For fear of upsetting the sheeple, the mainstream media in the US rarely reports hard economic news. To discover what is happening in the US we have no choice but to look overseas for a reality check. There are actually real investigative reporters in Canada, England and the Continent who report the true financial situation facing the world! Shocking, but true. American reporters long ago had their gonads neutralized and were inoculated with extreme political correctness while simultaneously filtering all information through their Druid (green) worldview to arrive at a predetermined conclusion before setting a word on paper.

~~~~~~~~~~~~~~~~~~~~~~

Time Is Up Congress - And America

by Karl Denninger, Oct. 8, 2008

http://market-ticker.denninger.net/

But the worst news is not in the stock market. It is in fact in some of the other indicators in the market which were indicating potential capital flight, along with still-extreme levels of stress.

I must caution everyone - if you are not prepared for six months to two years of unemployment, you need to be. If you are dependent on credit to survive (that is, if you couldn't make it without your credit cards) you need to fix that now.

Like today now.

Several times I have said "raise cash, get out of debt, be prepared."

I must reiterate this advice and emphasize it, as we may see a bond market dislocation and concurrent stock market crash at any time, without warning. It could be as early as today, in fact.

No, what happened the last three days isn't a crash, although it has now hit my full "bear market" target - 1070 - and in fact exceeded it.

Unfortunately what happened the last three days forces me to reset that target to the 2003 lows, and perhaps as low as four hundred on the S&P 500, 4000 on the DOW.

Needless to say if that happens it will be on the back of an economic catastrophe of a scale similar to the 1930s.

Bernanke's latest load of crap with an "SIV" for commercial paper is just another example of "more of the same" stupidity.

Bernanke and Paulson need to be indicted and jailed for criminal negligence (at best) and put in the stocks where the people can serve up some rotten tomatoes.

This evening we were "treated" to both political candidates shooting their mouths off on matters economic, but saying nothing of substance. Neither candidate was willing to admit the truth - that this "bailout" hadn't worked, that in fact the market had crashed by 15% since it was voted on, and that there is a zero chance of it having any positive impact on one American household.

But no, not even the "moderator" was willing to ask those tough questions, nor was anyone present.

These "debates" are a sham, a fraud and a gigantic waste of time.

Never mind that McCain embarrassed himself by claiming to be a "maverick" and "against pork", when he had just gotten done voting for over $150 billion of it in the Bailout Bill - pork that was not present in the original house version.

Was that claim of being "against pork" good for a "no" vote? Nope. He voted yes, as did Obama.

To those who dismissed the six petitions (you can go over to http://supportedthebailout.org and see the old ones) over the last year, how do you feel about it now?

To those who said that "subprime was contained", how contained is it now?

To those who said that deterioration in consumer credit wasn't going to be a big deal, would you like to revisit that belief?

To those who said that "the nation would not have a recession", do you have any regrets, apologies, or perhaps an outright retraction?

To those who told people to buy buy buy all the way down, how do you feel now that they've lost 30% of their money?

To those politicians from both parties who voted for the ESSA on the claim that it would "stabilize markets", can you show me where it has been, in fact, stabilized? If this is "stable" I'm somewhat curious as to your definition of "unstable".

There is chatter circulating, apparently, that "global equity markets will be closed after the emergency G7 meeting this weekend." That ought to induce confidence - just ask the Russians or Indonesians, both of whom have tried this and it has resulted in an instantaneous crash when they reopened (the Indonesian market was just closed AGAIN this evening, after literally imploding - down by more than 10% - within an hour of starting to trade.)

This is no longer a US problem, but the United States continues to refuse to lead. We continue to "trust" the idiot savants Bernanke and Paulson, both of whom have sung the same song since this crisis began more than a year ago, have been wrong 100% of the time, and yet have found an ear in Congress repeatedly willing to listen to and follow their insanity.

By allowing this action and indeed following the advice of these two each and every one of the 535 members of that body has taken unto themselves the responsibility for the calamity that now faces American investors and the public, as our economic system literally "folds back" and consumes itself. Americans will not be able to retire and have no economic security, and now are losing their jobs in increasing numbers. This will continue.

For more than a year I have tried to get the attention of Congress with petitions, phone calls and faxes. I have been ignored, as have others who have been consistently right in our expectations and beliefs, including "Mish" Shedlock, Nouriel Roubini, Charles Hugh Smith and others. Over 200 degreed economists urged that the "Bailout Bill" not be passed as submitted, including two Nobel Lauretes; all were ignored.

The people of this nation have sat on their hands and watched American Idol, now turning into the NFL, while lapping up the slop from Paulson, Bernanke and Bush about how the "economy is fundamentally strong", instead of showing up in Washington DC to protest or flooding the fax and phone lines demanding that Congress act to reign in the fraudsters.

Let me know how "fundamentally strong" the economy is when you're walking the unemployment line and waiting for your turn at the soup kitchen for something to eat.

Entitlements? Forget 'em. They're gone. Social Security? Medicare? Done. Not today, but in the not-distant future. China, having gotten its money from the $700 billion "bailout", will ditch our Treasuries and refuse to buy more, as they will no more need to sterilize export dollars as our economy collapses. We in turn will be left to twist.

We deserve it, because we could have (but didn't) stand up to their demands that we cover a private dispute instead of handing over $700 billion we don't have. When (not if) the foreign flow of funds inward disappears due to the lack of need for these nations to recycle dollars, we will suddenly find that we have a nearly $800 billion a year hole in our federal budget - a hole that can only be filled by chopping Social Security, Medicare and the Military. Congratulations Congress (and America in general); you didn't really think you'd get away with that, did you?

George W. Bush will go down in history as the President who held the office while we drove our nation's financial system off the cliff, laughing all the while about flipping houses. And despite his protests to the contrary, the history books will record that it was his administration that removed the 12:1 leverage limits, sued New York to prevent them from clamping down on predatory lending, and willfully stuck its head in the sand while Bear Stearns prepared to blow up, never mind ignoring the problem after Bear detonated in February.

Henry Paulson will go down in history as the Treasury Secretary who sold out our nation to the Chinese and London Bankers, then fled the country with $500 million he "earned" creating and selling the very credit instruments that later blew up and sunk the nation.

The members of the House Financial Services Committee, the Senate Banking Committee and the Joint Economic Committee will each have special places reserved in the history books for refusing to deal with Ben Bernanke's raw power grab after Bear Stearns, an act that will ultimately be judged to be the single most important element of the crisis, as it forever put the market in a mood to expect "rule changes" at any time, precipitously damaging trust and liquidity.

The "no short" rule will ultimately be cited as the reason that the market crashed, being that there were no shorts to cover and thus hundreds of stocks, on that fateful day, went "no bid" and had their prices collapse to zero - all at once.

Oil will collapse in price to $20/bbl. Unfortunately nobody will have any money to buy gasoline, or a car, so it won't matter. As in The Depression millions of automobiles will be scrapped after being abandoned by their owners for lack of insurance and registration fee money. Cheap scooters will become the dominant form of transportation for those with jobs, as they will be all most people can afford.

As credit collapses distribution of food and other essentials will break down. Unable to access credit, trucking companies will be unable to get goods to market. The current distribution system for food requires travel of over 500 miles from production to consumption; this is untenable in a market where stable credit is unavailable. Food distribution will be severely impacted and in some areas may break down below critical levels.

Unemployment will reach 25% within two years. Median income will fall by 30% nationally. Foreclosures will reach 20 million homes. The government will step in with HOLC-style remediation but it won't matter - the unemployed won't be able to pay irrespective of the price.

House prices will fall to well under $100,000 nationally on a median basis but with lending all but non-existent you'll need 50% down. A few people will make out like bandits near the bottom, being able to buy up homes for $10,000 each in blocks of 10 at a time - for cash. 60% of America will be renters; nearly half of all homeowners will ultimately lose their homes to foreclosure.

Civil unrest will break out in major cities when incomes fall but the cost of food and essential services fail to come down materially, leaving millions of Americans hungry, broke and homeless. Unlike in the 1930s America will not quietly stand in soup lines - instead they will riot, loot and burn. The National Guard will be called up but will find it impossible to exert meaningful control without shutting down all commerce in the affected areas. The decision will be made to cordon off the cities and deny entry to anyone who does not live in that specific neighborhood, essentially shutting down commercial activity. GDP will fall by 30%.

The S&P 500 will fall to 150 and flatline, a 90% loss. CNBC and Bloomberg will cease broadcasting. Volume will fall to 10% of former levels.

Bleak outlook?

Yep.

Quite possible?

Yep.

Can it be stopped?

Yes, but not for much longer.

The markets are perilously close to a tipping point where they will collapse, after which all of the above will come to pass, and Congressional action (or inaction) will be irrelevant.

Congress will then have to face the people, as will President Bush and his Cabinet, and may God have mercy on our Republican form of government, because history shows that when government mismanages things to this degree and refuses to respond to the will of the people, a "messiah" generally appears with a "solution" - but there will be "compromises."

Like your freedom.

To fix the problem trust must be restored. To restore trust you must stop the lying, expose the liars, prosecute and jail them all, and stop changing the rules in the middle of the game.

This must happen now. Today. Immediately. Not tomorrow, not next week, not after a series of hearings.

Right now.

Market participants must be able to know that when they engage in a transaction it will be transparent, handled fairly, and their rights will be protected.

Our politicians must stop demanding the impossible - that home prices "levitate." House prices cannot be maintained at more than 3x incomes - it simply can't be done. We must encourage home prices to contract to sustainable, affordable levels quickly and efficiently.

Mortgages must return to 30 year fixed notes, 20% down, no more than 36% DTI. No government-linked paper in any GSE may issue outside these guidelines. We must reliquify the mortgage market, and this is the only way to do it - by writing only sustainable mortgages.

Strong consumer protection laws must be written that bar negative balance auto and home loans. The practice of "rolling over" an old car loan into a new one, producing an instant 20% or more deficiency against the vehicles value, must end.

Usury laws must be re-imposed, limiting credit card and other consumer loan interest to no more than a reasonable spread over funding costs. Yes, this will limit credit to less-worthy borrowers. So be it. Unbridled credit got us here, and we must prevent it from happening again.

The excess, unsustainable debt in the system must be defaulted. Whether held by corporations or individuals, it must be purged from the system. Those firms and individuals that are bankrupt must be so declared and their assets liquidated, so they can start over and the market can clear.

People will say that what I ask is unreasonable, unable to be achieved, or "needs study."

You're free to study all you want, but if these actions are not taken immediately, right now, today, the above forecast will come to fruition.

You are seeing the global credit markets unravel in front of your eyes, and it is happening precisely because the fraud, avarice and outright theft has gone unpunished and left in place to siphon off wealth from the average American for more than 20 years, and our President, in that environment, went on national television and threatened the world with a global Depression unless his Treasury Secretary got a $700 billion blank check.

The markets, correctly perceiving there was a problem, did exactly what they did when this same gambit was run during the Fannie and Freddie debacle - they called the bluff.

The check is now on the table and we have but two choices - either pay it or suffer the consequences.

http://market-ticker.denninger.net/

~~~~~~~~~

The Market Ticker

Commentary On The Capital Markets

Wednesday, September 17. 2008

Posted by Karl Denninger at 16:06

http://market-ticker.denninger.net:80/]

The Potential End Of America's Government

Go look at the other video, and the other Ticker referenced in there.

Now understand that there is no solution to this fast and vicious destruction of America's financial markets and financial companies until and unless the lying stops.

It has NOT stopped and in fact has gotten materially worse.

Folks, this meltdown will not stop until either:

ALL financials mark everything to the market, ALL OTC derivatives are traded on an exchange or declared void, and ALL balance sheets are transparent so we can determine who is broke and who is not.

The market has completely imploded with every financial stock worth zero as the hedge funds and others short each in turn into the ground, forcing each to be bailed out in turn.

Those are the ONLY TWO CHOICES.

Nothing else HAS WORKED and nothing else WILL WORK. With each bailout you simply give people another target and a new way to kill the next company in line. This process will proceed from firm to firm until NONE ARE LEFT and credit availability in the economy is ZERO.

The Fed has expended more than half of their balance sheet, in excess of four hundred billion dollars. It has not stopped the cascade.

The Government has spent nearly a trillion dollars we do not have in bailouts and other miscellaneous nonsense. It has not stopped the cascade.

Indeed, all that has happened is that the velocity of the crash has accelerated dramatically.

There is NO WAY to fix this through adding "more liquidity" - the problem IS AND HAS BEEN THE LIQUIDITY in that this allows BANKRUPT companies to continue to operate and LIE instead of forcing them into the open where they can be liquidated under Chapter 11.

We are here precisely because of the intentional provision of far TOO MUCH liquidity by Alan Greenspan and now by Ben Bernanke.

You cannot solve someone's drinking problem by giving them another bottle of whiskey!

THE LIQUIDITY SWAMP MUST BE DRAINED.

We cannot have a "financial system" that is based on fraud and theft. We cannot have "financial institutions" that claim to be solvent when they in fact are not unless they are able to make up values that are much higher than the REAL value for their so-called "assets".

Wayne Angell was on "Fast Money" tonight claiming that the balance sheet of The Fed is "infinite" and that "they can't be downgraded."

Wayne, you need to be charged with treason for spewing that crap on national television.

Sure, "in theory" The Fed's balance sheet is infinite - they can coordinate with Treasury to print as much money as they want.

So was Weimar Germany's.

The word for what Wayne was promoting on Fast Money this evening is HYPERINFLATION where you find that a wheelbarrow is worth more than all the $100 bills you can stuff into it.

Does anyone remember how hyperinflation worked out for them? I seem to remember a gentlemen with the first name of "Adolf" that the world got out of that little exercise of an "infinite balance sheet."

Why does this path inevitably lead to political failure? Because as soon as lenders discern that this is occurring they shut off credit entirely.

Think about it - you have $1,000 to lend out. You detect that the government is printing and intentionally devaluing your money. If you lend it out at 10% interest but the government is hyperinflating at 100% a year, you lose about half of the money's value every year! So if you lend me that $1,000 when I pay you back you can only buy half as much as you could before! For obvious reasons you're not going to allow that - you will instead immediately spend your $1,000 on something of physical value such as land before it can be debased.

Hyperinflation kills all credit availability instantly for this reason and any credit-based economy immediately implodes. This results in enormous and immediate mass unemployment and a resulting rupture of the social and political fabric of a nation.

As for not being able to be downgraded, you obviously didn't hear S&P today, which stated quite clearly that the United States "AAA" credit rating is not a right and must be earned. Can't be downgraded eh? Oh yes The Fed can be - along with everything else.

Folks, we require over $2 billion a day in foreign investment in order to pay our bills.

This is what came out from China today:

"BEIJING, Sept 17 (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.

"The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun.

"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."

"Infinite Balance Sheet" eh? See what foreign governments think of that sort of garbage?

Please understand - if foreign governments withdraw their support of our government funding via either scaling back their Treasury purchases or outright refusal to buy (or worse, they dump them on the market into this "fear spike" we're seeing now), we are absolutely and instantaneously screwed.

Michael Bloomberg, one of the few intelligent commentators out there (and a billionaire by his own hand) said exactly the same thing today:

"WASHINGTON (AP) New York Mayor Michael Bloomberg is warning a 'next wave' of financial pain may come when foreign entities stop buying U.S. debt.

The billionaire mayor is speaking to an audience at Georgetown University, telling them it's not clear who is going to continue buying U.S. debt as financial firms try to cope with a crisis of confidence on Wall Street."

Mr. Bloomberg sees the same thing I do, but he's a bit more polite than I am about it.

Then there was S&P which made this quite clear as well:

"The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve "has weakened the fiscal profile of the United States," S&P's John Chambers told Reuters in an interview.

"Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating," Chambers said. "There's no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else."

Is that clear enough?

Congress MUST ACT RIGHT DAMN NOW.

Congress MUST stop The Fed and Treasury from printing any more money. The institutions that are insolvent must be forced into the open and put through bankruptcy.

We CANNOT wait until the next Congress and the election to stop this nonsense; that's five months in the future. By then The United States could easily be quite literally broke and forced into a hyperinflationary spiral!

Debt that cannot be paid must be defaulted.

Yes, this is painful.

Yes, it will hurt.

But as you can see it is already hurting plenty; the "alternative" isn't working and CAN'T WORK, as I've been pointing out for over a year!

We CANNOT get a true value on the market until this occurs.

It is NOT POSSIBLE.

In the BEST CASE if we do not act NOW, take your salary and assets and cut them by 30%. Everything else - cost of food, gas, electricity, etc - remains the same.

Worst case? Divide your salary and assets by three, but again, your costs remain the same.

If you are in the lower income echelon, you will go broke and become homeless.

If you are middle class, you will be living in a tenement or trailer. If you're lucky. If you currently own a home, you won't any more.

If you are upper-middle class, you will fall to lower-middle class, and all your luxuries will disappear. No more Lexus or nice vacations.

If you are "well off", you will be living in a modest home, what we now call "middle class", and some of you will go broke outright, because your "well off" status has been achieved with leverage - which will blow up in your face.

If you find this unacceptable you must act TODAY to stop the government from proceeding down the path we are on.

Your choices are:

DO NOTHING and your employer and you will lose access to credit. As he or she does, you will lose your job and ultimately everything you own.
GET ACTIVE RIGHT NOW - on the phone with Congress, Treasury, The President and the Candidates. Take to the streets. Organize a general strike with your friends and neighbors, and buy nothing for a day or even a week. Make clear to your representatives that you INSIST that they stop this fraud and nonsense, forcing all of the fraudsters and phony balance sheets and lies into the open, along with removing all of the regulators who intentionally turned a blind eye to this mess, including but not limited to Geithner, Bernanke and Paulson.

If you do nothing, you will get #1, or worse, The Government will continue to face bailout after bailout until the printing reaches a point that foreign governments say "no mas" - at which point our government's ability to fund itself - and our current way of life and representative government ends.

~~~~~~~~~~~~~~~~~~~~~~

STANDING UP TO THE BANKS:
If you get foreclosed, make them produce the note!

~~~~~~~~~~~~
Barclays warns of a financial storm as Federal Reserve's credibility crumbles

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarclays127.xml

Last Updated: 12:30am BST 27/06/2008

US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.

The grim verdict on Ben Bernanke's Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank's dovish policy statement on Wednesday. Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of "anti-dollar" and as a market reproach to Washington's easy-money policies.

The Fed's stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2pc to 5pc over the last year. Mr Bond said the emerging world is now on the cusp of a serious crisis. "Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and
1970s," he said.

"They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box."

Barclays Capital recommends outright "short" positions on Asian bonds, warning that yields could jump 200 to 300 basis points. The currencies of trade-deficit states like India should be sold. The US yield curve is likely to "steepen" with a vengeance, causing a bloodbath for bond holders.

David Woo, the bank's currency chief, said the Fed's policy of benign neglect towards the dollar had been stymied by oil, which is now eating deep into the country's standard of living. "The world has changed all of a sudden. The market is going to push the Fed into a tightening stance," he said.

The bank said the full damage from the global banking crisis would take another year to unfold. Rob McAdie, Barclays' credit strategist, said: "The core issues have not been addressed. We're still in a very large deleveraging cycle and we're seeing losses continue to mount. We think smaller banks will struggle to raise capital. We're very bearish - in the long-term - on high-yield debt. The default rate will reach 8pc to 9pc next year."

He said investors had taken their eye off the slow-motion disaster engulfing the US bond insurers or "monolines". Together these firms guarantee $170bn of structured credit and $1,000bn of US municipal bonds.

The two leaders - MBIA and Ambac - have already been downgraded as the rating agencies belatedly turn stringent. The risk is further downgrades could set off a fresh wave of bank troubles. "The creditworthiness of many US financial institutions will decline in coming months," he said.

The bank warned that engineering and auto firms we're likely to face a crunch as steel and oil costs surge. "Their business models will have to be substantially altered if they are going to survive," said Mr McAdie.

A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries. The teams at Soci t G n rale, Dresdner Kleinwort, and Banque AIG all warn that deflation may loom as housing markets crumble under record levels of household debt.

Bernard Connolly, global startegist at Banque AIG, said inflation targeting by central banks had become a "totemism that threatens to crush the world economy".

He said it would be madness to throw millions out of work by deflating part of the economy to offset a rise in imported fuel and food prices. Real wages are being squeezed by oil, come what may. It may be healthier for society to let it happen gently.

~~~~~~~~~~~~~~~

American financial fiasco could take down world economy
Posted By BERT HIELEMA - June 25, 2008

http://www.intelligencer.ca/ArticleDisplay.aspx?e=1087226

Triple warnings this past week: the Royal Bank of Scotland fears a steep fall in the world stock market; the bank of all banks in the world, the BIS, Bank of International Settlements, in Switzerland, said that a worldwide depression is now a distinct possibility; Morgan Stanley, a leading American Investment firm, signaled similar pessimistic messages.

So what's happening out there? Frankly, all financial institutions are in deep trouble, and the reason is the American dollar. The situation is so dire that it's not going to make a hoot of difference who becomes the next president of the United States: it's beyond the power of the rulers of the American political and economic system to curtail severe damage to its entire economic enterprise. Neither Obama nor McCain can do anything to stem the disaster that will be fully employed by the end of this year.

Part of the cause is that the USA happens to be the most indebted nation on the planet and its people the least prepared to cope with peak oil and peak food. Even now Americans throw away up to 40 per cent of the food they buy, their high-powered and fuel-thirsty automotive park cannot be converted to more efficient vehicles for many years, while their exurban lifestyle makes car-sharing and mass transport impossible for most.

So what's so inevitable of the current monetary scene?

The world's entire Gross domestic product is some $50 trillion, of which the USA accounts for about $13 trillion. However, it owes more than $2 trillion to foreigners, of which Japan and China carry about half and Great Britain some 10 per cent with the remainder divided over many countries. Canada has less than one per cent. The American public carries $9 trillion in credit-card debt and even more in mortgages. Its national debt is close to $10 trillion while its Social Security and Medicaid has a future liability in excess of $50 trillion, burdening the average USA household with debt totaling more than $600,000.

And then there are the outstanding derivatives! They grew from $100 trillion 5 years ago to $500 trillion in 2007. Warren Buffet -- the world's richest man after Bill Gates and a most savvy investor -- wrote in 2002: "We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

Now, when everything that can go wrong is going wrong, this financial WMD, this weapon of mass destruction, is no longer latent but out in the open ready to kill the American economy.

According to the LEAP think tank, based in Europe -- subscriptions cost 200 Euro or $300 per year -- in the next six months all factors affecting the economy will converge, and create a perfect socio-economic hurricane.

The root of the problem is always money, basically the US dollar of which there are trillions too many in circulations, so many that its value is decreasing, and the world doesn't know what to do with them. It's this flood of money that drives up the price of all commodities, including oil, of course. Nobody wants more US dollars, unless its value increases.

But that can only happen when the US pushes up interest rates, which will cause the US economy to die within a few weeks, as the real estate market falls to zero by lack of affordable credit, interest on Adjustable Rate Mortgage loans skyrockets, drastically shrinking consumption, and corporate failures multiply exponentially and stock markets collapse.

No, higher interest rates are not the solution. However, to do nothing is not an option either, because soon nobody will accept U. S. dollars anymore.

Basically the US has lost the ability to govern its own economic policy. Thanks to its trillions of debts, it is now powerless to avoid disaster. No wonder banks are getting nervous.

The immediate consequence of America's economic collapse will be the end of the war in Iraq, because, suddenly, as the greenback disappears as the world currency, the US will be forced to live within its means. Since the war is the most costly of all its undertakings, the troops will abruptly go home.

Curiously the WMDs -- the weapons of mass destruction -- were not in Iraq: they are in the heart of America, right on Wall Street. Pity the veterans and the wounded; there will be no money to look after them -- no pensions, no jobs, no medical care.

Eventually a new financial system will emerge, but only after a period of tremendous turmoil and pain.

http://www.intelligencer.ca/ArticleD...aspx?e=1087226

~~~~~~~~~~~~~

Stock slumps to a 53-year low; Bloomberg TV analyst recommends bankruptcy for automaker.

By Jeff Poor
Business & Media Institute
6/27/2008 8:10:07 AM

General Motors has been an American fixture for 111 years, but some warn that might be ending. The Michigan automaker faces tough obstacles ahead critical to its survival.

Brian Williams raised the possibility of General Motors (NYSE:GM) going out of business on the June 26 NBC Nightly News to Jim Cramer, host of CNBC s Mad Money.

[J]im, I know you talk about this, think about this everyday for a living and have a formula regarding this, Williams said. But first, what s going on out there? I heard one analyst today said, GM will go out of business, though I know a lot of people disagree with that and it s a scary thought.

Goldman Sachs (NYSE:GS) downgraded GM s stock earlier in the day and that forced GM to a 53-year low and put it at a risk of default. Goldman Sachs also downgraded Citigroup s (NYSE:C) to a sell on June 26.

I think GM is a huge part of the problem, [and] as you said, Citigroup, Cramer replied. These are companies that need much more cash than they have right now or they can raise so their stocks keep going lower. Unless we get a break in oil which keeps going up, food which keeps going up, or houses which keep going down Brian, it s going to get worse, not better.

The drop in GM and Citigroup sent the Dow plunging to its worst June since the Great Depression, according to Bloomberg on June 26. A June 26 Dow Jones story said some interpreted Goldman Sachs' downgrade to mean the automaker is going out of business.

We re going to move in the opposite direction of oil, and General Motors is going to go out of business, at least according to Goldman Sachs, Art Hogan, chief market strategist at Jefferies & Co. said to Dow Jones.

Analyst James Chanos, president of Kynikos Associates Ltd., appeared on Bloomberg Television on June 25 and said that GM should consider bankruptcy.

I think both of them [GM and Ford] have issues and as I told an elected official from Michigan, I mean arguably, one of the better things these companies could do is go bankrupt, Chanos said. I m not saying liquidate, I m saying go bankrupt and reorganize. I think that then they would have a fighting chance, but of course the board and the management works for the shareholders and their viewpoint might be a little different.

Chanos, a renowned short seller, has been known for his ability to smell blood in the water. In 2001, he became one of the first to short Enron and profited greatly from the company s demise. In 2002, Chanos testified in front of the House Committee on Energy and Commerce. He told the committee he saw the fall coming nearly a year before its ultimate collapse.

http://www.businessandmedia.org/arti...627063413.aspx

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You Can t Eat Gold,

Robert Morley

April 29, 2008 From www.theTrumpet.com

How good is money when you can t buy food? The Japanese are finding out and Americans are only a drought away.

Robert Morley The world teeters on the edge of economic crisis. The main question now seems to be how big and how long. Numerous financial experts warn of a Great Depression repeat. But surviving the next Great Depression won t be so easy. Last time, few people had money, but if they did, for the most part there was food available. This time, the depression may well be accompanied by widespread food shortages. As the Japanese are coming to realize, when there is no food, the value of money rapidly approaches zero.

Many economic analysts clearly see the economic problems facing America: the crashing housing market, insolvent banks, massive monetary inflation, the devaluing dollar, falling real wages, rising food and oil prices, and so on. Many also see the danger in the global food shortages. But at the same time, it is amazing how many think that all you need to do is invest in gold, or silver, or buy some agricultural commodity stocks, and you will be okay.

There is a fatal flaw in this thinking. Yes, as the United States continues to unravel, the price of gold may temporarily soar into the stratosphere. But no matter how many gold coins you have, if food supplies run out, bars of gold won t quell the hunger pains. You can t eat gold.

TheAge.com reports that Kazakhstan, the world s fifth-biggest wheat exporter, is the latest major country to prohibit grain exports. If Kazakhstan were alone, it might not be a big deal but unfortunately Kazakhstan is joining a growing list of other countries, including Russia, Ukraine and Argentina, that are also limiting wheat exports.

At the same time, America s wheat stockpile is at dangerously low levels levels not seen in over 60 years. And 60 years ago, America had a population of less than 150 million. That figure has more than doubled since that time.

The Department of Agriculture says that in the year ending May 31, U. S. wheat inventories could be down 47 percent to 6.6 million tons. That means there is a U. S. emergency wheat reserve supply of only about 43 pounds per person.

Expecting record-low food reserves to provide for record-high populations is asking for record-breaking hunger.

But wheat is only one of many foods in short supply; rice, corn and other agricultural commodities are near multi-decade lows too. All it would take is one bad global harvest and America, along with the rest of the world, would be in big trouble. Just one bad year! We had seven of them in a row during the 1930s.

It wouldn t matter how much money a person had; money can t buy what doesn t exist.

Take Japan for example.

Japan is the world s largest net food importer. The nation imports 86 percent of its wheat and approximately 60 percent of its daily food requirements.

Japan s problems began when countries such as Thailand, Vietnam and China imposed export curbs on rice to conserve food for domestic populations. Then Japan got hit again when global shortfalls in cattle feed led to a butter shortage, and again when global wheat prices went through the roof.

Food shortages have intensified to the point that, as Bloomberg reports, Japan will ask the World Trade Organization (wto) to introduce rules to prevent countries from restricting exports of wheat, rice and other grains. Japan may be about to find out that wto rules don t mean much when people are at risk of starvation.

The shortages have come as quite a shock to many Japanese who, like Americans, are accustomed to being able to buy whatever they want as long as they have the money. Until now Japan could rely on purchasing food from anywhere in the world because consumers can afford to pay, relates Yasuhiko Nakamura, head of the government s food education council. In the future, it may be impossible to import even if we have money (emphasis mine throughout).

There is nothing like a food shortage to wake up a nation.

Obviously, America isn t Japan we don t import two thirds of our food. But we are much more vulnerable than many realize.

In 2005, the Wall Street Journal reported that America had become a net importer of food. Bill Bonner, writing for the Daily Reckoning, confirms: If we understand that correctly, there is no longer enough food Made in the USA to feed Americans appetites (February 25). That means that even if America cut all exports, it would still need to import food to maintain current consumption levels.

America used to be the world s breadbasket. Now, as is the case in just about every other former category of production, America is becoming a gigantic food-consumption sinkhole.

[O]utsourcing your supply of food and water depending on unfriendly or unreliable trading partners to keep sending fresh fruit and poultry or thinking the global system of trade will forever expand and never again contract these are all dangerous assumptions that could leave you with an empty national stomach at night, warns the Daily Reckoning (ibid.).

Yet for the most part, Americans remain on the sidelines of the current food shortages at least so far. Besides some comparatively minor rice and cooking oil rationing at a few Costcos and Sam s Clubs, most Americans are content to grumble about rising food and fuel prices and watch the food riots in Haiti, Indonesia, and elsewhere so far.

But the fact that there is rationing at all should be a big wake-up call!

Living in the Breadbasket of the World, it is hard for most Americans to even conceive of the idea that food could become scarce in this country, writes author Monica Davis. Even America, she says, is not immune from the potential for food shortages, food riots and food insecurity. We re just blind to the possibility.

America s days of comparative economic prosperity are ending. Most Americans look at the world and think that they are rich and increased with goods, and in need of nothing. But they don t realize that all that separates the U. S. from becoming poor, destitute and hungry is one big drought. What good will riches be then?

America only has 43 pounds of wheat per person in case of emergency. That s just four and a half months worth.

A page out of the Bible is applicable here: Joseph, when he was in Egypt, prepared the nation to withstand seven years of drought. When drought came, not only did Egypt have food for its entire population, but for the surrounding nations as well. In that case, money bought food because Joseph had stored it up. In fact, that drought made Egypt a global power.

Today, the world lives from one harvest to the next. There are no significant global food reserves, and America doesn t even have enough to handle one really bad year. What would happen if another multi-year, 1930s-style drought occurred again?

Load up the pantry, says Manu Daftary, one of Wall Street s leading investors and the manager of the Quaker Strategic Growth mutual fund. I think prices are going higher. People are too complacent. They think it isn t going to happen here. But I don t know how the food companies can absorb higher costs.

Unfortunately, loading up the pantry isn t more than a short-term stop-gap. And in the long-term, neither is stockpiling treasure chests of precious metals.

The Bible talks of a future time when people will throw their gold and silver into the streets a time when money won t be able to buy food (Ezekiel 7:19).

The current global food shortages are the first rumbles of thunder from the approaching storm.

But shelter from the coming food storm can be found. God promises to not only protect those who obey Him, but to bless and magnify their food supplies even when everyone else is being pummeled with agricultural curses. God challenges you to test Him to see if He will not open to you the windows of heaven in time of need.

To see how a country with such vast agricultural resources could get itself into such a food dilemma, read The United States and Britain in Prophecy.

How Far is the US From Food Shortages and Food Riots?

March 24, 2008
Black Swans Everywhere
Kunstler
http://www.kunstler.com/index.html

After a one-day reprieve from total meltdown in the financial markets, news media cheerleaders for the most reckless gang of bankers in world history declared the crisis over on Good Friday (with the markets safely closed). Whew, that's a relief. Problem solved. And just in time for baseball season, too, so none of the Banker Boyz have to sell their sky box leases.

Commodities Drop, Rally in Dollar, Stocks Vindicate Bernanke

What is meant by "meltdown," by the way, since the word is used so promiscuously by myself and others. I'd define it as the shock of recognition that many big institutions are worse than flat broke and are therefore powerless to conduct normal operations. By "worse than flat broke" I mean they are so deep in hock that all the accountants who ever lived, in the life of this universe and several others like it, using the fastest parallel processing computers ever built, could not keep up with their compounding accelerating losses (now approaching the speed of light).

The current vacation from reality on Wall Street may last a few more days, or even a couple weeks, but it seems as though a whole flock of black swan events is circling the sky over Financial-land and is about to blot out the sun. By black swan, I refer to the concept popularized by Nassim Nicholas Taleb in his recent book of that name, namely unexpected events of great power that tend to change the course of history.

For the moment, with the crisis "contained," and the Boyz getting ready to air out their Hampton villas for the coming season, we are once again primed to be blindsided by potent random events that nobody saw coming. The trouble is, there are enough potent potential fiascos already visible on the horizon.
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