NightBlogger

Steve Lendman
Worse Than the Great Depression?
According to The New York Times, “leaders of 20 countries agreed Saturday to work together to revive their economies, but they put off thornier decisions about how to overhaul financial regulations until next year (when it plans) its next meeting for April 30, 101 days after (Obama) is sworn into office.” Whatever is finally agreed on, this much for certain is clear. Unchanged Washington/Wall Street dominance is planned along with putting the IMF in charge of global “neoliberalizing” with all its destructive fallout.

A Long-Term View on the Depression:

It’s from noted sociologist, social scientist and world-systems analyst Immanuel Wallerstein, now a Senior Research Scholar at Yale where he covers world-systems in three ways:

– the historical development of the modern world-system;

– the contemporary crisis of modern world-economy capitalism; and

– structures and knowledge.

He’s authored numerous books and writes regular commentaries on major world and national topics. A recent October 15 one is titled “The Depression: A Long-Term View.” It’s started in his view. We’re “at the beginning of a full-blown worldwide depression with extensive unemployment almost everywhere. It may take the form of a classic nominal deflation (or less likely) a runaway inflation, which is simply another way in which values deflate.” What caused it, he asks? Derivatives? Subprime mortgages? Oil speculators? It’s a “blame game of no real importance.”

Understanding it calls for far more revealing factors, such as “medium-term cyclical swings (and) long-term structural trends.” Over several hundred years at least, he describes two major ones. “One is the so-called Kondratieff cycles that historically” lasted 50 - 60 years. The other is called “hegemonic cycles” that are much fewer in number but last far longer.

America contended for hegemony as early as 1873, achieved it fully in 1945, and has been declining since the 1970s. “George W. Bush’s follies have transformed a slow decline into a precipitate one. And as of now, we are past any semblance of US hegemony. We have entered, as normally happens, a multipolar world. The United States remains a strong power, perhaps still the strongest, but it will continue to decline relative to other powers in the decades to come.” Nothing can change this.

Kondratieff cycles are timed differently. Its last B-phase ended in 1945, followed by “the strongest A-phase upturn in the history of the modern world-system.” It peaked around 1967 - 73, and headed down. “This B-phase has gone on much longer than previous (ones) and we are still in it.”

Its characteristics are as follows:

– “profit rates from productive activities go down, especially in those types of production that have been most profitable;”

– it directs capitalists to financialization and speculation for higher returns; and

– “productive activities, in order not to become too unprofitable, tend to move from core zones (like America) to (lower cost) parts of the world-system.”

Speculative bubbles are profitable while inflating, but they always burst. “If one asks why this Kondratieff B-phase has lasted so long, it is because the powers that be (the Treasury, Fed, IMF, and western European and Japanese collaborators) have intervened in the market regularly and importantly” to shore it up at times of economic disruptions - 1987, the 1989 S & L crisis, 1997 Asian contagion, 1998 Long Term Capital Management debacle, the 2001 - 2002 corporate scandal period, and more than ever today with big unanswered questions whether this time it will work.

It doesn’t matter because we’ve reached the limits of what can be done - “as Henry Paulson and Ben Bernanke are learning to their chagrin and probably amazement. This time, it will not be so easy, probably impossible, to avert the worst.” The present system won’t survive. A new one will replace it. It will not be capitalism as we know it, but may be far worse or far better (more democratic and egalitarian). Determining the outcome is “the major worldwide political struggle of our times.” More

Unfortunately, despite some 12 financing facilities created by the Treasury and the Fed, massive interest rate cuts and various bailouts, the government has little to show for its attempts to dictate where markets should trade. The Fed’s own balance sheet has exploded from roughly $900 billion worth of debt in August to around $2 trillion as of last week. Knowledgeable sources expect that to reach $3 trillion by the end of the year. These numbers and rates of growth are so enormous (and unprecedented) as to be utterly incomprehensible. Does anybody actually think the government has any idea what it’s doing? More

Bush and Paulson don’t care about America’s cities, only Wall Street Banks, meanwhile China spends billions on rebuilding her infrastructure.

Bloomberg – Philadelphia, Atlanta and Phoenix are asking the U.S. Treasury Department for part of the $700 billion financial rescue package to help them finance construction projects and pay bills. They seek $50 billion on behalf of cities nationally to spend on infrastructure and loans lasting for as long as a year to aid cash flow. A copy of the letter was supplied by a spokeswoman for Atlanta Mayor Shirley Franklin. “The federal government is providing support for the financial industry,” said Luke Butler, a spokesman for Philadelphia Mayor Michael Nutter, who organized the effort. “Cities could use some support, too.” In Washington, Treasury Secretary Henry Paulson said on Nov. 12 such requests are beyond the scope of the bailout. More

Robert Prechter
You would think that banks would learn to behave differently with centuries of history to guide them, but for the most part, they don’t. The pressure to show good earnings to stockholders and to offer competitive interest rates to depositors induces them to make risky loans. The Federal Reserve’s monopoly powers have allowed U.S. banks to lend aggressively, so far without repercussion. For bankers to educate depositors about safety would be to disturb their main source of profits. The U.S. government’s Federal Deposit Insurance Corporation guarantees to refund depositors’ losses up to [$200,000]…which seems to make safety a moot point. Actually, this guarantee just makes things far worse, for two reasons. First, it removes a major motivation for banks to be conservative with your money. Depositors feel safe, so who cares what’s going on behind closed doors? Second, did you know that most of the FDIC’s money comes from other banks? This funding scheme makes prudent banks pay to save the imprudent ones, imparting weak banks’ frailty to the strong ones. When the FDIC rescues weak banks by charging healthier ones higher “premiums,” overall bank deposits are depleted, causing the net loan-to-deposit ratio to rise.

This result, in turn, means that in times of bank stress, it will take a progressively smaller percentage of depositors to cause unmanageable bank runs. If banks collapse in great enough quantity, the FDIC will be unable to rescue them all, and the more it charges surviving banks in “premiums,” the more banks it will endanger. Thus, this form of insurance compromises the entire system. Ultimately, the federal government guarantees the FDIC’s deposit insurance, which sounds like a sure thing. But if tax receipts fall, the government will be hard pressed to save a large number of banks with its own diminishing supply of capital. The FDIC calls its sticker “a symbol of confidence,” and that’s exactly what it is. More

Weimar Republic Inflation 1923–24: a woman feeds her tiled stove with money. At the time, burning money was less expensive than buying firewood.

Summary of Hyperinflation Special Report by John Williams, dated April 8th, 2008.

1. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.

2. …a law professor at Harvard and The University of California, Berkeley, who experienced the Weimar Republic hyperinflation, said, ‘It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money.

3. …the still-unfolding banking solvency crisis has confirmed the Fed’s and the U.S. government’s willingness to spend whatever money they have to create in order to keep the financial system from imploding.

4. The circumstance envisioned ahead is not one of double- or triple- digit annual inflation, but more along the lines of seven to 10-digit inflation seen in other circumstances during the last century.

5. The historical culprit generally has been the use of fiat currencies — currencies with no asset backing such as gold — and the resulting massive printing of currency that the issuing authority needed to support its system, when it did not have the ability, otherwise, to raise enough money for its perceived needs, through taxes or other means.

6. The United States is no exception, already having obligated itself to liabilities well beyond its ability ever to pay off.

7. Hyperinflation: Extreme inflation, minimally in excess of four-digit annual percent change, where the involved currency becomes worthless. A fairly crude definition of hyperinflation is a circumstance, where, due to extremely rapid price increases, the largest pre-hyperinflation bank note ($100) becomes worth more as functional toilet paper than as currency.

8. The current economic contraction is about halfway towards being classified as a ‘depression.’

9. Official CPI could be running in double-digits by year-end 2008.

10. The U.S. economy has been in a recession since late-2006, entering the second down-leg of a multiple-dip economic contraction, where the first down-leg was the recession of 2001 that really began back in late-1999. Annual CPI inflation currently is running around 11.6%, again, facing further upside pressures.

11. The evolving depression quickly will move to great-depression status, when the hyperinflation hits. It will be extremely disruptive to the conduct of normal commerce.
Ongoing M3 currently shows a record annual growth rate of 17.3%.

12. In the near future, dollar selling should build towards an extreme, with heavy foreign investment in the dollar fleeing the U.S. currency for safety elsewhere. With the domestic financial markets and U.S. Treasuries so heavily dependent on foreign capital for liquidity, the Federal Reserve — now touted as the formal financial market stabilizer — will be forced increasingly to monetize federal debt. That process will build over time, given the federal government’s effective bankruptcy.

13. Again, the current circumstance will evolve into a hyperinflationary depression, then a great depression. Although such is not likely much before 2010, or after 2018, the financial end game for the current markets will tend to come sooner rather than later and will break with surprising speed when it hits.

14. 2008 will favor an incumbent party loss, i.e. a victory for the Democrats.

15. What promises hyperinflation this time is the lack of monetary discipline formerly imposed on the system by the gold standard, and a Fed dedicated to preventing a collapse in the money supply and the implosion of the still, extremely over-leveraged domestic financial system.

16. The limits to the unlimited abuse of the debt standard are particularly evident in the GAAP-based financial statements of the U.S. government, which show the actual federal deficit at $4.0-plus trillion for 2007 alone, with total federal obligations standing at $62.6 trillion. With no ability to honor these obligations, the government effectively is bankrupt.

17. Although the U.S, government faces ultimate insolvency, it has the same way out taken by most countries faced with bankruptcy. It can print whatever money it needs to create, in order to meet its obligations. The effect of such action is a runaway inflation — a hyperinflation — with a resulting, full debasement of the U.S. dollar, the world’s reserve currency.

18. Oil prices are near historic highs, the dollar is near historic lows, and money growth is at an all-time high. The near-term outlook for all three is for new record levels and for extremely strong upside pressure on U.S. inflation.… gold prices should continue setting new historic highs.

19. The difference is in accounting … for unfunded Social Security and Medicare liabilities.

20. Put into perspective, if the government were to raise taxes so as to seize 100% of all wages, salaries and corporate profits, it still would be showing an annual deficit using GAAP accounting on a consistent basis. In like manner, given current revenues, if it stopped spending every penny (including defense and homeland security) other than Social Security and Medicare obligations, the government still would show an annual deficit.

21. U.S. federal obligations are so huge versus the national GDP that the country’s finances look more like those of a banana republic than the world’s premiere financial power and home to the world’s primary reserve currency, the U.S. dollar.

22. The effect of this structural change has been that most consumers have been unable to sustain adequate income growth beyond the rate of inflation, unable to maintain their standard of living. The only way personal consumption can grow in such a circumstance is for the consumer to take on new debt or liquidate savings. Both those factors are short-lived and have reached untenable extremes.

23. From the Fed’s standpoint, it can neither stimulate the economy nor contain inflation. Lowering rates has done little to stimulate the structurally-impaired economy, and raising rates may become necessary in defense of the dollar.

24. By the time hyperinflation kicks in, the economy already should be in depression, and the hyperinflation quickly should pull the economy into a great depression. Uncontained inflation is likely to bring normal commercial activity to a halt.

Hyperinflationary Great Depression

25. In the United States, the printing presses have not been revved up heavily yet, but the commitments are in place, as seen in the annual GAAP-based deficit running on average more than $4.0 trillion per year. That amount is far beyond the ability of the government to tax or the political willingness of the government to cut entitlement spending. While the inevitable inflationary collapse, based solely on these funding needs, could be pushed well into the next decade, actions already taken likely have set the stage for a much earlier crisis.”

26. It is this environment that leaves the U.S. dollar open to potentially such a rapid and massive decline, and dumping of U.S. Treasuries, that the Federal Reserve would be forced to monetize significant sums of Treasury debt, triggering the early phases of a monetary inflation. In this environment annual multi-trillion-dollar deficits rapidly would feed into a vicious, self-feeding cycle of currency debasement and hyperinflation.

27. Given the extremely rapid debasement of the larger denomination notes, with limited physical cash in the system, existing currency would disappear quickly as a hyperinflation broke. From a practical standpoint, however, currency would disappear, at least for a period of time in the early period of a hyperinflation.

28. Barter System. With standard currency and electronic payment systems non-functional, commerce quickly would devolve into black markets for goods and services and a barter system.

29. “Gold and silver both are likely to retain real value and would be exchangeable for goods and services. Silver would help provide smaller change for less costly transactions.”

30. In such a circumstance, gold and silver would be primary hedging tools that would retain real value and also be portable in the event of possible civil turmoil. Also, at some point, the failure of the world’s primary reserve currency will lead to the structuring of a new global currency system. I would not be surprised to find gold as part of the new system, in an effort to sell the system to the public.

Bloomberg — American Express Co. won Federal Reserve approval to convert to a commercial bank, gaining access to funds as credit losses build and sales of asset-backed bonds plummet. “That business has totally dried up,” said Frederic Dickson, who helps oversee about $20 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. More

Karl Denninger
“Yes We Will (Have A Depression)”
Where we had a few investment banks running at 30:1 leverage, we now have our Fed running at fifty to one! The Fed is running what amounts to a gigantic kiting scheme where it borrows $500 billion (the “supplemental Treasury program”) from various foreign and domestic sources then loans that money out to the same domestic and foreign sources who settle those trades! As further evidence of this game we have an enormous number of “fails to deliver” in Treasuries. Why would there be a fail to deliver unless the person who sold it doesn’t have it? That’s the essence of a kiting scheme - you’re effectively counterfeiting, because you’re writing a draft that you can’t settle.

This is showing up in the Treasury market, where “fails” reached an aggregate five trillion dollars in October. We’re headed for another Depression folks and I no longer consider the actions that are being taken by our government to be “mistakes” - at this point they must be classified as knowing and intentional acts, depending on you, the public, being too ignorant of how banking and finance work to figure it out and demand that they stop it. More

If you’re wondering how bad it can get, and how fast, read this:

“Overnight, people lost their savings. Prices are soaring. Once-crowded restaurants are almost empty. Banks are rationing foreign currency, and companies are finding it dauntingly difficult to do business abroad. Inflation is at 16 percent and rising. People have stopped traveling overseas. The local currency, the krona, was 65 to the dollar a year ago; now it is 130. Companies are slashing salaries, reducing workers’ hours and, in some instances, embarking on mass layoffs.

“No country has ever crashed as quickly and as badly in peacetime,” said Jon Danielsson, an economist with the London School of Economics. “

Financial Times
AIG is asking the US government for a new bail-out less than two months after the Federal Reserve came to the rescue of the stricken insurer with an $85bn loan, according to people close to the situation. AIG’s executives were on Friday night locked in negotiations with the authorities over a plan that could involve a debt-for-equity swap and the government’s purchase of troubled mortgage-backed securities from the insurer. People close to the talks said the discussions were on-going and might still collapse, but added that AIG was pressing for a decision before it reports third-quarter results on Monday.

AIG’s board is due to meet on Sunday to approve the results and discuss any new government plan, they added. The moves come amid growing fears AIG might soon use up the $85bn cash infusion it received from the Fed in September, as well as an additional $37.5bn loan aimed at stemming a cash drain from the insurer’s securities lending unit. AIG has drawn down more than $81bn of the combined $122.5bn facility. The company’s efforts to begin repaying it before the 2010 deadline have been hampered by its difficulties in selling assets amid the global financial turmoil. AIG executives have complained to government officials that the interest rate on the initial loan – 8.5 per cent over the London Interbank Borrowing Rate – is crippling the company.

They compared the loan’s terms with the 5 per cent interest rate paid by the banks that recently sold preferred shares to the government. One of AIG’s proposals to the Fed is to swap the loan, which gave the authorities an 80 per cent stake in the company, for preferred shares or a mixture of debt and equity. Such a structure would reduce the interest rate to be paid by AIG and possibly the overall amount it has to repay. An extension in the term of the loan from the current two years to five years is also possible, according to people close to the situation. The renegotiation of the loan could be accompanied by the government’s purchase of billions of dollars in mortgage-backed securities whose steep fall in value has been draining AIG cash reserves.

AIG is also proposing the government buy the bonds underlying its troubled portfolio of credit default swaps in exchange for the roughly $30bn in collateral the company holds against the assets. Losses on the mortgage-backed assets, which were acquired by AIG with the proceeds of its securities lending programme, and the CDSs caused the company’s collapse. Since the government rescue, they have continued to haunt AIG, which is required to put up extra capital every time the value of these assets falls. AIG and the Fed declined to comment.

Credit Writedowns
For those of you concerned about the Fed’s risky behavior, its ballooning balance sheet, and its acceptance of dodgy collateral, well you may be about to see whether the American democracy can allow this unchecked power to continue without oversight. Bloomberg News has sued the Federal Reserve to force them to reveal what kind of collateral they are accepting in loaning out trillions of dollars to U.S. banks.

The Federal Reserve, which strictly speaking is a private corporation, has been accepting assets of ever more dubious quality in a bid to liquify the U.S. banking system. Moreover, their efforts should be considered highly inflationary and a long-term threat to the value of the U.S. dollar and to the American economy.

The Fed balance sheet is expected to balloon to $3 trillion by the end of the year, up from $900 billion in August — a rise in the Fed’s balance sheet from 6% of GDP to more than 20% of GDP in four months. In Japan, which was known for quantitative easing during its own deflationary crisis, the central bank’s balance sheet rose progressively from 9% of GDP to 29% of GDP. But this was over ten years from 1994 to 2004. At the current pace, the Fed might do in six months what it took ten years to do in Japan. Amazing.

Below is the article from Bloomberg describing their bold lawsuit.

Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.

The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages. “The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.

More

Jim Willie
…until the USEconomic recession achieves galloping speed downhill. The stagflation will eclipse that seen in the late 1970 decade. Today the economic growth in the GDP was posted for 3Q2008 at minus 0.25%, even with a hefty 5.4% PCE (personal consumption expenditures). This is another fairy tale told. The US consumer activity cut the GDP back by 2.25%, while the government activity added to the GDP by 1.15% in retrograde style. So the USDollar has rallied amidst economic decay, doing its death dance. Bear in mind that the stated admitted price inflation for Q2 was only 1.5% in that GDP corrupt calculation, which avoided a negative GDP for 2Q2008. They called inflation growth, the usual corrupted modus operandi. The second quarter was when prices skyrocketed for everything under the sun, if memory serves properly. Clearly, the wizards in the USGovt stat-rat offices, employing advanced techniques, moved some price inflation from Q2 into Q3, so that a recession would not be admitted all summer long. With the USFed rate cut to 1.0% again, they are admitting the recession.

The Shadow Govt Statistics folks pitch in a comment to provide light upon corrupted data:

“Narrower Than Expected GDP Contraction Is Nonsense. The difference between the reported 0.3% annualized Gross Domestic Product (GDP) and the consensus expectation of a 0.5% contraction is no more than statistical noise, yet the reported result most certainly was manufactured so as to allow the hypesters on Wall Street and in Washington to spin their fairy tales of a ‘less-severe recession’ in order to help draw the gullible back into stocks, at least for a day or two before next week’s election. This follows earlier economic scare tactics aimed at the public to help sell the ‘Bailout’ package… With a 95% confidence interval of +/- 3% around this morning’s estimate of an annualized 0.25% contraction in real (inflation adjusted), annualized quarterly third-quarter GDP growth, the number was not even statistically indistinguishable from growth or contraction in the 3% range. A quarterly contraction in excess of 2% would have been more realistic… U.S. Economy is in a severe recession. With real retail sales, housing, non-farm payrolls, new orders for durable goods, and industrial production all showing quarterly and annual growth patterns never seen outside of a recession still in deterioration, GDP reporting eventually should show a string of quarterly contractions, with the recession dating back to fourth-quarter 2006, long before the exacerbation of the current systemic solvency crisis.”

A simple statement is required to close the preface. The financial market crises, in numerous arenas, have come in large part because the banking authorities have intentionally provided rescues only for New York investment banks and other big financial firms. Up to a month ago, the USFed had sterilized most injections into the Wall Street centers of the banking system by denying the mainstream bank system via liquidity drains. Drain the national system where households work and live, and provide subsidies for the financial crime syndicate. This is a betrayal of government to the people. Elite gain came at mainstream expense. Attention has gained on the misuse, false promises, and other misdirection of USGovt funds even in the bailout packages. The big banks are ordered not to lend, but to acquire smaller banks.

Until the global interest rate cut was announced, the USFed had not created much new money, despite the numerous rate cuts on the US side. The policy was unconventional and deliberate, with a two-fold purpose to aid Wall Street and to keep a lid on the gold price. Their bad policy, emphasis upon rescue and redemption for criminal fraud, neglect of the private sector, have left the USEconomy vulnerable to an extreme breakdown. A GRAND REFLATION WILL SOON BE ATTEMPTED, TIMED OBVIOUSLY AFTER THE ELECTION. The effect will be much like blowing up a dam holding back a lake, where downstream the price inflation will be broad, deep, and powerful. That day comes soon, and if not, then the entire US financial system will go dark. That cannot be permitted, since the aristocrats need the serfs in the public fields to work, so as to be exploited for gain.

COMMENT ON USDOLLAR PARADOX

As a preface, much response came from last week’s article about the “USDollar Death Dance” from both the public and analyst community. No hint of investment in the USEconomy is coincident with the paradoxical US$ rise. In “Plumbing the Depths of Depravity” posted of October 29 (CLICK HERE), the intrepid expert forensic financial analyst Rob Kirby, and erstwhile bond trader, confirmed my view of a twisted engineered perverse USDollar rally. He echoes one of my major points delineated, that settlement of credit derivatives, like with the credit default swaps from failed insured asset backed bonds, has produced a demand for USDollars in contract settlement payouts. His website (http://www.kirbyanalytics.com) contains a treasure trove of information that reads like criminal indictments, but without the hundreds of obscurely written pages and weird words.

In the cited article, Kirby wrote:

“What folks need to understand is that the global OTC derivatives market, measured in tens or hundreds of Trillions, is virtually all US Dollar denominated. Its SYSTEMIC failure, which is now occurring, requires US Dollar balances to clear (settle) the trades (bets). This has created the paradoxical global demand for US Dollars, the currency of a country that is fundamentally bankrupt. By rationing credit to hedge funds that were naturally levered and ‘long commodities’ (institutions like JP Morgan routinely took the other sides of their customers commodities bets, ruining institutions like natural gas player Amaranth), and propping up the balance sheets of those who were short commodities [such as] the Banks. The Federal Reserve led cabal of Central Bankers have ENGINEERED the collapse in commodities prices while creating the illusion (of a perverse USDollar rally). The engineered collapse of the commodities complex became necessary in the eyes of monetary elites because the rush for tangibles and corresponding repudiation of fiat money was becoming manic, as so CLEARLY evidenced by the emerging shortages of precious metals, gold and silver bullion.”

My rejoinder is that the crude oil price, and many commodity prices, have come down right before the election, just like in autumn 2006, a perception we share. Kirby went on to conclude that “We are CLEARLY going to HYPERINFLATE!!!!” He steadfastly contradicts shallow assertions that deflation will dominate the scene. Anyone observing the money supply acceleration in recent weeks can easily see this, yet deflationists seem unable to observe the human response in desperation. More

Radio interview with Jim Willie covers how the Elite have corrupted the Bailout Programs, and
how the USFed has drained the banking system to enable bailouts. The financial bailout package is not quite what we have been led to believe. Jim fills us in on the shell game, and how the banking system is side-stepping credit lending, using the funds to rescue themselves from themselves. Listen here

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?

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.”

The Mogambo Guru
“It is estimated that there is a 10x multiplier for every dollar the government puts into the banking system”, which translates into the result that this new “$2,250 billion does not equal $2,250 billion in benefits to the economy. It equals $10,000 billion - $20,000 billion….”Every dollar that goes into the banking system will then get lent out to someone, who will then use that dollar to buy goods from someone, who will then use that dollar to hire people.”

Although this ignores the ugly effect of taxes, which inexorably grinds the original dollar down to zero as it goes from hand to hand, it is also a good example of the velocity of money (the number of times per year that a dollar changes hands) and with overtones of the multiplier inherent in fractional-reserve banking, as banks are allowed to loan out a multiple of every dollar of deposits! So a measly 10x multiplier makes me laugh at the estimate of an effective $20 trillion addition to the money supply because the actual reported reserves in the banks of the USA have been, month after month, year after year, the same piddly little $42 billion or so for over a decade! Hahaha!

In the meantime, as those years and years rolled by, bank assets went gigantically up, bank liabilities went gigantically up, but the reported reserves held against those liabilities and assets in the banks hardly changed a dime! Hahahaha! Talk about a multiplier! Hahaha! Of course, this means that another $2.25 trillion shoveled wholesale into the USA economy is actually fodder for an infinite increase in the money supply, just like all the other increases. And it also means that I am NOT coming out of this bunker, except to buy more gold, silver, oil or tasty victuals. Maybe wave to the wife and kids, but that’s it! More

Marc Faber Video

Marc Faber: “The governments in this world in the long run have no other option but to print money and that will lead down the road to inflation. We may have a bout of deflation; the more deflation we have the more governments will print money because the whole system collapses in deflation. Not because deflation is bad but because governments have been inflating for the last 25 years.

The only way out of debt is to reduce debt but if you listen to the policy makers, especially in the US, IT’S ALL ABOUT HOW TO REVIVE LENDING, IN OTHER WORDS, MORE DEBT ON TOP OF A HUGE DEBT PYRAMID ALREADY. When actually the policy should be designed to boost productivity, to boost savings, and to boost essentially capital and reduce debts — that is the policy they should take but that is a very painful policy, that’s why they’re not going to take it. They will just put white paint on a crumbling building.

The US has no savings rate at the present time; that’s one of the problems of the US: that under the FED’s policy of easy money which stimulated strong credit growth, you had rising asset prices so people in the US began to save out of capital gains rather then to save out of income and that has led the US in a very precarious financial position….To rebuild health in the US you need a serious recession that will last several years — the patient that got drunk on credit growth, he needs to go into rehabilitation, and to just give him more alcohol, the way the FED and the Treasury propose to do is the wrong medicine.

In the US, the median household in 2007 earned $50,200 compared to $50,600 in the year 2000 — that is not inflation adjusted that is in nominal terms. The typical household in the US has not participated at all in the economic expansion driven by expansion monetary policies by the FED. This expansion has been especially good for Wall Street and money managers and real estate people and so on. Now if we go into recession, the ordinary American will not suffer all that bad. The people that will suffer badly are people that own the assets — the 1% of the population or the 5% of the population — they’re going to get hit but they’ve already been hit. They’ve lost 50% of their money in the last 6 months or so because this recession is unusual in the sense that’s it’s not been driven by inventory accumulation but by decline in asset values, and where as in the year 2000 we only had a decline in the TMT sector, now we have an asset decline of colossal proportions in commodities, in real estate, in stocks and stocks across the world — the world’s index, the market Cap is for all purposes cut in half, down 50%. This is a huge balance sheet destruction….” _________________________________________________________________________________
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.

Stephen Lendman
StephenLendman’sBlog
…Maybe not as bad as Ambrose Evans-Pritchard saw them last month in the UK Telegraph. But who knows. He may be right. His September 22 column was headlined: “Crisis may make 1929 look (like) a walk in the park.” He cites meager and fleeting effects from “buckets of liquidity” and quotes economist (92-year old) Anna Schwartz saying “Liquidity doesn’t do anything in this situation. It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue.”

Schwartz also gave the Wall Street Journal an October 18 interview in which she said Treasury and Fed policies are wrong. She repeated that liquidity isn’t the problem. At issue is uncertainty “that the balance sheets of financial firms are credible.” As a result, credit spreads haven’t budged because you don’t know who’s solvent and who isn’t and too many are in the latter category.

Liquidity was the issue in the 1930s when the money supply contracted sharply. Not today with bank problems on the asset side of their ledgers. “All these exotic securities that the market does not know how to value. They’re toxic because you cannot sell them. Your balance sheet is not credible, and the whole market freezes up. We don’t know who to lend to because we don’t know who is sound.” Schwartz is worried that Paulson is trying to save banks, not the system. Insolvent ones and said we shouldn’t “be recapitalizing firms that should be shut down.” They should be allowed to fail. “Everything works much better when wrong decisions are punished and good (ones) make you rich.”

She commented also on what caused the current crisis. Like in the 1920s, it started with a “mania.” In every case, it was expansive monetary policy generating an asset boom. She’s very critical of Alan Greenspan dropping interest rates to 1%. Seeing the negative effect and doing nothing about it. She’s no gentler with Ben Bernanke and accused him of fighting the last war. The result so far is failure. “So my verdict on this present Fed leadership is that they have not really done their job.”

As a result, lenders are hoarding cash and economist Peter Spencer said that global authorities have just weeks to make things right. Instead they’re making them worse. Unless changed, things may start to implode.

Economists like Nouriel Roubini aren’t as dire but nonetheless see grim times ahead. His October 17 commentary echoed them:

– continued negative economic surprises;

– “a major surge in corporate default rates;”

– a weak recovery “as the recession becomes severe” and credit spreads widen;

– “the risk of a CDS (credit default swap) market blowout as corporate defaults” spike;

– hundreds of hedge funds collapsing; liquidation of their assets and the toll on financial markets as a result;

– major insurance companies in trouble;

– “a slow motion refinancing and insolvency crisis for many toxic LBOs;”

– “the risk that other systemically important financial institutions are insolvent” and need expensive rescue packages;

– the continuing vicious circle of falling asset prices; the result of ongoing deleveraging into illiquid financial markets;

– growing numbers of margin calls as asset prices fall; cascading them lower as a result;

– the continuing housing slide “pushing over 20 million households into negative equity by 2009;” and

– the risk of an emerging or developed country experiencing a severe financial crisis; much like Iceland in recent days.

Roubini calls the last factor “crucially important” and cites about 12 or more emerging economies “in serious financial trouble.” Especially in Eastern Europe, including Turkey, but also Korea, Indonesia and Pakistan. The risk of contagion is worrisome as even tiny Iceland (population 300,000) sent tremors globally.

Overall, risks and vulnerabilities remain. They’re growing, not receding. Not a hint of resolution is in sight and observers expressing near-term optimism need a reality check. The best to hope for is a severe, protracted recession. Most likely globally. Further, inadequate measures are in place, and more corrective ones are needed to avoid an economic meltdown. The longer they’re delayed, the worse conditions will get.

Globally we have a severe recession combined with a financial and banking crisis. The result of the largest ever leveraged asset and credit bubbles. Multiple ones in housing, mortgages, credit, equities, bonds, commodities, private equities and hedge funds all simultaneously imploding. There’s no simple or easy way out of this and overwhelming risks of something much more serious loom. Unmentioned in daily business news reporting that instead touts a market bottom and a great time to buy stocks. Leaving unexplained the risk of doing it in a very hazardous climate.

People today should be cautious and demand far more from elected officials than they’re getting. Critical times like these require radical measures. So far only handouts to Wall Street. To fraudsters through what economist Michael Hudson calls a “con game (and an) unprecedented giveaway of financial wealth.” What financial affairs author Ellen Brown brilliantly explains this way:

We seeing “the collapse of a 300 year Ponzi scheme. All the king’s men cannot put the private banking system together again, for the simple reason that (it’s) reached its mathematical limits.” It needs new borrowers but doesn’t have them. This racket has gone on for 300 years “ever since the founding of the Bank of England in 1694.” The whole world now is “mired in debt to the bankers’ private money monopoly.” The dirty game has reached its finite limits. “The parasite has finally run out of its food source.”

World governments are scrambling frenetically as a result. Supplying mountains of credit (liquidity) to support troubled and over-indebted banks. Leaving distressed households high and dry and sticking them with the bill.

Eventually the game will end badly. In this case, a lengthy asset and debt deflation. Long after bankers took the money and ran. Wrecking economies and throwing ordinary people to the wolves. Michael Hudson puts it this way:

“Neither the Treasury nor Congress is helping to resolve this problem.” Newly issued debt won’t re-inflate markets or stabilize the economy. Just the opposite. “As debt deflation eats into the domestic market for goods and services, corporate sales and earnings will shrink,” and so will market valuations. The end result will be “the very bankruptcy that the bailout was supposed to prevent.”

That prospect is nightmarish so here we are. America’s economy is eroding. Government and Wall Street are orchestrating it. Maybe even willfully, and here’s the legacy they’re leaving. The nation “passing from democracy to oligarchy (and steering it is) a bipartisan financial kleptocracy” chuckling all the way to their offshore tax havens. More

Robert Reich’s Blog
The Dow is see-sawing but the reality is that the Bailout of All Bailouts isn’t working. Credit markets are largely still frozen. Despite all the money going directly to the big banks, despite all the government guarantees and loans and special tax breaks, despite the shot-gun weddings and bank mergers, despite the willingness of the Treasury and the Fed to do almost whatever the banks have asked, the reality is that credit is not flowing. It’s not flowing to distressed homeowners. It’s not flowing to small businesses. It’s not flowing to would-be homeowners with good credit ratings. Students are having a harder time borrowing for their tuition. Auto loans are drying up.

Why? Because the underlying problem isn’t a liquidity problem. As I’ve noted elsewhere, the problem is that lenders and investors don’t trust they’ll get their money back because no one trusts that the numbers that purport to value securities are anything but wishful thinking. The trouble, in a nutshell, is that the financial entrepreneurship of recent years — the derivatives, credit default swaps, collateralized debt instruments, and so on — has undermined all notion of true value.

Many of these fancy instruments became popular over recent years precisely because they circumvented financial regulations, especially rules on banks’ capital adequacy. Big banks created all these off-balance-sheet vehicles because they allowed the big banks to carry less capital.

Paulson is recapitalizing the banks — giving them money directly rather than relying on reverse auctions — largely because he’s come to understand that the banks have taken on so much debt that the reverse auction system he told Congress he would use(designed to place a market value on these fancy-dance instruments) will leave too many banks insolvent.

But pouring money into these banks, expecting they’ll turn around and lend to small businesses and Main Streets, is like pouring water into a dry sponge. Nothing will come out of it because Wall Street is so deep in debt that the banks are using the extra money to improve their balance sheets. They’re hoarding it because their true balance sheets — considering the off-balance sheet vehicles they created over the past several years — are in such rotten shape.

In other words, taxpayers are financing a massive effort to save Wall Street’s balance sheets from Wall Street’s previous off-balance-sheet excesses. It won’t work. It can’t work. The entire effort is merely saving the asses of lots of executives and traders who got us into this mess in the first place, and whose asses should not be saved at taxpayer risk and expense.

What to do? Immediately require the Treasury to stop the broad Wall Street recapitalization, and require Wall Street to lend the money directly to Main Street. At the same time, force Wall Street to write down its true balance sheets: Let the executives and traders take the hit. Let their shareholders and even their creditors take the hit for Wall Street’s collosal irresponsibility. This is the only true way to restore trust. It’s also the only way to save Main Street’s small businesses, homeowners, students, and everyone else.

In a desperate bid to help U.S. banks recapitalize, Washington is dropping its inhibitions and reaching out to Canadian financial institutions to gauge their willingness to participate in rescue operations. The Federal Reserve has activated a back channel that puts the central bank in direct contact with chief executives at Canada’s largest banks and insurers, according to a person familiar with the dialogue. They are approaching “banks with major assets in the U.S. like [Toronto-Dominion Bank] and Royal [Bank of Canada], because when they have a bailout situation they want everyone who is a potential buyer to look at it,” the source said.

The ongoing conversations between the U.S. central bank and Canadian executives reflects the challenge facing Washington as it seeks to address both short-term liquidity and permanent capital needs of financial institutions crippled by more than $500-billion in losses and limited access to financing. The communications have included phone calls from Fed officials pitching potential sales of assets of U.S. financial companies and at least one intensive discussion of a major rescue operation, according to people familiar with the contacts. More

Bob Chapman
…this Excellent Bailout Bonanza, this Paulson Ponzi-Plan, is just a sideshow to distract everyone from the real issue, which is of course the Derivative Death-Star, with a Quadrillion Dollar mass that is about to implode, detonate, and morph into a financial black hole that will suck the entire world economy into its dark, massive, foreboding center. The subprime debacle is just one of the many fuses leading into the gargantuan derivatives powder keg. The subprime paper to be auctioned is little more than a catalyst for the creation of the real disaster, which are the credit-default swaps and interest rate swaps, an entangled, Byzantine labyrinth of opaque, unregulated counterparty risk that will be ignited by continuing corporate bankruptcies and double-digit interest rates that will be created by a hyper-inflated economy awash in bailout dollars which the Fed will have created out of thin air.

Foreign nations with dollar forex cannot possibly keep buying all the treasuries that will have to be created to fund all these bailouts because they are all experiencing rampant inflation, and printing more of their own domestic currencies to absorb the dollars necessary to purchase treasuries is no longer possible without risking social upheaval and revolution as hyperinflation destroys their economies. This means that some, or even most, of the new treasuries that will be created by the Treasury and the Fed to fund the bailouts and deficits will have to be monetized, which is immediately inflationary. M3 is about to explode as these many monetizations and the Fed’s trillions in liquidity injections continue to flood the fiat money and credit system, which will continue in its cryogenic state despite the Paulson Ponzi-Plan that will now be implemented in an attempt to re-inflate the credit markets, which are the lifeblood of our debt-based, fiat money system, thanks to the cessation of the gold standard. Everyone on Wall Street knows that the subprime paper is not the real problem. The real reason they distrust one another, and will not lend to one another, is the unknown counterparty risk that will go into a plasma state when the Derivative Death-Star detonates. It is the opaque, unregulated OTC derivatives market that they are really afraid of.

Due to the fact that you have 70 or more trillion of credit default swaps insuring 5 trillion in bonds, a ten billion dollar loss by a large corporation can on average morph into a 140 billion disaster of epic proportions that could wipe out several other companies, whose own credit-default swap counterparty risk would then ignite, in a chain reaction reminiscent of a thermonuclear explosion. Remember, credit default swaps are not true derivatives with a zero net sum. They are insurance policies. But unlike most insurance, there are no regulators or loss reserves, thanks to Slick Willie Clinton and the Congress, which passed the Commodity Futures Modernization Act in 2000. Worse yet, they can be used to insure property which the insured party does not even own. Hence, you can see why everyone trembles at the thought of this radioactive sector going thermonuclear. More

Murray N. Rothbard
Ludwig von Mises Institute
Murray N. Rothbard (1926–1995) was dean of the Austrian School. He was an economist, economic historian, and libertarian political philosopher.

[This essay was originally published as a minibook by the Constitutional Alliance of Lansing, Michigan, 1969.]

Fortunately, a correct theory of depression and of the business cycle does exist, even though it is universally neglected in present-day economics. It, too, has a long tradition in economic thought. This theory began with the eighteenth century Scottish philosopher and economist David Hume, and with the eminent early nineteenth century English classical economist David Ricardo. Essentially, these theorists saw that another crucial institution had developed in the mid-eighteenth century, alongside the industrial system. This was the institution of banking, with its capacity to expand credit and the money supply (first, in the form of paper money, or bank notes, and later in the form of demand deposits, or checking accounts, that are instantly redeemable in cash at the banks). It was the operations of these commercial banks which, these economists saw, held the key to the mysterious recurrent cycles of expansion and contraction, of boom and bust, that had puzzled observers since the mid-eighteenth century.

The Ricardian analysis of the business cycle went something as follows: The natural moneys emerging as such on the world free market are useful commodities, generally gold and silver. If money were confined simply to these commodities, then the economy would work in the aggregate as it does in particular markets: A smooth adjustment of supply and demand, and therefore no cycles of boom and bust. But the injection of bank credit adds another crucial and disruptive element. For the banks expand credit and therefore bank money in the form of notes or deposits which are theoretically redeemable on demand in gold, but in practice clearly are not. For example, if a bank has 1000 ounces of gold in its vaults, and it issues instantly redeemable warehouse receipts for 2500 ounces of gold, then it clearly has issued 1500 ounces more than it can possibly redeem. But so long as there is no concerted “run” on the bank to cash in these receipts, its warehouse-receipts function on the market as equivalent to gold, and therefore the bank has been able to expand the money supply of the country by 1500 gold ounces.

The banks, then, happily begin to expand credit, for the more they expand credit the greater will be their profits. This results in the expansion of the money supply within a country, say England. As the supply of paper and bank money in England increases, the money incomes and expenditures of Englishmen rise, and the increased money bids up prices of English goods. The result is inflation and a boom within the country. But this inflationary boom, while it proceeds on its merry way, sows the seeds of its own demise. For as English money supply and incomes increase, Englishmen proceed to purchase more goods from abroad. Furthermore, as English prices go up, English goods begin to lose their competitiveness with the products of other countries which have not inflated, or have been inflating to a lesser degree. Englishmen begin to buy less at home and more abroad, while foreigners buy less in England and more at home; the result is a deficit in the English balance of payments, with English exports falling sharply behind imports. But if imports exceed exports, this means that money must flow out of England to foreign countries. And what money will this be? Surely not English bank notes or deposits, for Frenchmen or Germans or Italians have little or no interest in keeping their funds locked up in English banks. These foreigners will therefore take their bank notes and deposits and present them to the English banks for redemption in gold — and gold will be the type of money that will tend to flow persistently out of the country as the English inflation proceeds on its way. But this means that English bank credit money will be, more and more, pyramiding on top of a dwindling gold base in the English bank vaults. As the boom proceeds, our hypothetical bank will expand its warehouse receipts issued from, say 2500 ounces to 4000 ounces, while its gold base dwindles to, say, 800. As this process intensifies, the banks will eventually become frightened. For the banks, after all, are obligated to redeem their liabilities in cash, and their cash is flowing out rapidly as their liabilities pile up. Hence, the banks will eventually lose their nerve, stop their credit expansion, and in order to save themselves, contract their bank loans outstanding. Often, this retreat is precipitated by bankrupting runs on the banks touched off by the public, who had also been getting increasingly nervous about the ever more shaky condition of the nation’s banks. More

Source: American Free Press
The trillion-dollar Wall Street bailout plan negotiated by the White House and Congress has reinvigorated the debate about Texas Republican Rep. Ron Paul’s Federal Reserve Board Abolition Act (HR 2755), which was introduced into Congress in June 2007. In the halls of Congress, legislators have yet to bring Paul’s bill to the floor. It is currently languishing in the House Committee on Financial Services. However, there has been a great deal of discussion about this landmark legislation on the Internet and in the alternative press. Constitution Party presidential candidate Chuck Baldwin has even made abolishing the Fed one of the top planks in his platform.

Paul’s measure, as it is now, would kill the Federal Reserve Act and would then phase out the Federal Reserve one year after the bill becomes law. The Federal Reserve Act, passed by Congress in 1913, laid the foundation for the creation of a privately owned and controlled central bank and gave private bankers the power to control the nation’s money supply. Nearly 100 years later, the role the central bank has played in the financial scandal has been widely reported in the mainstream. Former Federal Reserve chairman Alan Greenspan, once heralded as “the maestro,” has been feeling the heat for supporting the deregulation of financial institutions and flooding markets with cheap dollars.

U.S. News & World Report had a recent commentary titled “From Enron to the Financial Crisis, With Alan Greenspan in Between” excoriating Greenspan, who as the nation’s top banker, repeatedly downplayed the risks associated with derivatives even after the collapse of Enron in 2002. On September 27, The New York Times also hit Greenspan for his failure to watch over and regulate greedy banks. To its credit, the Times also blasted Congress for dismantling important safeguards, including the Glass-Steagall Act, which kept commercial and investment banks at a safe distance.

“Now we know that an entire ‘shadow banking system’ has grown up,” wrote the Times, “without rules or transparency, but with the ability to topple the financial system itself.”

Even the cable news shows are getting in on the game. NBC’s cable news show interviewed well-known investor Jim Rogers, who made a fortune betting on commodities markets.

“How much money does the Federal Reserve have?” asked Rogers. “I know they can run their printing presses forever, but that is not good for the world. Inflation is not good for the world. A collapsing currency is not good for the world. It means worse recession in the end. . . . I would abolish the Federal Reserve.” Neo-conservative talk show host Glenn Beck has also assailed the Federal Reserve for its role in the financial crisis. On September 15, Beck had a lively debate about who exactly owns the Federal Reserve.

“The Federal Reserve has nothing to do with the government,” said Beck. “It’s a separate, global banking system. . . . And when everyone was meeting with our Secretary of Treasury Henry Paulson, I thought to myself: ‘Who the hell is representing us, the American people?”

Ron Paul financial advisor Paul Schiff responded: “The Fed got us into this mess. It drives me crazy to see Alan Greenspan on television talking about this ‘100 year flood,’ like the events that are taking place today are random and have nothing to do with his monetary policy. He blew up the bubble, and now it’s burst.”

Wall Street Journal editorial writer Steven Moore added: “And by the way, who elected Ben Bernanke? Who elected Alan Greenspan?” Now is the time for Americans to fan the flames. Call your congressman and two senators and ask them to support Paul’s bill, which would abolish the Fed. There can be no end to these manufactured financial crises until the government gets rid of the Fed and replaces it with honest, debt-free money.

US banks borrowed a record $367.8 billion a day from the Federal Reserve in the week ended October 1. Data from the US central bank shows how much financial institutions are relying on the Fed in its role as lender of last resort as short-term funding becomes almost impossible to find elsewhere. Banks’ discount window borrowings averaged $367.80 billion per day in the week ended October 1, nearly double the previous record daily average of $187.75 billion last week. Michael Feroli, economist at JPMorgan in New York, said: “Each time it gets more and more stunning. You’re just seeing huge increases across the board. It tells you that the paralysis is massive.” More

Ron Paul on the Glenn Beck Show

Ron Paul on the Glenn Beck Show: “What Treasury did and what the FED did is UNconstitutional. The constitution role is for Congress to regulate the money and its value and they’re totally neglectful. They didn’t do anything about this; they’re just sitting on the sidelines, sitting on their hands.”

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.”

Peter Schiff
By nationalizing nearly 80% of AIG for $85 billion, the Fed is doing a lot more than simply flushing taxpayer money down the toilet. The greater wrong is allowing the agency that has the power to print money to take control of a private enterprise, especially without the approval of the company’s shareholders. The move represents the largest lurch toward socialism that this country has ever seen, and signals the end of the vibrancy of America