China's Gold Reserves At Least 2.5 Times Higher Than Reported, ‘De-Americanisation’ Continues Submitted by GoldCore on 10/25/2013 13:35 -0400 50 Day Moving Average Bond British Pound China Debt Ceiling default Dumb Money Federal Reserve Global Economy Hong Kong International Monetary Fund Monetary Policy Recession Reserve Currency Smart Money Technical Analysis World Bank in Share 8 Today’s AM fix was USD 1,341.75, EUR 971.79 and GBP 827.58 per ounce. Yesterday’s AM fix was USD 1,336.25, EUR 968.79 and GBP 825.76 per ounce. Gold climbed $12.10 or 0.91% yesterday, closing at $1,345.40/oz. Silver inched up $0.11 or 0.49% closing at $22.67. Platinum rose $15.45 or 1.1% to $1,445.75/oz, while palladium fell $0.53 or 0.1% to $743.47/oz. Gold Krugerrands (1 oz) are trading at $1,406.48 or premiums between 4.75% and 5.5% and Gold Kilo Bars (1 kilo) are trading at $44,451.89 or premiums between 3% and 3.5%. Premiums are steady. Bloomberg Industries - Precious Metal Mining Gold dipped below its three-week high in London on profit taking after a 2% gain this week, which put gold on course for a second week of higher prices. Gold closed above the 50-day moving average and this in conjunction with two weekly higher closes is bullish technically. Gold’s gains yesterday came due to increasing concerns that the Federal Reserve will maintain the pace of unprecedented monetary stimulus and debasement. Gold is on track for its first yearly drop in over 13 years, as speculators sold gold on the COMEX and some investors became nervous of the recent price falls. Gold is probably at a cyclical bottom and CPM sees gold prices rising sharply in 2016-2023, CPM Group’s Jeffrey Christian said in a speech in Toronto on Wednesday. The call is interesting as CPM have been notoriously bearish on gold in recent years - throughout much of the 11 year bull market. CPM Group sees the gold price at $1,240-$1,380/oz for “most of the next few months,” CPM managing partner Jeffrey Christian said. Gold may trade in a $1,240- to $1,500/oz range for “the next couple of years”. Gold in USD - Year To Day and 50 Day Moving Average - Bloomberg Gold may jump 7.5% or $100 to $1,450/oz by year end if prices break out of a pennant formation, according to technical analysis by Paul Kavanaugh of Future Path Trading as seen on Bloomberg. The chart above shows gold trading in a “pennant flag,” when the upper and lower trend lines for prices meet to form a triangle. The lower level is $1,251, and the upper is $1,434, Kavanaugh said. “Prices are clearly trying to move higher, and a close above the 50-day moving average means we could see some strength,” Kavanaugh said. Comments from state backed Xinhua that call for a "de-Americanised world" and a proposal to consider a new international reserve currency to replace the dollar mark a key event for gold prices. The official Xinhua News Agency and the voice of the Chinese government, offered a not so subtle, highly critical commentary on October 14 regarding the U.S.’ appalling fiscal, monetary and political situation as it stands today. While the Chinese echoed the notion of a "super-sovereign reserve currency" before, their statement is more important as the U.S. continues to struggle to reach agreements on debt ceiling talks and future monetary policy actions. “It is perhaps a good time for the befuddled world to start considering building a de-Americanised world”said the important op-ed. Bloomberg Industries - Precious Metal Mining Key among its proposals: the creation of a new international reserve currency to replace the present reliance on the U.S. dollar as reserve currency. The article suggested that this is a necessary step to prevent American bumbling and profligacy from further afflicting the world. “The world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites.” “The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising the debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized,” says Xinhua. The Chinese have for a long number of years expressed concerns about the direction Washington, led by Wall Street, is leading the world financial system and the global economy. In March 2009, the governor of the People’s Bank of China, Zhou Xiaochuan, called for the creation of a new reserve currency, albeit in less forthright language. The world needs a new “super-sovereign reserve currency” to replace the current reliance on the dollar, Zhou wrote in a paper published on the People’s Bank of China’s website. Zhou Xiaochuan is still China’s central bank governor. The goal is to “create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run.” This sounds like he may be referring to gold, as gold is an “international reserve currency that is disconnected from individual nations” and has remained “stable in the long run.” Toppling the dollar isn’t enough today, however: “Several cornerstones should be laid to underpin a de-Americanised world,” explains the Xinhua piece. Bloomberg Industries - Precious Metal Mining Along with a greater role for developing-market economies in both the World Bank and International Monetary Fund, “the authority of the United Nations in handling global hot-spot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate.” “A self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies,” the commentary continues. “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.” Since the early 2000s, those positive on gold have rightly suggested that excessive money printing by the Federal Reserve would lead to a devaluation of the world's reserve currency as inflation picks up and hampers the currency. Those more concerned about the dollar’s fate has warned of a currency collapse and serious inflation. While the notion of the dollar losing its status as the world's reserve currency had appeared muted for some time given the lack of alternatives, it is now gaining credence. A deeper look into China's gold holdings warrants attention (see charts). Its last reported gold holdings in April 2009 were 1,054 metric tons. After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons. If one were to take away gold uses for jewelry, industrial, and other categories and only add implied bar demand to central bank holdings, the figure is likely closer to 2,710 metric tons according to Bloomberg Industries’ Andrew Cosgrove and Kenneth Hoffman. In just 10 years, China’s gold holdings could catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions (see chart). Bloomberg Industries - Precious Metal Mining At current run rates, China is on pace to add 622 metric tons of bars to its central bank holdings this year (380 mt in 2012). Given the low gold price, growing reserves in 2014 above this year's levels appears achievable. Gold will benefit from the continuing move away from the dollar as the world's reserve currency as some form of a gold-backed currency emerges. China's call for "de-Americanization" is likely just a posturing maneuver. A large-scale sale of China's U.S. Treasury holdings would likely cause a dramatic decline in the dollar, while increasing rates. This would cripple the U.S. economy and dent export demand for Chinese products. This therefore, is the “nuclear option” for the Chinese government and one that they will be keen to avoid. They will only adopt this position if forced to in extreme circumstances, such as a U.S. default or extreme debasement of the dollar. Already, the Chinese have stopped accumulating dollars - preferring safer currencies, infrastructure, hard assets and commodities and of course gold. Even a small amount of Chinese selling could lead to substantial dollar weakness and much higher bond yields plummeting the U.S. into another recession. The smart money, including the Chinese people and the People’s Bank of China, is concerned about currency debasement and continue to accumulate physical gold for the long term. The dumb money continues to not understand the ramifications of dollar currency debasement and the De-Americanising world and continues to see gold as a trade or a mere speculation rather than the essential safe haven asset that it is. Gold is heading for the first annual decline since 2000. The Chinese have lustily greeted gold’s 19% drop this year by continuing to buy record amounts of gold. They know the price drop has created a gift for physical buyers globally. 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NSA Busted Conducting Industrial Espionage In France, Mexico, Brazil, China and All Around the World Submitted by George Washington on 10/21/2013 12:46 -0400 Brazil China Copenhagen Department Of Commerce France Global Economy Japan Mexico national security New York Times Newspaper Saudi Arabia SPY SWIFT Toyota Treasury Department Wall Street Journal in Share 0 U.S. Conducts Industrial Espionage Globally Le Monde has revealed that the NSA gathered more than 70 million French phone calls in a single month . France’s largest English-language newspaper – The Local – reports : Le Monde said the documents gave grounds to think the NSA targeted not only people suspected of being involved in terrorism but also high-profile individuals from the world of business or politics. *** French Prime Minister Jean-Marc Ayrault “I am deeply shocked…. It’s incredible that an allied country like the United States at this point goes as far as spying on private communications that have no strategic justification, no justification on the basis of national defence ,” he told journalists in Copenhagen. Der Spiegel notes : The NSA has been systematically eavesdropping on the Mexican government for years. *** In the space of a single year, according to the internal documents, this operation produced 260 classified reports that allowed US politicians to conduct successful talks on political issues and to plan international investments . The NSA was recently revealed to have been spying on Brazil’s largest oil company . Guardian columnist Seumas Milne correctly notes : #NSA - #GCHQ about power not security : hacked # Mexico president for political/ investment edge , leak shows, like #Brazil …. The NSA was also recently busted spying on Chinese technology company Huawei . German companies are concerned that the NSA has conducted espionage in that country. And the leaders of Latin American countries have also expressed disgust at the industrial espionage. The NSA is also spying on the biggest financial payments systems such as VISA and Swift. In a slide leaked by Edward Snowden, “economic” was one of the main justifications for spying. The top U.S. spy’s justification for such financial spying is: “We collect this information for many important reasons: for one, it could provide the United States and our allies early warning of international financial crises which could negatively impact the global economy. It also could provide insight into other countries’ economic policy or behavior which could affect global markets .” (Top financial experts say that the NSA and other intelligence agencies are also using the information to profit from this inside information . And the NSA wants to ramp up its spying on Wall Street … to “protect” it.) The Spying Has Been Going On For Decades It is true that the spying is about power, and not security. Proof here , here and here . But this has actually been going on for decades . It has long been clear that the U.S. spying program is being used for industrial espionage. The New Statesman wrote about it in 1988. Die Zeit in 1999. The New York Times reported in 1995: Each morning, they gave Mickey Kantor, the United States trade representative, and his aides inside information gathered by the Central Intelligence Agency’s Tokyo station and the electronic eavesdropping equipment of the National Security Agency, sifted by C.I.A. analysts in Washington. Mr. Kantor received descriptions of conversations among Japanese bureaucrats and auto executives from Toyota and Nissan who were pressing for a settlement, and read about the competing pressures on Japan’s Trade Minister, Ryutaro Hashimoto. When the negotiations came to a climax in Geneva, the intelligence team was in place at the Intercontinental Hotel, working alongside Mr. Kantor’s negotiators, offering assessments of how far the Japanese side could be pressed. *** Spying on allies for economic advantage is a crucial new assignment for the C.I.A. now that American foreign policy is focused on commercial interests abroad . President Clinton made economic intelligence a high priority of his Administration, specifically information to protect and defend American competitiveness, technology and financial security in a world where an economic crisis can spread across global markets in minutes. *** At the Treasury Department, the trade representative’s office and the Commerce Department, officials say they now receive a torrent of information from the C.I.A. BBC reported in 2000: A report published by the European Parliament in February alleges that Echelon twice helped US companies gain a commercial advantage over European firms . Duncan Campbell, the British intelligence expert and journalist who wrote the report, raises the prospect that hundreds of US Department of Commerce “success stories”, when US companies beat off European and Japanese commercial opposition, could be attributed to the filtering powers of Echelon. *** The European consortium Airbus lost a $6bn contract with Saudi Arabia after NSA found Airbus officials were offering kickbacks to a Saudi official. The paper said the agency “lifted all the faxes and phone-calls between Airbus, the Saudi national airline and the Saudi Government” to gain this information. *** The US firm Raytheon used information picked up from NSA snooping to secure a $1.4bn contract to supply a radar system to Brazil instead of France’s Thomson-CSF. *** Former CIA director James Woolsey , in an article in March for the Wall Street Journal, acknowledged that the US did conduct economic espionage against its European allies , though he did not specify if Echelon was involved. BONUS: Government Has Contemplated Seizing Pension Money for Over a Decade Top Economic Advisers Forecast War and Unrest Average: 5 Your rating: None Average: 5 ( 8 votes)
China's Largest Conglomerate Buys Building Housing JPMorgan's Gold Vault Submitted by Tyler Durden on 10/18/2013 13:54 -0400 China General Motors Hong Kong Italy JPMorgan Chase New York City None Real estate in Share 8 In what is the most remarkable news of the day, which has so far passed very quietly under the radar, Fosun International, China's largest private-owned conglomerate which invests in commodities, properties and pharmaceuticals also known as "Shanghai's Hutchison Whampoa", announced in a statement filed just as quietly with the Hong Kong stock exchange, that it had purchased JPM's iconic former headquarters, the tower built by none other than David Rockefeller, at 1 Chase Manhattan Plaza for a measly $725 million. Here is Bloomberg described the transaction : Over the past year, other Chinese developers and wealthy investors have been buying real estate in the U.S. China Vanke Co., the biggest homebuilder listed in mainland China, said in February it joined a residential real estate venture in San Francisco. The families of Zhang Xin, co-founder of Soho China Ltd. (410), the biggest developer in Beijing’s central business district, and Brazilian banking billionaire Moise Safra this year bought a 40 percent stake in New York’s General Motors Building. The landmark 1 Chase Manhattan Plaza, designed by architect Gordon Bunshaft and built in the 1950s, was once the headquarters of Chase Manhattan Bank. Rockefeller, as head of the bank’s building committee, selected the site and oversaw its construction. JPMorgan intends to relocate about 4,000 employees, most of the people who work in the 60-story skyscraper, to other New York locations, Brian Marchiony, a spokesman, said in August. JPMorgan occupies about half of its space. None of this is particularly newsworthy What is , however, is what Zero Hedge exclusively reported back in March, namely that the very same former JPM HQ at 1 Chase Manhattan Plaza is also the building that houses the firm's commercial gold vault: incidentally, the largest in the world . Recall : What do we know about 1 Chase Manhattan Plaza. Well, aside from the fact that the 60-story structure, built in the 1950s, was the headquarters of the once-legendary Chase Manhattan corporation, and which when it was built was the world's sixth tallest building, not much. So we set off to learn more. To learn more, we first went to the motherlode: the Landmarks Preservation Commission, whose report on 1 CMP describes everyone one wants to know about this building and then much more, such as that: One Chase Manhattan Plaza combines three main components: a 60-story tower, a 2½ acre plaza, and a 6-story base, of which 5 floors are beneath grade. So the old Chase HQ, once the stomping grounds of one David Rockefeller, and soon to be the other half of JPMorgan Chase, has 5 sub-basements, just like the NY Fed... Reading on: Excavations, said to be the largest in New York City history, reached a depth of 90 feet Or, about the same depth as the bottom-most sub-basement under the NY Fed... But then we hit the jackpot: Originally constructed with white marble terrazzo paving and enclosed by a solid parapet of white marble travertine that was personally selected by Bunshaft in Tivoli, Italy, the L-shaped plaza levels the sloping site and conceals six floors of operations that would have been difficult to fit into a single floor of the tower, including an auditorium seating 800 the world’s largest bank vault . And there you have it: the JPM vault, recommissioned to become a commercial vault, just happens to also be the "world's largest bank vault." Digging some more into the curious nature of this biggest bank vault in the world, we learn the following, courtesy of a freely available book written by one of the architects: On the lowest level was the vault, which rested directly on the rock - the " largest bank vault in the world, longer than a football field ." It was anchored to the bedrock with steel rods. This was to prevent the watertight, concrete structure from floating to the surface like a huge bubble in the event that an atomic bomb falling in the bay would blow away the building and flood the area. In other words, the world's biggest bank vault, that belonging to the private Chase Manhattan empire, and then, to JPMorgan, was so safe, the creators even had a plan of action should it sustain a near-direct hit from a nuclear bomb, and suffer epic flooding (such as that from Hurricane Sandy). * * * So, what the real news of today is not that JPM is selling its gold vault, we knew that two months ago , or that it is outright looking to exit the physical commodities business, that too was preannounced . What is extremely notable is that in one very quiet transaction, China just acquired the building that houses the world's largest gold vault. Why? We don't know. We do know that China's gross gold imports from Hong Kong alone have amounted to over 2000 tons in the past two years. This excludes imports from other sources, and certainly internal gold mining and production. One guess: China has decided it has its fill of domestically held gold and is starting to acquire gold warehouses in the banking capitals of the world. For now the reason why is unclear but we are confident the answer will present itself shortly. 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Chart Of The Day: China Imports Over 2,000 Tons Of Gold In Last Two Years Submitted by Tyler Durden on 10/13/2013 11:15 -0400 China Germany Hong Kong International Monetary Fund Renminbi Reserve Currency in Share 0 China has just one thing to say to all those who engage in the now daily slamdowns of gold just around the time of the London fixing, after 8 am Eastern, which lately have gotten so vicious they have resulted in "stop logic" market halts not on one but at least two occasions , keeping the price of gold delightfully low for all those who instead of selling, are looking to buy: " thanks ." As the chart below shows, in the past two years since September 2011 (ironically the same month we wrote " Wikileaks Discloses The Reason(s) Behind China's Shadow Gold Buying Spree " namely that the PBOC was quietly seeking to make the renminbi the new gold-backed reserve currency ) the mainland has imported an unprecedented 2,116 gross tons of gold from Hong Kong (in addition to the hundreds of tons produced domestically), for the first time crossing the 2k gross ton import barrier in a two year period! Focusing on just the most recent import data for the month of August, seemingly unaware that all expert, hedge funds in the US have been "capitulating" on gold just because the momentum trade is no longer there, and because it somehow makes more sense to buy gold when the price is high rather than low, shows that China imported 131.4 gross tons of gold in the month, a 146% increase compared to a year prior, when the price of gold was substantially higher. Indeed, in a "shocking" turn of events, China actually buys more physical gold when the price is lower than higher. So much more, in fact, that August was the second highest gold importing month in history, lower only compared to March when it imported an unprecedented 223.5 tons. But what about exports of gold, and China's net monthly gold needs. The chart below should answer that particular question. Net of gold export to Hong Kong, China imported 110.5 tons, the second highest net number in history, and second once again, only to March's 136.2 tons. Year to date, China has imported a gross 997 tons, and a net 741 tons . Since this accounts for just two-thirds of the year in the history books, on a gross and net basis, China will likely import over 1500 gross and over 1000 net tons for all of 2013 : an absolutely stunning record in gold demand by just one nation. Finally, putting all this feverish gold accumulation in perspective, here is the latest amount of official Chinese gold holdings as per the IMF. Incidentally, this is a number that has not been "updated" since April 2009 . The unofficial China gold holdings number since 2009 based on our internal calculations: about 2500 tons higher , which would make it the world's second largest official gold holder below the US and surpassing Germany, and rising at 100 tons per month. Source: HK Census Dept Average: 4.789475 Your rating: None Average: 4.8 ( 19 votes) !-- - advertisements - .AR_2 .ob_empty {display: none;} .AR_2 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_2 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_2 {float: left;width:50%} .AR_2 li {list-style: none outside none !important;font-size: 10px;padding-bottom: 10px;line-height: 13px;margin:0;} .AR_2 .ob_org_header {color: #000000;text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_3 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_3 .rec-src-link {font-size: 12px;} .AR_3 li {padding-bottom: 10px;list-style: none outside none !important;font-size: 10px;line-height: 13px;margin:0;} .AR_3 .ob_dual_left, .AR_3 .ob_dual_right {float: left;padding-bottom: 0;padding-left: 2%;padding-top: 0;} .AR_3 .ob_org_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .ob_ads_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} -- - advertisements - Login or register to post comments 16562 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Chart Of The Day: Chinese November Gold Imports Soar To 91 Tons; 2012 Total 720 Tons Hong Kong Completing 1,000 Ton Gold Vault China Imports More Gold From Hong Kong In Five Months Than All Of UK's Combined Gold Holdings Gold Reaches $1,900 Again - Supported by Risk of U.S. Recession, German Euro Risk and Wikileaks China Gold Cables Name The New Reserve Currency: China Imports More Gold In 2012 Than All ECB Holdings
Guest Post: The Original Dollar Crisis And How It Led To Today's Crisis - Part 1 Submitted by Tyler Durden on 06/29/2010 16:40 -0400 Bank of England Bear Market Belgium Central Banks China Credit Suisse Creditors ETC Federal Reserve fixed Foreclosures Foreign Central Banks France Germany Gordon Gekko Guest Post Hyperinflation International Monetary Fund Italy Japan Market Bottom Monetary Policy Money Supply Portugal Recession Reserve Currency Swiss Banks Swiss Franc Switzerland Time Magazine Trade Balance Trade Deficit Tribune Unemployment Zurich in Share 0 The Original Dollar Crisis And How It Led To Today's Crisis - Part 1, Submitted By John Law To fully understand today's economic crisis and where we are heading,one must find the origin of this crisis -- the event or the culmination of events that put us down this path. The event leading us to the current crisis isn't the high unemployment -- currently 9.7% -- and avalanche of foreclosures or the bailout of all the major banks as a result of the housing boom and subsequent crash of the 2000s. It wasn't the preceeding tech bubble of the late 1990s and early 2000, or all the years of the Fed's easy monetary policy. Which lead to the high -- arguably understated -- inflation of the last three decades. No one of these events put us down this path. When one searches for the origins of the current crisis, they will find all of these events are rather the symptoms of the same illness -- the same illness that has steadily worsened and accelerated us down the path upon which we are now traveling. A path that leads us over a cliff into which we fall into the abyss. The origins of today's crisis can be traced all the way back to the 1944 Bretton Woods agreement. In 1944, world leaders and economists met to form a new world monetary system for the post war era. With the Bretton Woods agreement, America became the reserve currency of the world, promising other nations they could redeem any dollars they had for gold. While the dollar's value was set in gold, the other countries' currency valuations were fixed to the dollar. The value of the dollar was set at FDR's 1934 revaluation of $35 per ounce of gold. Before FDR's revaluation, the dollar was stronger and was valued at $20.67 per ounce of gold. However, this was not a true gold standard and it heavily favored the United States. In a true gold standard the currency is convertible by any one -- private citizen, foreign central bank etc. -- whereas under the Bretton Woods agreement, only foreign central banks could convert their dollars to gold. It favored the United States because the US could settle its foreign payments in dollars. Whereas other nations had to settle their foreign payments -- including any with the US -- in gold, so the US could simply print dollars and send them overseas and keep doing this until when/if foreign central banks started demanding gold for their dollars. Under a true gold standard, all foreign payments by any country would be settled in gold. Thus putting a limit on the number of dollars the Federal Reserve could print. Forcing balance of payments and trade responsibility, so as to the outflow of gold is not greater than the inflow of gold. After World War II, it didn't take the US long to find itself in war again, this time in Korea. War broke out on June 25, 1950. The Korean War escalated the Cold War between the US and the Soviet Union; and as what would have been a civil war, turned into a proxy war between the two powers, with the US vowing to defeat communism at all costs. The war ended on July 27, 1953 with an armistice, but the stage was set for the further escalation of the Cold War and the international currency crisis that would engulf the world in the late 60s and in 1971, bring the collapse of the Bretton Woods agreement and the ensuing run on the dollar that pushed it to the brink of collapse and hyperinflation. The three year Korean War set the stage for these events by the financial cost of the war and the actions -- which are still repeated this day -- taken to pay for the costs. Although the US had a trade surplus, it had a balance of payments deficit which was due mainly to government spending on overseas expenditures, including military and foreign aid to help rebuild Europe. The US Treasury issued new bonds which were then bought by The Federal Reserve with money printed out of thin air. By the year 1951, The Federal Reserve had more US Treasury bonds on its balance sheet than it had in gold reserves. By 1958 these dollars were being exchanged for gold by foreign central banks at an alarming rate. By the end of 1958 US gold reserves had fallen 9%. By October 1960, the outflow of gold from the United States was beginning to put upward pressure on the price of gold. Gold had just reached $40 per ounce in trading on The London Gold Exchange that October, while the official price was still at $35 per ounce. In an effort to suppress the price of gold, the US, Great Britain, Germany, France, and other western central banks, formed the London Gold Pool in 1961. If the price of gold neared $35.20, the group would dump gold onto the market in an effort to get gold back to the official $35 price and if the price fell below $35, the group would buy gold to bring the price of gold back to $35. By 1965 the outflow of gold was accelerating even more as the balance of payments deficit grew ever larger. Large tax cuts proposed by President Kennedy and passed after his death by President Johnson in 1964 had taken effect. A massive full escalation of the Vietnam War had started, the space race with the Soviet Union was in full swing, and huge, new entitlement spending on President Johnson's Great Society also had taken effect. As a result of the massive increase in government outlays, in 1967 total US foreign liabilities had soared to $36 billion, while the US only had $12 billion in gold reserves -- only one third of total obligations. With the acceleration in the outflow of gold, the US increasingly attempted to forcefully control the outflow. In 1959 President Eisenhower made it illegal for Americans to buy gold overseas. Before his death, President Kennedy proposed The Equalization Tax, which was passed after his death in 1964. The act was a new tax on foreign currency deposits to prevent Americans from investing overseas. President Lyndon Johnson went as far as to discourage Americans from traveling. He stated "We may need to forgo the pleasures of Europe for a while." And also, "I am asking the American people to defer, for the next two years, all non-essential travel outside the western hemisphere." And as a Time magazine article from February 12, 1965 noted: "Martin, Douglas Dillon and Budget Director Kermit Gordon are lobbying for measures that would drastically affect the nation's foreign and domestic policies. Among the proposals that one or all three of them have forwarded: an exit tag of $50 or $100 per person to discourage tourism abroad, direct controls on U.S. investments abroad..." Beginning in 1965, French President General Charles de Gaulle-- who by that time had made France an economic power house through austerity programs in which built up France's gold reserves after he returned to power in 1958-- started demanding a reform of the international monetary system, a move back to the gold standard. As this February 12, 1965 Time article explains: "Perhaps never before had a chief of state launched such an open assault on the monetary power of a friendly nation. Nor had anyone of such stature made so sweeping a criticism of the international monetary system since its founding in 1944. There was Charles de Gaulle last week proclaiming that the primacy of the dollar in international dealings was finished, calling for an eventual return to the gold standard —which the world's nations scrapped 50 years ago — and practically inviting other countries to follow France's lead and cash in their dollars for gold. It was a particularly nettling irritant just as the U.S. was deeply involved in making some hard decisions about its monetary policy." Time also wrote in the article that "past attempts to close the payments gap have been mere palliatives — and that the problem has begun to undermine U.S. influence around the globe." And: "Just before De Gaulle spoke, Treasury Secretary Douglas Dillon made the first public admission that the U.S. payments deficit in 1964 moved higher than anyone had expected. It totaled about $3billion, all of which the U.S. is legally committed to exchange for U.S. gold on demand. The Federal Reserve announced that the U.S. gold supply declined last week by $100 million, to a 26-year low of 15.1 billion. France converted $150 million into gold last month, plans another $150 million conversion soon. Following that lead, Spain has quietly exchanged $60 million of its dollar reserves for U.S. gold—the biggest such transaction of the Franco era. To free more gold to meet rising demand, a congressional committee last week approved President Johnson's proposal to eliminate the 25% gold backing now legally required for deposits held in the Federal Reserve System. But concern is growing in Washington that nations that have so far refrained from converting dollars out of consideration for the U.S. may cash them in for gold once the extra bullion becomes available—and thus send still more gold-laden truckloads rolling out of Fort Knox." Unlike France, Great Britain’s economy was already a disaster and was getting worse. Britain’s external trade balance and general economic conditions were poor and was getting worse. With foreign obligations growing and a shrinking industrial base, fears began to fester the Bretton Woods agreement would be broken at the Pound Sterling link. With fears of a Sterling crisis and a breakdown of the Bretton Woods agreement possible, causing France's Charles de Gaulle to push for an overhaul of the international monetary system, de Gaulle was the target of several CIA-linked assassination attempts between 1965-1966. After these attempts failed, de Gaulle's government was then a target of destabilization which later succeeded in 1968. Economist and historian William Engdahl gives a more detailed account in his 1992 (republished 2004) book, "A Century of War: Anglo-American Oil Politics And The New World Order": "After the war , under Bretton Woods, Britain, through her Sterling Bloc ties with colonies and former colonies, had been able to make the Pound Sterling a strong currency, which in many parts of the world was regarded the equal of the dollar as a stable reserve currency. Member countries in the British Commonwealth were required, among other "courtesies," to deposit their national gold and foreign exchange reserves in London and to maintain Sterling balances in City of London British banks. Britain's quota share in the IMF was second only to that of the United States. Therefore, the Pound was disproportionately important to the stability of the Bretton Woods dollar order in the 1960's, despite the clearly depleted condition of her economy. During the 1960's England, like America, was a net exporter of financial funds to the rest of the world, despite the fact that her technologically stagnant industrial base created increasing trade deficits. Continental European economies, through growth of trade within the new Common Market and their productive advantages from strong investment in technology, grew vigorously. Thus Britain's deficiencies and lack of new technological investment grew ever larger by comparison. The powerful financial interests of the City of London again preferred to focus single- mindedly on drawing the world's financial flows into London banks by maintaining the highest interest rates of any major industrial nation throughout the mid-1960's. Industry went into a slump, unable to borrow for needed technological innovations. By 1967, the British position was alarming. Despite several large emergency borrowings from the IMF to help stabilize the Pound Sterling, British foreign debts continued to grow, rising another $2 billion, or some 20% in that year alone. In January, 1967, de Gaulle's principal economic adviser, Jacques Rueff, came to London to deliver a proposal for raising the official price of gold held by the leading industrial nations. The United States and Britain continuously refused to hear such arguments, which would have meant a de facto devaluation of their currencies. Throughout 1967, the Bank of England's gold reserves declined. Foreign creditors, sensing the obviously imminent devaluation of the weakening Pound, scrambled to redeem paper for gold, which they calculated must rise in value. By June 1967, de Gaulle's government announced that France had withdrawn from the American-instigated "Gold Pool." In 1961, under U.S. pressure, the central banks of ten leading industrial countries had created the Group of Ten as it became known. In addition to the U.S., Britain, France, Germany, and Italy were added Holland, Belgium, Sweden, Canada, and Japan. The Group of Ten had agreed in 1961 to pool reserves into a special fund, the Gold Pool, to be administered in London by the Bank of England. Under the arrangement, a temporary remedy at best, as events revealed, the U.S. "central bank contributed only half the costs of continuing to maintain the world price of gold at the artificially low $35/ounce of 1934. The other nine, plus Switzerland, agreed to pay the second half of such "emergency" interventions, on the argument the situation would be temporary. But the "emergency" had become chronic by 1967. Washington refused to bring its war spending deficits under control, and Sterling continued to weaken along with the collapsing British economy. De Gaulle withdrew from the Gold Pool, not wanting to lose additional French central bank gold reserves to the bottomless pit of interventions. The American and British financial press, led by the London Economist, began a heightened attack against French policy. But de Gaulle made one tactical blunder in the process. On January 31, 1967, a new law came into effect in France which allowed unlimited convertibility for the French Franc. At the time, with French industrial growth among the strongest in Europe, and the Franc, backed by strong gold reserves, one of the strongest currencies, convertibility was seen as a confirmation of France's successful economic policy since de Gaulle took office in 1958. It was soon to become the Achilles heel which finished de Gaulle's France at the hands of Anglo-American financial interests. French Prime Minister Georges Pompidou, in a public speech in February 1967, reaffirmed French adherence to a gold-backed monetary system as the only way to avoid international manipulations, adding that the "international monetary system is functioning poorly because it gives advantages to countries with a reserve currency (i.e., the United States): these countries can afford inflation without paying for it." In effect, the Johnson administration and the Federal Reserve simply printed dollars and sent them abroad in place of its gold. The lines were more sharply drawn over the course of 1967. France's central bank, determined to exchange its dollar and Sterling reserves for gold, left the voluntary 1961 "gold pool" arrangement. Other central banks followed. The situation assumed near panic dimensions; some 80 tons of gold were sold on the London market toward the end of the year in an unheard-of period of five days, in a failed effort to stop the speculative attack. Fear grew that the entire Bretton Woods edifice was about to crack at the weakest link, the Pound Sterling. By the second half of 1967, financial speculators were selling Pounds and buying dollars or other currencies which they then used to buy commercial gold in all possible markets from Frankfurt to Pretoria, sparking a steep rise in the market price of gold, in contrast to the$35/ounce official U.S. dollar price. The Sterling crisis indirectly focused attention on the growing vulnerability at the core of the international monetary system, the U.S. dollar itself. By November 18, 1967, the British Labour government of Harold Wilson bowed to the inevitable, despite strong pressure from Washington, and announced a 14% devaluation of Sterling from $2.80 down to $2.40 per Pound, the first devaluation since 1949. The Sterling crisis abated, but the dollar crisis was only beginning. Once Sterling was devalued, speculative pressures turned directly to the U.S. dollar at the end of 1967. International holders of dollars went to the New York Federal Reserve Gold Discount Window and demanded their rightful gold in exchange. The market price of gold began an even steeper rise as a result, despite efforts of the U.S. Federal Reserve to dump its gold reserves onto the market to stop the rise. Washington, under the sway of the powerful dollar-based New York banks, adamantly refused to budge from the $35/ounce official valuation of gold. But the withdrawal of France, one of the largest holders of gold, from the Group of Ten Gold Pool, had intensified Washington's problem. By the end of the year, Washington's official gold stock declined another $1 billion, to only $12 billion. De Gaulle is toppled The crisis gathered momentum into 1968, and between March 8 and March 15 of that year the Gold Pool in London had to provide nearly 1,000 tons to hold the gold price. The weighing-room floor, loaded with gold at the Bank of England, almost collapsed under the weight. U.S. Air Force planes had been commandeered to rush gold in from the U.S. reserve at Fort Knox. On March 15, the U.S. requested a two-week closing of the London gold market. By April, 1968, a special meeting of the Group of Ten was convened, in Stockholm, at Washington's request. U.S. officials planned to unveil yet another scheme, the creation of a new "paper gold" substitute through the IMF, so-called Special Drawing Rights (SDRs), in an effort to postpone the day of reckoning still further. At the Stockholm gathering, designed to set the stage for official I MF adoption of the Washington SDR scheme at the upcoming IMF meeting the following month, France defiantly blocked unanimous agreement, with France's Minister Michel Debre reasserting traditional French policy on a return to the original rules of Bretton Woods. De Gaulle's adviser Rueff had repeatedly proposed a "shock" devaluation of the U.S. dollar of 100% against gold, which would have been elegantly simple, would have doubled official U.S. gold reserves in dollar terms and would have been sufficient to allow the U.S. to convert the approximate $10 billion of foreign held dollars, while still maintaining the value of its gold reserves as before. This would have been far more rational and painless, in human terms, than what ensued from Washington's side. But tragically, it was not to result. Within days of the French refusal to back Washington's SDR dollar bailout scheme, France itself was the target of the most serious political destabilization of the postwar period. Beginning with leftist students at the University of Strasbourg, soon all of France was brought to a chaotic halt as students rioted and struck across France. Coordinated with the political unrest (which, interestingly the French Communist Party attempted to calm down), U.S. and British investment houses started a panic run on the French Franc which gained momentum as it was touted loudly in Anglo-American financial media. The May 1968 student riots in France were the result of the vested London and New York financial interests in the one G-10 nation which continued to defy their mandate. Taking advantage of the new French law allowing full currency convertibility, these financial houses began to cash in Francs for gold, draining French gold reserves by almost 30% by the end of 1968, and bringing a full- blown crisis in the Franc. Sadly, the counterattack of the Anglo-Americans succeeded. Within a year, de Gaulle was out of office and France's voice severely weakened. One of his last meetings while still President in 1969, was with British Ambassador to France, Christopher Soames. Once again, the General told Soames, in a broad review of French postwar policy, that Europe must be independent and that her independent stance had been profoundly compromised by the "pro-American" sentiments of many European countries, most especially Britain. One other country openly daring to defy the powerful financial interests of London and New York at this time was the largest gold-producer in the west, the Republic of South Africa. During the early part of 1968, South Africa refused to sell its newly-mined gold for Pounds or dollars at the official price of $35/ounce. France and South Africa had been holding talks to form a new gold basis for reforming the Bretton Woods monetary order. This provoked a U.S.-led central bank boycott of South Africa, a move again repeated by the same interests almost exactly 20 years later, in the mid-1980's. Despite the apparent decline of the French "threat," Washington and London's success was to prove a Pyrrhic victory." The US Federal Reserve requested the London Gold Market be closed for two weeks on March 15, 1968. While the London Gold Market was closed, the Gold Pool was dismantled. Upon the London Gold Market's reopening, gold rose to $39 per ounce. On the same day, western central banks, led by the US Treasury Secretary Robert Fowler, in what is known as the Washington Accord, announced the world's monetary reserves to be "sufficient" and no additional purchases or sales of gold by any central bank in any market was needed. Letters were sent to some 95 central banks asking them not to buy gold. Fowler hoped that by boycotting South Africa, monetary demand for gold would drop, thus forcing South Africa, producer of 77% of the non-Communist world's output of gold at the time , to dump its gold on markets in London and Switzerland and thus drive the price down to the official $35-per-ounce level. The boycott had no effect at first. As the price of gold by July 1968 was over $40 per ounce and by mid-1969 was approaching $44 . South Africa was able to pay for its imports in several ways: In the three years prior to 1968, South Africa had run capital account surpluses; also, after the bear market bottom in 1966, South Africa saw huge foreign currency inflows from bullish investors. South Africa was even able to sell some of its gold to western central banks despite the US led boycott. The Bank of Portugal broke the central bank boycott and bought $145 million worth of gold in 1968 and another $120 million by mid 1969. South Africa also sold gold to three Swiss banks, Credit Suisse, Union Bank and Swiss Bank Corp.(apparently these three wanted Zurich to challenge London's status as the leading gold market in the world) South Africa even offered to sell gold to the IMF--which IMF rules stated the fund must buy all gold offered to it, by its members. South Africa offered the IMF 1 million ounces of gold in May 1968, but the IMF deferred decision on the legality of gold purchases, with the US having 25% of the board votes. However, by mid 1969, South Africa was in desperate need of exporting its gold to pay for its imports. The Bull market in stocks that had started in 1966 had ended and investors were increasingly shunning South Africa, who in the 2Q of 1969 had its first capital account deficit since 1965. As a result, South Africa began dumping gold on the market in London. South Africa's reserves fell from $1.4 billion in May 1969 to $1.1 billion the following August. An estimated 20 tonnes of South African gold was hitting the market. This dumping of gold on the markets was a disaster for gold prices. Gold prices would fall from $43.50 to $35 by the end of that October and all the way down to $34.80 on January 16, 1970. This decline was short lived however. By the end of 1970 gold was back to $37.50 per ounce, as the economic situation in the US deteriorated. For the first time in the 20th century, the US had a trade deficit in 1970. This flood of new dollars to foreign countries would soon find their way back home in the form of gold demands; demand for gold the US could not cover. By 1971, total US gold reserves had fallen to just $10 billion, while foreign central banks held some $80 billion -- eight times the total of US gold reserves. With the Vietnam War still raging and now not only a balance of payments deficit, but now also a trade deficit and a major economic recession looming, the Federal Reserve, in the face of rising inflation and commodity prices in 1971, increased the money supply by 10%. Fearing massive inflation and no longer willing to prop up the dollar, inflation-leery West Germany -- Wiemar Germany hyperinflated in the early 1920s -- pulled its Deutsche Mark from the Bretton woods agreement. This move actually strengthened the German economy and also the Deutsche Marked as it appreciated some 7.5% vs. the dollar by August 1971. The German withdrawal from the Bretton Woods agreement sparked panic and a currency crisis. By the end of June 1971, $22 billion in assets had left the US. Later, in July 1971, Switzerland redeemed $50 million for gold and one month later in August, pulled its Swiss Franc from the Bretton Woods agreement. At the same time, France redeemed $191 million for gold by sending a French battleship to New York to take delivery of the gold from the Federal Reserve and to bring back to France. Then, in a shocking move on August 11, 1971, the British ambassador requested to redeem an astonishing $3 billion for gold -roughly one third of the total gold reserves of the US, at the time. The same day, Congress released a report recommending a devaluation of the dollar in an effort to protect the dollar from "foreign price-gougers." It was too little, too late. The dollar was in a full blown crisis and was on the brink of collapse and hyperinflation as faith had been lost. So, on August 15, 1971 President Richard Nixon, in an event that would come to known as the Nixon shock, unilaterally closed the US gold window and imposed a 90 day price and wage freeze along with a 10% surcharge tax on imports. For the first time ever, America was on a full fiat paper system. This concludes part one. The Bretton Woods agreement put us on this path and infected us wth an illness, an illness in which today has grown to monstrous proportions and has us gasping for our last breaths. What is this illness and how did it contribute to America's first bankruptcy in 1971? How will it lead to the second and final currency crisis and bankruptcy of the US? I am currently working on part two and hope to have it finished and published in the coming weeks. Part two will take us through the post Bretton Woods era, from the high inflation of the 70s and early 80s, to the Gordon Gekko era of greed in the mid-late 80s till today. The asset mania that engulfed the nation in the 90s and continues till this day and the dot com bubble in the late 90s. And all the other events, manias, wars etc. over the last 10 years. --------------------------------------------------------------------------------- References: Mises Daily Tuesday March 31, 2009 "The Losing Battle to Fix Gold at $35, Part II" http://mises.org/daily/3402 William Engdahl "A Century Of War: Anglo-American Oil Politics and The New World Order" published 2004 p.120 Time Magazine February 12, 1965 "Money: De Gaulle v. the Dollar" http://www.time.com/time/magazine/article/0,9171,840572-1,00.html Time Magazine Jul. 25, 1969 "Money: Where the Gold Has Gone" http://www.time.com/time/magazine/article/0,9171,901146,00.html Asia Times October 2, 2008 "Gold, manipulation and domination" http://www.atimes.com/atimes/China_Business/JJ02Cb03.html Chicago Tribune June 15, 1975 featured a front-page story which read in part: “Congressional leaders have been told of CIA involvement in a plot by French dissidents to assassinate... De Gaulle... Sometime in the mid-1960s – probably in 1965 or 1966 – dissidents in the De Gaulle government are said to have made contact with the CIA to seek help in a plot to murder the French leader.... According to the CIA briefing officer, discussions were held on how best to eliminate De Gaulle, who by then had become a thorn in the side of the Johnson administration because of his ouster of American military bases from French soil and his demands that U.S. forces be withdrawn from the Indochina War" 25407 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Warning: Do Not Taunt Happy Fun Schweizerische Nationalbank Swiss National Bank Accelerates Downside Currency Intervention, Raises To Bernanke The Biggest EURUSD Bull, Goldman's Thomas Stolper, Throws In The Towel, Cuts His Forecast Across The Board Frontrunning: November 30 Guest Post: Swiss Finish Sets New Standard for Global Bank Regulation
Is This A 2007 Redux? Submitted by Tyler Durden on 07/20/2013 17:06 -0400 Ben Bernanke Bond China Eurozone Federal Reserve Goldilocks Gross Domestic Product Guest Post John Hussman Market Timing Price Action Reality Recession Submitted by Lance Roberts of Street Talk Live blog , I read a very interesting prediction from noted market bull Jeff Saut who, in an interview with Eric King of King World News , stated that: "For the past two and a half months I have targeted tomorrow, July 19th, as the intermediate-top on both my quantitative timing and technical models. So I think tomorrow is the potential turning point for the first meaningful decline of the year. I have been raising cash for the past few weeks and I think this correction in the stock market will be roughly 10% to 12%. It's just a question of, is this thing going to end with a whimper, or is it going to end with a bang? The shorts have been absolutely destroyed here. We could see a blue-heat move that carries the SP 500 somewhere between 1,700 and 1,730. That would be the ideal pattern, but they don't operate the market for my benefit so you have to take what they give you. I don't think anybody can time the market on a consistent basis, but if you listen to the message of the stock market you sure as heck can decide when you should be 'playing hard' and when you should not be playing as hard, and so I'm not playing that hard right here." Whether, or not, Jeff is right about the exact date of the market top it does bring attention to the recent correction and subsequent rally to new highs. Was that correction just a pullback in an ongoing upward bullish trend or is the beginning of a more major topping process much as we saw in 2007? The chart below shows the price action of the market from 2003-2008 as compared to 2009 top. The interesting thing about the historical price action is the potential timing of the Federal Reserve's "tapering" of the current bond buying scheme. The market advance prior to 2008 which was driven by excess liquidity derived from the credit boom cycle - the current advance has been driven almost entirely by the liquidity pushed into the system by the Federal Reserve. The extraction of that liquidity could well mark the top of the current cyclical bull advance later this year or in early 2014. It is not just price patterns that have me concerned but rather other similarities between these two advances that should be noted as well. Leverage The next chart below is the amount of leverage in the financial system as measured by the level of margin debt. Margin debt has currently risen to an all-time high during the current liquidity cycle much the same as was witnessed prior to the financial crisis. As you can see spikes in margin debt, as market exuberance begins to form, generally takes place near market peaks. The current spike in margin debt to record levels is not necessarily a sign of good things to come. Valuations Market valuations have been expanding over the last couple of quarters as prices have been artificially inflated while earnings growth has deteriorated. The result has been a push of market valuations, as measured by P/E ratios, to levels in excess of those witnessed at the prior market peak. The chart below shows reported trailing twelve month price-earnings ratios for the seven quarters leading up to the peak in earnings. While valuation measures are historically horrible market timing devices, especially when the market is being pushed by liquidity, they do give some insight as to extremes. I should not have to remind you that post the peak in reported earnings in 2007 they fell sharply to a low of just $6.86 per share by March of 2009. Of course, at the peak in 2007, the economy was growing, there was no threat of recession, housing related issues were "contained" and Bernanke calmly explained that we were in a "goldilocks economy." Just six months later the economy was in a recession and the financial crisis had set upon us. While I am not saying that the same thing is about to happen - what does concern me is the extreme amount of confidence that currently exists that we have once again entered into that same "goldilocks" state. Earnings Of course, you cannot really discuss P/E ratios without discussing the trend and trajectory of earnings. Reported earnings were steadily rising as we entered into the peak of valuations in 2007. At that time the belief was that market prices would continue to rise along with earnings. The problem was that belief was quickly shattered as the initial waves of the recession began to set in. Currently, that same belief is once again largely prevalent. The chart below shows the historical trend of reported trailing twelve months earnings per share versus the stock market. Despite the fact that earnings have been stagnating for several quarters now; the belief is that at just any moment the economy will kick into gear and earnings will play catchup with rapidly rising valuations. This has historically been a losing proposition. Valuation excesses tend to be mean reverting through a fall in the numerator rather than a rise in the denominator. Economic Growth Looking at earnings, valuations and price are all important to whether or not we are currently near a peak in the financial markets. However, ultimately, it is the economy that will drive all of these issues in the future. The chart below shows annualized growth rates of quarterly real GDP for the periods of 2004 through 2007 and 2009 to present. The importance here is that in both cases the actual rate of economic growth peaked near the middle of the economic cycle and then began to wane. The polynomial trend lines shows this a little more clearly. Of course, as stated above, despite clear evidence that the economy was beginning to struggle the inherent belief by most mainstream analysts and economists was that the "soft patch" would quickly recover. Unfortunately, that was not the case. The impact of the recession in the Eurozone, and the slowdown in China, is clearly impacting corporate earnings and revenue which puts the current market at risk. Is This A Market Top? Mr. Saut's very bold prediction that we are likely making a market top currently is certainly attention grabbing. The reality, however, is that the current "liquidity driven exuberance" could keep the markets "irrational" longer than logic, technicals or fundamentals would dictate. Are we likely forming a market top? It is very possible. We saw the same type of market action towards the last two market peaks. However, it will only be known for sure in hindsight. The many similarities between the last cyclical bull market cycle and what we are currently experiencing should be at least raising some warning flags for investors. The levels of speculation, leverage, price extensions, duration of the rally, earnings trends and valuations are all at levels that have historically led to not so pleasant outcomes. John Hussman summed it up well recently when he stated: "Given the present evidence, however, my real concern is that much like the rolling tops of 2000 and 2007, each pleasant breeze here lulls investors into complacency – but in the face of overvalued, overbought, over bullish conditions that, from a cyclical and secular standpoint, should probably have them wide-eyed with terror. We can't rule out that the bough will sway for a while longer despite the weight, but we won't embrace the situation by putting our own baby on the twigs. It's quite crowded up there already." Average: 4.636365 Your rating: None Average: 4.6 ( 11 votes) !-- -- Tweet !-- - advertisements - .AR_2 .ob_empty {display: none;} .AR_2 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_2 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_2 {float: left;width:50%} .AR_2 li {list-style: none outside none !important;font-size: 10px;padding-bottom: 10px;line-height: 13px;margin:0;} .AR_2 .ob_org_header {color: #000000;text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_3 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_3 .rec-src-link {font-size: 12px;} .AR_3 li {padding-bottom: 10px;list-style: none outside none !important;font-size: 10px;line-height: 13px;margin:0;} .AR_3 .ob_dual_left, .AR_3 .ob_dual_right {float: left;padding-bottom: 0;padding-left: 2%;padding-top: 0;} .AR_3 .ob_org_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .ob_ads_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} -- - advertisements - Login or register to post comments 11948 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Guest Post: 2011 - Catch-22 Year In Review Guest Post: Bad Moon Rising Guest Post: 2012 - The Year Of Living Dangerously Guest Post: Illusion Of Recovery - Feelings Versus Facts Guest Post: Epic Fail - Part One
Guest Post: Analysis of the Global Insurrection Against Neo-Liberal Economic Domination and the Coming American Rebellion Submitted by Tyler Durden on 02/26/2011 21:53 -0400 AIG Alan Greenspan American International Group Bank of America Bank of America Barack Obama Ben Bernanke Ben Bernanke Boeing CDO China Citibank Citigroup Collateralized Debt Obligations Corruption Crude Crude Oil David Rosenberg default Demographics Department of Justice Detroit Dylan Ratigan Enron ETC Fail FBI Federal Reserve First Amendment Florida Foreclosures France Freedom of Information Act Germany Global Economy goldman sachs Goldman Sachs Greece Gross Domestic Product Guest Post Hank Paulson Hank Paulson Henry Paulson Hyperinflation Illinois International Monetary Fund Iraq Ireland Italy Jamie Dimon Japan Joseph Stiglitz Ken Lewis Larry Summers Lehman Lehman Brothers Lloyd Blankfein Matt Taibbi Meltdown Mexico Michigan Middle East Morgan Stanley Muni Bonds national security Obama Administration Ohio Poland Portugal Private Equity Quantitative Easing ratings Reality Recession Robert Rubin Rosenberg Saudi Arabia South Carolina SPY Tim Geithner Timothy Geithner Too Big To Fail Transparency Twitter Unemployment Unemployment Benefits Vikram Pandit Wells Fargo White House World Bank Submitted by David DeGraw from Amped Status Guest Post: Analysis of the Global Insurrection Against Neo-Liberal Economic Domination and the Coming American Rebellion – We Are Egypt If you think what’s happening in Egypt won’t happen within the United States, you’ve been watching too much TV. The statistics speak for themselves. In previous Revolution Roundups , before we were knocked offline, we featured mass protests by the people of Ireland, Italy, Britain, Austria, Greece, France and Portugal, as the Global Insurrection contagion spread throughout Europe. And now, as we have seen over the past month, North African and Middle Eastern nations have joined the movement as the people of Egypt, Tunisia, Jordan, Morocco, Gabon, Mauritania, Yemen, Bahrain, Libya, Palestine, Iraq, Sudan and Algeria have taken to the streets en masse. The connection between this latest round of uprisings and the prior protests throughout Europe is one the mainstream media is not making. We are witnessing a decentralized global rebellion against Neo-Liberal economic imperialism. While each national uprising has its own internal characteristics, each one, at its core, is about the rising costs of living and lack of financial opportunity and security. Throughout the world the situation is the same: increasing levels of unemployment and poverty, as price inflation on food and basic necessities is soaring. Whether national populations realize it or not, these uprisings are against systemic global economic policies that are strategically designed to exploit the working class, reduce living standards, increase personal debt and create severe inequalities of wealth. These global uprising, which have only just begun, are the first wave of the inevitable reaction to the implementation of a centralized worldwide Neo-Feudal economic order. The global banking cartel, centered at the IMF, World Bank and Federal Reserve, have paid off politicians and dictators the world over — from Washington to Greece to Egypt. In country after country, they have looted national economies at the expense of local populations, consolidating wealth in unprecedented fashion – the top economic one-tenth of one percent is currently holding over $40 trillion in investible wealth, not counting an equally significant amount of wealth hidden in offshore accounts. IMF imperial operations designed to extract wealth and suppress populations have been ongoing for decades. As anyone researching economic imperialism will know, a centrally planned Neo-Liberal aristocracy controls the global economy. I: Centrally Planned Economic Repression The IMF has a well-worn strategy that they use to conquer national economies. As I warned four months ago, we have now progressed into Step 3.5: World Wide IMF Riots. Back in October, in a TV interview with Max Keiser, we discussed leaked World Bank documents that revealed the IMF’s strategy. I stated the following: “They have a four-step strategy for destroying national economies…. We are about to enter what they would call Step Three. Step Three is when you’ve looted the economy and now food and basic necessities all of a sudden become more expensive, harder to get to. And then, Step 3.5 is when you get the riots. We are fastly approaching that…. We are headed to, as the IMF said, and as they plan, Step 3.5: IMF Riots. That’s what’s coming…” Fast-forward four months to today, and now we see country after country rebelling against high food prices. Since our October interview, food prices have spiked 15%. According to new World Bank data, since June 2010, “Rising food have pushed about 44 million people into poverty in developing countries.” As Federal Reserve Chairman Ben Bernanke announced another round of Quantitative Easing (QE2), those of us paying attention knew that the trigger had been pulled and Step Three had been executed. It was a declaration of economic war, an economic death sentence for tens of millions of people – deliberately devaluing the dollar and sparking inflation in commodities/basic necessities. It was a vicious policy that would impact people from Boston to Cairo. When QE2 was announced, I warned : “Food and Gas Prices Will Skyrocket, The Federal Reserve Just Dropped An Economic Nuclear Bomb On Us.” I also wrote : “The Federal Reserve is deliberately devaluing the dollar to enrich a small group of a global bankers, which will cause significant harm to the people of the United States and severe ramifications throughout the world…. The Federal Reserve’s actions are already causing the price of food and gas to increase and will cause hyperinflation on most basic necessities.” To be clear, there are several significant factors contributing to rising food prices, such as extreme weather conditions, biofuel production and Wall Street speculation ; but the Federal Reserve’s policies deliberately threw gasoline all over those brush fires. QE2 was another economic napalm bomb from the global banking cartel. In a recent McClathy news article entitled, “Egypt’s unrest may have roots in food prices, US Fed policy,” Kevin Hall reports : “‘The truth of the matter is that when the Federal Reserve moved on the quantitative easing, it did export inflation to a lot of these emerging markets…. There’s no doubt that one of the side effects of the weak dollar and quantitative easing has been rising commodity prices. It helped create this bullish environment for commodities. This is a very delicate balancing act.’ It’s a view shared by Ed Yardeni, a veteran financial market analyst, who reached a similar conclusion in a research note to investors…. He joked that Fed Chairman Ben Bernanke should be added to a list of revolutionaries, since his quantitative easing policy, unveiled last year in Wyoming, has provoked unrest and change in the developing world. ‘Since he first indicated his support for such a revolutionary monetary change… the prices of corn, soybeans and wheat have risen 53 percent, 37 percent and 24.4 percent through Friday’s close,’ Yardeni noted. ‘The price of crude oil rose 19.8 percent over this period from $75.17 to $90.09 this (Monday) morning. Soaring food and fuel prices are compounding anger attributable to widespread unemployment in the countries currently experiencing riots.’” The people throughout the Middle East and Northern Africa, on the fringe of the Neo-Liberal economic empire and most vulnerable to the Fed’s inflationary policies, are the first to rebel. Before analyzing the situation within the US, let’s take a closer look at the global Neo-Liberal economic policies that led to the Egyptian and Tunisian revolts. II :: Economic Imperialism: IMF Plunder of Egypt and Tunisia In the Middle East and North Africa populations are rising against their local dictators. However, these “dictators” take orders from the IMF. A report from the Center for Research on Globalization revealed some background and historical context: “The Alliance between Global Capitalism and Arab Dictators It is paramount to understand that the Arab dictators and tyrants serve the interests of organized capital. This is their primary function. They are elements of the global system formed by organized capital. Looking back, protests and riots started in 1977 against the regime of Mohammed Anwar Al-Sadat, Mubarak’s predecessor. The causes of these protests were the neo-liberal policies that the I.M.F. had handed down to Sadat. The I.M.F. policies ended government subsidies on basic daily commodities of life. Food prices jumped and Egyptians became hard-hit…. The Arab people grasp the fact that their ruling class and governments are not only corrupt regimes, but also comprador elites, namely the local representatives of foreign corporations, governments, and interests…. In Egypt, Gamal Mubarak (who was being groomed by his father for the presidency) worked for Bank of America. In Tunisia, Zine Al-Abidine Ben Ali was a military officer trained in French and American military schools who, once in power, served U.S. and French economic interests. In Lebanon, Fouad Siniora was a former Citibank official before he became prime minister…. Within the corrupt Palestinian Authority, Salam Fayyad worked for one of the banks forming the U.S. Federal Reserve and the World Bank…. Moreover, almost all Arab finance ministers are affiliated to the major global banking institutions. All of them also strictly adhere to the Washington Consensus of the International Monetary Fund (I.M.F.) and the World Bank…” Samer Shehata, professor of Arab politics at Georgetown University, summed up the situation in Egypt and Tunisia: “Beginning in 2004… Egypt began implementing economic reforms called for by the IMF—or really forced on them by the IMF and the World Bank… a new government was appointed, new ministers were appointed, who believed wholeheartedly in the ideas of the IMF and the World Bank. And they quite vigorously pursued these policies. And there was at one level, at the level of macroeconomic indicators, statistics, GDP growth rates, foreign direct investment and so on—Egypt seemed to be a miracle. And this, of course, was the case with the Tunisian model earlier. You’ll remember that Jacques Chirac called it the ‘economic miracle,’ and it was the darling of the IMF and the World Bank, because it implemented these types of reforms earlier. Well, of course, we saw what happened in Tunisia. In Egypt, from 2004 until the present, the government and its reforms were applauded in Washington by World Bank, IMF and US officials…. Egypt received the top reformer award from the IMF and the World Bank…” Former Goldman Sachs executive Nomi Prins reveals more details : The Egyptian Uprising Is a Direct Response to Ruthless Global Capitalism “The revolution in Egypt is as much a rebellion against the painful deterioration of economic conditions as it is about opposing a dictator…. When people are facing a dim future, in a country hijacked by a corrupt regime that destabilized its economy through what the CIA termed, ‘aggressively pursuing economic reforms to attract foreign investment’ (in other words, the privatization and sale of its country’s financial system to international sharks), waiting doesn’t cut it…. Tunisia’s dismal economic environment was a direct result of its increasingly ‘liberal’ policy toward foreign speculators. Of the five countries covered by the World Bank’s, Investment Across Sectors Indicator, Tunisia had the fewest limits on foreign investment…. Egypt adopted a similar come-and-get-it policy, on steroids…. But, as we learned in the U.S., what goes up with artificial helium plummets under real gravity…. Not surprisingly, those foreign speculation strategies didn’t bring less poverty or more jobs either. Indeed, the insatiable hunt for great deals, whether by banks, hedge funds, or private equity funds, as it inevitably does, had the opposite effect…. Ironically, the brochure touted the large college graduate population entering the job market each year — 325,000. The same graduates are the core of the current revolution. They failed to find adequate jobs and are faced with an official unemployment rate of just below 10 percent (though, similar to the U.S., that figure doesn’t account for underemployment, poor job quality or long-term prospects)…. Meanwhile, 20 percent of Egypt lives in poverty… For in the United States, economic statistics are no better. By certain measures, like income inequality, they are worse than in Egypt.” III :: US-Egypt Economic Parallels, Inequality Poverty Comparable economic statistics between the US and Egypt are facts that US mainstream media propagandists are not reporting. Inequality of Wealth Income inequality has reached a record level within Egypt, as Pat Garofalo explained : “One of the driving factors behind the protests is the… growing sense of inequality. ‘They’re all protesting about growing inequalities…. The top of the pyramid was getting richer and richer,’ said Emile Hokayem of the International Institute for Strategic Studies in the Middle East. As Yasser El-Shimy, former diplomatic attaché at the Egyptian Ministry of Foreign Affairs, wrote in Foreign Policy, ‘income inequality has reached levels not before seen in Egypt’s modern history.’” As the US mainstream media references the “oppressive” and “corrupt” inequality of wealth throughout Egypt, the hypocrisy is shameful. The inequality of wealth in the United States is currently the most severe it has ever been. Gini coefficient ratings are a measure of a nation’s inequality – the higher a nation scores, the more unequal the society is. The US has a Gini coefficient rating of 45, compared to Egypt’s 34.4, Yemen’s 37 and Tunisia’s 40, making the US the most unequal, “oppressive” and “corrupt” of the four. As John Dewey once said, “There is no such thing as the liberty or effective power of an individual, group, or class, except in relation to the liberties, the effective powers, of other individuals, groups or classes.” Poverty When well-paid “experts” in expensive suits sitting behind desks in state of the art studios discuss the hardships of the Egyptian people, something tells me that these pundits haven’t spent much time interacting with tens of millions of people living in inner city America – just because the mainstream media doesn’t cover them, doesn’t mean they don’t exist. They exist in larger numbers in the US than they do in most rebelling countries. The rising price of food has played a pivotal role in sparking the uprisings, food prices have a larger impact in countries like Egypt and Tunisia, as they represent a more significant percentage of total income. However, the overall costs of living in the US are significantly higher. When these costs are factored in — medical expenses, housing, transportation, education, etc. – the US poverty level of $22k per year, for a family of four, is comparable to the poverty rate measure in Egypt. According to the CIA, the poverty rate in Egypt is 20%. With a population size of 83 million people, this would put 16.6 million Egyptians living in poverty. In the US, the current poverty rate is 16.8% , with a population of 309 million, this puts 52 million Americans living below the poverty line. When you consider that the US has 52 million people currently living in poverty, you realize, as shocking as it may sound, that we have a larger number of desperate people in the US than rebelling populations in countries throughout the Middle East and Europe. Overall, in comparison to Egypt, the US population is obviously more geographically spread out, but if you breakdown the demographics, many large US cities have a poverty rate higher than the 20 percent rate in Egypt. Consider that, according to low-ball government statistics, nine major US cities have a poverty rate over 25%. IV :: Debt Slavery: Unemployed, Underemployed, Underpaid, In Debt The unemployment rate in Egypt mirrors the unemployment rate in the US, currently fluctuating between nine and ten percent, according to government sources. The unemployment rate among recent graduates attempting to enter the workforce also mirrors the crisis in the US. The young unemployed and underemployed demographic has played a pivotal role in leading the rebellion. Reporting for the Financial Times in an article entitled, “ At hand, an Arab awakening ,” Roula Khalaf sums it up this way: “In Egypt, as in Tunisia, the young people who initiated the street campaigns were educated, internet-savvy activists with no political affiliation. After watching the fervour unleashed in the past month, young Syrians, Bahrainis, Algerians and even the quiescent Libyans are turning to Facebook and Twitter to call for their own ‘day of rage’. As Mr Khashoggi puts it: ‘The 25-year-old unemployed today has become the strong man.’” A report from Business Week entitled, “ The Youth Unemployment Bomb ,” provides more detail: “In Tunisia, the young people who helped bring down a dictator are called hittistes—French-Arabic slang for those who lean against the wall. Their counterparts in Egypt… are the shabab atileen, unemployed youths… In Britain, they are NEETs – ‘not in education, employment, or training.’ In Japan, they are freeters: an amalgam of the English word freelance and the German word Arbeiter, or worker. Spaniards call them mileuristas, meaning they earn no more than 1,000 euros a month. In the U.S., they’re ‘boomerang’ kids who move back home after college because they can’t find work. Even fast-growing China… has its ‘ant tribe’ – recent college graduates who crowd together in cheap flats on the fringes of big cities because they can’t find well-paying work. In each of these nations, an economy that can’t generate enough jobs to absorb its young people has created a lost generation of the disaffected, unemployed, or underemployed—including growing numbers of recent college graduates for whom the post-crash economy has little to offer…. More common is the quiet desperation of a generation in ‘waithood,’ suspended short of fully employed adulthood. At 26, Sandy Brown of Brooklyn, N.Y., is a college graduate and a mother of two who hasn’t worked in seven months. ‘I used to be a manager at a Duane Reade in Manhattan, but they laid me off. I’ve looked for work everywhere and I can’t find anything,’ she says. ‘It’s like I got my diploma for nothing.’” The collapsing job market, declining wages, loss of benefits and skyrocketing cost of education has created a “lost generation” of young college graduates with little options and massive debt. When millions of American students took out tens of thousands of dollars in student loans to pay for an education which they assumed would give them the skills needed to make a good living, they never imagined that they would be either unemployed, working part-time, or making significantly less than people in their chosen profession have traditionally made. The majority of young workers in their twenties and early thirties have debt that they will spend most of their life trying to pay back. They’ve been sentenced to a life of… Debt Slavery Mike Whitney recently interviewed Alan Nasser on CounterPunch for a piece entitled, “ The Student Loan Swindle .” Here’s an excerpt: “ MW: Is it possible to ‘walk away’ from a student loan and declare bankruptcy? Alan Nasser: No, it’s not possible for student debtors to escape financial devastation by declaring bankruptcy. This most fundamental of consumer protections would have been available to student debtors were it not for legislation explicitly designed to withhold a whole range of basic protections from student borrowers. I’m not talking only about bankruptcy protection, but also truth in lending requirements, statutes of limitations, refinancing rights and even state usury laws – Congress has rendered all these protections inapplicable to federally guaranteed student loans. The same legislation also gave collection agencies hitherto unimaginable powers, for example to garnish wages, tax returns, Social Security benefits and – believe it or not – Disability income. Twisting the knife, legislators made the suspension of state-issued professional licenses, termination of public employment and denial of security clearances legitimate measures to enable collection companies to wring financial blood from bankrupt student-loan borrowers. Student loan debt is the most punishable of all forms of debt – most of those draconian measures are unavailable to credit card companies…. MW: Is it fair to say that the student loan industry is a scam that targets borrowers who will never be able to repay their debts? Are these students like the people who were seduced into taking out subprime loans? How much money is involved and how much of that money is either presently in default or headed for default? Alan Nasser: It’s as fair as fair can be. First, the student loan industry is huge – a large majority of students from every type of school are in debt. Debt is held by 62 percent of students enrolled at public colleges and universities, 72 percent at private non-profit schools and 96 percent at private, for-profit (‘proprietary’) schools. It was announced last summer that total student loan debt, at $830 billion, now exceeds total US credit card debt, which is itself bloated to the bubble level of $827 billion. And student loan debt is growing at the rate of $90 billion a year.” These students weren’t expecting an economic crisis to occur, and, unlike the banks that lent them the money, they’re not getting a bailout. Also factor in that the overwhelming majority of new jobs, the few that are being added, are either part-time, temporary or in low paying fields without health or retirement benefits. Mix all of this together, and you have a vicious cycle with devastating consequences. Given the size of this segment of the population, carrying this much debt, at such a young age, with limited prospects, you can feel the winds of revolution blowing. Contrary to all the propaganda you hear from the mainstream media and politicians, the economy is still shedding jobs at a staggering pace. ZeroHedge recently featured a report entitled, “ Just How Ugly Is The Truth Of America’s Unemployment ” by economist David Rosenberg: “It is laughable that everyone believes the labor market in the U.S.A. is improving.… The data from the Household survey are truly insane. The labor force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labor force soared 753k in the past two months. These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support…. Of all the analysis we saw over the weekend, the only one that made any sense was the editorial by Bob Herbert: ‘The policy makers don’t tell us that most of the new jobs being created in such meager numbers are, in fact, poor ones, with lousy pay and few or no benefits. What we hear is what the data zealots pump out week after week, that the market is up, retail sales are strong, Wall Street salaries and bonuses are streaking, as always, to the moon, and that businesses are sitting on mountains of cash. So all must be right with the world. Jobs? Well, the less said the better. What’s really happening, of course, is the same thing that’s been happening in this country for the longest time — the folks at the top are doing fabulously well and they are not interested in the least in spreading the wealth around. The people running the country — the ones with the real clout, whether Democrats or Republicans — are all part of this power elite. Ordinary people may be struggling, but both the Obama administration and the Republican Party leadership are down on their knees, slavishly kissing the rings of the financial and corporate kingpins.’ … the civilian population rose 1.872 million last year. At the same time, the labor force fell 167k. Those not in the labor force soared 2.094 million. Just in January, we saw 319,000 people drop out of the work force. These numbers are incredible. This is a highly dysfunctional labor market. People are falling through the cracks at an alarming rate as they come off their extended jobless benefits….” In the US, we have over six million people who have now been unemployed for over six months, the highest total we have ever had. Factoring long-term unemployed and part-time workers looking for full-time work in to the total unemployment count, we now have over 30 million Americans in need of employment. V :: The American Dream Foreclosed Upon The foreclosure crisis in the United States, which has already affected over seven million people since the crisis began, is not slowing down, it’s accelerating. Economist Joseph Stiglitz recently predicated another two million foreclosures in 2011 . David Walsh sums up the growing crisis : Nearly 30 percent of US homeowners now ‘underwater’ “Year over year, home values were down 5.9 percent nationally, and have fallen 27 percent since their peak in June 2006. The total value of US single-family homes fell a staggering $798 billion in 2010’s fourth quarter, and for the entire year, more than $2 trillion…. The number of US homeowners ‘underwater,’ i.e., owing more than their homes were worth, at the end of 2010, jumped to 27 percent, up from 23.2 percent in the third quarter…. ‘The rate of homes selling for a loss reached a new peak in December, with more than one-third (34.1 percent) selling for a loss. The rate of homes sold for a loss has increased steadily for the past six months.’ Some 15.7 million homeowners had negative equity at the end of the fourth quarter, in households home to more than 40 million people. The massive number of those underwater will ‘surely lead to higher foreclosure rates soon,’ notes CNNMoney…. Economist Joseph Stiglitz, speaking at a conference in Mauritius February 9, predicted that another 2 million foreclosures would take place in the US in 2011, adding to the 7 million already recorded since the financial meltdown of 2008. Banks repossessed 1 million homes in 2010, and this year is expected to be bleaker. Approximately 5 million borrowers are at least two months behind in their mortgage payments.” VI :: A Recipe For Revolution: Tax Breaks for the Rich, Budget Cuts for the Poor Let’s recap the statistics: we have 59 million people without healthcare, 52 million in poverty, 44 million on food stamps, 30 million in need of work, seven million foreclosed upon and five million homes over two months late in their mortgage payments. Meanwhile, all new political policies and proposals on the table, on the state and federal level, are committed to major cuts in social services. In a sign of what’s to come, Obama’s first disclosed spending cut targets the poor. As Salon recently reported : New Obama strategy: Beat up poor people “To prove it is ‘serious’ about the deficit, the White House proposes cutting a program that helps pay heating bills. The Obama administration… will propose big cuts to a program that provides energy assistance to poor people when it unveils its suggested 2012 budget. ‘The Low Income Home Energy Assistance Program, or LIHEAP… would see funding drop by about $2.5 billion from an authorized 2009 total of $5.1 billion.’ The news is generating a lot of outrage… in large part because of a paragraph that suggests that the White House wants to gain political advantage from being seen as tough on the most vulnerable Americans — people who can’t afford heating oil during cold winters…. If the White House wants to convince Americans that it is serious about budget discipline, it should do so by ‘going after powerful vested interests rather than those least able to defend themselves within the political arena.’ The White House could redouble its efforts to cut oil company subsidies or repeal tax cuts for the rich, for example.” As The Independent reported , “Obama to set out painful budget plans for austerity in America. Americans are about to get a first glimpse of what tight-fisted federal government looks like with President Barack Obama releasing an austerity-tinged draft budget.” In a report we featured on the AmpedStatus Hot List with the headline, “US Democracy Crushed By Economic Elite,” Bob Herbert sums it up : “One state after another is reporting that it cannot pay its bills. Public employees across the country are walking the plank by the tens of thousands. Camden, N.J., a stricken city with a serious crime problem, laid off nearly half of its police force. Medicaid, the program that provides health benefits to the poor, is under savage assault from nearly all quarters. The poor, who are suffering from an all-out depression, are never heard from. In terms of their clout, they might as well not exist. The Obama forces reportedly want to raise a billion dollars or more for the president’s re-election bid. Politicians in search of that kind of cash won’t be talking much about the wants and needs of the poor. They’ll be genuflecting before the very rich.” Austerity measures and draconian cuts to the social safety net are occurring just after passing hundreds of billions of dollars in tax breaks to multi-millionaires and billionaires. On the state level, the Center on Budget and Policy Priorities released a report revealing, “Thirty-one states have released their initial budget proposals for fiscal year 2012 (which begins July 1 in most states), and, for the fourth year in a row, these budgets propose deep cuts in education, health care, and other important public services…” After committing trillions of dollars to bailing out the big banks, the Federal Reserve and government officials have now made it clear that the states will not receive the same treatment. In fact, the bailed out players on Wall Street, who have taken our tax dollars and given themselves all-time record-breaking bonuses, are looking to cash in on the suffering of states across the country. As Lynn Parramore recently put it : Crank Up the Casino! Hedge Funds to Short American States and Cities “The looming possibility of municipal defaults, which some say could total hundreds of billions of dollars, is causing grave concern. Hedge funds are also deeply concerned about America’s municipal debt crisis. They worry about how to best profit from it. The Wizards of Wall Street have looked over the catastrophe of cash-strapped America and found it good for business. In their corporate laboratories, they are working furiously to whip up wondrous new financial products that will allow them to reap millions from misery. You might think that after plunging the country into said Recession with their fancy financial products, these Wizards might feel a little indelicate about gearing up for a game of shorting a community near you. Clearly you don’t know Wall Street. The Financial Times reports that once-boring muni bonds are suddenly sexy.” Speaking of reaping millions from misery, the food stamp racket pays off just as well as the war racket. The economic parasites profit off of food stamps: Food Stamps: JPMorgan Banking Industry Profit From Misery “JPMorgan’s division that makes food stamp debit cards made $5.47 billion in net revenue in 2010. As the head of this division, Christopher Paton, says, ‘This business is a very important business to JPMorgan in terms of its size and scale.’ According to the company’s most recent quarterly filing with the SEC, the Treasury Securities Services segment, which is the division that includes the food stamp business, was up 2% in the last three months of last quarter and brought in $5.47 billion in net revenue for most of 2010.” Republicans and Democrats, along with their Wall Street masters, are so arrogant, deluded with wealth, completely lacking perspective, shortsighted and, quite frankly, ignorant. As the economic top one-tenth of one percent has more wealth than they have ever had, the middle class is quickly disappearing and poverty is soaring. As politicians ignore the needs of the suffering masses in favor of a Kleptocratic Oligarchy, which operates above the law, it is only a matter of time before an uprising takes hold. After analyzing societal and economic indicators within the US, in comparison to rebelling countries, it is not a matter of whether people will revolt or not, it’s a matter of when. There are two significant differences between the United States and other rebelling nations: 1) The US has a much more powerful, sophisticated and omnipresent propaganda media system to keep the populace suppressed – isolated and confused. 2) The US keeps 52 million people temporarily pacified in anti-poverty programs by giving them food stamps, unemployment benefits or other forms of life-sustaining government assistance. Both of these differences are temporary, and not in any way sustainable. The safety nets here are unraveling and cuts in vital social services will be implemented just as millions more will need them. At the same time, food stamps and other forms of limited government assistance will be worth less and less as food and gas prices continue to rise. Rising commodity prices will push the 239 million Americans currently living paycheck to paycheck over the edge. Also factor in healthcare costs, which have been skyrocketing even faster. On a personal level, my health insurance provider just notified me that my family has to pay 45% more for coverage – and we already had the world’s most expensive healthcare system. For my wife, one child and myself, we will now have to pay over $1100 per month for a basic health insurance plan. There are currently 59 million Americans who don’t even have healthcare insurance. The health system has become vintage Grapes of Wrath , as have most aspects of the centrally planned system of economic despotism that we live under. Add all of these factors together and you have a recipe for revolution. The mainstream propaganda news outlets and “Reality” TV soma will only keep people at bay for so long. The propaganda system collapses when people can’t afford to eat. Americans may be late to the party, but once one city revolts, the dominos will fall and a wave of protest will sweep through the country like a tsunami. The only questions are: when will it happen, and how it will begin? VII :: “Hungry People Don’t Stay Hungry For Long” Food prices have been a leading indicator for rebellion thus far. Given the Federal Reserve’s commitment to driving food prices higher, as a matter of policy, and the government’s commitment to cutting assistance programs, people lining up at Wal-Mart on the last day of the month, waiting for the clock to strike midnight so they can buy their family milk and bread on their food stamp debit card, seem to be the most likely to rebel first. As food prices increase, food stamps are obviously going to buy you less food. On top of that, as food prices escalate, millions more will need food assistance, right at the point when the current safety net can least afford it. Let’s analyze the most recent food stamp data to see how America’s inevitable revolution may begin. With 43.6 million Americans currently relying on food stamps, there are 13 states with over a million people already on food stamps: · Texas 3,925,119 (number of people on food stamps) — 15.6% (of state population) · California 3,521,881 — 9.5% · Florida 2,994,413 — 15.9% · New York 2,934,493 — 15.1% · Michigan 1,920,330 – 19.4% · Ohio 1,772,608 — 15.4% · Georgia 1,732,865 — 17.9% · Illinois 1,732,169 — 13.5% · Pennsylvania 1,673,714 — 13.2% · North Carolina 1,531,255 — 16.1% · Tennessee 1,264,407 — 19.9% · Arizona 1,050,181 — 16.4% · Washington 1,019,791 — 15.2% States with over 18% of the population on food stamps: · Mississippi 612,889 — 20.7% · Tennessee 1,264,407 — 19.9% · Oregon 749,498 — 19.6% · Michigan 1,920,330 — 19.4% · New Mexico 399,454 — 19.4% · Louisiana 866,905 — 19.1% · West Virginia 345,683 — 18.7% · Kentucky 813,041 — 18.7% · Maine 241,117 — 18.2% · South Carolina 839,109 — 18.1% · Alabama 863,606 — 18.1% In our nation’s capital, the District of Columbia, there are 131,611 people on food stamps, which is a stunning 21.9% of the population. As mentioned before, cities with a poverty rate over 25% – Detroit 36%, Cleveland 35%, Buffalo 29%, Milwaukee 28%, St. Louis 27%, Miami 27%, Memphis 26%, Cincinnati 26% and Philadelphia 25% – are also highly vulnerable to revolt. VIII :: The Empire State Rebellion Given all the data, due to New York’s geographical lay out, population size and proximity to power, it is a prime candidate for insurrection. There are currently 2.9 million people living in New York that are on food stamps, which is equivalent to the entire population of Manhattan. Just imagine three million people flooding into lower Manhattan. Imagine if three million people decided to take a 15-30 minute subway ride down to the Financial District and camped out from Wall Street to the NY Fed, spilling over to the corporate offices of JP Morgan, Goldman Sachs, Citigroup, Wells Fargo, Morgan Stanley and Bank of America. Perhaps the one million people on food stamps from New Jersey and Connecticut will make a short trip into lower Manhattan as well, four million strong shutting down lower Manhattan, the economic capital of the world. How would that play out in the global media? One million people gathering in Cairo, Egypt sent shock waves throughout the world, and rightfully so, but just wait until millions of Americans begin flooding the streets. The revolution contagion will spread throughout the world like a category five hurricane. “The civilization may still seem brilliant because it possesses an outward front, the work of a long past, but is in reality an edifice crumbling to ruin and destined to fall in at the first storm.” – Gustave Le Bon, The Crowd: A Study of the Popular Mind IX :: The Battle in Madison: A Sign of Things to Come While bloated federal and state spending has grown to staggering levels of debt, and demands immediate attention, any cut in spending or attempts to reduce the deficit must first come at the expense of the organized criminal class that has looted the national economy. Any cuts that happen before that need to be understood as an escalation and extension of the attacks on the American people. While continuing their attacks on American small businesses and private-sector workers, the global financial elite are now stepping up their attacks on public workers. In this context, the Wisconsin state government attacks against the state teachers’ union doesn’t have anything to do with the old Democrat Vs. Republican divide and conquer debates of the past. This is about people fighting back against their economic oppressors. In Egypt, Mubarak was the Neo-Liberal Aristocracy’s local enforcer. In Wisconsin, Scott Walker is the Neo-Liberal Aristocracy’s local enforcer. This battle in Madison, Wisconsin, between the American people and the global financial elite, represents the opening salvo, the awakening of an American resistance movement and a sign of what’s to come. In a report entitled, “Wisconsin governor threatens to call National Guard on state workers,” Andre Damon explains the situation: “Scott Walker, the governor of Wisconsin, announced an assault against state…. Walker’s proposal, which he said would quickly pass in the state legislature, drastically limits collective bargaining, removing the right of unions to negotiate pensions, retirement and benefits…. When asked by a reporter what will happen if workers resist, Walker replied that he would call out the National Guard. He said that the National Guard is ‘prepared … for whatever the governor, their commander-in-chief, might call for … I am fully prepared for whatever may happen.’ Walker’s proposal allows state authorities to arbitrarily fire workers who ‘participate in an organized action to stop or slow work,’ or who ‘are absent for three days without approval of the employer,’ according to the governor’s press release.” Democracy Now pointed out: “… the governor’s actions could have national ramifications: ‘If Governor Walker pulls this off… if he takes down one of the strongest and most effective teachers’ unions, WEAC, in the country, then we really are going to see this sweep across the United States.’” As a recent Washington Post report summed it up: Workers toppled a dictator in Egypt, but might be silenced in Wisconsin “In Egypt, workers are having a revolutionary February. In the United States, by contrast, February is shaping up as the cruelest month workers have known in decades. The coup de grace that toppled Hosni Mubarak came after tens of thousands of Egyptian workers went on strike beginning last Tuesday. By Friday, when Egypt’s military leaders apparently decided that unrest had reached the point where Mubarak had to go, the Egyptians who operate the Suez Canal and their fellow workers in steel, textile and bottling factories; in hospitals, museums and schools; and those who drive buses and trains had left their jobs to protest their conditions of employment and governance. As Jim Hoagland noted in The Post, Egypt was barreling down the path that Poland, East Germany and the Philippines had taken, the path where workers join student protesters in the streets and jointly sweep away an authoritarian regime. But even as workers were helping topple the regime in Cairo, one state government in particular was moving to topple workers’ organizations here in the United States…. Scott Walker, Wisconsin’s new Republican governor, proposed taking away most collective bargaining rights of public employees. Under his legislation… the unions representing teachers, sanitation workers, doctors and nurses at public hospitals, and a host of other public employees, would lose the right to bargain over health coverage, pensions and other benefits. (To make his proposal more politically palatable, the governor exempted from his hit list the unions representing firefighters and police.)…. often profess admiration for foreign workers’ bravery in protesting and undermining authoritarian regimes. Letting workers exercise their rights at home, however, threatens to undermine some of our own regimes, and shouldn’t be permitted. Now that Wisconsin’s governor has given the Guard its marching orders, we can discern a new pattern of global repressive solidarity emerging – from the chastened pharaoh of the Middle East to the cheesehead pharaoh of the Middle West.” Part Two :: The Most Repressive Regime: US Police State X :: Torture: Made in the USA It is extremely hypocritical when well-paid mainstream “news” people talk about how repressive and barbaric the Mubarak regime is in Egypt. Once again, I doubt they’ve been to inner city America recently. If you want to report on Egypt participating in torture, it is vital to point out where they were getting their weapons, training and funding from. Who paid them to commit horrific crimes against humanity? Look in the mirror US taxpayers; you may not like what you see. WikiLeaks revealed information on a US-Egyptian torture program : WikiLeaks Docs: Torture-Linked Egyptian Police Trained in U.S. “Newly released classified U.S. diplomatic cables from WikiLeaks have shed more light on the key U.S. support for human rights abuses under Mubarak’s regime in Egypt. The cables show Egyptian secret police received training at the FBI’s facility in Quantico, Virginia, even as U.S. diplomats in Egypt sent dispatches alleging extensive abuse under their watch. Coincidentally, Quantico also hosts the military base where alleged WikiLeaks whistleblower U.S. Army Private Bradley Manning is being held in solitary confinement. A cable from October 2009 cites allegations from ‘credible’ sources that some prisoners were tortured ‘with electric shocks and sleep deprivation to reduce them to a ‘zombie state.’ One cable from November 2007 shows then-FBI deputy director John Pistole praised the head of Egypt’s secret police for ‘excellent and strong’ cooperation between the two agencies. Pistole currently heads the Transportation Security Administration in the United States.” America the beautiful… The Transportation Security Administration, from electric shocks, sleep deprivation and zombie states in Egypt, to cancer causing, civil liberty-destroying Naked Scanners at an airport near you. XI :: American Gulag: World’s Largest Prison Complex If you want to report on Egypt putting their citizens in prison, again, the hypocrisy is astonishing. The US, by far, has more of its citizens in prison than any other nation on earth. China, with a billion citizens, doesn’t imprison as many people as the US, with only 309 million American citizens. The US per capita statistics are 700 per 100,000 citizens. In comparison, China has 110 per 100,000. In the Middle East, the repressive regime in Saudi Arabia imprisons 45 per 100,000. US per capita levels are equivalent to the darkest days of the Soviet Gulag . The majority of prisoners are locked up for non-violent crimes, with tens of thousands in Supermax cells. In addition to the heinous torture programs that the US government has carried out in Abu Ghraib, Bagram and Gitmo, we have our own solitary confinement torture programs for Americans in Supermax Units throughout the country. As Jim Ridgeway from Solitary Watch explains: “Solitary confinement has grown dramatically in the past two decades. Today, at least 25,000 prisoners are being held in long-term lockdown in the nation’s ‘supermax’ facilities; some 50,000 to 80,000 more are held in isolation in ‘administrative segregation’ or ‘special housing’ units at other facilities. In other words, on any given day, as many as 100,000 people are living in solitary confinement in America’s prisons. This widespread practice has received scant media attention, and has yet to find a place in the public discourse or on political platforms.” The US prison industry is thriving and expecting major growth over the next few years. A report from the Hartford Advocate titled “ Incarceration Nation ” revealed, “A new prison opens every week somewhere in America.” If you want to report on the brutal suppression of citizens, consider that somewhere in America, every week, a new prison is being built to literally “house the poor.” A Boston Globe article by James Carroll shined a light on our repressive regime: “… as federal corrections budgets increased by $19 billion, money for housing was cut by $17 billion, ‘effectively making the construction of prisons the nation’s main housing program for the poor.’ State budgets took their cues from Washington in a new but unspoken national consensus: poverty itself was criminalized. Although ‘law and order’ was taken to be a Republican mantra, this phenomenon was fully bipartisan.” Again, just because you don’t hear this reported on TV, doesn’t mean it’s not happening. XII :: Loss of Civil Liberties In addition to the record-breaking imprisonment of the American population, since 9/11 our civil liberties have been violated in unprecedented fashion. Tom Burghardt, in an article entitled, “American Police State: FBI Abuses Reveals Contempt for Political Rights, Civil Liberties,” summed up a new report from the Electronic Frontier Foundation “documenting the lawless, constitutional-free zone under construction in America for nearly a decade:” “As mass revolt spreads across Egypt and the Middle East and citizens there demand jobs, civil liberties and an end to police state abuses from repressive, U.S.-backed torture regimes, the Obama administration and their congressional allies aim to expand one right here at home. Last week, the Electronic Frontier Foundation (EFF) released an explosive new report documenting the lawless, constitutional-free zone under construction in America for nearly a decade. That report, ‘Patterns of Misconduct: FBI Intelligence Violations from 2001-2008,’ reveals that the domestic political intelligence apparat spearheaded by the Federal Bureau of Investigation, continues to systematically violate the rights of American citizens and legal residents…. According to EFF, more than 2,500 documents obtained under the Freedom of Information Act revealed that: * From 2001 to 2008, the FBI reported to the IOB approximately 800 violations of laws, Executive Orders, or other regulations governing intelligence investigations, although this number likely significantly under-represents the number of violations that actually occurred. * From 2001 to 2008, the FBI investigated, at minimum, 7000 potential violations of laws, Executive Orders, or other regulations governing intelligence investigations. * Based on the proportion of violations reported to the IOB and the FBI’s own statements regarding the number of NSL violations that occurred, the actual number of violations that may have occurred from 2001 to 2008 could approach 40,000 possible violations of law, Executive Order, or other regulations governing intelligence investigations. But FBI lawbreaking didn’t stop there. Citing internal documents, EFF revealed that the Bureau also ‘engaged in a number of flagrant legal violations’ that included, ‘submitting false or inaccurate declarations to courts,’ ‘using improper evidence to obtain federal grand jury subpoenas’ and ‘accessing password protected documents without a warrant.’ In other words, in order to illegally spy on Americans and haul political dissidents before Star Chamber-style grand juries, the FBI routinely committed perjury and did so with absolute impunity. Reviewing the more than 2,500 documents EFF analysts averred that they had ‘uncovered alarming trends in the Bureau’s intelligence investigation practices’ and that the ‘documents suggest the FBI’s intelligence investigations have compromised the civil liberties of American citizens far more frequently, and to a greater extent, than was previously assumed.’” XIII :: Internet Crackdown When the Egyptian regime shut down the Internet, they did so by using American made technology. Having been knocked offline here at AmpedStatus.com, we have firsthand experience in what it feels like to have your ability to communicate and First Amendment rights stripped away. We still don’t know who was behind the attacks on our website, but the situation in Egypt was an interesting case study. As it turned out, Obama’s new Chief of Staff, Bill Daley’s company provided the technology used to shut down the Internet in Egypt. No, I’m not referring to JP Morgan, it was the other company Bill Daley was a board member of up until last month, Boeing. As media reform organization Free Press revealed : “The Mubarak regime shut down Internet and cell phone communications before launching a violent crackdown against political protesters. Free Press has discovered that an American company — Boeing-owned Narus of Sunnyvale, CA — had sold Egypt ‘Deep Packet Inspection’ (DPI) equipment that can be used to help the regime track, target and crush political dissent over the Internet and mobile phones. Narus is selling this spying technology to other regimes with deplorable human rights records. The power to control the Internet and the resulting harm to democracy are so disturbing that the threshold for using DPI must be very high. That’s why, before DPI becomes more widely used around the world and at home, the U.S. government must establish clear and legitimate criteria for preventing the use of such surveillance and control technology.” It is probably just be an odd coincidence, but it was soon after we published the following report that we were knocked offline: Obama Renews Commitment to Complete Destruction of the Middle Class – Meet the New Economic Death Squad “…. Boeing certainly does love Wall Street. For those of you out of the loop, you may not recall that the most powerful and destructive WMD that Boeing executives ever helped develop was the CDO, that’s a Collateralized Debt (Damage) Obligation. Do you remember Edward Liddy? Liddy and Bill Daley were both Boeing board members, before Liddy temporarily moved to Goldman Sachs where he oversaw their Audit Committee. Liddy was the person who had the most knowledge of Goldman’s CDO exposure insured through, what was that company’s name?… Oh, AIG. Yeah, that was it. Then, Hank ‘Pentagon-Watergate-Goldman’ Paulson unilaterally made Liddy the CEO of AIG, before teaming up with Tim ‘Kissinger-Rubin-Summers-IMF’ Geithner to flush $183 billion tax dollars down the ‘too big to fail’ drain. And then… after the government was finished pumping our tax dollars to financial terrorists through the AIG SPV, Liddy scurried back to the board of Boeing where he could have cocktails with his ole pal Billy-Boy Daley. Yep, Goldman, JP Morgan, Boeing and the destruction of the US economy, birds of a feather…” Within an hour of publishing that report , our site was knocked offline. Something that has become very clear to me: when you accurately criticize the most powerful people, most people will ignore you, except the people who have the most power. They notice right away, and they let you know about it. As I said, this is all probably just a coincidence. However, this tangled web of interests between the Pentagon, Wall Street and the White House is fully exposed, yet again, with Obama’s special envoy to Egypt, Frank Wisner Jr. Wisner has just as many conflicts of interest as Bill Daley and Edward Liddy. Some reports have mentioned that Wisner was biased toward supporting the Mubarak regime because he is a longtime friend of Mubarak, and worked for a law firm that represented the regime, Patton Boggs. But that’s only part of the story. Wisner, like Bill Daley, is a Council on Foreign Relations member . He is the son of legendary CIA propaganda expert Frank Wisner Sr., who created and ran Operation Mockingbird . For those of you who haven’t heard of Frank Wisner Sr., he used to report on “his ‘mighty Wurlitzer,’ on which he could play any propaganda tune.” Frank Jr. was also a board member of Enron , up until its collapse, and like Edward Liddy, he also worked for AIG, from 1997 until 2009 . Wisner oversaw two of the greatest corporate catastrophes in American history, back to back. Given his track record, Barack “mighty Wurlitzer” Obama must have thought he was the perfect guy for a collapsing corporate puppet regime in Egypt. Wisner is a disaster capitalism expert, right up there with Edward Liddy and Chief of Staff Bill Daley. Birds of a feather… XIV :: Silencing Dissent The recent internal emails from cyber-security firm HB Gary, released by WikiLeaks, exposing online campaigns to crackdown on critical journalists, reveals some of the other common methods used by the financial elite, like the Chamber of Commerce and Bank of America, to target and silence political adversaries. As one of the targets of the revealed campaign, Brad Friedman reported : US Chamber of Commerce Thugs Used ‘Terror Tools’ for Disinfo Scheme Targeting Me, My Family, Other Progressive U.S. Citizens, Groups “The US Chamber of Commerce, the most powerful Rightwing lobbying group in the country, was revealed to have been working with their law firm and a number of private cyber security and intelligence firms to target progressive organizations, journalists and citizens who they felt were in opposition to their political activism, tactics and points of view.” Glenn Greenwald, a journalist who was a constitutional law and civil rights litigator, was also a target of these planned attacks. In a report on the campaign to smear and discredit him, he focused on how common these illegal attacks are: The leaked campaign to attack WikiLeaks and its supporters “The real issue highlighted by this episode is just how lawless and unrestrained the unified axis of government and corporate power is. As creepy and odious as this is, there’s nothing unusual about these kinds of smear campaigns. The only unusual aspect here is that we happened to learn about it this time because of Anonymous’ hacking. That a similar scheme was quickly discovered by ThinkProgress demonstrates how common this behavior is. The very idea of trying to threaten the careers of journalists and activists to punish and deter their advocacy is self-evidently pernicious; that it’s being so freely and casually proposed to groups as powerful as the Bank of America, the Chamber of Commerce, and the DOJ-recommended Hunton Williams demonstrates how common this is. “ Greenwald later added : “Given the players involved and the facts that continue to emerge — this story is far too significant to allow to die due to lack of attention…. As the episode… demonstrates, simply relying on the voluntary statements of the corporations involved ensures that the actual facts will remain concealed if not actively distorted…. Entities of this type routinely engage in conduct like this with impunity, and the serendipity that led to their exposure in this case should be seized to impose some accountability… that these firms felt so free to propose these schemes in writing and, at least from what is known, not a single person raised any objection at all — underscores how common this behavior is.” Dylan Ratigan recently interviewed Glenn Greenwald and they summed up the situation , here’s a brief excerpt: DYLAN: Am I correct in understanding that substantial, legitimate, serious, powerful private security firms were pitching Bank of America and the Chamber of Commerce a campaign for which they would be paid money, in which they would assassinate the reputations and intimidate and threaten the well-being of targeted private individuals. Is that true? GLENN: Yes, the journalists, activists, political groups, and the like. DYLAN: Whoever it may be. And that the law firm that brought these private security firms in was recommended by the U.S. Department of Justice. So it’s on a recommendation from the DOJ that private and substantial security firms are being brought in to pitch smear and intimidation campaigns against those who support transparency in information. Fair? GLENN: Yes, exactly…. DYLAN: … they were saying, ‘You pay me money and those who are validating the efforts of WikiLeaks or the efforts of transparency, period, in the modern information world, we will threaten their careers such that they’ll give up the cause, if you pay us.’ GLENN: Right. ‘We’ll investigate them. We’ll find out dirt on them. We will destroy their reputation using all kinds of schemes and techniques.’ DYLAN: And this came out through another leak which is the ironic twist… GLENN: Well, one ironic twist is that it came out through a leak and the other ironic twist is that these are internet security firms that held their expertise in providing internet security and yet their e-mail system was hacked. XV :: Protected By Anonymous Propaganda doesn’t work as well when you have the Internet, a cyberspace Underground Railroad, a form of mass communication that allows citizens to interact without corporate gatekeepers effectively censoring critical thought. All of these attacks show the desperation of the ruling class, in attempting to maintain an obsolete propaganda system. Just look at how common and accepted unlawful practices have become in pursuit of their goals. It is a strategic imperative that we protect Internet freedom from the forces of media concentration and censorship. Organizations such as WikiLeaks and Anonymous are playing a critical role in exposing information and protecting those who are critical of the most powerful and corrupt elements within society. Part 3: Bring the Tyrants Down Henry David Thoreau, On the Duty of Civil Disobedience : “All people recognize the right of revolution; that is, the right to refuse allegiance to, and to resist, the government, when its tyranny or its inefficiency is great and unendurable. And oppression and robbery are organized, I say; let us not have such a machine any longer. I think that it is not too soon for honest people to rebel and revolutionize.” XVI :: The Denial of Wealth As I wrote in The Economic Elite Vs. The People : “When you take the time to research and analyze the wealth that has gone to the economic top one percent, you begin to realize just how much we have been robbed. Trillions upon trillions of dollars that could make the lives of all hard-working Americans much easier have been strategically funneled into the coffers of the Economic Elite. The denial of wealth is the key to the Economic Elite’s power. An entire generation of massive wealth creation has been strategically withheld from 99% of the US population.” In a new report entitled, “ Nine Pictures of the Extreme Income/Wealth Gap ,” Dave Johnson helps make the point: “Many people don’t understand our country’s problem of concentration of income and wealth because they don’t see it. People just don’t understand how much wealth there is at the top now. The wealth at the top is so extreme that it is beyond most people’s ability to comprehend. If people understood just how concentrated wealth has become in our country and the effect it has on our politics, our democracy and our people, they would demand our politicians do something about it…. Top 1% owns more than 90% of us combined…. 400 people have as much wealth as half of our population.” XVII :: Economic Death Squad A report entitled, “ Grapes of Wrath – 2011 ,” presents a challenge to us: “The American people have a choice…. The current path, forged by a minority of privileged wealthy elite, will lead to the destruction of this country and misery on an unprecedented scale…. Are you prepared to incur the wrath of the vested interests and meet their lies and propaganda with the fury of your own wrath in search for the truth? These men are sure you don’t have the courage, fortitude and wrath to defeat them.” In an article and video entitled, “ The Wall Street Economic Death Squad ,” as I reported back in October, 2009: “We need to focus our strategy on the small group of men who carried out the financial coup. These 13 men played leading roles in first crashing the economy, and then stealing trillions in taxpayer funds. Some of them are now calling the shots and running the government to insure that their obscene profits keep pouring into their coffers. Know Our Enemies, EHMs – Meet The Wall Street Economic Death Squad: Hank Paulson, Tim Geithner, Ben Bernanke, Robert Rubin, Larry Summers, Alan Greenspan, Lloyd Blankfein, Jamie Dimon, John Mack, Vikram Pandit, John Thain, Hank Greenberg, Ken Lewis. These men ‘presided over the largest transfer of wealth in history, from the working class to the flamboyant super rich.’ What these men have done is obscene. After crashing the economy, trillions, literally trillions of dollars have been funneled into the pockets of a select few, in secrecy, while billions of people suffer in poverty, billions suffer to survive. This small tight-knit Wall Street cadre has committed a crime against humanity .” Ralph J. Dolan, writing on Dissident Voice, declares, “Bring the Tyrants Down!” “… while we’re observing these historic events in Egypt we might take a lesson in justice. We might come to our senses and freeze the assets of Lloyd Blankfein of Goldman Sachs, Vikram Pandit of Citigroup, Brian Moynihan of Bank of America, Jamie Dimon of J.P. Morgan Chase and John Strumpf of Wells Fargo – for starters. Then we could go after the other major players in orchestrating the financial meltdown – Timothy Geithner, Henry Paulson, Ben Bernanke, Lawrence Summers, Robert Rubin, Alan Greenspan, etc. These guys who waltz away with billions in profits while they create misery and dislocation for many millions of struggling working people are beneath contempt…. We seem ready to kneel at the feet and kiss the hands of those who would rob us blind. Enough! Let us bring these tyrants down!” If Egyptians can seize the assets of a dictator like Mubarak, why can’t we seize the assets of Jamie Dimon and Llyod Blankfein? A new report from Matt Taibbi in Rolling Stone harshly sums up Banana Republic USA: “A former Senate investigator laughed as he polished off his beer. ‘Everything’s fucked up, and nobody goes to jail,’ he said. ‘That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that.’ I put down my notebook. ‘Just that?’ ‘That’s right,’ he said. ‘Everything’s fucked up, and nobody goes to jail. You can end the piece right there.’ Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft.” Once again, veteran financial journalist Paul B. Farrell hits the nail on the head. Writing for Market Watch, Farrell doesn’t pull any punches in summing up what needs to be done, and it can’t be said enough: Fed Dictator Bernanke Needs To Be Toppled “Fed boss Ben Bernanke is the most dangerous human on earth, far more dangerous than Hosni Mubarak, Egypt’s 30-year dictator, ever was. Bernanke rules a monetary dictatorship… But this reign of economic terror will end. Just as Mubarak was blind to the economic needs of the masses and democratic reforms, Bernanke is blind to the easy-money legacy that’s set the stage for revolution, turning the rich into super rich while the middle class stagnates and peanuts trickle down to the poor.” You can’t sentence the overwhelming majority of the population to slow death through economic policy and expect to get away with it. While one-tenth of one percent of the population rolls around in obscene wealth, they may want to take a look outside of their groupthink short-sighted delusional perspective and notice the outside world. You cannot ignore the suffering of the masses. They will show up at your doorstep next. I hear footsteps… XVIII :: 99.9% Vs. 0.1% Egypt exposed the power that the people have. One million Egyptians proved that you can shut down a powerful regime through a mass demonstration of non-violent force. Here in the US, according to public opinion polls, 75-80% of the population believes the government doesn’t have the consent of the governed. The mainstream media leaves Americans feeling isolated and powerless to create change, but in reality, average Americans have all the power that they need to end the economic suffering and injustices that they endure. The overwhelming majority of people feel powerless to create change, if they would just realize that they are the overwhelming majority, we would have the change we so desperately need. As I’ve written in the past : “To those Americans who feel powerless to change things, I say that your feelings are only a result of your induced delusion. You have become so propagandized that you do not even understand the significant position that you are in…. We are still a mass of people who have the power to change the course of history…. we are 99.9% of the US population, and they are only 0.1%. If we fight, we win!” The people of Tunisia and Egypt has shown us the way. People are rising up throughout the world against the exact same people who looted America. The economic central planners that have launched an economic war on Americans, are also plundering the rest of the global economy with devastating consequences for 99.9 percent of the global population. As John Pilger points out : The Egyptian Revolt Is Coming Home “The uprising in Egypt is our theatre of the possible. It is what people across the world have struggled for and their thought controllers have feared…. Across the world, public awareness is rising and bypassing them. In Washington and London, the regimes are fragile and barely democratic. Having long burned down societies abroad, they are now doing something similar at home, with lies and without a mandate. To their victims, the resistance in Cairo’s Liberation Square must seem an inspiration.” We are, as fate has it, the most power group of people on the planet. The sooner a critical mass can understand this, and the urgency of the moment, the better chance we have of solving this crisis through non-violent means. When the aware but passive realize that they too will face increasingly harsh consequences, that’s when we will have a chance to fix things. Until then, the hole gets deeper by the day. As nations continue to fall to internal revolt, the more covert and militaristic elements of power will move to the fore. In a world of collapsing economies, limited resources and extreme weather, it appears we are on a road to worldwide war . As the people of Egypt have demonstrated, the non-violent movement has to assert itself before the situation gets so dire that outbreaks of violence will be commonplace, thus insuring a further, much harsher crackdown, police state and Neo-Feudal economic order. As Chris Hedges makes clear : “The longer we believe in the fiction that we are included in the corporate power structure, the more easily corporations pillage the country without the threat of rebellion…. No system of total control, including corporate control, exhibits its extreme forms at the beginning. These forms expand as they fail to encounter resistance…. All centralized power, once restraints and regulations are abolished, once it is no longer accountable to citizens, knows no limit to internal and external plunder. The corporate state, which has emasculated our government, is creating a new form of feudalism, a world of masters and serfs.” If we do not stand and rebel now, devastating consequences are sure to drastically lower our living standards within the near future. If we rise, people across the globe will continue to rise. “We must conclude that a changeover is imminent and ineluctable in the co-opted cast who serve the interests of domination, and above all manage the protection of that domination. In such an affair, innovation will surely not be displayed . It appears instead like lightening, which we only know when it strikes.” – Guy DeBord When revolution returns to America, the point won’t be to take down a figure head puppet politician like Mubarak or Obama, mere public relations moves will not suffice. We will take down the system behind them. We will take down the global banks, break them up, end the campaign finance racket, end closed-door lobbying, end the system of political bribery, end the two-party oligarchy, remove puppet judges who voted for unlimited spending by private economic elites, end corporate welfare and the various financial rackets which loot national wealth at the expense of the people. “All countries are basically social arrangements, accommodations to changing circumstances. No matter how permanent and even sacred they may seem at any one time, in fact they are all artificial and temporary.” – Strobe Talbott We must enact common sense polices to deter organized corruption. The devil is always in the details, so rain RICO laws down upon them. They shall reap what they sow. Their day of reckoning is fast approaching. Thomas Jefferson was correct when he said, “I believe that banking institutions are more dangerous to our liberties than standing armies.” As Jefferson rightfully declared, “Every generation needs a new revolution.” Great ready… here it comes. As a wise man once said, “Rise like Lions after slumber In unvanquishable number Shake your chains to earth like dew Which in sleep had fallen on you Ye are many they are few ” 49431 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Overallotment: June 8 Doug Kass Predicts 2010's Big Colored Swans And Turkeys Presenting The Upcoming Bestseller: Quantitative Ponzinomics For Dummies Following Doug Kass' Prediction Of A 25% Drop In Gold, Here Is How His Other Recent Forecasts Have Fared Guest Post: A World Crisis No Bailout Can Stop
China's Mea Culpa: "It Is Not That There Is No Money, But The Money Has Been Put In The Wrong Place" Submitted by Tyler Durden on 06/23/2013 12:36 -0400 Central Banks China Copper M2 Money Supply None Ten days ago, we penned " Chinese Liquidity Shortage Hits All Time High ", in which we predicted ridiculous moves in the Chinese interbank market as a result of short-term funding literally evaporating as a result of the PBOC's stern refusal to step in and bail out its banking sector (despite the occasional rumor of this bank bailed out or that) by injecting trillions in low-powered money. A few days later this prediction was confirmed when the overnight repo and SHIBOR market for all intents and purposes broke down as was also reported here previously . Now, for the first time, China, via the Politburo's Chinese Hilsenrath-equivalent, Xinhua, has provided its own version of events which is as follows: " It is not that there is no money, but the money has been put in the wrong place. " Oh, so in a world of $12 trillion of excess liquidity provided by central banks in the past 5 years there is a slight capital misallocation problem the world's central-planning states (virtually all of them these days)? And despite injecting trillions, none of this cash is actually going to growing the economy (as we have discussed for the past two years and most recently here ). Why thanks for clarifying (and confirming) all of that China. From the FT: The government has yet to give an explicit explanation for the central bank’s move to allow rates for lending between banks to surge on Thursday. But the commentary from Xinhua, which Beijing often uses to make policy statements, comes the closest it has yet to that. The news agency argued that while banks, the stock market and small and medium-sized enterprises lacked money, the broad money supply M2 had still expanded by 15.8 per cent compared with the same period last year, new loans were still high and total social financing aggregate, a broad liquidity measure, continued to grow rapidly in the first five months of this year. “ Is China really experiencing a ‘cash crunch’ where liquidity is being squeezed ?” asked Xinhua, and added that many large enterprises continued to spend heavily on wealth management products, capital was still in search of speculative investment opportunities and private lending continued to be strong. “ This contrast clearly shows that this seemingly ferocious ‘cash crunch’ is in fact structural funding constraints caused by a misallocation of funds. It is not that there is no money, but that the money has not reached the right places ,” the commentary said. Of course, we have covered this topic extensively verbally, as well as visually, both here ... and especially here : The chart above, from " China Joins The Broken "Keynesian Multiplier" Club " is precisely what Xinhua is lamenting: unprecedented credit formation and yet little of it trickling down to economic growth, hence a "broken Keynesian multiplier." Which, of course, is what we have been warning about since the beginning: under central planning capital is always, ALWAYS misallocated in a way that ultimately makes any eventual marginal credit/money formation meaningless. As China has found out the hard way. But here is the punchline and what was left unsaid by China: if what the PBOC is implying is true, then between the unwind of the Chinese Copper Financing Deals , and the less relevant but still substantial, Wealth Management Products, the country is about to undergo an unprecedented deleveraging that could amount to over CNY1 trillion in order to force reallocate capital in a more efficient basis. That's right: a massive deleveraging coming dead ahead in China just in time to shock the market still reeling from the threat of the Fed's tapering. And it is not as if China needs to be spooked any more: "The mood remained jittery at the weekend. When a technical glitch caused by a long-planned software upgrade at Industrial and Commercial Bank of China made cash withdrawals impossible for almost one hour at the bank’s ATMs, many consumers fretted that one of the biggest state lenders was in trouble." Maybe not today, but force deleverage a few hundred billion, and it sure will be. It also means that there will be no respite for short-term funding, which while maybe not suffering from lack of money, it certainly is suffering from the lack of money in the right place: the first milestone of a failing central-planning regime. Just as China finally admitted. Average: 5 Your rating: None Average: 5 ( 6 votes)
China's Red Flags Submitted by Tyler Durden on 06/19/2013 22:49 -0400 China Copper default Government Stimulus Gross Domestic Product Money Supply Newspaper Recession Shadow Banking Yield Curve UPDATE: China 7-day repo +374bps to 12%! China Flash PMI 48.2 (49.1 exp) - lowest in 9 months; worst 3-month plunge since Feb 2011. Via Market News International: HSBC chief China economist Qu Hongbin on June flash PMI (48.3 vs 49.2): "The HSBC China Flash Manufacturing PMI dropped to a nine-month low of 48.3 in June, following on the sequential reduction in both production and demand. Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures. Beijing prefers to use reforms rather than stimulus to sustain growth. While reforms can boost long-term growth prospects, they will have a limited impact in the short term. As such we expect slightly weaker growth in 2Q ." All these major liquidiaty problems do make us think a little about the end of CCFDs and as we warned "The Bronze Swan" as financing via copper collateral is under pressure and the bank that 'own; the warehoused copper have no need to hold (and in fact are willing sellers as the carry costs rise)... Following the hushed-up default by Everbright Bank last week , the liquidity situation in China has gone from bad to worse - with 1Y IRS now at all-time record highs. Many are now questioning whether the dramatic elevation in short-term financing rates is "here to stay," and with the Chinese yield curve now inverted... ...in a similar fashion as the US Treasury market prior to the US recession in 2007... and for a similar period before the US recession... the clarion call for government stimulus is loud from the addicts. However, as HSBC notes today, since the government is now putting more emphasis on balanced growth and market reforms , it will tolerate GDP growth in the 7-7.5% range and will therefore take no strong measures to boost growth unless there is a risk of growth slowing to 7%. The markets, even though the Shangahi Composite is trading at near-seven-month lows... ...will be disappointed; and we suspect, as the FT notes , that "the central bank wants to send a warning signal to commercial banks and other credit issuers that unchecked credit expansion, particularly through the shadow banking system, will not be accommodated ." As the PBoC itself noted (via its state-owned newspaper) and we confirmed yesterday , " we cannot use fast money supply growth as in the past, or even faster, to promote economic growth , and must control the pace of money supply growth." But macro data is almost as bad as it has ever been... Simply put, as Stan Druckenmiller noted here previously , In essence, the frantic stimulus China put together at the end of 2008 sowed the seeds of slower growth in the future by crowding out more productive investments. Despite all efforts to slow inflation (and rein in the credit bubble ), the hot money imported from the Fed and the BOJ continues to push home prices ever higher which continues to be the key marginal variable for the PBOC - as long as the hot "carry" money is exported by the Fed and the BOJ , the Chinese economy will continue to suffer . Average: 5 !-- - advertisements - .AR_2 .ob_empty {display: none;} .AR_2 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_2 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_2 {float: left;width:50%} .AR_2 li {list-style: none outside none !important;font-size: 10px;padding-bottom: 10px;line-height: 13px;margin:0;} .AR_2 .ob_org_header {color: #000000;text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_3 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_3 .rec-src-link {font-size: 12px;} .AR_3 li {padding-bottom: 10px;list-style: none outside none !important;font-size: 10px;line-height: 13px;margin:0;} .AR_3 .ob_dual_left, .AR_3 .ob_dual_right {float: left;padding-bottom: 0;padding-left: 2%;padding-top: 0;} .AR_3 .ob_org_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .ob_ads_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} -- Login or register to post comments 4705 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: On The Fun (But Pointless) Debate Between Rick Santelli And Rich Bernstein On What The Yield Curve Indicates (In A Time Of Central Planning) Goldman Reveals The First 5 Of Its Top Trades For 2011 Guest Post: The Economic Death Spiral Has Been Triggered IMF Cuts Global Growth, Warns Central Banks, Whose Capital Is An "Arbitrary Number", Is Only Game In Town Financial Lexicon 101: Summary Of Key Terms
Beware, The Brent Vigilantes Are Coming Back Submitted by Tyler Durden on 05/08/2013 10:21 -0400 Bond China Crude Crude Oil Vigilantes Back in February we introduced the world to their last best hope in controlling the largesse of the world's central bankers . The 'Brent Vigilantes' were shown to have taken over the mantle of the now totally-repressed and benign bond vigilantes (since deficits don't matter apparently). Each time retail gas prices have breached $3.80 in the past six years, the SP 500 has crested (specifically the crossing of that threshold has seen P/E multiple expansion brought to a halt). With current gas prices around $3.53, we hear you cry, "what are you worried about?" Well, simply put, the answer lies in what is coming. Prices at the pump follow crude oil prices extremely closely with around a 30-day lag; the current WTI crude prices imply a price of gas at the pump around $3.80. So, if there is anything that can stop us from hitting 2,000 on the SP 500 (or Dow 30,000), we suspect it is the 'tax' that gas prices represent and we now know what the trajectory of those prices is likely to be in the next few weeks. Each time retail gas prices have topped $3.80, valuations (Fwd P/E) have also topped - not good news for a market driven solely by hope-driven multiple expansion... Especially as it would appear clear that gas prices at the pump are set to surge up to that $3.80 level once again... The Brent Vigilantes are on their way back... maybe that is what China is banking on? Charts: Bloomberg Goodbye Bond Vigilantes, Hello Brent Vigilantes Brent WTI Back To $20 - Some Thoughts On What's Next From Goldman Guest Post: Analysis of the Global Insurrection Against Neo-Liberal Economic Domination and the Coming American Rebellion Market Sentiment: Mixed SocGen Lays It Out: "EU Iran Embargo: Brent $125-150. Straits Of Hormuz Shut: $150-200"
Physical Gold Vs Paper Gold: Waiting For The Dam To Break Submitted by Tyler Durden on 04/27/2013 13:14 -0400 Australia Bank of England Bear Market Capital Markets Central Banks China Commitment of Traders Eurozone Exchange Traded Fund Guest Post India Investor Sentiment Japan Market Conditions Middle East Moving Averages Precious Metals Switzerland Technical Analysis United Kingdom Submitted by Alasdair Macleod, via GoldMoney.com , Introduction In this article I will argue that the recent slide in the gold price has generated substantial demand for bullion that will likely bring forward a financial and systemic disaster for both central and bullion banks that has been brewing for a long time. To understand why, we must examine their role and motivations in precious metals markets and assess current ownership of physical gold, while putting investor emotion into its proper context. In the West (by which in this article I broadly mean North America and Europe) the financial community treats gold as an investment. However, of the global pool of gold, which GoldMoney estimates to be about 160,000 tonnes, the amount actually held by western investors in portfolios is a very small fraction of this amount. Furthermore investor behaviour, which in itself accounts for just part of the West’s bullion demand, is sharply at odds with the hoarders’ objectives, which is behind underlying tensions in bullion markets. To compound the problem, analysts, whose focus incorporates portfolio investment theories and assumptions, have very little understanding of the economic case for precious metals, being schooled in modern neo-classical economic theories. These economic theories, coupled with modern investment analysis when applied to bullion pricing, have failed to understand the growing human desire for protection from monetary instability. The result has for a considerable time been the suppression of bullion prices in capital markets below their natural level of balance set by supply and demand. Furthermore, the value put on precious metals by hoarders in the West has been less than the value to hoarders in other countries, particularly the growing numbers of savers in Asia. These tensions, if they persist, are bound to contribute to the eventual destruction of paper currencies. The ownership of gold The amount of gold bullion that backs investor-driven markets is not statistically recorded, but we can illustrate its significance relative to total stocks by referring back to the time of the oil crisis of the mid-1970s. In 1974 the global stock of gold was estimated to be half that of today, at about 80,000 tonnes. Monetary gold was about 37,000 tonnes, leaving 43,000 tonnes in the form of non-monetary bullion, coins and jewellery. Let us arbitrarily assume, on the basis of global wealth distribution, that two thirds of this was held by the minority population in the West, amounting to about 30,000 tonnes. This figure probably grew somewhat before the early 1980s, spurred by the bull market and growing fear of inflation, which saw investors buy mainly coins and mining shares. Demand for gold bars was driven by the rapid accumulation of dollars in the oil-exporting nations, as well as some hoarding by wealthy investors from all over the world through Switzerland and London. The sharp rise in global interest rates in the Volcker era, the subsequent decline of the inflation threat and the resulting bear market for gold inevitably led to a reduction of bullion holdings by wealthy investors in the West. Swiss and other private banks, employing a new generation of fund managers and investment advisors trained in modern portfolio theories, started selling their customers’ bullion positions in the 1980s, leaving very little by 2000. In the latter stages of the bear market, jewellery sales in the West became a replacement source of bullion supply, but this was insufficient to compensate for massive portfolio liquidation. So by the year 2000, Western ownership of non-monetary gold suffered the severe attrition of a twenty-year bear market and the reduction of inflation expectations. Portfolios, which routinely had 10-15% exposure to gold 40 years ago even today have virtually no exposure at all. Given that jewellery consumption in Europe and North America was only 400-750 tonnes per annum over the period, by the year 2000 overall gold ownership in the West must have declined significantly from the 1974 guesstimate of 30,000 tonnes. While the total gold stock in 2000 stood at 128,000 tonnes, the virtual elimination of portfolio holdings will have left Western holders with little more than perhaps an accumulation of jewellery, coins and not much else: bar ownership would have been at a very low ebb. Since 2000, demand from countries such as India and more recently China is known to have increased sharply, supporting the thesis that gold has continued to accumulate at an accelerating pace in non-Western hands. Western bullion markets have therefore been on the edge of a physical stock crisis for some time. Much of the West’s physical gold ownership since 2000 has been satisfied by recycling scrap originating in the West, suggesting that total gold ownership in the West today barely rose before the banking crisis despite a tripling of prices. Meanwhile the disparity between demand for gold in the West compared with the rest of the world has continued, while the West’s investment management community has been actively discouraging investment. The result has been that nearly all new mine production and Western central bank supply has been absorbed by non-Western hoarders and their central banks. While post-banking crisis there has presumably been a pick-up in Western hoarding, as evidenced by ETF and coin sales and some institutional involvement, it is dwarfed by demand from other countries. So it is reasonable to conclude that of the total stock of non-monetary gold, very little of it is left in Western hands. And so long as the pressure for migration out of the West’s ownership continues, there will come a point where there is so little gold left that futures and forwards markets cease to operate effectively. That point might have actually arrived, signalled by attempts to smash the price this month. This admittedly broad-brush assessment has important implications for the price stability essential to bullion banks operating in paper markets as well as for central banks attempting to maintain confidence in their paper currencies. Precious metals in capital markets In the West itself, the attitudes of the investment community are fundamentally different from even those of the majority of Western hoarders, who are looking for protection from systemic and currency risks as opposed to investment returns. Western investors are generally oblivious to the implications, the most fundamental of which is that falling prices actually stimulate physical demand. Before the recent dramatic slide in prices the investment community undervalued precious metals compared with Western hoarders, let alone those in Asia, encouraging physical bullion to migrate from financial markets both to firmer hands in the West as well as the bulk of it to non-West ownership. There is now irrefutable evidence that these flows have accelerated significantly on lower prices in recent weeks, as rational price theory would lead one to expect. Pricing bullion is therefore not as simple as the investment community generally believes. It is being put about, mostly on grounds of technical analysis, that the bull markets in gold and silver have ended, and precious metals have entered a new downtrend. The evidence cited is that medium and longer-term moving averages have been violated and are now falling; furthermore important support levels have been breached. These developments, which arise out of the futures and forward markets, have rattled Western investors who thought they were in for an easy ride. However, a close examination of futures trading shows the bearish case even on investment grounds is flawed, as the following two charts of official statistics provided by weakly Commitment of Traders data clearly show. The Money Managers category is the clearest reflection in the official data of investor portfolio positions, representing sizeable mutual and hedge funds. In both cases, the number of long contracts is at historically low levels, and shorts, arguably the better reflection of money-manager sentiment, remain close to high extremes. On this basis, investor sentiment is clearly very bearish already, with the investment management community already committed to falling prices. Put very simplistically there are now more buyers than sellers. Money Managers are in stark opposition to the Commercials, who seek to transfer entrepreneurial risk to Money Managers and other investor and speculator categories. The official statistics break Commercials down into two categories: Producer/Merchant/Processor/User, and Swap Dealers. Both categories include the activities of bullion banks, which in practice supply liquidity to the market. Because investors and speculators tend to run bull positions, bullion banks acting as market-makers will in aggregate always be short. A successful bullion bank trader will seek to make trading profits large enough to compensate for any losses on his net short position that arise from rising prices. A bullion bank trader must avoid carrying large short positions if in his judgement prices are likely to rise. He will be more relaxed about maintaining a bear position in falling markets. Crucially, he must keep these opinions private, and the release of market statistics are designed to accommodate these dealers’ need for secrecy. Bullion banks’ position details are disclosed at the beginning of every month in the Bank Participation Reports, again official statistics. They are broken down into two categories, based on the individual bank’s self-description on the CFTC’s Form 40, into US and Non-US Banks. Their positions are shown in the next two charts (note the time scale is monthly). In both gold and silver, the bullion banks have managed to reduce their exposure from extreme net short over the last four months. The reduction of their market exposure suggests that they have been deliberately transferring this risk to other parties, and is consistent with an anticipation that bullion prices will rise. It is the other side of the high level of bearishness reflected in the Money Manager category shown in the first two charts. The bullion banks control the market; the Money Managers are merely tools of their trade. There has been little reduction in open interest in gold and it has remained strong in silver, because risk has been transferred rather than extinguished. Daily official statistics on open interest are provided by the exchange and summarised in the next two charts (note that data is daily). From these charts it can be seen that recent declines in the gold price are failing to reduce open interest further, and in silver open interest remains stubbornly high. Therefore, attempts by bullion banks to reduce their net short exposure by marking prices down are showing signs of failure. We can therefore conclude that investor sentiment is at bearish extremes and the bullion banks have reduced their net short exposure to levels where it risks rising again. Therefore the downside for precious metals prices appears to be severely limited, contrary to sentiments expressed by technical analysts and in the media. This market position is against a background of a growing shortage of physical bullion, which is our next topic. Physical markets Casual observers of precious metal prices are generally unaware that the headline writers focus on activity in the futures markets and generally ignore developments in physical bullion. This is consistent with the fact that market data is available in the former, while dealing in the latter is secretive. However, as with icebergs, it is not what you see above the water that matters so much as that which is out of sight below. It is not often understood in investment circles that gold and silver are commodities for which the laws of supply and demand are not overridden by investor psychology. Therefore, if the price falls, demand increases. Indeed, the increase in demand has far outweighed selling by nervous investors; even before the price-drop, demand for both silver and gold significantly exceeded supply. Evidence ranges from readily available statistics on record demand for newly-minted gold and silver coins and the net accumulation of gold by non-Western central banks, to trade-based information such as imports and exports of non-monetary gold as well as reports from trade associations reporting demand in diverse countries such as India, China, the UK, US, Japan and even Australia. All this evidence points in the same direction: that physical demand is increasing on every price drop. There is therefore a growing pricing conflict between futures and forward markets, which do not generally involve settlement but the rolling-over of speculative positions, and of the underlying physical metal. Furthermore, analysts make the mistake of looking at gold purely in terms of mining and scrap supply, when nearly all gold ever mined is theoretically available to the market, in the right conditions and at the right price. The other side of this larger coin is that if the price of gold is suppressed by activity in paper markets to below what it would otherwise be, the stimulus for physical demand, being based on a 160,000 tonne market, is likely to be considerably greater on a given price drop than analysts who are myopic beyond 2,750 tonnes of annual mine production might expect. The numbers that are available confirm this to have been the case, particularly over the last few weeks, with reports from all over the world of an unprecedented surge in demand. This is at the root of a developing crisis of which few commentators are as yet aware. Demand for physical has accelerated the transfer of bullion from capital markets to hoarders everywhere and from the West’s capital markets to other countries, which has been the trend since the oil crisis in the mid-Seventies. This is what’s behind an acute shortage of physical gold in capital markets, explaining perhaps why bullion banks feel the need to reduce their short positions. While we can detail their exposure in futures markets, meaningful statistics are not available in over-the-counter forward markets, particularly for London, which dominates this form of trading. Forwards are considerably more flexible than futures as a trading medium, generating trading profits, commissions, fees and collateralised banking business. The ability to run unallocated client accounts, whereby a client’s gold is taken onto a bank’s balance sheet, is in stable market conditions an extremely profitable activity, made more profitable by high operational gearing. The result is that paper forward positions are many multiples of the physical bullion available. The extent of this relationship between physical bullion and paper is not recorded, but judging by the daily turnover in London there is an enormous synthetic short physical position. For this reason a sharply rising price would be catastrophic and any drain on bullion supplies rapidly escalates the risk. Overseeing this market is the Bank of England co-operating with other Western central banks and the Bank for International Settlements, whose combined interest obviously favours price stability. They have been quick to supply the market if needed, confirmed by freely-admitted leasing operations in the past, and by secretive supply into the market, which has been detected by independent supply and demand analysis over the last 15 years. Furthermore, as currency-issuing banks, central banks are unlikely to take kindly to market signals that suggest gold is a better store of value than their own paper money. We can only speculate about day-to-day interventions by Western central banks in gold markets. In this regard it seems that the slide in prices on the 12th and 15th April was triggered by a very large seller of paper gold; if this market story and the amount mentioned are correct, it can only be central bank intervention, acting to deliberately drive prices lower. Given the market position, with Money Managers in the futures markets already short and highly vulnerable to a bear squeeze, the story seems credible. The objective would be to persuade holders of physical ETFs and allocated gold accounts to sell and supply the market, on the assumption that they would behave as investors convinced the bull market is over. Conclusions For the last 40 years gold bullion ownership has been migrating from West to elsewhere, mostly the Middle East and Asia, where it is more valued. The buyers are not investors, but hoarders less complacent about the future for paper currencies than the West’s banking and investment community. There was a shortage of physical metal in the major centres before the recent price fall, which has only become more acute, fully absorbing ETF and other liquidation, which is small in comparison to the demand created by lower prices. If the fall was engineered with the collusion of central banks it has backfired spectacularly. The time when central banks will be unable to continue to manage bullion markets by intervention has probably been brought closer. They will face having to rescue the bullion banks from the crisis of rising gold and silver prices by other means, if only to maintain confidence in paper currencies. Any gold held by struggling eurozone nations, theoretically available to supply markets as a stop-gap, will not last long and may have been already sold. This will likely develop into another financial crisis at the worst possible moment, when central banks are already being forced to flood markets with paper currency to keep interest rates down, banks solvent, and to finance governments’ day-to-day spending. Its importance is that it threatens more than any other of the various crises to destabilise confidence in government-backed currencies, bringing an early end to all attempts to manage the others systemic problems. History might judge April 2013 as the month when through precipitate action in bullion markets Western central banks and the banking community finally began to lose control over all financial markets. 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10 Year Prices At 2.05%: Highest Yield Since March 2012 Submitted by Tyler Durden on 02/13/2013 13:20 -0500 China High Yield It was well-known that today's 10 Year auction would price somewhere north of 2.00%, for the first 2%+ print since April of 2012, it just wasn't known where. Sure enough, moments ago the US Treasury priced $ 24 billion in 10 Year paper at a high yield of 2.046% (38.76% allotted at high), the highest since last March when we had a 2.076% 10 Year auction (and a carbon copy environment in which every pundit was screaming about a great rotation out of bonds), only to see the April and especially May auction tumble in yield when Europe once again became unfixed . What was notable about today's auction is that it tailed the When Issued modestly, which was bid 2.039% at 1 pm, implying a 0.7 bps tail. Also notable: the Bid to Cover dropped to 2.68, below January's 2.83, and well below the 12 month TTM of 2.99. Dealers took down 47.7% of the auction, Directs as has recently been the case ended up with a sizable 24.2%, while Indirects took only 28% of the auction, higher than the December 24.2%, yet worse than all other auctions going back all the way to April 2009. For those confused - don't be - we have been here in 2012, and 2011, and 2010, when risk assets were surging, and when yields were sliding, only to see a modest subsequent pick up in inflation, mostly in China, but certainly Europe, at which point the global liquidity glut ceased and the economy (if not the centrally-planned market) resumed on its downward glideslope. Average: 0 Your rating: None Tweet - advertisements - Login or register to post comments 3723 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: $35 Billion 3 Year Bond Auction Closes At 1.055% High Yield, 3.20 Bid To Cover, Highest PD Takedown Since May 2009 $33 Billion 3 Year Auction Comes At Record Low Yield Of 0.79%, Primary Dealer Takedown Highest Since May 2009 So Much For "Sell Bonds, Buy Stocks": Net Long Positions In 10 Year Treasury Highest Since March 2008 Dow Closes At Highest Since 2007 As High Yield Outperforms Daily US Opening News And Market Re-Cap: March 1 - Eurozone Jobless Rate Highest Since October 1997
http://www.nature.com/news/china-has-the-capacity-to-lead-in-carbon-trading-1.12212 Pilot schemes launched this year could be the start of a world-class system — if the country can solve its data-gathering problems, says Qiang Wang . The value of the world’s carbon market fell for the first time last year. More than one-third was wiped from the price of carbon credits in a plunge that reflects the continued global economic crisis and uncertainty over the future of emissions-trading schemes. Is it a good time to buy carbon credits? Perhaps not yet, but some shoots of recovery are visible, not least in my own country of China. Largely unnoticed in the West, Chinese carbon trading is getting up and running. In just two years, officials have designed and started to implement seven trading trials that cover around one-third of China’s gross domestic product and one-fifth of its energy use. If successful, the schemes will show that emissions trading could be a powerful way for China to control its greenhouse-gas emissions. Related stories Europe’s untamed carbon Climate policy: The Kyoto approach has failed Emissions trading: Cap and trade finds new energy The first trades in one of these schemes took place in September 2012, when four cement-manufacturing companies in the southern, industrial region of Guangdong province invested several million dollars each in carbon-pollution permits, which they will need to expand operations. The Guangdong scheme is expected to cover more than 800companies that each emit more than 20,000tonnes of carbon dioxide a year across nine industries, including the energy-intensive steel and power sectors. These firms account for more than 40% of the power used in the province. The Guangdong carbon market alone will regulate some 277million tonnes of CO2emissions by 2015, almost equal to Ukraine’s total annual CO2emissions. China plans to open six further regional emissions-trading schemes this year, in the province of Hubei and in the municipalities of Beijing, Tianjin, Shanghai, Chongqing and Shenzhen. It plans to expand and link them until they form a nationwide scheme by the end of the decade; that would then link to international markets. China is not alone. Australia and South Korea are scheduled to open their own carbon markets in 2015, and California launched its first carbon-allowances auction in November 2012. China may not seem a natural home for carbon trading. With heavy government intervention, significant state ownership of enterprises and a culture of distrust in business, the country remains far from a true market economy. Until now, China’s experience of carbon trading has been almost exclusively under the Clean Development Mechanism, the international carbon-trading scheme set up under the Kyoto Protocol, to which it is the leading supplier of credits. Only a few symbolic transactions of carbon offsets have been made since the Beijing, Tianjin and Shanghai voluntary emissions-trading exchanges opened in 2008. However, China’s political system could let a carbon market grow faster than anywhere else. Once Chinese leaders have accepted a concept, opposition is steamrollered and changes are implemented much more quickly and broadly than is possible in societies in which policy-making is based on a balance of the interests from different stakeholders. Stable policies are crucial to the success of emissions trading, which — unlike most markets — grows from the top down. “China’s political system could let a carbon market grow faster than anywhere else.” Challenges lie ahead for emissions trading in China. The country needs to develop and enforce proper legislation and regulations to measure, report and verify carbon emissions from industrial sites. It needs to build an effective and accountable framework to oversee the reporting and trading of carbon credits. Most urgently, China needs to look at how it collects and analyses data on carbon emissions. The credibility of China’s statistics on energy use and carbon emissions has long been questioned, partly because numbers calculated using top-down and bottom-up statistics do not match. The discrepancies can be very large. For example, last year, scientists compared Chinese CO2emissions as calculated using top-down energy data from the National Bureau of Statistics of China with those calculated using bottom-up data from the 30provincial statistics bureaus. For 2010, the bottom-up figure was larger by an amount equivalent to the total annual CO2emissions of Japan, about 5% of the global total ( D.Guan etal . Nature Clim. Change 2, 672–675;2012 ). Without accurate numbers, the first deal of the Guangdong trading scheme was based on expected future carbon emissions, rather than historical data. China should set up a reliable system for gathering carbon data as soon as possible, and build a comprehensive database of carbon emissions. Standard international methods for carbon trading to reduce emissions demonstrate how to set up a baseline, show that any emissions change is genuine and calculate the reductions. Reliable data-gathering will require effort from the scientific community at home and abroad, to improve statistical methodology. It will also need political action. The organizations that collate and publish carbon statistics should be made independent of possible government interference. And China needs specific laws to ensure honest reporting and transparency, and to punish those who make fraudulent or misleading claims about their carbon emissions. If China can build a workable and credible emissions-trading scheme, it will benefit not just one country, but the entire world.
Roadblocks to an Aus-China ETS link http://www.climatespectator.com.au/commentary/roadblocks-aus-china-ets-link Alex Lo The Conversation In the United Nation’s annual climate change conference held in Doha last December, delegates from 194 countries came together at the last minute to extend the Kyoto Protocol . The Protocol is a legally binding climate accord by which rich countries are required to make quantified carbon emission cuts. But the second phase of the Protocol, commencing in 2013, still omits China – the world’s biggest national source of greenhouse gases. China is often seen as a roadblock in international climate change talks. Its own greenhouse gas emissions have soared in the past decade . With a population of 1.3 billion it has contributed 19.1 per cent of the greenhouse gas emissions produced worldwide. Senior Chinese officials reject emission reduction in absolute terms . They insist that rich nations should do more on the climate before they commit more. But China is more ambitious back home than it appears in international scenes. It has pledged to cut back emissions intensity (emissions per unit of GDP) by 40-45 per cent, relative to 2005 by 2020. Short-term goals include reduction in energy intensity by 16 per cent and carbon intensity by 17 per cent, for the period from 2011 through 2015. The most prominent plan is to run a national emission trading scheme , ahead of the US and along with Australia. It is destined to be the world’s second-largest emissions market. The notion of carbon emission trading has found its way in industrialised economies, notably the European Union. Yet, carbon trading had experienced an uncertain period in 2009 when the world economy stumbled and international climate change negotiations encountered major hurdles. At the time of uncertainties, a non-traditional market advocate cast a vote of confidence for the contested concept of carbon trading. That is China, which has called itself a “socialist market economy”. In late 2011, the Chinese government appointed seven pilot sites across the country, including two provinces (Guangdong and Hubei) and five cities (Beijing, Tianjin, Shanghai, Chongqing, and Shenzhen). Altogether they account for 27.4 per cent of China’s national GDP and 18.4 per cent of its population. The short-term goal is to establish trans-provincial and trans-regional trading schemes in transition to a national scheme by 2015. The pilot schemes begin operation from 2012/2013. Beijing, Shanghai and Guangdong launched their pilot programs on March 28, August 16, and September 11, 2012, respectively. Australia is happy to see the roll-out of China’s emissions trading scheme. In this Asian Century , the Chinese scheme is one institutional window through which Australia can strengthen its role in regional climate policy development. South Korea and Vietnam have also approved plans for implementing a national emissions trading scheme. Tokyo has a metropolitan ETS and India started a pilot scheme in three states. If the Chinese ETS works, one may expect other Asian national economies to follow suit. With the current efforts by Australia and New Zealand, there are some prospects for an Asia-Pacific network for emission trading. From 2015, Australia will run a national ETS, eventually tied to the EU ETS . In the same year (if not 2016), China (and South Korea) will introduce a national ETS. This means Australia is moving forward in tandem with two key developments in the international carbon economy; that is, maturation of the world’s largest emissions trading scheme, operated by the EU, and evolution of an Asian ETS, with China destined to be a key player. Australia would benefit from establishing bilateral or multilateral linkages with these regional schemes. Emission permits would be traded across these regions. Australian firms would be able to meet their assigned emission reduction targets by sourcing emission permits from officially linked carbon markets abroad. The regional developments could offer better trading opportunities for Australia. Ultimately this means lower costs of emission reduction. The challenge is that China falls short of what is required for an efficient trading scheme. A binding emission cap is a prerequisite of ‘cap-and-trade’ mechanisms, such as an ETS. China has no national cap. Local authorities are left to set the rules as they see fit. Under the pilot schemes they have the discretion to determine emission targets and permit allocation rules, and to develop governance systems and market infrastructure. These include the emission caps for the pilot schemes. Conceivably, there is very strong resistance from the ground. To the local officials, strong economic growth remains top priority. GDP always comes first . Pilot schemes are likely to be based upon emission intensity caps, rather than absolute caps. This situation is different here in Australia – it’s just one technical issue for bilateral linking. There are political-economic challenges too. In China, key commodity prices, including electricity prices, are actively regulated by a central authority . Since the prices of emission permits are supposed to be reflected in commodity prices, will permit prices under the Chinese ETS actually follow market fluctuations? They are more likely to reflect political judgments, which are a source of price distortion. Synchronising carbon prices across continents would then be impractical. Legal enforcement is another issue. The pilot schemes face considerable challenges in setting up robust monitoring, reporting and verification mechanisms. Chinese experience with trading other emissions is not very encouraging. For example, the country’s SO2 (sulphur dioxide) emissions trading schemes are predominantly based on self-reporting. Emissions are not regularly monitored. The regulatory infrastructure is far from complete and not up to international standards. The ETS developments in Asia raise prospects for a common carbon price across the globe. Nations may be able to achieve more together through such economic mechanisms than international “talks”. But this is Asia. Unlike stock markets, compliance carbon markets are primarily regulation driven. The Chinese ETS operates in a different institutional system. Not built upon a mature free market and a transparent democratic regime as we know in the western world, it is going to be a totally different animal from what we have here. Negotiations on trade terms will be highly politicised. Emissions trading schemes with Asian linking are likely to become just another venue for political struggles among participating countries. Alex Lo is a Lecturer in Environmental Economics at Griffith University.
China's land price inflation for residential homes is expected to quicken this year after picking up in the fourth quarter, the Ministry of Land and Resources said on Tuesday, amid growing expectations that the property market is rebounding. The average price of land for residential homes rose 1.2 percent to 4,620 yuan ($740) per square meter in 105 cities between October and December compared to the third quarter, the ministry said. Prices had risen 0.9 percent in the third quarter. It is good to see housing market rebound which contribute to the recovery of economy in China. On the other hands, a small group of people benefit it far more than the majority. The gap between the poor and the rich widens. Good luck and invest wisely to bridge the gap.
Top Economic Advisers Forecast World War Submitted by George Washington on 11/18/2012 11:40 -0500 Charles Nenner China Global Economy Goldman Sachs goldman sachs Jim Rogers Kyle Bass Kyle Bass Marc Faber Purchasing Power Trade War Trade Wars Kyle Bass writes : Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion . We believe that war is an inevitable consequence of the current global economic situation. Larry Edelson wrote an email to subscribers entitled “What the “Cycles of War” are saying for 2013″, which states: Since the 1980s, I’ve been studying the so-called “cycles of war” — the natural rhythms that predispose societies to descend into chaos, into hatred, into civil and even international war. I’m certainly not the first person to examine these very distinctive patterns in history. There have been many before me, notably, Raymond Wheeler, who published the most authoritative chronicle of war ever, covering a period of 2,600 years of data. However, there are very few people who are willing to even discuss the issue right now. And based on what I’m seeing, the implications could be absolutely huge in 2013. Former Goldman Sachs technical analyst Charles Nenner – who has made some big accurate calls, and counts major hedge funds, banks, brokerage houses, and high net worth individuals as clients – says there will be “a major war starting at the end of 2012 to 2013”, which will drive the Dow to 5,000. Why are these economic gurus forecasting war? For one thing, many influential people wrongly believe that war is good for the economy. In addition, Jim Rogers says : If it turns into a trade war, it is the most momentous thing of 2011,” said Rogers. “ Trade wars always lead to wars . Nobody wins trade wars, except general who end up fighting the physical wars when they happen. This is very dangerous. Rogers also explains : A continuation of bailouts in Europe could ultimately spark another world war, says international investor Jim Rogers. *** “Add debt, the situation gets worse, and eventually it just collapses. Then everybody is looking for scapegoats. Politicians blame foreigners, and we’re in World War II or World War whatever .” And Marc Faber says that the American government will start new wars in response to the economic crisis: “The next thing the government will do to distract the attention of the people on bad economic conditions is they’ll start a war somewhere.” “If the global economy doesn’t recover, usually people go to war.” Faber also believes the U.S., China and Russia may go to war over Mideast oil . Average: 4.72222 Your rating: None Average: 4.7 ( 18 votes) Tweet George Washington's blog Login or register to post comments 19314 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Japan Machinery Orders Implode As Global Economy Grinds To A Halt Marc Faber Jim Rogers On Our "Clueless, Ignorant, Dangerous" Leaders 150 Seconds Of "You Can't Handle The European Truth" From Kyle Bass Guest Post: Cashing In On Japan's Debt Conundrum? Kyle Bass: Fallacies Such As MMT Are "Leading The Sheep To Slaughter" And "We Believe War Is Inevitable"
The Main Driver of GDP Growth: A Strong Rule of Law Submitted by George Washington on 07/30/2012 15:39 -0500 China Corruption Gambling Germany Global Economy Gross Domestic Product Hong Kong LIBOR national security Niall Ferguson Transparency United Kingdom World Bank Economist Woody Brock says that a nation's GDP growth is based mainly on whether or not it follows the rule of law. Economist and investment adviser John Mauldin notes : I had dinner with Dr. Woody Brock this evening in Rockport. We were discussing this issue and he mentioned that he had done a study based on analysis by an institution that looks at all sorts of “fuzzy” data, like how easy it is to start a business in a country, corporate taxes and business structures, levels of free trade and free markets, and the legal system. It turned out that the trait that was most positively correlated with GDP growth was strength of the rule of law . It is also one of the major factors thatNiall Ferguson cites in his book Civilization as a reason for the ascendency of the West in the last 500 years, and a factor that helps explain why China is rising again as it emerges from chaos. One of the very real problems we face is the growing feeling that the system is rigged against regular people in favor of “the bankers” or the 1%. And if we are honest with ourselves, we have to admit there is reason for that feeling. Things like LIBOR are structured with a very real potential for manipulation. When the facts come out, there is just one more reason not to trust the system. And if there is no trust, there is no system . Dr. Brock is not alone. Economists have thoroughly documented that failure to enforce the rule of law leads to a loss of trust ... which destroys economies. This is true whether it is in the West, in Nigeria or any other country. We're Number ... What? Economic historian Niall Ferguson notes : The World Economic Forum’s annual Global Competitiveness Index and, in particular, the Executive Opinion Survey on which it’s partly based ... includes 15 measures of the rule of law, ranging from the protection of private property rights to the policing of corruption and the control of organised crime. It’s an astonishing yet scarcely acknowledged fact that on no fewer than 15 out of 15, the United States now fares markedly worse than Hong Kong . In the Heritage Foundation’s Freedom Index, too, the U.S. ranks 21st in the world in terms of freedom from corruption, a considerable distance behind Hong Kong and Singapore . Perhaps the most compelling evidence of all comes from the World Bank’s Indicators on World Governance, which suggest that, since 1996, the United States has suffered a decline in the quality of its governance in three different dimensions: government effectiveness, regulatory quality and the control of corruption . Compared with Germany or Hong Kong, the U.S. is manifestly slipping behind . Indeed - as we've extensively documented - the rule of law is now as weak in the U.S. and UK as many countries which we would consider "rogue nations". See this , this , this , this , this , this , this , this , this , this and this . This is a sudden change. As famed Peruvian economist Hernando de Soto notes : In a few short decades the West undercut 150 years of legal reforms that made the global economy possible. How Did We Slip So Fast? Of course, the repeal of the basic laws which enforced the rule of law among financial players is a part of the problem. Virtually everyone - other than those currently working for the big banks or on their payroll - is calling for reinstatement of the separation between banks and speculative gambling. Free market libertarians - like everyone else - are demanding prosecution of criminal fraud using basic fraud laws. Yet the government has made it official policy not to prosecute fraud . People have lost trust in the system, because government corruption is as widespread as Wall Street corruption ... and those in power in D.C. have the same sociopathic traits as those they supposedly regulate on Wall Street. And as Professor Ferguson notes , draconian national security laws are one of the main things undermining the rule of law: We must pose the familiar question about how far our civil liberties have been eroded by the national security state – a process that in fact dates back almost a hundred years to the outbreak of the First World War and the passage of the 1914 Defence of the Realm Act. Recent debates about the protracted detention of terrorist suspects are in no way new. Somehow it’s always a choice between habeas corpus and hundreds of corpses. Of course, many of this decades' national security measures have not been taken to keep us safe in the "post-9/11 world": many of them started before 9/11 . And America has been in a continuous declared state of national emergency since 9/11, and we are in a literally never-ending state of perpetual war. See this , this , this and this . In fact, government has blown terrorism fears way out of proportion for political purposes, and "national security" powers have been used in many ways to exempt big Wall Street players from the rule of law rather than to do anything to protect us. Is it any wonder that we're still in an economic crisis? Average: 4.55 Your rating: None Average: 4.6 ( 20 votes) Tweet George Washington's blog Login or register to post comments 7499 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Niall Ferguson On China's Gold And The "Tremendous Flux In International Order" Niall "Hit The Road Barack" Ferguson Responds To The "Liberal Blogosphere" The Hoarding Continues: China Purchases A Record 100 Tons Of Gold In April From Hong Kong The Two Year Anniversary Of "China's Ghost Cities" Epic Keynesian Fail Guest Post: It's A Matter Of Trust - Part 1
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Global stock markets edged higher on Friday after the Chinese government reported that growth eased to its slowest pace in three years in the second quarter, leading investors to bet that policymakers would expand stimulus measures aimed at reviving growth of the world’s second-largest economy. China’s National Bureau of Statistics reported that second-quarter growth slowed to an annualized pace of 7.6 percent—less than the first-quarter’s 8.1 percent expansion and right in the 7.5-7.7 percent range it had been expecting, according to a Bloomberg News report. In all, the report was something of a relief, as some had been expecting a lower number. Investments focused on stocks and commodities rose on the news, reflecting expectations that lower interest rates and ramped-up government spending would be a shot in the arm for the global economy. The Chinese government has already been moving to reverse the trend—most recently last week by cutting official borrowing rates, and also by unveiling a slew of new spending programs. Gold, frequently the beneficiary of easy-money central banking policies, was one of the most conspicuous movers early Friday, with spot prices jumping more than $20 from Thursday's closing futures price to over $1,583 a troy ounce, according to Kitco. The SPDR Gold Shares (NYSEArca: GLD), the $63.52 billion bullion ETF, was up 1.4 percent to $154.64 a share. The flip side of easy-money policies is that they weaken currencies and the fact that the WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca: CYB) was edging lower in the wake of the data was no surprise. But the iShares FTSE China 25 Index Fund (NYSEArca: FXI), a bellwether for Chinese stocks, was up 1.25 percent at $32.49, according to data on Google Finance. FXI’s percentage move was roughly in line with that of the SPDR Dow Jones Industrial Average Trust (NYSEArca: DIA) and the iShares SP 500 Index Fund (NYSEArca: IVV). Nervousness Shines Through Suspicion While some analysts quibble about the accuracy of data from China’s government and wonder if the pace of growth isn’t even weaker, everyone agrees that the prospect of a slowing Chinese economy is bad news. A slowing expansion there threatens to further derail a global economy rendered vulnerable by Europe’s debt crisis, which has left much of the region in recession. In fact, there’s something of a negative feedback loop that’s probably at play by now, with Europe’s weakness contributing to slowing growth in China and the U.S. and, now, China’s clearly slowing growth contributing further to Europe’s malaise and to economic head winds in the U.S. The point is that the Chinese economy has been growing at an annualized pace of 10 percent since 2000, as the Wall Street Journal reported earlier this week, and the global economy in general has come to depend on that Chinese growth. At about 6 a.m. Eastern time, Japan’s Nikkei was up 0.05 percent; South Korea’s KOSPI jumped 1.54 percent; the Shanghai Composite of mainland China stocks rose 0.02 percent; the Hang Seng in Hong Kong climbed 0.35 percent; and the SP/ASX 200 in Australia increased 0.35 percent. The Stoxx Europe 600 Index was meanwhile up about 0.8 percent, and U.S. stock futures were pointing to a higher open, with both markets also reacting to the report on China’s second-quarter GDP. Other Affected ETFs One ETF that got an outsized pop from the China news was the iShares MSCI South Korea Index Fund (NYSEArca: EWY). It’s almost 2 percent higher on the day, though is down by about 2 percent over the past five days—an indication that economies closer to China are likely to feel any Chinese slowdown in a much more immediate way. Also, the broad futures-based commodities ETF, the United States Commodity Index Fund (NYSEArca: USCI), pushed about 1 percent higher to $59.74 a share— a clear sign that investors reckon that more aggressive monetary easing and fiscal stimulus plans by China will affect the entire world of raw materials.
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