States and England still maintain the grand illusion of being in control. They are not, since both are deep debtor nations and operating under failed banking systems. The major creditor nations will not permit a simple restart of Western nations, under the same rules. Big changes are coming. The gold and silver prices will soon enter a powerful stage of rising price, as in go through the roof. Defaults are likely at the COMEX, so watch the December contracts.

envast.blogspot.com
In a recent Business News Network interview, Amanda Lang talks with John Embry, Chief Investment Strategist at Sprott Asset Management, about his position on precious metals (bullish) and base metals (bearish). While hesitating to make a definitive prediction in the midst of such widespread asset destruction, Embry nonetheless looks beyond the carnage to what he suggests could be the seminal event for gold—the possibility of default on physical delivery for the December futures contract. He also explains why gold has failed to rise to the occasion of the worst-case financial scenario in history. Below are some excerpts from the interview, edited for length and clarity.

Amanda Long: People say gold really should be doing better than it is now and that actually becomes a justification for not buying it. It’s not doing what it should be doing in a crisis and, therefore, I don’t want to own it.

John Embry: That is a wonderful analysis because that is exactly the mindset the guys who are driving the price down are trying to create. Gold doesn’t work so keep away from it. They’re able to control the price quite easily in the paper markets because the paper markets are so huge in comparison. “The guys” – the central banks and their bullion bank accomplices—have a lot of power and a lot of money, so they can overwhelm the other side. But what’s happening is that the physical supply is diminishing dramatically. It’s getting harder and harder to purchase gold and silver through traditional avenues. You can’t get it in coin shops to any extent. You can’t get it through your banks. The physical side is really constricted by supply. That, to me, is the reality. The paper stuff is just the illusion.

AL: Now the problem, of course, for investors is that the paper market is the one you’ve got to play and, for the most part, it affects the price. How will that be resolved?

JE: What will have to happen is the people that are on the long side of the paper market in, say, on Comex, are going to have to call for delivery. When they call for delivery and there isn’t enough gold available to meet that call, the game changes. That is probably going to be the event that changes the perception. There’s a suggestion that something may happen around the time of the maturity of the December contract.

AL: Would you expect them to do that out of fear? In other words, they’d literally want to take delivery so that they have gold in their vaults?

JE: I would think that would be the best reason to do it for the simple reason that I want physical gold today. I mean that is the one thing you can trust. Paper gold, who knows? You may have a force majeure in the sense that people in the end will settle for paper and you won’t have the gold protection you think you have. You’ll get your money’s worth, but you’ll have paper. So that to me is the reason why I think somebody’s going to say, wait a minute, I want the gold. [Ed. Note: Force Majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as war, strike, riot, crime, act of nature (e.g., flooding, earthquake, volcano), prevents one or both parties from fulfilling their obligations under the contract.]

AL: In that transaction people ask for delivery. Will that trade crush a lot of people? Are there a lot of people who are short this market?

JE: Yes, without question. For the people who are short this market, there will be a force majeure and they will have to settle in paper because they can’t meet the requirements of gold. That is going to be the seminal event that defines this whole situation. More

Goldseek.com
During the past 10 years, at least, I have been following the growth of International Reserves. The first graph I elaborated to show their growth was back in 1999 and it was based on IMF data up to 1997. Recently, I have been updating the graph using Alex Tanzi´s numbers. Alex works at Bloomberg and from time to time, Doug Noland at www.prudentbear.com quotes his numbers regarding International Reserves, excluding gold.

As of August 2008, as you can see from the graph, according to Alex Tanzi International Reserves were growing at the explosive annual rate of 26.5%. Suddenly, since August, Reserves have stopped growing.

In August, they were just under $7 trillion expressed in dollars, though “paper” Reserves are made up not only of dollars, but also euros, British pounds, Japanese Yen and a smaller quantity of some other currencies. It seems to me that when a huge number such as $7 trillion suddenly stops growing, it must indicate that something very serious is going on. The growth of Reserves was so severe it was really an explosion; quite abruptly, it has stalled and has actually turned negative.

One explanation might be that since the figure is given in dollars, and the values of the other currencies which make up Reserves have been falling with regard to the dollar (except for the yen), that the contraction in the value of euro and pound Reserves caused the amount of Reserves to begin contracting. Still, the huge rate of growth of Reserves, year-on-year, was up to 26.5%, and it seems to me that this previous explanation is not sufficient to account for a sudden halt in growth and the onset of a decrease in Reserves.

I have not seen a single article dealing with this important change; I comb the Internet daily and I have found not one comment on this development.

The International Reserves were growing by leaps and bounds, as a consequence of the “Imbalances in International Trade”, where the countries which were issuing currencies accepted as Reserves were exporting huge amounts of their currencies in “payment” of their trade deficits. These currencies were then re-invested by the exporting countries in bonds and agency debt. The main actor was the US, which was able to fund its enormous fiscal deficits through the sale of these bonds and agency debts. It was a nice deal while it lasted for the US and, I suppose, for the Brits as well as the Europeans.

Now, if the Reserves are no longer growing but diminishing, this might indicate that the exporting countries are no longer buying and accumulating more US, British and European debt. If they are not accumulating more foreign currency bonds and debt, then the fiscal deficits of the US, the Brits and the European Union countries are no longer being funded – especially important to the US, which is running an immense fiscal deficit, what with the US Treasury going into debt like a drunken sailor on account of the need to bail-out all and sundry debtors.

Now if the US deficit is not being funded, then that means that the fiscal deficit is simply being monetized by the Fed. Or what else can it mean? The US is on track to incur a fiscal deficit of $1 Trillion, perhaps much more, in this fiscal year. If the International Reserves are not growing, that means it will be impossible to fund that deficit. That would mean: monetary inflation in spades, in the US.

I’ll leave you with this question: what is the significance of the drastic change in the growth-trend of International Reserves, from explosive growth, to the sudden beginning of a contraction? I hope others, more competent than myself, address this question. I believe it is quite important that we have an authoritative answer to it.

More info: www.plata.com.mx

Peter Schiff
The Tales Get Taller
When inexplicable events perplexed our early forbears, village wise men concocted elaborate and colorful explanations to soothe the populace. Earthquakes, hailstorms, and solar eclipses were all ascribed to root causes that made sense to the villagers and increased the esteem of the story tellers. The recent, unexpected surge of the U.S. dollar has led many Wall Street witch doctors to conjure a series of logic-defying tales to give reason to what is surely the random scramble of a confused herd. Wall Street spun similar yarns during the dot.com and real estate bubbles as investors groped for reasons to justify sky high prices.

The recent surge, which has pushed the dollar up more than 30% against some currencies in recent months, is purely a short-term technical phenomenon. The move is caused by global investment deleveraging, in which major financial players are reversing (unwinding) risky trades and piling into what is erroneously perceived as the safest haven they can find. Increasingly, foreign assets, many of which had appreciated more than American assets, have been sold, and the proceeds stashed into U.S. Treasury bonds, which these investors believe to be the Fort Knox of finance. The cascade has caused momentum trades, margin calls, redemptions, and other factors having nothing to do with the underlying fundamentals of the dollar or the U.S. economy. In fact, all that has happened to the U.S. economy, and all that the government has done, and is likely to do, in their misguided attempts to contain the damage, is extremely bearish for the U.S. dollar.

Mesmerized by technical moves and oblivious as always to the fundamentals, the Wall Street brain trust has offered flimsy explanations. One popular rationale is that as bad as things are in the United States, they are even worse every place else. Still another is that since the U.S. was the first country into the crisis that we will be the first nation to come out. Still another is that since our government is acting more boldly than most to tackle the problems, our economy will not suffer as badly as others where governments have been slower to react and more timid in their responses. In addition, many still perceive the United States as the citadel of stability in a world of second-rate economies.

However, if we look beyond these “explanations,” the fundamentals loom simple and irrefutable: American borrowers of all stripes cannot afford to repay the trillions of dollars we owe. Over the past decade, the vast majority of lending has come from abroad, and as Americans don’t pay, the losses show up on foreign balance sheets. Since we blew most of the money we borrowed on consumption, we simply lack the industrial capacity to repay our debts without resorting to a printing press.

In bankruptcy, both the debtor and creditors are affected. However, while creditors take a financial hit, ramifications for debtors are typically more severe. Creditors are generally better prepared to absorb their losses. However, for bankrupt debtors usually much more substantial changes ensue.

Since America is the world’s biggest debtor, with our IOU’s broadly held by every creditor nation, the effects of our bankruptcy are being felt worldwide. However, while our creditors are suffering now, their pain will be temporary and relatively mild compared to what awaits Americans.

So while it may appear to some that things are worse abroad, that is only because the full extent of our problems has yet to be reckoned with. The main lesson our creditors will learn from this crisis is not to lend American consumers any more money. Once the lending stops, our “cart before the horse” borrow to spend economy will crumble. While the rest of the world absorbs their losses and moves on, we will be digging our way out of the rubble for years to come.

Earthquakes are caused by the fundamental shifts of tectonic plates beneath the Earth’s surface. A similar move is underway in the global economy. Describing either event without a basic understanding of either geology or economics will simply result in a tale being told by an idiot.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

MOSCOW, (RIA Novosti)
Russian Prime Minister Vladimir Putin proposed on Tuesday that Russia and China gradually switch over to national currency payments in bilateral trade, expected to total $50 billion in 2008. “We should consider improving the payment system for bilateral trade, including by gradually adopting a broader use of national currencies,” Putin told a bilateral economic forum. He admitted the task would be tough, but said it was necessary amid the current problems with the dollar-based global economy.

Chinese Prime Minister Wen Jiabao described strengthening bilateral relations as “strategic.” “Mutual investment by Russia and China has already exceeded $2 billion, this is a very good index,” Jiabao said. He praised the success of numerous projects, including additional construction of China’s Tianwan nuclear power plant and the opening of a joint pharmaceuticals center in Moscow. A number of large Russian companies, including state-run oil producer Rosneft and aluminum champion RusAl, are seeking to develop investment projects in China, Jiabao said.

The Chinese premier said bilateral cooperation in the helicopter industry, mechanical engineering, the energy sector, timber production and innovation sector was also showing signs of progress. “China is a staunch supporter of Russia’s accession to the WTO, but is categorically against politicizing the issue,” Jiabao said. The Russian premier invited Chinese investors to join Russian timber projects. “We welcome both domestic and foreign investment in Russia’s timber sector,” Putin said. “As one of the largest consumers of our products, China could be a source of such investment.” He also offered Beijing Russia’s assistance in developing a large passenger plane on the basis of Russia’s experience with its wide-bodied Il-96 aircraft.

Also See: New world currency coming soon
Chinese State Newspaper urges replacing dollar as World Currency

Source: Credit Writedowns
I have felt for sometime that dollar strength is a counter-trend that has a sell-by date written all over it. You see, the Federal Reserve is ballooning its balance sheet like nobody’s business as it tries to be the global lender of last resort. This is very inflationary. Apparently, the Fed wants to trash the Dollar. And, despite recent events, I believe it will eventually get its wish. The United States is the world’s biggest debtor nation, dependent upon foreign governments to buy treasury and agency debt in order to maintain itself. However, two articles I read today have convinced me that this situation is about to change in a nasty way and Asian countries are about to let the dollar go (very big hat tip Scott). The first article concerns Taiwan and their apparent desire to stop buying agency debt for fear of throwing good money after bad.

Taiwan Dumps Fannie, Freddie. And Uncle Sam?
Taiwan’s financial regulators reportedly have ordered that nation’s insurance companies to pare their holdings of the debt and mortgage-backed securities of Fannie Mae (ticker: FNM), Freddie Mac (FRE) and Ginnie Mae securities, according to a report on the Internet site of Asian Investor magazine.

Such an order would be a stunning rebuke to Washington, coming a little more than a month after the federal government effectively nationalized the mortgage giants. Fannie and Freddie last month were placed into conservatorships with the Treasury standing ready to inject up to $100 billion through purchases of preferred shares in the government sponsored enterprises. More

This certainly is bad news for U.S. interest rates, mortgage rates and the U.S. Dollar. However, more worrying that mainland China seems to be following its Taiwanese brothers in rejecting the U.S.

Reuters: The United States has plundered global wealth by exploiting the dollar’s dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.

The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies. A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said. More

China is the largest holder of U.S. government and agency debt. If they go on strike, the consequences for the U.S. would be catastrophic. It is hard to believe we are asking this, but events are pointing in an ominous direction: Is the U.S. Government even solvent?

(Reuters)
The United States has plundered global wealth by exploiting the dollar’s dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday. The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies. A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said. The People’s Daily is the official newspaper of China’s ruling Communist Party. More

Now let’s review what Jim Willie said just the other day to Al Korelin at the Toronto Resource Investment Conference:

“I got word in the last 24 hours that the Europeans, Russians, Chinese and Arabs, have agreed to a new world currency. It’s going to be based on a basket and the dollar and British Pound are not included. Those currencies are going to be largely tethered to gold. There’s going to be a new Russian gold-backed Rubel and a new Arab-Gulf Dinar.”

Listen to the recording here

More from Jim Willie:
Factors behind USDOLLAR rally and death dance

NEW BRETTON WOODS II FARCE

Last weekend in Brussels, G8 Finance Ministers met. Among other things, they discussed a reform to the global banking structures. For the many challenged on geography, that city is in Belgium, headquarters for many European Union functions, in Western Europe. Creditors were not present, which means the finance ministers were talking to themselves. Credit masters were not invited. The nations whose banking systems are in the process of implosion are essentially attempting to revise the global currency system. Those in attendance constitute the losers! However, the Arabs and Chinese were not present. This seems entirely backwards. The bankrupt nations do not dictate to the creditors terms of a revised agreement.

Imagine a large business saying the following. “We are bankrupt. We want a meeting. We are going to dictate to you bankers anyway. We are broke. Our economies are shattered. Our banking systems are in ruins. But we going to tell you how we are to restructure our debt and rework a new system. We realize our debts to you are bigger than we can ever repay. We realize we cannot continue in commerce without your continued extended credit. But we will force upon you a new system. It does not matter what your opinion is. You do not have a seat on this elite committee, sorry!” THIS FLOW IS NOT FROM THE WORLD OF REALITY!

No! Bankruptcy receivership is next, where creditors will be left with few options. They will be compelled to run management committees, and dissolve many functions of government. Creditors will probably await the G8 initiative, then summarily reject it. They will next propose their own new global financial structure. The teenager’s credit card is about to be taken away, when the irresponsible kid proposes a new repayment system, new promises, new chores done even. The kid has burned down half the neighborhood, yet thinks he can call the shots! Sadly, the parents will probably ground him and force a tutor to direct his studies, and force a strict drill sergeant to direct his work activities. His friends will not be permitted to form new teams that include him. A ‘Post-US World’ is being planned, and Americans are the last to know. Entire new barter systems between a key pair of nations is about to be launched. Regional bond and commodity organizations are being formed, with exclusion of the US. The US press reports nothing on these important developments.

Foreign creditors will form new committees, which will be recognized in time as the Receivership Committee. Foreigners are watching in horror. Decisions have already been made, with Americans the last to know. In order to arrest the cancer they so clearly see, they are ready to force a complete upheaval. The USDollar will lose its global currency status, a thoroughly abused privilege. The above lack of disclosure only reinforces their motive to take action. They will move when they must, upon a system failure, or when they are challenged, or when flimsy attempts by debtors are made to dictate reform.

Without any changes forthcoming soon, the foreign banking systems and economies face huge threats to failure. To friends, family, and contacts, my approach has been to attempt to explain the underlying forces behind revolutionary financial change. Foreigners must cut off a cancerous body part, the one attached to the United States. Foreigners must cut off flow from a toxic systemic organ, the one attached to the United States. CUT IT OFF OR RISK DEATH. They must disconnect of USDollar from the global currency system attached intimately to their own financial and economic systems. They must to survive.

ARAB GOALS & MOTIVES

Arabs clearly lust to control and manage a global gold trading center. It will be in Dubai in the United Arab Emirates. The new Gulf dinar currency will pave the road to that center. The Gulf Coop Council is biding time, cutting time delay deals, warding off pressure by the USGovt, appeasing with weapons contracts from the USMilitary, and is working behind the scenes to create a new dinar currency. The new Gulf dinar is likely to be primarily gold in its backing. So, foreign nations will soon be forced to purchase the dinar for all or most of crude oil payments. This forces the purchase of gold in order to purchase crude oil. The demand for gold will thus fortify the global banking system, by means of commodity settlements. Many details are unknown, but the basic structure has been slowly come to light. A new motive flashes red in front of Arabs to institute some changes FAST. The crude oil price is down, cut in half from July. Their revenues are sharply reduced. Russia figures into the complex deal to launch the dinar. The Saudis and small sheikdoms need security protection. The next chapter will involve protection amidst a gold-backed currency, not a military-backed currency, in Saudi eyes.

ISOLATED USTREASURYS

The other side to the Arab dilemma is that the USTreasury Bond demand is quickly eroding from Petro-dollar recycle on trade surplus. The USGovt finds itself as relying far too much on foreign central banks for demand of USTBonds, relying far too much soon on the printing press. The USTBond demand is missing the oil surplus in recycle. Their reduced and unstable oil revenue motivates the Arabs to install a new payment system, based upon an end to the ugly defacto Petro-dollar standard. It shamefully is the basis of what my analysis has called a Protection Racket.

The incredible fact evident in the data is that until mid-September, the US Federal Reserve has drained liquidity from the US private banking system in order to offset its colossal bond swap bailouts for major Wall Street and New York money center banks. Their objective was to avoid undue US$ money supply growth. THEY WERE TARGETING GOLD. They essentially drained the lifeblood from the USEconomy on Main Street in order to subsidize fraud sanctioned and approved on Wall Street. Only since mid-September has the USFed been monetizing USTBond debt issuance. They are running scared, printing with abandon. The gold price is falling as the USDollar printing press is rapidly heating up, no longer offset by bank system drains. Details are in the Hat Trick Letter report.

Peter Schiff: major move coming — Dollar Collapse

Peter Schiff:

“The major move that’s coming with the dollar and gold is way up in gold and way down in the dollar. All the economic growth that we had since the bursting of the tech bubble was phony. All we did is borrow trillions of dollars from the rest of the world, we blew the money on consumption, and now all those Greenspan chickens are coming home to roost….The problem is that we borrowed and spent all that money is the first place and we never would have done it were it not for the most irresponsible monetary policy in US history.

“What’s actually happening right now is the world is basically realigning itself. The global economy has been the function of the world saving and producing the America borrowing and spending, but now we’re too broke to pay back the money; we have nothing to show for all our borrowing because we spent it, and this is causing a lot of angst around the world — when you loan somebody money and they can’t pay you back there’s a problem. But the credit crises is real and it can’t be solved by the government printing money. The credit is gone because the savings is gone. What the market is trying to do is bring about a badly needed recession, trying to get Americans to stop spending and start saving their money again, but the government is resisting it, and the reason the dollar is gonna fall through the floor is because the trillions of dollars the government is trying to create to try and replace all the savings that we don’t have is very negative for the dollar. And once this market noise is over, foreigners are not going to bu our currency, they’re not going to buy our bonds, the only buyers are going to be the FED.”

Rick Santelli, the only guy on CNBC who has any sense of reality and vision responds:

“Peter’s on to something that I really agree with, that the end game here is that all of these countries recycling our dollars back to support our current account deficit, our trade deficit, even our budget deficit, that once the realignment of the euro and the pound is done, they aren’t going to do that, so I agree with him. There’s gotta be a major higher interest rate environment around the globe when they stop supporting each other’s debt habits.”

Marc Faber: US will go bankrupt

“Marc Faber was born in Zurich and schooled in Geneva, Switzerland. He studied Economics at the University of Zurich and, at the age of 24, obtained a Ph.D. in Economics magna cum laude. Faber resides in Thailand and is best known for the Gloom Boom Doom newsletter…Faber is famous for advising his clients to get out of the stock market one week before the October 1987 crash.”

Marc Faber said US long term treasury bonds should have “junk” ratings and US government will go bankrupt; it’s only a matter of time.

Gold prices rallied 14 percent over the last two weeks as stocks declined — but the precious metal is down for the quarter. But Dan Smith of Standard Chartered told CNBC he’s bullish on the commodity. “We’ve seen very strong physical demand for gold coins in places like India and Europe,” he said. “A lot of the bad news [for commodities] is already priced in.” What about the resurgent U.S. dollar? As of this writing, the dollar is up against the yen and against the euro But Smith says that’s merely temporary: “The [U.S.] dollar is in a substantial weakening cycle, both for structural reasons and expectations of the bailout” and its effect on the U.S. budget balance sheet, he said. More

Max Keiser on current (Laundering) $700 Bn Bailout
Max Keiser: “Remember, these congressmen all are huge stock owners in all these banks and corporations. American congress has been co-opted by the corpocracy in America; I don’t really believe that they are speaking absolutely in the best interest of the American people; they’re speaking in their own self interest. John Kerry and Nancy Pelosi, for example, have huge stock positions in the very companies that are suppose to be subjected to some kind of oversight….” Max says there will be NO election in November. See Video

Ellada Khankishiyeva
Trend Capital
Latest developments in the financial markets of US and see-saws in the exchange rate of dollar have undermined the position of the America currency in world markets. Today, even more countries are thinking about refusing dollar USD as reserve currency. By doing this, they want to secure their markets and promote the role of national currencies.

According to International Monetary Fund, if in 1999 dollar assets accounted for 71% of all currency reserves worldwide, it makes 65% at present. A total of 25% of reserves of central banks and 39% of liquid demands in private sector are preserved in euros. Not only central banks and source companies, but also investment funds give preference to euro in their currency policy. Diversification of currency reserves reduces threat of losses from the change in rate of one of the currencies.

Azerbaijan has turned to diversification of currency reserves between dollar and euro since 2007. As a result, 60% of currency reserves of Azerbaijan are formed in US dollars and 40% in euro and pound sterling. NBA began to support cost of Azerbaijani manat in bi-currency basket against dollar and euro from 11 March. The basket has been formed by 30% in euros and 70% in dollars against previous 20% and 80% accordingly. Introduction of a new percentage enabled to reduce import of inflation, lessen risks of businessmen carrying out operations with Euro zone and secure neutral level of nominal efficient exchange rate of manat against currencies of the key trade partners. More

Bob Chapman
The International Forecaster
After over 40 years of financial reporting and analysis, we can say, without hesitation, that the 700 billion bailout plan proposed by Fed Chairman Buck-Busting Ben Bernanke and Treasury Secretary Hanky Panky Paulson, on behalf of the Caligula Administration, is the most abusive and piggish fascist scheme we have ever heard proposed. This is the living, freaking, end. We sit hear stunned and stupefied at the sheer arrogance of a corporatist, fascist plan, so saturated with moral hazard, that it can only be described, to use the words of Jean-Pierre Roth, president of the Swiss National Bank, in his description of the breakdown in American lending standards, as “unbelievable!”

First, note how the elitists have allowed the stock markets to crash over the past two days in order to put pressure on Congress to adopt their plan. They have withdrawn PPT support in an effort to stuff this plan down Congress’s throat. And this pressure will continue until they get their way. This is what Congress gets for letting the Illuminati run our country. Now, they will have to face their constituents in a no-win situation. If they adopt the plan, they will be accused of bailing out the fraudsters, and of privatizing the profits from the sheople’s hard work in evil elitist corporations, while socializing the losses from yet another bankers’ Ponzi-scheme in the sheople as is their custom. If they don’t adopt the plan, and as a result, the credit markets freeze up and the US economy goes down in flames, they will be blamed for that as well, even though that is our best solution at this point (i.e. purging the system of its excesses). The fact that our Congress has sat on their collective duffs and allowed this financial debacle to happen, when it was quite easily avoidable with even the slightest amount of regulation and oversight, gives you every reason to vote out every one of these reprobates and sociopaths ,which we like to refer to as “incumbent scum.” The only exceptions to the coming ouster of incumbents, as far as we are concerned, are Ron Paul, and perhaps Senator Jim Bunning of Kentucky.

Congress appears to be balking, and rightly so, claiming that they need more time to deliberate over this situation, to ponder potential alternative plans, or at the very least to modify the current proposal to make it more palatable to voters, which is impossible, at least in our humble opinion. But is this just more posturing to make it look like they are not rolling over and playing dead for the elitists, or has Congress finally found their collective backbone? Only time will tell, but based on past experience, we aren’t getting our hopes up.

These filthy Bosch Pigs want to give Paulson carte blanche to pay for toxic waste at its “hold-to-maturity” value with taxpayer funds, meaning you will pay par for crap that is worth pennies on the dollar. Then you, the taxpayer, will get paid back in hyper-inflated dollars on ever-deteriorating assets, with flagging real estate prices chipping away at their value without recovery for decades, meaning that your collateral on any of these no-down-payment, give-him-a-loan-if-he’s-breathing mortgages will be impaired and next to useless in the event of default. And who is going to administer all these loans, and process the payments, and deal with defaults? And what types of toxic waste will be subject to the bailout? Will we be taking on defaulted credit default swaps, interest rate swaps, credit cards, corporate bonds, commercial paper and aircraft leases also? Will we solve the mortgage-backed securities problem only to be bitten in the butt by credit default and interest rate swaps, or other toxic paper that was equally steeped in fraud? Of course we will.

The most egregious part of the proposed bailout is that it allows Paulson to dole out the funds and deal with the toxic waste without any judicial oversight and with full immunity from any criminal prosecution. This means he can pay par with your hard-earned money, and then when it becomes clear that the cess-pool-paper is only worth a small fraction of par, he can pawn it off to his cronies at bargain basement prices, thus distributing any profits to the elitists as they see fit, and the American people can go spit in the wind.

And how is this elitist bailout bonanza going to benefit the taxpayers, or our economy? It isn’t! In fact, it is going to exacerbate an already volatile situation. Thanks to free trade and globalization, the global economy has become a tripwire economy. One wrong move, and the claymores go off, taking out the entire global financial system in a blaze of shrapnel and glory. The whole house of fraudster cards, rife with trade and investment imbalances, then collapses and gets sucked into a gargantuan financial black hole. All it will take is one nation whose citizens are fed up with rampant inflation. They will have to break the dollar pegs, cash in their US treasury bonds, and absorb the excess amounts of their domestic currencies by purchasing them with the dollars received as proceeds from the sale of the treasury bonds. This strengthens their currency, thus moderating their inflationary problems, but then their exports suffer. Meanwhile, the dollar starts to decline, and everyone else is afraid that this decline will continue and threaten the value of their reserves. The mad dash for the front door begins, and not everyone can fit through at the same time. The dollar gets destroyed, along with the US economy, as the cash from dumped treasuries finds its way back to the US through purchases of US assets by the foreign nations that are looking desperately to dump their cash, thus creating hyperinflation on a Weimar scale. That is why the FTC is no longer publishing statistics regarding foreign investment in the US, to hide this problem from the public as the dollars start pouring in. Adding to global woes, the exporting nations, whose goods are now no longer competitively priced, go down with the USS Titanic.

The United States operates at a deficit, spending more money than we gained from our own production, and we need foreigners to finance our profligacy. In order to help us finance this deficit, these foreigners buy our treasury paper with the excess dollars they obtain from their trade with the US. They do this by having their central banks print more of their domestic currency to absorb the dollar forex which is flooding their economies due to trade imbalances with the US. Their central banks simply print more of their own currency, which is then used in currency exchanges to soak up that dollar forex. This process inflates their economies by dumping their own currency on their domestic markets while bidding up dollars which are then used to purchase treasuries. While those dollars are parked in treasuries, they do little harm to US citizens via inflation, although we do have to pay interest on them. The foreign nations then enjoy a competitive price on their exports to the US because of their artificially weakened currency, but at the expense of domestic inflation. This system perpetuates the trade imbalances, and the inflation in the foreign nations. Obviously, this cannot go on forever.

And now, all these wild, lunatic bailouts will threaten the entire world economy. Why? Because we are dumping more dollars into the world economy, devaluing our currency, and therefore the value of all these foreign-owned US treasury bonds. Imagine what will happen when 700 billion dollars, in cash, is dumped into the fraudster system. If the fraudsters start lending again, that means the fractional banking multiplier, which usually runs at 7 to 8 times reserves, will then generate five to six trillion dollars of new money and credit, an amount that would swamp the US and global financial systems even if the Fed shut off its money and credit spigot completely. And who would they lend all this money to? The overextended, totally broke, unemployed, underemployed sheople who are being hyper-inflated into oblivion? Of course not. It will be used for more wild speculation, and to produce more leverage, and more fraud, and more toxic waste, which will add yet more money and credit to our already waterlogged, or should we say dollar-logged, system.

And just because there are losses does not mean that this 700 billion will be absorbed by those losses. The money that was used to produce the assets which suffered those losses is still in the system, but not where the elitists wanted it to be parked. They are trying to get that money back, at your expense, through this bailout plan. Where is that money now? It is following a path from wherever the last seller of the toxic waste, before it went bad, spent or invested the proceeds from the sale of that toxic waste. Remember, these derivatives added nothing to the system. They are just a re-bundling of existing debt-type assets, with the proceeds being used to create more debt for more re-bundling, in what is truly a Ponzi-scheme, using the same money over and over again to create more debt. The only new money produced were the fees and commissions paid to do the re-bundling. What about the money that the current owner of the toxic waste has lost on principal and interest on defaulted loans? That money is in the future earnings of the defaulted borrowers, who instead of spending it on principal and interest to cover mortgage payments, will now spend it on rent and other necessities. And what of the lost leverage? That is being replaced by the dollars coming back into the system through de-leveraging, and which will be available for re-leveraging when it comes into stronger hands, as it must, eventually.

Further, our national debt is going to grow by leaps and bounds on account of these bailouts, and this affects our ability to repay, thus weakening the dollar further and exacerbating inflationary pressures. We are like a person who earns twenty thousand dollars a year and has two hundred thousand dollars worth of credit card balances. We have news for you. Those balances are not going to be repaid. The foreign holders of dollar-denominated assets are not stupid, and the dollar suffers in foreign exchange markets every time the debt ceiling gets raised. Our debts are accelerating. They are not leveling off. And these bailouts will put that acceleration into hyper-drive. Once the exit from treasuries begins, there will be no stopping it. The elitists want to jump-start the system so they can run the markets up again to complete The Big Sting Two, but this is a futile effort because everything else is imploding. Few can qualify for loans anymore, because the credit standards are being tightened and they are broke and overextended, and the ones who do qualify do not need it. What will businesses do with loan money when they have no customers left to buy their products? As the economy and the real estate markets continue to tank, the toxic waste will become ever less valuable, and now they want to plant that future misery in the taxpayer gardens. These bailouts must be stopped at all costs, or we are going to get vaporized later.

The system must be purged, and the dollar rescued, although we believe it is probably too late for the latter. But it is sure worth giving it a try, because having the world’s reserve currency is very advantageous.

All this craziness reminds us of an old Genesis song, called “Land of Confusion.” We note that our generation unknowingly, or ignorantly, helped bring the Illuminati into power, and now the Baby Boomers, who have tasted of their venomous temptations, are going to have to take them out. We know you can do it. You are our largest generation, and you have the most to lose, so you cannot, and must not, fail. All we can do now is teach you where things went wrong. It will be up to you to set things right, if not for yourselves, then for your children and your grandchildren.

(Source: Itar-Tass)
Prime Minister Vladimir Putin called for changing the architecture of the international financial system. “We all need to think about changing the architecture of international finances and diversifying risks. The whole world economy cannot depend on one money-printing machine,” Putin said at the final press conference after a meeting of the Russian-French bilateral commission on cooperation in Sochi on Saturday. “This is a very serious issue that should be addressed in a calm, attentive and working manner without haste together with our colleagues from Europe and America,” Putin said. “This issue should be considered not in a confrontation-like way but very benevolently in order to find the most acceptable ways for the development of the world economy and world finances.”

French Prime Minister Francois Fillon said he would put forth several initiatives within days for dealing with the world financial crisis. He said it was not possible yet to say whether France or Europe has survived the financial crisis. He believes it necessary to strengthen control and bring more transparency into cooperation between fiscal authorities of different countries. “We will be working on this together in the next couple of weeks,” he said.

Max Keiser - Special Liquidity Schemes, Gold and the Dollar

Note: 5 second delay before Video begins
Max Keiser on Aljazeera English news. “I’m looking for gold to go to $2000 an ounce because people are sick and tired of the lies from Hank Paulson, from Ben Bernanke, from all the central bankers, from Goldman Sachs, from JP Morgan, lies, more lies, nothing but lies.”

The dollar fell the most against the euro since January 2006, pushing it down from a one-year high, on reduced demand for the greenback as a haven. The euro, the Brazilian real and the pound advanced versus the yen as Lehman Brothers Holdings Inc. negotiated with potential buyers, encouraging investors to reduce bets against higher-yielding assets. The dollar also declined versus the euro as traders increased speculation that the Federal Reserve will cut borrowing costs by the end of the year. More

Peter Schiff
In the latest example of financial market madness, the recent government “bailout” of Freddie Mac and Fannie Mae has perversely resulted in a sharp rise in the value of the U.S. dollar. If the markets were functioning rationally, the transference of staggering new liabilities to the U.S. Treasury would have been immediately seen as catastrophic for the dollar. Instead the markets have ignored the obviously negative long-term implications and have remained fixated on the more immediate effects. However, rather than solving the problems, the government’s actions merely confirm my worst fears, and increase the chances for a hyper-inflationary outcome.

By transforming $5.5 trillion of suspect mortgage-backed securities into seemingly bullet-proof Treasury bonds, the move has sparked a relief rally in the dollar as foreign investors no longer have to worry about defaults or markdowns. In fact, to holders of Fannie and Freddie debt, it no longer matters what happens to the housing market. Home prices can drop another 50%, every single homeowner can default on their mortgage, and bond holders will not lose one dime. This has emboldened foreign investors, and temporarily increased demand for both dollars and Freddie and Fannie debt.

Had the government done the right thing and not guaranteed Freddie and Fannie debt, I believe we would now be experiencing an outright financial crisis. The dollar would be falling sharply along with real estate prices, gold would be soaring and the recession would be deepening. However, by nationalizing Freddie and Fannie, the government has merely delayed the crisis. The borrowed time will cost us dearly, as the day of reckoning will now likely involve much steeper losses for our currency.

The Freddie and Fannie takeover does nothing to address the underlying problems that forced the companies into bankruptcy in the first place. All of the bad mortgage debt still exists. In fact, based on this bailout, there will be trillions more in bad mortgages insured over the next few years. The only thing that has changed is how the losses will be distributed. Instead of falling solely on bond holders, who had chosen to invest in mortgage debt, they will now be dispersed among U.S. taxpayers and all holders of U.S. dollars, who made no such choices.

Over the next year or two, my prediction is that several trillion dollars of existing mortgages, not currently insured by Freddie or Fannie, will be transferred to the pile. Going forward the vast majority of new mortgages made to Americans will be bought by Fannie or Freddie. Therefore in a few short years the $5.5 trillion of initially transferred liabilities could grow to more than $10 trillion of new obligations for the U.S. Treasury.

The defenders of the bailout claim that Fannie and Freddie debt does not represent true obligations because they are fully collateralized by homes. But anyone with a casual interest in the current real estate market knows that homes are now only worth a fraction of outstanding mortgage debt. And that fraction gets smaller every day. My guess is that $10 trillion of federally insured mortgages could result in $2 trillion of losses, which amounts to more than $25,000 per American family.

Also, there is no reason to believe that the bailout merry-go-round will end with Fannie and Freddie. Faltering investment bank Lehman Bros. is now positioned to receive the kind of Federal backstop that smoothed the purchase of Bear Stearns back in March. Bailouts of automotive and airline companies can’t be long in coming. Once the market perceives a Federal magic wand, it becomes politically impossible to stop waving it.

In addition to adding new sources of debt in the form of mortgage backed securities, the government is also piling on debt the old fashioned way…through budget deficits. Recent projections put the 2008 deficit at $410 billion, not counting the Iraq war or any costs related to financial bailouts. It is my guess that the annual Federal budget deficit will soon approach, and then exceed, $1 trillion, and that the national debt, including actual bonds and guaranteed mortgages, will soon exceed $20 trillion. When these untenable obligations force Treasury and agency investors to shift focus from default risk to inflation risk, a mass exodus from both Treasuries and mortgage-backed securities (now Treasuries in disguise) will ensue. The stampede will trample the dollar.

When the dust settles, the Federal government will be left with staggering liabilities that will be impossible to repay with legitimate means (taxation or borrowing). To make good, they must rely on the printing press to create money out of thin air. The rapid expansion in money supply will push the dollar down mercilessly.

Right now every asset on the planet is being sold except the U.S. dollar. To me this rally looks like the last gasp of a dying currency. Just like a toy rocket ship, once the dollar runs out of fuel it will crash back down to Earth.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

Jim_Willie_CB
In truly perverse fashion, only in America, the USDollar is rallying as a prelude to a US financial system breakdown. Call it a blowoff top! The Wall Street carnival seems to celebrate anything to lift the USDollar, even recession and the death knell for USTreasurys. Nationalization is never a positive for financial prospects. A powerful reversal comes when intervention ammunition wanes and the reality of US bank system implosion returns. The rally could reach the 82 mark, if the reversal pattern reaches full completion. The three major factors pulling the US$ down are the bank losses, the housing decline, and the job loss situation. Nothing has changed with these factors, except they have worsened!

My position is unshakable. The financial structure of the Untied States is besieged by powerful bankrupt insolvencies. 1) USGovt federal deficits are exploding, from war, from handouts, from recession, from bailouts. 2) US trade deficits are chronic and have risen over $60 billion monthly, soon to worsen from the US$ rise rendering harm to exports. 3) US banks are insolvent, with congames the only force forestalling bankruptcy as they continue to distort their balance sheets, while showing inability to raise needed cash in their replenishment. 4) US homeowners are now increasingly living with loans that reflect negative equity, as the proportion sits around one third in such upside-down living rooms. In the next few months, all four wrecked pillars will worsen dramatically. Fundamentals drive the USDollar lower. An assault on the USTreasurys will put the US$ into No Man’s Land.

The most dangerous reaction investors can make now is to believe the USDollar has begun a major new upleg. The second most dangerous reaction is to sell gold or silver into this climax of fraud, manipulation, bankruptcy, and protected larceny. The sun is soon to set on the Fascist Business Model network. Those who put leverage into their portfolios have forfeited their freedom to hold. The father of a friend down here in half sunny, half rainy Costa Rica just lost his $250k silver account. He had told me of his father’s strong belief in silver and the wrecked US$ condition, but he was not even aware that his father had a silver futures account, not physical silver bullion or coins. He owned paper silver, bound by the illusion of wealth. Now Dad has no silver at all, as he liquidated after a few margin calls. A piece of the inheritance is gone. My Dad has significant bank deposits, which might be under a different strain as banks drop like flies this winter. My advised strategy since the beginning of the year has been to hold silver or gold in physical form, for at least one third of accounts, maybe more.

The uplift coming this autumn and winter will be historic, as new chapters will be written on the global financial rehabilitation and remake. The world is planning the post-US era, amused by the celebration taking place on Wall Street. It will wind down soon enough. The next chapter will be characterized by isolation, retribution, receivership , dismissed government, overriding supply contracts, and redrawn lines. More

The International Forecaster
Well, it’s in. It is now official. Q2 GDP was 3.3%. And if you believe that, we will be happy to sell you that bridge in Brooklyn that we have for perpetual sale to the incredibly gullible and naive. This structural icon is a magnificent piece of US Americana and infrastructure that everyone should own. It can be yours for a cool million bucks, which is a bargain considering the tolls you could impose. And never mind that we already sold it to the people who believed the NIST’s report on Building 7 of the former World Trade Center. As you know, it is perfectly OK to sell property you don’t own. If you don’t believe us, then ask all the bullion banks who sell the gold and silver they have leased from central banks and precious metals ETF’s.

The real figure for GDP is of course negative. To be charitable, let’s call it minus 1%. The reason for the ludicrously higher GDP figure, aside from the bogus government accounting practices, which are used to calculate official GDP, is that the official GDP deflator is about one third of actual. That results directly from the fact that official inflation is one third of the actual inflation you experience when you purchase goods and services. That way our corporatist, fascist government can rip off retirees on their social security benefits and give people an excuse to remain in denial about the destruction of our economy via hyper-stagflation. Note that GDP was negative despite a 160 billion dollar stimulus package, which stimulated nothing, and despite substantially increased US exports due to the weakness of the dollar. Yes, it is that bad, and it is going to get a lot worse.

The dollar continues to bounce around between 76 and 77.5 on the USDX, as the PPT continues to put on a show for the benefit of the incumbent scum while the reprobates and sociopaths, who pass themselves off as our political leaders, cause us to puke with their corn-ball theatrical performances at the Jackass and Dumbo Follies, which some dare to call political conventions. Aside from direct collusion and intervention by central banks, dollar support has resulted from several “cutesy” moves. When the SEC decided to enforce the law against naked-shorting, albeit only for the “Magnificent 19,” this caused a huge short-squeeze that put many hedge funds under water. The troubled funds were forced to bail themselves out, and that meant selling their winners in long oil contracts, which in turn collapsed the price of oil. This sharp drop in oil prices then wiped out a huge hedge fund that was long oil big-time, causing oil prices to collapse even further.

Dollars had to be purchased to acquire the liquidated oil contracts, thus supporting the dollar, and these dollar proceeds were then used to pay down margins at big commercial and investment banks, which then used the margin-covering funds to purchase treasuries not only to make a return, but also to absorb the dollars that had been flushed out by the collapse in oil prices. More

Dan Yorcini
jsmineset.com
If anyone wants to know why bonds have been busy going nearly straight since the middle of July…. The first is Federal Agency Debt holdings in the New York Federal Reserve’s Custodial Accounts. The second chart is US Treasuries holdings in those same accounts. The third is total holdings in the Custodial Accounts. Foreign Central Bank holdings of US Federal Agency debt holdings hit a high water mark of $986 billion reported on July 17 of this year. This week’s data shows that those same Foreign Central Banks are now down to $968 billion. In five weeks time, foreign central banks have sold $18 billion worth of US Federal Agency debt.

Over that same time period, they have increased their holdings of US Treasury debt from $1.363 trillion to $1.441 trillion, an increase of $77.33 billion! For the entire 5 week period beginning July 17, 2008 to the present week, total custodial holdings have increased $59.71 billion. Foreign Central Banks have been quite busy unloading US Federal Agency Debt and acquiring US Treasuries in its place and then some. One would easily get the idea that they do not feel comfortable with it any more. Even a cursory glance at the Agency Debt Holdings chart shows that the last five weeks have seen the largest drop in this category over the life of the data series that I am using. While we have seen reductions in their holdings from week to week on occasion over the data range, this is the first time we have seen a reduction in US Federal Agency debt holdings that has continued for this length of time. More

Financial journalist and author Roger Lowenstein predicts the cause of the next widespread economic crunch as he excerpts his new book, “While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis.” Series: Revelle Forum at the Neurosciences Institute.