The Bullion Insider

Announcing: The Austrian Investor

2009-03-03T18:36:00.000-08:00

Visit our new location at www.austrianinvestor.com
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More Wisdom from Peter Schiff

2009-02-27T21:31:00.000-08:00

Obama Puts the Economic Cart before the Horse

By: Peter Schiff, Euro Pacific Capital, Inc.

-- Posted Friday, 27 February 2009 | Digg This Article | Source: GoldSeek.com

In his first televised speech before Congress, President Obama asserted that prosperity will return once the government restores the flow of credit in the economy. It may come as a surprise to him, but an economy cannot run on consumer loans. Furthermore, credit stopped flowing in the U.S. for a very good reason: there was no more savings left to loan. Government efforts to simply make credit available, without rebuilding productive capacity or increasing savings, are doomed to destroy what's left of our economy.

The central tenets of Obamanomics appear to be that access to credit will enable people to borrow money to buy stuff, the spending will spur production and employment, and thus the economy will grow. It's a neat and simple picture, but it has nothing whatsoever to do with how an economy works. The President does not understand that consumption is made possible by production and that credit is made possible by savings. The size and complexity of modern economies has obscured these simple concepts, but reducing the picture to a small scale can help clear away the fog.

Suppose there is a very small barter-based economy consisting of only three individuals, a butcher, a baker, and a candlestick maker. If the candlestick maker wants bread or steak, he makes candles and trades. The candlestick maker always wants food, but his demand can only be satisfied if he makes candles, without which he goes hungry. The mere fact that he desires bread and steak is meaningless.

Enter the magic wand of credit, which many now assume can take the place of production. Suppose the butcher has managed to produce an excess amount of steak and has more than he needs on a daily basis. Knowing this, the candlestick maker asks to borrow a steak from the butcher to trade to the baker for bread. For this transaction to take place the butcher must first have produced steaks which he did not consume (savings). He then loans his savings to the candlestick maker, who issues the butcher a note promising to repay his debt in candlesticks.

In this instance, it was the butcher's production of steak that enabled the candlestick maker to buy bread, which also had to be produced. The fact that the candlestick maker had access to credit did not increase demand or bolster the economy. In fact, by using credit to buy instead of candles, the economy now has fewer candles, and the butcher now has fewer steaks with which to buy bread himself. What has happened is that through savings, the butcher has loaned his purchasing power, created by his production, to the candlestick maker, who used it to buy bread.

Similarly, the candlestick maker could have offered “IOU candlesticks” directly to the baker. Again, the transaction could only be successful if the baker actually baked bread that he did not consume himself and was therefore able to loan his savings to the candlestick maker. Since he loaned his bread to the candlestick maker, he no longer has that bread himself to trade for steak.

The existence of credit in no way increases aggregate consumption within this community, it merely temporarily alters the way consumption is distributed. The only way for aggregate consumption to increase is for the production of candlesticks, steak, and bread to increase.

One way credit could be used to grow this economy would be for the candlestick maker to borrow bread and steak for sustenance while he improves the productive capacity of his candlestick-making equipment. If successful, he could repay his loans with interest out of his increased production, and all would benefit from greater productivity. In this case the under-consumption of the butcher and baker led to the accumulation of savings, which were then loaned to the candlestick maker to finance capital investments. Had the butcher and baker consumed all their production, no savings would have been accumulated, and no credit would have been available to the candlestick maker, depriving society of the increased productivity that would have followed.

On the other hand, had the candlestick maker merely borrowed bread and steak to sustain himself while taking a vacation from candlestick making, society would gain nothing, and there would be a good chance the candlestick maker would default on the loan. In this case, the extension of consumer credit squanders savings which are now no longer available to finance other capital investments.

What would happen if a natural disaster destroyed all the equipment used to make candlesticks, bread and steak? Confronted with dangerous shortages of food and lighting, Barack Obama would offer to stimulate the economy by handing out pieces of paper called money and guaranteeing loans to whomever wants to consume. What good would the money do? Would these pieces of paper or loans make goods magically appear?

The mere introduction of paper money into this economy only increases the ability of the butcher, baker, and candlestick maker to bid up prices (measured in money, not trade goods) once goods are actually produced again. The only way to restore actual prosperity is to repair the destroyed equipment and start producing again.

The sad truth is that the productive capacity of the American economy is now largely in tatters. Our industrial economy has been replaced by a reliance on health care, financial services and government spending. Introducing freer flowing credit and more printed money into such a system will do nothing except spark inflation. We need to get back to the basics of production. It won't be easy, but it will work.

President Obama would have us believe that we can all spend the day relaxing in a tub while his printing press does all the work for us. The problem comes when you get out of the tub to go to dinner and the only thing on your plate is an IOU for steak.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar, read my just released book "The Little Book of Bull Moves in Bear Markets." Click here to order your copy now.

For a look back at how I predicted our current problems read my 2007 bestseller "Crash Proof: How to Profit from the Coming Economic Collapse." Click here to order a copy today.

More importantly, don't wait for reality to set in. Protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com. Download my free Special Report, "The Powerful Case for Investing in Foreign Securities" at www.researchreportone.com. Subscribe to my free, on-line investment newsletter, "The Global Investor" at http://www.europac.net/newsletter/newsletter.asp.

-- Posted Friday, 27 February 2009 | Digg This Article | Source: GoldSeek.com

- Peter Schiff C.E.O. and Chief Global Strategist
Euro Pacific Capital, Inc.

FDIC Friday - 2 more banks fail

2009-02-27T21:13:00.000-08:00

Security Savings Bank of Nevada and Heritage Community Bank of Illinois failed today and were taken over by the FDIC.

http://www.fdic.gov/bank/individual/failed/banklist.html
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Ponzi Scheme in Gold

2009-02-26T08:13:00.000-08:00

Moral of the story: Take possession of your gold

This time, a 'golden' opportunity
Commentary: The gold world's Bernie Madoff promised 45% annual returns
By David Weidner, MarketWatch

Last update: 9:38 a.m. EST Feb. 26, 2009

NEW YORK (MarketWatch) -- Gold bugs enjoy a special place here on Wall Street.
They're our bizarre-o twins in the world of investing. When our market is up, theirs is down. We trade securities used to assign a value to companies, industries and commodities. They trade a useless piece of rock that people dig up.

We don't understand one another, so we eye each other warily. Sure, some of us may own a little gold, but we only hold it as a hedge -- or as jewelry. The gold bugs may hold some stock, but their hearts aren't in it. And they can't wear it.

Full Story...

FDIC Friday - Silver Falls Bank fails

2009-02-20T21:30:00.000-08:00

Oregon bank is 14th failure of 2009
By MarketWatch
Last update: 9:35 p.m. EST Feb. 20, 2009

SAN FRANCISCO (MarketWatch) -- Silver Falls Bank, of Silverton, Ore., was closed Friday by state regulators and the Federal Deposit Insurance Corporation.

It was the 14th bank to fail so far this year and the 39th since the beginning of the current credit crisis.

Citizens Bank, of Corvallis, Ore. will assume all of the deposits of Silver Falls Bank, the FDIC said. Silver Falls Bank had three branches, all of which will reopen Monday as branches of Citizens Bank.

As of Feb. 9, the bank had total assets of approximately $131.4 million and total deposits of $116.3 million. Citizens Bank did not pay a premium to acquire the deposits of Silver Falls Bank, according to the FDIC.

In addition to acquiring all of the failed banks deposits, including those from brokers, Citizens Bank agreed to purchase approximately $13 million in assets comprised of cash, cash equivalents, securities, overdraft loans, and deposit secured loans. The FDIC will retain any remaining assets for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $50 million.

What a tangled web they weave...

2009-02-20T17:24:00.000-08:00

I can't blame these investors. They bought these mortgages under certain terms and now the government is changing those terms. Why would anyone want to lend if the government is going to come in and change the terms!?!? No wonder there is a credit crunch! The market must self-correct without government intervention.

True capitalism is based upon the protection of private property and private contracts. When government destroys property rights, capital flees. This is why gold is zooming - it is a vote of "no confidence" and "no trust" in government and it's worthless dollar. If you have an interest in understanding the real cause of the economic crisis I suggest listening to the Austrian Economic Theory audio courses and reading the following two books: An Introduction to Austrian Economics and Understanding the Dollar Crisis.

Mortgage investors may sue on modified loans
However, a bill under consideration on Capitol Hill might take away that right
By Ronald D. Orol, MarketWatch
Last update: 3:39 p.m. EST Feb. 20, 2009

WASHINGTON (MarketWatch) -- The White House plan announced Wednesday to help as many as 9 million homeowners avoid foreclosure was greeted with generally positive reaction by homeowners and mortgage servicers that are responsible for collecting monthly loan payments.
But many private mortgage investors, owners of trillions of dollars worth of mortgage-backed securities considered to be at the center of the financial crisis, are less impressed. Many are preparing to file lawsuits against the banks and other financial institutions that service mortgages.

Full Story...
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And the Dominoes continue to fall...

2009-02-20T17:11:00.000-08:00

Latvia's government collapses amid economic crisis
By Polya Lesova, MarketWatch
Last update: 2:27 p.m. EST Feb. 20, 2009

NEW YORK (MarketWatch) -- Latvia's coalition government collapsed Friday, plunging the Baltic country into political turbulence at a time when its economy is mired in a severe crisis and investors are increasingly concerned about the situation in Eastern Europe.

President Valdis Zatlers said he has accepted the resignations of Prime Minister Ivars Godmanis and his administration, according to media reports.

Godmanis said his position had become untenable after his two main coalition partners failed to support him earlier Friday, the BBC reported. The capital Riga was rocked by protests over economic policy in January, and Godmanis subsequently survived a Feb. 3 parliamentary vote of confidence, according to the report.

The government collapse in Latvia comes only weeks after Iceland's government resigned over the devastating crisis that has wrecked the island nation's economy. In Ukraine, the finance minister quit last week over economic policy disagreements with the prime minister.

Full Story...

Banks kicking you while you're down

2009-02-20T08:35:00.000-08:00

Only leave in the bank what you can afford to lose. If you decide to pull your money out of the banks you had better hurry. Fractional reserve banking simply means that they only have about $1 on reserves for every $10 on deposit. If you are not one of the first 10% to pull out your money then you will be screwed.

Here is the story on excessive bank fees.
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Awesome video of Rick Santelli telling it like it is!

2009-02-19T21:15:00.000-08:00

Awesome, must see video of Rick Santelli telling it like it is (thanks to EPJ for bringing this to my attention):

Rick Santelli on CNBC

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A Humerous Illustration of TARP

2009-02-19T20:58:00.000-08:00

12 slides...very funny...

TARP Slideshow

The End of Swiss Bank Secrecy

2009-02-19T08:36:00.000-08:00

UBS to pay $780 million in tax conspiracy case
Swiss bank admits helping US clients avoid taxes; agrees to reveal identities

By Alistair Barr, MarketWatch
Last update: 6:53 p.m. EST Feb. 18, 2009

SAN FRANCISCO (MarketWatch) - UBS AG agreed to pay $780 million for helping U.S. customers avoid taxes, the Department of Justice said Wednesday.

Switzerland's largest bank also agreed to turn over the identities and accounts of some of its U.S. clients to the American government, in an unprecedented move that could shine a light into the country's secretive banking industry, the DOJ added.

Full Story...

First Iceland collapses...now Ireland?

2009-02-16T15:56:00.000-08:00

Spreads highlight Ireland fears
By William L. Watts, MarketWatch

Last update: 12:37 p.m. EST Feb. 16, 2009

LONDON (MarketWatch) -- Fears that Ireland's banking woes will send the Emerald Isle the way of Iceland has sent the cost of insuring sovereign Irish debt against default to record levels.

Spreads on Ireland's five-year credit default swaps rose to a record 377 basis points on Friday, analysts said. That means it would cost $377,000 a year to insure a notional $10 million of debt against default. That's up from around just $24,000 a year ago.

Ireland's fiscal position has eroded sharply due to a steep economic slump. On top of that, add in the effective nationalization of the country's three largest banks and expectations for further outlays.

Iceland was left virtually bankrupt after its outsized financial sector collapsed under the weight of massive foreign-denominated debt.

Full Story...

You are being watched...

2009-02-16T15:37:00.001-08:00

Click on the following link to view the technology that is available. Zoom in on the crowd and then go watch the movie "Enemy of the State". If you are so inclined, listen to the song that the following lyrics go to:

Electric Eye (click on this link)
(song lyrics by Judas Priest)

Up here in space
I`m looking down on you
My lasers trace
Everything you do

You think you`re private lives
Think nothing of the kind
There is no true escape
I`m watching all the time

I`m made of metal
My circuits gleam

I am perpetual
I keep the country clean
I`m elected electric spy
I`m protected electric eye

Always in focus
You can`t feel my stare
I zoom into you
You don`t know I`m there

I take a pride in probing all your secret moves
My tearless retina takes pictures that can prove

I`m made of metal
My circuits gleam
I am perpetual
I keep the country clean

Electric eye, in the sky
Feel my stare, always there
There`s nothing you can do about it
Develop and expose
I feed upon your every thought
And so my power grows

I`m made of metal
My circuits gleam
I am perpetual
I keep the country clean

Thanks to Jim Sinclair for this link.

Job Losses Pose a Threat to Stability Worldwide

2009-02-16T09:55:00.000-08:00

February 15, 2009

Job Losses Pose a Threat to Stability Worldwide
By NELSON D. SCHWARTZ
New York Times

PARIS — From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe.

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.

“Nearly everybody has been caught by surprise at the speed in which unemployment is increasing, and are groping for a response,” said Nicolas Véron, a fellow at Bruegel, a research center in Brussels that focuses on Europe’s role in the global economy.

In emerging economies like those in Eastern Europe, there are fears that growing joblessness might encourage a move away from free-market, pro-Western policies, while in developed countries unemployment could bolster efforts to protect local industries at the expense of global trade.

Indeed, some European stimulus packages, as well as one passed Friday in the United States, include protections for domestic companies, increasing the likelihood of protectionist trade battles.

Protectionist measures were an intense matter of discussion as finance ministers from the Group of 7 economies met this weekend in Rome.

While the number of jobs in the United States has been falling since the end of 2007, the pace of layoffs in Europe, Asia and the developing world has caught up only recently as companies that resisted deep cuts in the past follow the lead of their American counterparts.

The International Monetary Fund expects that by the end of the year, global economic growth will reach its lowest point since the Depression, according to Charles Collyns, deputy director of the fund’s research department. The fund said that growth had come to “a virtual halt,” with developed economies expected to shrink by 2 percent in 2009.

“This is the worst we’ve had since 1929,” said Laurent Wauquiez, France’s employment minister. “The thing that is new is that it is global, and we are always talking about that. It is in every country, and it makes the whole difference.”

In Asia, any smugness at having escaped losses on American subprime debt has been erased by growing despair over a plunge in sales among major exporters. On Thursday, Pioneer of Japan said it would abandon the flat-screen television business and cut 10,000 jobs worldwide in response to sagging demand for consumer electronics.

Millions of migrant workers in mainland China are searching for jobs but finding that factories are shutting down. Though not as large as the disturbances in Greece or the Baltics, there have been dozens of protests at individual factories in China and Indonesia where workers were laid off with little or no notice.

The breadth of the problem is also becoming apparent in Taiwan, where exports were down 42.9 percent last month, compared with a year ago, the steepest plunge in Asia.

Chang Yung-yun, a 57-year-old restaurant kitchen worker, was laid off when her employer closed in mid-November. Her son, an engineer, has been put on unpaid vacation for weeks, a tactic that has become common in Taiwan.

“The greatest fear for our people is losing jobs,” Taiwan’s president, Ma Ying-jeou, said in an interview.

Calls for protectionism have resonated among a fearful public. In Britain, refinery and power plant employees walked off the job last month to protest the use of workers from Italy and Portugal at a construction project on the coast. Some held up signs highlighting Prime Minister Gordon Brown’s earlier promise of “British jobs for British workers.”

Unemployment in Britain is expected to rise to 9.5 percent by the middle of 2010, from 6.3 percent now, according to Peter Dixon, an economist with Commerzbank in London. Germany’s jobless rate could rise to 10.5 percent from 7.8 percent, he added.

In France last week, President Nicolas Sarkozy agreed to supply low-interest loans of 3 billion euros, or $3.86 billion, each to PSA Peugeot Citroën and Renault in exchange for an agreement not to lay off French workers.

To a greater extent than in past European downturns, highly trained white-collar workers are pounding the pavement, too. Naomi Runquist-Ohayon, a trademark lawyer, has been looking for work in Paris since the beginning of the year, after losing her job in December.

“This is a new experience for me,” said Ms. Runquist-Ohayon, 39, a Swedish native who has lived in Paris and London and speaks fluent English, French, Swedish and Italian. “In London, I never had to really look. Recruiters or headhunters would call me or I would call them. It’s not so easy now.”

Half a world away in Colombia, Jaime Galeano, 40, is in a similar predicament. As a bodyguard in a country notorious for drug-related violence and kidnappings, Mr. Galeano thought his profession was immune until he lost his job last year.

“The conditions for finding a job are terrible,” he said. What is more, his age is now an impediment, with a ministry informing him that only applicants under the age of 32 would be considered for new positions.

“After turning 35, a person is worth nothing,” Mr. Galeano said.

Even India, whose startling rise to the forefront of the global economy was portrayed in the hit movie “Slumdog Millionaire,” has hit a wall. About 500,000 people lost jobs between October and December 2008, according to one recent analysis.

In New Delhi, Tarun Lamba lost the first real job he ever had about a month ago, when he was laid off as a sales manager. Mr. Lamba, 24, said he knew bad news was coming because it had been weeks since he had written a truck loan. If he has to, he said, he could join his father’s business, selling clothes. But he hopes it will not come to that.

“The cycle has to keep running,” he said. “We had a boom period one year ago, now we are in a recession, and after some time the boom will come again.”

Many newer workers, especially those in countries that moved from communism to capitalism in the 1990s, have known only boom times since then. For them, the shift is especially jarring, a main reason for the violence that exploded recently in countries like Latvia, a former Soviet republic.

“For the young generation, aged 20 to 24, this is the first time we’ve had this,” said Valdis Zatlers, Latvia’s president.

The ripples from the slowdown in Europe, North America and Asia are also being felt in Africa as migrant workers abroad lose their jobs and find themselves unable to send money home.

Since his last temporary job as a metalworker in Paris ended three months ago, Ignace Abdul has halted the monthly 200 euro payments he had been sending to his wife and three children back in Senegal. “Between 2004 and 2008, I worked nonstop,” Mr. Abdul, 30, said in an interview in a bleak Paris unemployment office. “Right now, there is nothing.”

Reporting was contributed by Keith Bradsher from Taipei, Taiwan; Heather Timmons from New Delhi; Simon Romero and Jenny Carolina González from Bogota, Colombia; and Maïa de la Baume from Paris.

FDIC Friday - 4 more banks bite the dust

2009-02-13T20:19:00.000-08:00

FDIC shutters four banks in one day
Oregon, Nebraska, Florida, Illinois bank failures bring year's total to 13

By John Letzing, MarketWatch
Last update: 11:06 p.m. EST Feb. 13, 2009

SAN FRANCISCO (MarketWatch) -- Loup City, Neb.-based Sherman County Bank, Cape Coral, Fla.-based Riverside Bank of the Gulf Coast, Pittsfield, Ill.-based Corn Belt Bank and Trust Company, and Beaverton, Ore.-based Pinnacle Bank were closed by regulators Friday, bringing the number of U.S. bank failures for 2009 to 13 and 38 total since the start of the credit crisis, the Federal Deposit Insurance Corp. said.

Full Story...

John Williams: $100 Bills Will Become Worthless

2009-02-12T21:22:00.000-08:00

Hyperinflation Video

2009-02-11T07:32:00.000-08:00

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Buy Gold & Silver

Jim Rogers: Failing banks don't need money

2009-02-10T21:07:00.000-08:00

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Buy Gold & Silver

Dr. Marc Faber cracks me up!

2009-02-10T21:02:00.000-08:00

Because if I didn't laugh I would cry...

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Buy Gold & Silver

Are you Servant or Master?

2009-02-10T20:47:00.001-08:00

This is a great, short video where Rep. Ackerman grills the SEC regarding the Madoff scandal. The point is this: Government doesn't have a clue or the desire to fulfill their duties because there is no accountability. The system itself does not have proper accountability - they take your taxes whether they do a good job or not. There is no real agency relationship (as Lysander Spooner put it so eloquently in "No Treason VI: The Constitution of No Authority"). The system is illegitimate and flawed from its inception. You are not the master because you cannot fire your servant. It is only a matter of time before the masses simply stop paying taxes in revolt - milions already are. Then they will become the Masters again.

Ackerman and SEC Video

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Buy Gold & Silver

The Coming Great Depression. Why Government Is Powerless

2009-02-09T21:01:00.000-08:00

Armstrong Economics:

The Coming Great Depression.

Why Government Is Powerless

It is frustrating to read so many comparisons of our current situation with 1929 while watching policy be set-in-motion to create spending on infrastructure. Everyone has their hand out looking for a bailout like a bunch of street burns pleading for money so they can get drunk or stay drunk. Almost nothing of what I have read is close to being accurate. The scary part is depressions are inevitably caused by politicians who may be paving the road with good intentions, but are relying upon analysis so biased, we do not stand a chance.

The stock market by no means predicts the economy. A stock market crash does not cause a Depression. The Crash of 1903 was properly titled – “The Rich Man's Panic." What has always distinguished a recession from a Depression is the stock market drop may signal a recession, but the collapse in debt signals a Depression. This Depression was set in motion by (1) excessive leverage by the banks once more, but (2) the lifting of usury laws back in 1980 to fight inflation that opened the door to the highest consumer interest rates in thousands of years and shifted spending that created jobs into the banks as interest on things like credit cards. As a percent of GDP, household debt doubled since 1980 making the banks rich and now the clear and present danger to our economic survival. A greater proportion of spending by the consumer that use to go to savings and creating jobs, goes to interest and that has undermined the ability to avoid a major economic melt-down.

The crisis in banking has distinguished depression from recession. The very term "Black Friday" comes from the Panic of 1869 when the mob was dragging bankers out of their offices and hanging them in New York. They had to send in troops to stop the riot. A banking collapse destroys the capital formation of a nation and that is what creates the Depression. The stock market is not the problem despite the fact it is visible and measurable and may decline 40%, 60% or even 89% like in 1929-32. But the stock market decline is normally measured in months (30-37) whereas the economic decline is measured in years (23-26). Beware of schizophrenic analysis that is often mutually contradictory or often antagonistic in part or in quality for far too often people think they have to offer a reason for every daily movement.

Our fate will not be determined by the stock market performance. Neither can we stimulate the economy by increasing spending on infrastructure any more than buying your wife a mink coat, will improve the grades of your child in school. We are facing a Depression that will last 23-26 years. The response of government is going to seal our fate because they cannot learn from the past and will make the same mistakes that every politician has made before them. Even if the Dow Industrials make new highs next week (impossible), the Depression is unstoppable with current models and tools.

Stocks & Consumers vs. Investment Banks

Let us set the record straight. The Stock Market is a mere reflection of the economy like looking at yourself in a mirror. It is not the economy and does not even provide a reliable forecasting tool of what is to come economically. We are headed into the debt tsunami that is of historical proportions unheard-of in history. There have been the big debt crisis incidents that have hobbled nations, toppled kings, and set in motion economic dark ages. It is so critical to understand the difference between the economy and the stock market, for unless you comprehend this basic and root distinction between the two, survival may be impossible.

To the left I have provided the Economic Confidence Model for the immediate decline. You will notice I did not call this the "stock market

model" nor a model for gold, oil, or commodities. I used the word "economic" with distinct and clear purpose. I have stressed it does not forecast the fate, of a particular market or even a particular economy. It is the global economic cycle some may call even a business cycle. Please note that what does line-up and peaks precisely with this model often even to the specific day that was calculated decades advance is the area of primary focus. Yet the US stock market reached a high precisely with this model and then rallied to a new high price 8.6 months later. In Japan, the NIKKEI 225 peaked precisely on February 26th, 2007. This is not a very good omen. But there was something profound that turned down with the February 27th, 2007 target - the S&P Case-Shiller index of housing prices in 20 cities. February 2007 was the peak for this cycle in the debt markets - not the US stock market.

The stock market always bottoms in advance of the economic low. In fact, we will see new highs in the now even in the middle of a Great Depression. At least the 1929 cycle was more of a bubble top in stocks than what we have in place currently in the US stock market. We still had the bubble top in the NASDAQ back in 2000, but this illustrates the point. There was a major explosive speculative boom. The bubble burst in 2000 and there was a moderate investment recession into 2002, but there was no appreciable economic decline that was set in motion because of that crash. Currently, we have a major high in 2007, but it was not a bubble top because it was not the focus of speculation. The real concentration of capital that created the bubble top, took place in the debt markets. This is the origin of the economic depression - not stocks and not the displacement of farmers because of a 7 year drought created by the Dust Bowl that invoked the response of the Works Progress Administration (WPA) in 1935. Keep in mind the stock market bottomed in the mid summer of 1932 when unemployment was not excessive from a historical perspective. The 25% level of unemployment came after the major 1932 stock market low that was followed by both the banking crisis after the election of FDR and before his fateful inauguration. The Banking Crisis came about because of rumors that Roosevelt was going to confiscate gold. Herbert Hoover published his memoirs showing letters written to Roosevelt pleading with him to make a statement that the rumors were false. He did not.

It’s the Debt Level Stupid

In 1907, the excessive debt was in the stock market. Call Money Rates (the level of interest paid to support broker loans) reached 125%. Even 1929 never came close to such levels. This also illustrates that the capital markets do not have enough money to invest equally on all levels in all segments of a domestic economy or in particular nations. To create the boom-bust, it requires the concentration of capital. A bubble top is formed when the majority of those seeking to employ money to make money are focused in a particular market or even country. The 1907 Crash was a bubble top because capital invested on a highly concentrated basis in railroad stocks. The bubble top in Japan back in 1989 was caused by a concentration of both domestic and international capital that had made Japan the number one market in the World. It is this concentration of capital that creates the boom and bust cycle. If money was evenly disbursed like the socialistic & communistic philosophies argue, we would be back to the dark ages where there was no concentration of capital and no economy beyond the walls of the castle so to speak. That is why communism failed.

It is the overall level of debt that has reached a bubble top in almost every possible area. For example, in 1980, household debt was about 50% of GDP. Going into the February 2007 high, it reached about 100% of GDP. We must also realize that something profound took place back in 1980. Americans would on the first blush seem to be living it up, buying everything they can on credit and have piles of tangible assets to show for it. That is like looking at the statistics for carrots and arguing that they are lethal because every person who has ever eaten a carrot is dead or in the process of a gradual slow death. This absurd example illustrates the bias that can produce the schizophrenic analysis.

There were, once upon a time, usury laws that generally held any interest rate greater than 10% was illegal. The Federal Reserve under Paul Volker believed that interest rates needed to be raised to insane levels to stop the runaway inflation, which was the first stone that hit the water sending the shock waves that we are having to pay for today. Once the usury laws were altered so the Fed could fight inflation, it set in motion the doubling of household debt, not to mention the national debt. At 8%, the principle is doubled through interest in less than 10 years. The national debt exploded from $1 to about $10 trillion in 25 years and household debt has doubled. Some states now consider usury to be 26%. Historically, these are the interest rates paid by the very worst of all debtors - the bankrupts. In fact, in China, the worst creditors historically paid at best 10%. What we have done is the lifting of usury to fight inflation back in 1980, has resulted in usury now being so high, a larger portion of income of the common worker is spent on interest, not buying goods & services that even create jobs. This is one primary reason why jobs have been leaving as well. The consumer needs the lowest possible price and labor wants the highest wages, and to stay competitive, producers leave taking manufacturing jobs as well as service jobs. The extraordinary rise in interest rates that are historical highs since at least pre-Roman times, could not have been possible but for the lifting of usury laws back in 1980 to fight inflation. This amounted to setting a fire to try to stop a brush fire that failed. Consumers pay the highest rates in thousands of years that feed the banks at the expense of economic growth. Even the National Debt rose from $2. 1 to $8.5 trillion between 1 986 and 2006 with $6. 1 trillion being interest. We are funding the nation on a credit card and destroying the economy simultaneously.

This has been enhanced by the tremendous leverage and false position that were created in the derivative markets causing the banks to just implode. Indeed, this is the origin of the economic Depression we are facing. The $700 billion bailout might have worked if Paulson did what he said he would - buy the debt and take it out of the banks. Had the debt been segregated into a pool and managed independently by a hedge fund manager not an investment banker, we could have mitigated the problem. But that is now too late. The credit implosion is taking place on a wholesale basis around the world. The more the economy declines in housing prices, the greater the defaults, the greater the foreclosures,

and the lower the economy will move. We are now in a downward spiral that cannot be fixed by indirect schemes. As I said, you cannot get your kid's test scores up by purchasing a mink coat for your wife. Everyone will have their hand out begging for infrastructure money. But the theory of just spending money that will somehow make things better, it is like handing Mexico a trillion dollars and arguing that they will buy US goods that will somehow reverse the economy.

The leveraging of debt by the Investment Banks in particular has undermined the global economy. Where household debt has doubled since 1980, the professional financial service sector has seen a rise from 21% of GDP in 1980 to 116% by February 2007. Now consider the debt that they created with the mortgages is already down by 50% and falling, the bailouts will keep coming. To help correct the problem, the commercial banks will tighten credit to make their exposure less, and in fact, their solvency ratios will require it anyway. This we can expect to see not just in business, but housing and car loans that will contract the economy as well.

The Great Depression is not the perfect model for today. It was a complete capital contraction. The stock market basis the now Dow Jones Industrials fell 89% between September 3rd, 1929 and July 1932. The contraction in debt was quite massive. Then too, the leverage in banks collapsed that reduces the velocity of money and therefore the money supply. The banks were the first real widespread failures with 608 in 1930. Between February and August 1931, the commercial banks began to bleed profusely as bank deposits fell almost $3 billion or about 9% of all deposits. As 1932 began, the number of bank failures reached 1,860. The massive amount of bank failures in the thousands took place with the rumor of Roosevelt's intention to confiscate gold. Although he denied that was his policy the night of the elections, he remained silent refusing to discuss the issue until he was sworn in. on March 6, 1933 just 2 days after taking office, Roosevelt called a bank "holiday" closing the banks from which at least another 2,500 never reopened.

All of these events are contrasted by the collapse in national debts in Europe. Other than Herbert Hoover’s memoirs, I have yet to read any analysis of the Great Depression attribute anything internationally other than the infamous US Smoot-Hawley Act setting in motion the age of protectionism in June 1930. It was the financial war between European nations attacking each other's bond markets openly shorting them that led to all of Europe defaulting on their debt. Even Britain went into a moratorium suspending debt payments. This is what put the pressure on capital flows sending waves of capital to the United States that to sane degree was kind of like the capital flow to Japan into 1989. This put tremendous pressure upon the dollar driving it to new record highs that were misread by the politicians who did not understand capital flow. They responded with Smoot-Hawley misreading the entire set of facts. (see Greatest Bull Market In History) (Herbert Hoover's memoirs).

It is true that today we have Keynesian and Monetarist theories to manage the crisis. Sad to say, neither one will now work. Bernanke has responded in force dropping the federal funds rate from 5.25% to .25%. He has also opened the Fed Window and thrown out more than $1 trillion in 13 months. However, as admirable as this may be, he has no tool that will do the job. Milton Friedman was correct! The Great Depression was not caused by the decline in the stock market. The event was set in motion by the credit and banking crisis that resulted in a one-third contraction in the money supply.

Interest rates will do nothing. The flight to quality always takes place so what happens is a two-fold punch. (1) Interest rates collapse because capital seeks preservation not yield and will accept during such times virtually a zero rate of return, and (2) the flight to quality takes more available cash from the private sector because government debt truly does compete with the private sector. We are seeing this even now. Federal debt becomes the place to go so we see higher yields

in both state am municipal bonds because they are not quality and could default like any bank. This contracts the money supply. Opening the window and just throwing buckets of money into the system will never have any impact to reverse the trend.

Furthermore, we are now in a Floating-Exchange Rate system that has made the global economy far more complex than it was in 1929. We all know that China is one of the biggest holders of US government debt. With the contagion spreading to Russia, South America, and China aside from Europe, we see a steeper decline in the China stock market than we do in the United States because that is where capital had concentrated domestically. If China needs money to stimulate its own economy when exports appear to be collapsing by about 50%, then we can see that the Keynesian model is worthless. If the Fed tries to pump money into the system through buying bonds from the private sector, those bonds may be held by aliens who take the money back to their own economies. The Fed cannot be sure it is even capable of stimulating the purely domestic economy. Lower interest rates to virtually zero like Japan did during the 19905, then if capital finds a better place to invest, it can leave for a higher rate of interest as capital did from Japan to the United states, which is why their domestic economy was never stimulated by the' lower interest rates. Leverage during the Great Depression was not even remotely close to what we have to face today. The credit-default swaps are alone worth about $60 trillion. This was a stupid product for it has so tangled the world there may be no way out. This product created the false illusion that you did not have to worry about the quality of the loan because it was insured. We have no way of covering this level of implosion. Add the unfunded entitlements and then the state and local debts who cannot print money to cover their shortfall s, and we are looking at a contraction of debt that is simply beyond all contemplation.

So What Now?

So now that we see it is not Wall Street, again, but the banks, perhaps we can separate the facts from the fantasy. We can now see that there are two separate and distinct forecasts to be made - (1) economy and (2) stock market. Economic Depressions have a duration unfortunately of generally 23 years with an outside potential of 26 years. The 1873 Panic led to a economic depression of really 23 years into 1896. There were bouts with high volatility and injection of major waves of inflation following the major silver discoveries. It was the age of the Silver Democrats who tried to create inflation by over-valuing silver relative to gold. This created a wave of European-American arbitrage where silver flowed into the US exchanging it for gold, which then flowed back to Europe. By 1896, the US Treasury was broke.

The Panic of 1873 marked the collapse of J. Cook & Co, the huge investment bank that was the 19th Century version of Goldman Sachs. They went bust because of excessive leverage in railroad stocks. It matters not what the instrument may be, it is always the leverage, which set the tone for a economic depression that lasted into 1896 where JP Morgan became famous for leading a bailout of the us Treasury organizing a loan of gold bullion. The stock market rallied and made new highs with plenty of panics between 1873 and 1896. The point is, The Panic of 1893 was quite a horrible one. The point is, the stock market is not a reflection of the economy. It often trades up in anticipation of better times, and trades down on those same perceptions of bad times. In both cases, new highs or lows unfold even contrary to economic trends.

We will see new highs in the now long before we see the final low in the economy. The ideal lows on a timing basis for the stock market will be as soon as April 2009 or by June of 2009. The more pronounced lows would be due on a timing basis between December 2009 and April 2010. The most extreme target would seem to be August 2010. The shorter the resolution to the stock market low, the sooner we will start to see much higher volatility.

The low for the Dow would be indicated by reaching the 3,500-4,000 area. A 2008 closing below 12,000 in the cash now Jones Industrials will signal that the bear market is underway into at least 2009 if not 2010. A year-end closing for 2008 below the 9,700-9,800 level, will signal higher volatility as well. The real critical level for the closing of 2008 will be the 7,200 area generally. A year-end closing beneath this general level will signal that we could see the sharp decline to test the extremes support at 3,600-4,000 by as early as April 19th, 2009 going into May /June 2009. If we were to drop so quickly into those targets, this would be most likely the major low with a significant rally into at least April 16th, 2010.

The less volatile outcome would be a prolonged decline into the December 2009 target to about April 16th, 2010. A low at that late date would tend to project out for a high as early as June 2011 or into late 2012. Nevertheless, volatility appears to be very high. Those who were at the 1985 Economic conference in Princeton, may want to review those video tapes. The volatility we were looking at 20-30 years into the future is now. As 3 of the 5 major investment bankers failed, Merrill, Lehman and Bear, the liquidity has evaporated so the swings are going to be much more dramatic.

The major support is 3,600 on the now Industrials.

During '09, the support area appears to be 6,600, 5,000, and 4,000-3,600. Clearly, resistance is shaping up at 9,700-9,800. It would take a monthly close back above the 12,400 level to signal new highs are likely. If we saw a complete collapse into a low by April 2009 or June 2009 reaching the 4,000 general area, this would be the major low with most likely a hyper-inflationary spiral developing thereafter. In that case, the now Jones Industrials could be back at even new highs as early as mid 2011 or going into late 2012.

Gold has decoupled from oil as it should and has been rising on an ounce-to-barrel ratio. Here, the pivot area for 2009 seems to be the $730-$760 area with the key support being still at the $525-$540 zone. The major high intraday was on March 17th, 2008. A weekly closing below $800 warns of consolidation. Only a monthly closing below the $535 area would signal a major high is in place. The more critical support appears to be at about $680 - $705. A weekly closing beneath this area will also warn of a potential consolidation. A major high is possible as early as 2010-2011 with the potential for an exponential rally into 2015 if there is any kind of a low going into 2011.45. The key to watch will be crude Oil. The collapse of Investment Banks has removed the speculation that exaggerated the trend. A year-end close below $40 for 2008 would signal a major high and serious economic decline ahead.

There Are No Tools Left! The Emperor Has No Clothes

It is hard to explain to someone who believe he has power, that he really has nothing of any significance. This becomes the story of the Emperor Has No Clothes. No one will tell him, and if you do, it may be off-with-your-head. This is akin to the man behind the curtain in the Wizard of OZ trying to keep up the whole illusion. After all, why do we vote for people unless we believe that will somehow change our lives?

Interest Rates

When an economy is rising and the stock market is exploding, interest rates always rise because the demand for money is rising because people believe that they can make a profit. Government pretend to be raising interest rates to stop inflation, but they do not create a trend contrary to the free markets. What happened in 1980 was merely that the government over-shoots the differential between expectations and the rate of interest. If you believe the stock market will double, you will pay 20% interest. A rising interest rate does not create a bear market. Only when the rate of interest exceeds expectations of potential profit offering almost a fixed secured return, will capital leave the speculative market and run to the bond market. In a bear market, interest rates always decline because of the flight to quality.

When there is a risk of a .banking crisis as well, then the flight to quality shows that capital is willing to accept virtually zero in return for the privilege to park itself is a secure manner to preserve the future.

In both cases, the government may accelerate the trend, but by no means can they create the trend or alter the trend. Lowering interest rates to zero right now will not reverse the economic decline. People will look out the window and until they feel confident again, they will not come out from behind the castle walls. Japan lowered interest rates to virtually zero for nearly a decade. All it did was fuel the carry trade whereby yen was borrowed at 0.1 % and invested in dollars at 5-8%. There was little opportunity to invest domestically in Japan and the stock market languished in a broad consolidation with flurries the upside every-now-and-again.

Monetary Theory

The Fed has already put into the system about $1 trillion in 13 months. The real problem is they are buying back US government debt injecting cash into the system. But if those bonds are sold to the Fed by foreign holders, there can be no injection of cash into the domestic economy. This amounts to the monetization of our debt in any event. Clearly, buying bonds from the market is not a guaranteed increase in domestic money supply especially when the velocity of money is itself collapsing. Borrowing heavily all these years and depending on foreign investors to buy that debt, altered the course of economics. Of course there has always been the foreign investor, but there has not been the floating exchange rate system. The rise and fall of the dollar itself can now either attract foreign capital with an advance or repel capital with its decline. Like we needed another new variable.

Infrastructure Spending

There really is nothing left in the tool bag that can help even to mitigate the coming Economic Depression. The unemployment rate at the end of 1930 was only about 8.9% - similar to the 1975 recession. Things were very slow back then. Even housing was not moving and people took whatever offers came their way. It was the Dust Bowl that began in 1934 that sent the unemployment rising after the 1932 low in the stock market. About 40% of the work force was agrarian. Hence, Congress could not pass a law to make it rain. The real devastation was that this presented a huge portion of the work force that had to be retrained into skilled labor. It was the Great Depression that finally by force of necessity, created an industrial work force that may have taken another 200 years to unfold by gradual transformation.

The WPA was formed in 1935, 3 years after the low in the stock market (1932). It had a slow and marginal success. At best, if we attribute all improvement to this one program, very unlikely, unemployment was only reduced by about 20%.

1935 20.3%

1936 16.9%

1937 14.3%

1938 19.0%

1939 17.2%

1940 14.6%

Even if we attribute everything to the WPA, all the way into 1940, the most the unemployment declines was by 30%. However, at the end of World War II, we see an Unemployment rate of 1.9% by 1945. Any ideas that we can spend trillions on infrastructure and make it all better, forget it.

Turning to infrastructure in the middle of a debt crisis makes no sense. The idea of just spending money will somehow stimulate the economy, will not work. This is like trying to fight in the desert of Iraq using the same tactics as in Vietnam. There has to be sane connection to what we are doing. Just because FDR instituted the WPA when we had a huge displacement issue in the work force, almost 6 years after the crash began, makes no sense at all for our current problems. As I said, this is like buying your wife a mink coat to somehow influence your kid to get their grades up. The connection is tenuous at best and nonexistent in all reality.

Summary

Unless we attack the debt structure directly, there is no point in counting upon any government to help mitigate the problem and more-likely-than-not, our very future may be recast in so many ways, the level of frustration will rise, and that leads to war because war distracts the people from hanging their own politicians. The oldest trick in the book is to blame the guy next-door down. Unless we are honestly prepared to truly 1) reorganize the structure of government, 2) reorganize the entire debt structure both private and public, 3) regulate leverage, 4) restore usury laws that will free up personal income, and 5) look at just eliminating the federal income tax in combination with 6) establishing a new national heathcare system that will restructure all pension plans public and private, there is not much hope for the future from government. Our definition of money (M1) does not include bonds so we can fool ourselves by issuing $10 trillion in bonds is different than printing the cash. It is still money. Taxes are needed in a gold standard where money cannot be created. Stop competing with the states, control the budget as a percent of GDP, increase the money supply to that degree, and stop the taxing when money is created by leverage and velocity anyway. This will restore jobs and inject huge confidence as in 1964 when the payroll tax was cut permanently. One-offs never work. People save the rebates for a rainy day. We need real honest reform since the states will go broke and seek handouts as well. So, it is time to get real. It is time we restructure the entire system including the banks which always cause the problem. We don't need excessive regulation of things that did not create the problem when the real culprits always escape.

You may send comments directly to Martin Armstrong at ArmstrongEconomics@GMail.com.

January 09, 2009 in Martin Armstrong | Perma

Martin Armstrong: The Coming Great Depression

Armstrong EconomicsThe Coming Great DepressionWhy Government Is Powerless

It is frustrating to read so many comparisons of our current situation with 1929 while watching policy be set-in-motion to create spending on infrastructure. Everyone has their hand out looking for a bailout like a bunch of street burns pleading for money so they can get drunk or stay drunk. Almost nothing of what I have read is close to being accurate. The scary part is depressions are inevitably caused by politicians who may be paving the road with good intentions, but are relying upon analysis so biased, we do not stand a chance.

The stock market by no means predicts the economy. A stock market crash does not cause a Depression. The Crash of 1903 was properly titled – “The Rich Man's Panic." What has always distinguished a recession from a Depression is the stock market drop may signal a recession, but the collapse in debt signals a Depression. This Depression was set in motion by (1) excessive leverage by the banks once more, but (2) the lifting of usury laws back in 1980 to fight inflation that opened the door to the highest consumer interest rates in thousands of years and shifted spending that created jobs into the banks as interest on things like credit cards. As a percent of GDP, household debt doubled since 1980 making the banks rich and now the clear and present danger to our economic survival. A greater proportion of spending by the consumer that use to go to savings and creating jobs, goes to interest and that has undermined the ability to avoid a major economic melt-down.

The crisis in banking has distinguished depression from recession. The very term "Black Friday" comes from the Panic of 1869 when the mob was dragging bankers out of their offices and hanging them in New York. They had to send in troops to stop the riot. A banking collapse destroys the capital formation of a nation and that is what creates the Depression. The stock market is not the problem despite the fact it is visible and measurable and may decline 40%, 60% or even 89% like in 1929-32. But the stock market decline is normally measured in months (30-37) whereas the economic decline is measured in years (23-26). Beware of schizophrenic analysis that is often mutually contradictory or often antagonistic in part or in quality for far too often people think they have to offer a reason for every daily movement.

Our fate will not be determined by the stock market performance. Neither can we stimulate the economy by increasing spending on infrastructure any more than buying your wife a mink coat, will improve the grades of your child in school. We are facing a Depression that will last 23-26 years. The response of government is going to seal our fate because they cannot learn from the past and will make the same mistakes that every politician has made before them. Even if the Dow Industrials make new highs next week (impossible), the Depression is unstoppable with current models and tools.

Stocks & Consumers vs. Investment Banks

Let us set the record straight. The Stock Market is a mere reflection of the economy like looking at yourself in a mirror. It is not the economy and does not even provide a reliable forecasting tool of what is to come economically. We are headed into the debt tsunami that is of historical proportions unheard-of in history. There have been the big debt crisis incidents that have hobbled nations, toppled kings, and set in motion economic dark ages. It is so critical to understand the difference between the economy and the stock market, for unless you comprehend this basic and root distinction between the two, survival may be impossible.

To the left I have provided the Economic Confidence Model for the immediate decline. You will notice I did not call this the "stock market model" nor a model for gold, oil, or commodities. I used the word "economic" with distinct and clear purpose. I have stressed it does not forecast the fate, of a particular market or even a particular economy. It is the global economic cycle some may call even a business cycle. Please note that what does line-up and peaks precisely with this model often even to the specific day that was calculated decades advance is the area of primary focus. Yet the US stock market reached a high precisely with this model and then rallied to a new high price 8.6 months later. In Japan, the NIKKEI 225 peaked precisely on February 26th, 2007. This is not a very good omen. But there was something profound that turned down with the February 27th, 2007 target - the S&P Case-Shiller index of housing prices in 20 cities. February 2007 was the peak for this cycle in the debt markets - not the US stock market.

The stock market always bottoms in advance of the economic low. In fact, we will see new highs in the now even in the middle of a Great Depression. At least the 1929 cycle was more of a bubble top in stocks than what we have in place currently in the US stock market. We still had the bubble top in the NASDAQ back in 2000, but this illustrates the point. There was a major explosive speculative boom. The bubble burst in 2000 and there was a moderate investment recession into 2002, but there was no appreciable economic decline that was set in motion because of that crash. Currently, we have a major high in 2007, but it was not a bubble top because it was not the focus of speculation. The real concentration of capital that created the bubble top, took place in the debt markets. This is the origin of the economic depression - not stocks and not the displacement of farmers because of a 7 year drought created by the Dust Bowl that invoked the response of the Works Progress Administration (WPA) in 1935. Keep in mind the stock market bottomed in the mid summer of 1932 when unemployment was not excessive from a historical perspective. The 25% level of unemployment came after the major 1932 stock market low that was followed by both the banking crisis after the election of FDR and before his fateful inauguration. The Banking Crisis came about because of rumors that Roosevelt was going to confiscate gold. Herbert Hoover published his memoirs showing letters written to Roosevelt pleading with him to make a statement that the rumors were false. He did not.

It’s the Debt Level Stupid

In 1907, the excessive debt was in the stock market. Call Money Rates (the level of interest paid to support broker loans) reached 125%. Even 1929 never came close to such levels. This also illustrates that the capital markets do not have enough money to invest equally on all levels in all segments of a domestic economy or in particular nations. To create the boom-bust, it requires the concentration of capital. A bubble top is formed when the majority of those seeking to employ money to make money are focused in a particular market or even country. The 1907 Crash was a bubble top because capital invested on a highly concentrated basis in railroad stocks. The bubble top in Japan back in 1989 was caused by a concentration of both domestic and international capital that had made Japan the number one market in the World. It is this concentration of capital that creates the boom and bust cycle. If money was evenly disbursed like the socialistic & communistic philosophies argue, we would be back to the dark ages where there was no concentration of capital and no economy beyond the walls of the castle so to speak. That is why communism failed.

It is the overall level of debt that has reached a bubble top in almost every possible area. For example, in 1980, household debt was about 50% of GDP. Going into the February 2007 high, it reached about 100% of GDP. We must also realize that something profound took place back in 1980. Americans would on the first blush seem to be living it up, buying everything they can on credit and have piles of tangible assets to show for it. That is like looking at the statistics for carrots and arguing that they are lethal because every person who has ever eaten a carrot is dead or in the process of a gradual slow death. This absurd example illustrates the bias that can produce the schizophrenic analysis.

There were, once upon a time, usury laws that generally held any interest rate greater than 10% was illegal. The Federal Reserve under Paul Volker believed that interest rates needed to be raised to insane levels to stop the runaway inflation, which was the first stone that hit the water sending the shock waves that we are having to pay for today. Once the usury laws were altered so the Fed could fight inflation, it set in motion the doubling of household debt, not to mention the national debt. At 8%, the principle is doubled through interest in less than 10 years. The national debt exploded from $1 to about $10 trillion in 25 years and household debt has doubled. Some states now consider usury to be 26%. Historically, these are the interest rates paid by the very worst of all debtors - the bankrupts. In fact, in China, the worst creditors historically paid at best 10%. What we have done is the lifting of usury to fight inflation back in 1980, has resulted in usury now being so high, a larger portion of income of the common worker is spent on interest, not buying goods & services that even create jobs. This is one primary reason why jobs have been leaving as well. The consumer needs the lowest possible price and labor wants the highest wages, and to stay competitive, producers leave taking manufacturing jobs as well as service jobs. The extraordinary rise in interest rates that are historical highs since at least pre-Roman times, could not have been possible but for the lifting of usury laws back in1980 to fight inflation. This amounted to setting a fire to try to stop a brush fire that failed. Consumers pay the highest rates in thousands of years that feed the banks at the expense of economic growth. Even the National Debt rose from $2. 1 to $8.5 trillion between 1 986 and 2006 with $6. 1 trillion being interest. We are funding the nation on a credit card and destroying the economy simultaneously.

This has been enhanced by the tremendous leverage and false position that were created in the derivative markets causing the banks to just implode. Indeed, this is the origin of the economic Depression we are facing. The $700 billion bailout might have worked if Paulson did what he said he would - buy the debt and take it out of the banks. Had the debt been segregated into a pool and managed independently by a hedge fund manager not an investment banker, we could have mitigated the problem. But that is now too late. The credit implosion is taking place on a wholesale basis around the world. The more the economy declines in housing prices, the greater the defaults, the greater the foreclosures, and the lower the economy will move. We are now in a downward spiral that cannot be fixed by indirect schemes. As I said, you cannot get your kid's test scores up by purchasing a mink coat for your wife. Everyone will have their hand out begging for infrastructure money. But the theory of just spending money that will somehow make things better, it is like handing Mexico a trillion dollars and arguing that they will buy US goods that will somehow reverse the economy.

The leveraging of debt by the Investment Banks in particular has undermined the global economy. Where household debt has doubled since 1980, the professional financial service sector has seen a rise from 21% of GDP in 1980 to 116% by February 2007. Now consider the debt that they created with the mortgages is already down by 50% and falling, the bailouts will keep coming. To help correct the problem, the commercial banks will tighten credit to make their exposure less, and in fact, their solvency ratios will require it anyway. This we can expect to see not just in business, but housing and car loans that will contract the economy as well.

The Great Depression is not the perfect model for today. It was a complete capital contraction. The stock market basis the now Dow Jones Industrials fell 89% between September 3rd, 1929 and July 1932. The contraction in debt was quite massive. Then too, the leverage in banks collapsed that reduces the velocity of money and therefore the money supply. The banks were the first real widespread failures with 608 in 1930. Between February and August 1931, the commercial banks began to bleed profusely as bank deposits fell almost $3 billion or about 9% of all deposits. As 1932 began, the number of bank failures reached 1,860. The massive amount of bank failures in the thousands took place with the rumor of Roosevelt's intention to confiscate gold. Although he denied that was his policy the night of the elections, he remained silent refusing to discuss the issue until he was sworn in. on March 6, 1933 just 2 days after taking office, Roosevelt called a bank "holiday" closing the banks from which at least another 2,500 never reopened.

All of these events are contrasted by the collapse in national debts in Europe. Other than Herbert Hoover’s memoirs, I have yet to read any analysis of the Great Depression attribute anything internationally other than the infamous US Smoot-Hawley Act setting in motion the age of protectionism in June 1930. It was the financial war between European nations attacking each other's bond markets openly shorting them that led to all of Europe defaulting on their debt. Even Britain went into a moratorium suspending debt payments. This is what put the pressure on capital flows sending waves of capital to the United States that to sane degree was kind of like the capital flow to Japan into 1989. This put tremendous pressure upon the dollar driving it to new record highs that were misread by the politicians who did not understand capital flow. They responded with Smoot-Hawley misreading the entire set of facts. (see Greatest Bull Market In

History) (Herbert Hoover's memoirs).

It is true that today we have Keynesian and Monetarist theories to manage the crisis. Sad to say, neither one will now work. Bernanke has responded in force dropping the federal funds rate from 5.25% to .25%. He has also opened the Fed Window and thrown out more than $1 trillion in 13 months. However, as admirable as this may be, he has no tool that will do the job. Milton Friedman was correct! The Great Depression was not caused by the decline in the stock market. The event was set in motion by the credit and banking crisis that resulted in a one-third contraction in the money supply.

Interest rates will do nothing. The flight to quality always takes place so what happens is a two-fold punch. (1) Interest rates collapse because capital seeks preservation not yield and will accept during such times virtually a zero rate of return, and (2) the flight to quality takes more available cash from the private sector because government debt truly does compete with the private sector. We are seeing this even now. Federal debt becomes the place to go so we see higher yields in both state am municipal bonds because they are not quality and could default like any bank. This contracts the money supply. Opening the window and just throwing buckets of money into the system will never have any impact to reverse the trend.

Furthermore, we are now in a Floating-Exchange Rate system that has made the global economy far more complex than it was in 1929. We all know that China is one of the biggest holders of US government debt. With the contagion spreading to Russia, South America, and China aside from Europe, we see a steeper decline in the China stock market than we do in the United States because that is where capital had concentrated domestically. If China needs money to stimulate its own economy when exports appear to be collapsing by about 50%, then we can see that the Keynesian model is worthless. If the Fed tries to pump money into the system through buying bonds from the private sector, those bonds may be held by aliens who take the money back to their own economies. The Fed cannot be sure it is even capable of stimulating the purely domestic economy. Lower interest rates to virtually zero like Japan did during the 19905, then if capital finds a better place to invest, it can leave for a higher rate of interest as capital did from Japan to the United states, which is why their domestic economy was never stimulated by the' lower interest rates. Leverage during the Great Depression was not even remotely close to what we have to face today. The credit-default swaps are alone worth about $60 trillion. This was a stupid product for it has so tangled the world there may be no way out. This product created the false illusion that you did not have to worry about

the quality of the loan because it was insured. We have no way of covering this level of implosion. Add the unfunded entitlements and then the state and local debts who cannot print money to cover their shortfall s, and we are looking at a contraction of debt that is simply beyond all contemplation.

So What Now?

So now that we see it is not Wall Street, again, but the banks, perhaps we can separate the facts from the fantasy. We can now see that there are two separate and distinct forecasts to be made - (1) economy and (2) stock market. Economic Depressions have a duration unfortunately of generally 23 years with an outside potential of 26 years. The 1873 Panic led to a economic depression of really 23 years into 1896. There were bouts with high volatility and injection of major waves of inflation following the major silver discoveries. It was the age of the Silver Democrats who tried to create inflation by over-valuing silver relative to gold. This created a wave of European-American arbitrage where silver flowed into the US exchanging it for gold, which then flowed back to Europe. By 1896, the US Treasury was broke.

The Panic of 1873 marked the collapse of J. Cook & Co, the huge investment bank that was the 19th Century version of Goldman Sachs. They went

bust because of excessive leverage in railroad stocks. It matters not what the instrument may be, it is always the leverage, which set the tone for a economic depression that lasted into 1896 where JP Morgan became famous for leading a bailout of the us Treasury organizing a loan of gold bullion. The stock market rallied and made new highs with plenty of panics between 1873 and 1896. The point is, The Panic of 1893 was quite a horrible one. The point is, the stock market is not a reflection of the economy. It often trades up in anticipation of better times, and trades down on those same perceptions of bad times. In both cases, new highs or lows unfold even contrary to economic trends.

We will see new highs in the now long before we see the final low in the economy. The ideal lows on a timing basis for the stock market will be as soon as April 2009 or by June of 2009. The more pronounced lows would be due on a timing basis between December 2009 and April 2010. The most extreme target would seem to be August 2010. The shorter the resolution to the stock market low, the sooner we will start to see much higher volatility.

The low for the Dow would be indicated by reaching the 3,500-4,000 area. A 2008 closing below 12,000 in the cash now Jones Industrials will signal that the bear market is underway into at least 2009 if not 2010. A year-end closing for 2008

below the 9,700-9,800 level, will signal higher volatility as well. The real critical level for the closing of 2008 will be the 7,200 area generally. A year-end closing beneath this general level will signal that we could see the sharp decline to test the extremes support at 3,600-4,000 by as early as April 19th, 2009 going into May /June 2009. If we were to drop so quickly into those targets, this would be most likely the major low with a significant rally into at least April 16th, 2010.

The less volatile outcome would be a prolonged decline into the December 2009 target to about April 16th, 2010. A low at that late date would tend to project out for a high as early as June 2011 or into late 2012. Nevertheless, volatility appears to be very high. Those who were at the 1985 Economic conference in Princeton, may want to review those video tapes. The volatility we were looking at 20-30 years into the future is now. As 3 of the 5 major investment bankers failed, Merrill, Lehman and Bear, the liquidity has evaporated so the swings are going to be much more dramatic.

The major support is 3,600 on the now Industrials. During '09, the support area appears to be 6,600, 5,000, and 4,000-3,600. Clearly, resistance is shaping up at 9,700-9,800. It would take a monthly close back above the 12,400 level to signal new highs are likely. If we saw a complete collapse into a low by April 2009 or June 2009 reaching the 4,000 general area, this would be the major low

with most likely a hyper-inflationary spiral developing thereafter. In that case, the now Jones Industrials could be back at even new highs as early as mid 2011 or going into late 2012.

Gold has decoupled from oil as it should and has been rising on an ounce-to-barrel ratio. Here, the pivot area for 2009 seems to be the $730-$760 area with the key support being still at the $525-$540 zone. The major high intraday was on March 17th, 2008. A weekly closing below $800 warns of consolidation. Only a monthly closing below the $535 area would signal a major high is in place. The more critical support appears to be at about $680 - $705. A weekly closing beneath this area will also warn of a potential consolidation. A major high is possible as early as 2010-2011 with the potential for an exponential rally into 2015 if there is any kind of a low going into 2011.45. The key to watch will be crude Oil. The collapse of Investment Banks has removed the speculation that exaggerated the trend. A year-end close below $40 for 2008 would signal a major high and serious economic decline ahead.

There Are No Tools Left! The Emperor Has No Clothes

It is hard to explain to someone who believe he has power, that he really has nothing of any significance. This becomes the story of the Emperor Has No Clothes. No one will tell him, and if you do, it may be off-with-your-head. This is akin to the man behind the curtain in the Wizard of OZ trying to keep up the whole illusion. After all, why do we vote for people unless we believe that will somehow change our lives?

Interest Rates

When an economy is rising and the stock market is exploding, interest rates always rise because the demand for money is rising because people believe that they can make a profit. Government pretend to be raising interest rates to stop inflation, but they do not create a trend contrary to the free markets. What happened in 1980 was merely that the government over-shoots the differential between expectations and the rate of interest. If you believe the stock market will double, you will pay 20% interest. A rising interest rate does not create a bear market. Only when the rate of interest exceeds expectations of potential profit offering almost a fixed secured return, will capital leave the speculative market and run to the bond market. In a bear market, interest rates always decline because of the flight to quality. When there is a risk of a .banking crisis as well, then the flight to quality shows that capital is willing to accept virtually zero in return for the privilege to park itself is a secure manner to preserve the future.

In both cases, the government may accelerate the

trend, but by no means can they create the trend or alter the trend. Lowering interest rates to zero right now will not reverse the economic decline. People will look out the window and until they feel confident again, they will not come out from behind the castle walls. Japan lowered interest rates to virtually zero for nearly a decade. All it did was fuel the carry trade whereby yen was borrowed at 0.1 % and invested in dollars at 5-8%. There was little opportunity to invest domestically in Japan and the stock market languished in a broad consolidation with flurries the upside every-now-and-again.

Monetary Theory

The Fed has already put into the system about $1 trillion in 13 months. The real problem is they are buying back US government debt injecting cash into the system. But if those bonds are sold to the Fed by foreign holders, there can be no injection of cash into the domestic economy. This amounts to the monetization of our debt in any event. Clearly, buying bonds from the market is not a guaranteed increase in domestic money supply especially when the velocity of money is itself collapsing. Borrowing heavily all these years and depending on foreign investors to buy that debt, altered the course of economics. Of course there has always been the foreign investor, but there has not been the floating exchange rate system. The rise and fall of the dollar itself can now either

attract foreign capital with an advance or repel capital with its decline. Like we needed another new variable.

Infrastructure Spending

There really is nothing left in the tool bag that can help even to mitigate the coming Economic Depression. The unemployment rate at the end of 1930 was only about 8.9% - similar to the 1975 recession. Things were very slow back then. Even housing was not moving and people took whatever offers came their way. It was the Dust Bowl that began in 1934 that sent the unemployment rising after the 1932 low in the stock market. About 40% of the work force was agrarian. Hence, Congress could not pass a law to make it rain. The real devastation was that this presented a huge portion of the work force that had to be retrained into skilled labor. It was the Great Depression that finally by force of necessity, created an industrial work force that may have taken another 200 years to unfold by gradual transformation.

The WPA was formed in 1935, 3 years after the low in the stock market (1932). It had a slow and marginal success. At best, if we attribute all improvement to this one program, very unlikely, unemployment was only reduced by about 20%.

1935 20.3%

1936 16.9%

1937 14.3%

1938 19.0%

1939 17.2%

1940 14.6%

Even if we attribute everything to the WPA, all the way into 1940, the most the unemployment declines was by 30%. However, at the end of World War II, we see an Unemployment rate of 1.9% by 1945. Any ideas that we can spend trillions on infrastructure and make it all better, forget it.

Turning to infrastructure in the middle of a debt crisis makes no sense. The idea of just spending money will somehow stimulate the economy, will not work. This is like trying to fight in the desert of Iraq using the same tactics as in Vietnam. There has to be sane connection to what we are doing. Just because FDR instituted the WPA when we had a huge displacement issue in the work force, almost 6 years after the crash began, makes no sense at all for our current problems. As I said, this is like buying your wife a mink coat to somehow influence your kid to get their grades up. The connection is tenuous at best and nonexistent in all reality.

Summary

Unless we attack the debt structure directly, there is no point in counting upon any government to help mitigate the problem and more-likely-than-not, our very future may be recast in so many ways, the level of frustration will rise, and that leads to war because war distracts the people from hanging their own politicians. The oldest trick in the book is to blame the guy next-door down. Unless we are honestly prepared to truly 1) reorganize the structure of government, 2) reorganize the entire debt structure both private and public, 3) regulate leverage, 4) restore usury laws that will free up personal income, and 5) look at just eliminating the federal income tax in combination with 6) establishing a new national heathcare system that will restructure all pension plans public and private, there is not much hope for the future from government. Our definition of money (M1) does not include bonds so we can fool ourselves by issuing $10 trillion in bonds is different than printing the cash. It is still money. Taxes are needed in a gold standard where money cannot be created. Stop competing with the states, control the budget as a percent of GDP, increase the money supply to that degree, and stop the taxing when money is created by leverage and velocity anyway. This will restore jobs and inject huge confidence as in 1964 when the payroll tax was cut permanently. One-offs never work. People save the rebates for a rainy day. We need real honest reform since the states will go broke and seek handouts as well. So, it is time to get real. It is time we restructure the entire system including the banks which always cause the problem. We don't need excessive regulation of things that did not create the problem when the real culprits always escape.

You may send comments directly to Martin Armstrong at ArmstrongEconomics@GMail.com.

U.S. Debt Default, Dollar Collapse Altogether Likely

2009-02-08T18:35:00.000-08:00

U.S. Debt Default, Dollar Collapse Altogether Likely
by: James West February 03, 2009
SeekingAlpha.com

The prospect of the United States defaulting on its debt is not just likely. It's inevitable, and imminent.

The regulatory black holes into which sanity and reason disappear on a daily basis are soon to collapse under the mass of their sheer size. The circle jerk going on among G7 governments has to end – the steady advance of gold, even in the face of a managed price, exposes the real value of the U.S. dollar, as opposed to its apparent value expressed in the dollar index.

Is 2009 the year that the United States formally defaults? And with that, will the dollar collapse be rolled back ten for one or more?

There are a lot of reasons to support that theory. To Wall Street economists, such an event is heresy and therefore unthinkable. Yet Wall Street is the very La-la-land that bred the idea of a perpetually indebted nation in the first place.

Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.

Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.

Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009. The further out the maturities on notes, the more bearish the sentiment towards them. The only way to entice buyers is through the increase in yields.

But with yields at 1.82 per cent, five-year notes were met with a demand for 1.98 times the amount offered - the lowest bid-to-cover ratio since September. A sell-off in treasuries began in earnest upon the conclusion of that auction.

The U.S. Federal Reserve suggested last week that it was going to step up its treasury-buying activity, and the mainstream media interprets this as a form of market support. What it actually is evidence of growing anxiety and desperation on the part of the Fed as the realization dawns that demand for treasuries is progressively evaporating.

The increased demand for gold as an investment witnessed throughout the last two weeks that has pushed gold to a 4 month high is further evidence that investors across the board are gravitating more towards gold and away from U.S. debt.

So what is the catalyzing event that will precipitate outright capitulation?

I think the spin-controlled version of events will make the collapse of the derivatives market the red herring that facilitates the aw-shucks-we-have-no-choice shoe-gazing moment possible, and that’s exactly the parachute the government needs to retain a veneer of credibility - at least in its own delusional mirror.

The announcement that the CFTC was about to become the target of a regulatory overhaul supports this theory. Consistent with his unfortunate proclivity to hiring foxes to guard chickens, Barack Obama’s choice for CFTC commissioner Gary Gensler was the undersecretary of the U.S. Treasury when the Commodity Futures Modernization Act of 2000 was passed, and is one of its architects. This was the piece of legislation that was put forth to appease the opposition to “dark market” trading in certain OTC derivatives first noisily derided by CFTC commissioner Brooksley Born in 1998.

Ignoring Born’s admonishments with this act, it exempted credit default swaps (CDO’s) from regulation, resulting in the somewhere between 58 and 300 trillion dollars in value presently under threat if the positions were to be unwound. Because of their unregulated status, counterparties in the largest transactions can simply “roll forward” contracts, instead of the losing party in the transaction covering their loss with a transfer of money. It is this massive “nominal” value that could be the Achilles heel of what’s left of the U.S. banking system, and by extension, the U.S. dollar.

I don’t arrive at this conclusion because I like making catastrophic outlandish predictions. Its merely the result of following certain logical paths to their most likely outcome based on what has happened in the past.

In discussions on this topic with editors of top tier financial publications, such speculation is dismissed out of hand, and the argument to refute the likelihood of such outcomes is never brought forward.

Gold exchange traded funds (ETFs) are now the largest holders of physical gold, and as a proxy for investors who don’t want to be encumbered with taking delivery of the physical, provide a simple way to participate in the gold market.

United States citizens should bear in mind, however, that should the banking system be brought down completely by the collapse of the futures market, proxies for gold such as ETF’s and bullion funds could theoretically be targeted by a government desperate for possession of value. The risk from security in holding physical bullion is matched by the risk of confiscation by government in these volatile times. Don’t forget, the government confiscated and outlawed private ownership of gold in 1933 in support of an ill-conceived gold standard, which to some extent, was that era’s spin to halt the flight of gold (and real value) from U.S. soil.

Don’t think for a minute such drastic events are outside the realm of possibility. If somebody had told you in 1998 that a bunch of angry crazy pseudo-Muslims were going to fly jetliners into the World Trade Center, what would you have said?

Correction: 3 banks closed last Friday - not 2

2009-02-08T18:12:00.000-08:00

Two banks in California, 1 in Georgia are closed
By John Letzing, MarketWatch
Last update: 4:41 p.m. EST Feb. 8, 2009

SAN FRANCISCO (MarketWatch) -- Regulators shut two banks in California and one in the Atlanta area on Friday, bringing the number of U.S. failures this year to nine, while marking the 34th collapse since the recession began.

full story...

United States Progresses Down the Path to Depression

2009-02-08T17:04:00.000-08:00

A very important article to consider:

United States Progresses Down the Path to Depression
By Lawrence Tout
Sunday, February 8th 2009

What’s in a Depression?
Is the USA in a Depression yet? It’s a question that a lot of us are asking currently. Well it’s rather hard to tell because it seems that no one really knows how to define a depression. It appears there is no formal definition to be had with attempts ranging from the ‘not very helpful’ to the ‘how the heck did you arrive at those figures’ types. The vague to the more specific range of definitions basically run from “a prolonged and severe downturn in economic activity” to “a decline in real GDP exceeding 10% or a recession lasting 3 years or more”.
Does it really matter you may well ask? To which I would reply – I wish Mr. Bernanke had the foresight to manage our deflation expectations as well as he managed our inflation expectations. When you are dealing with rigged casinos rather than free markets; when whole economies teeter on a knife-edge, and when two thirds of GDP are derived from wanton consumption, consumer confidence and expectations are key.
In the absence of a sound formula therefore, it is more apt to rely on popular consensus. So can we confidently say we are in a Depression when enough Main Stream Media (MSM) economists use the ‘D’ word or maybe when it seems that ‘all-things-economic’ have gone to hell in a hand basket. Until then we will just have to read more saner commentary (try here and here), read the signposts along the way and try to make up our own minds. Interestingly enough it seems that the ‘D’ word is even sinking deep into the psyche of world leaders. Gordon Brown’s (Freudian?) slip of the tongue recently made UK headlines.
more...

FDIC Friday - 2 more banks fail

2009-02-06T20:28:00.000-08:00

California, Georgia banks are latest to be seized
By John Letzing, MarketWatch
Last update: 8:14 p.m. EST Feb. 6, 2009

SAN FRANCISCO (MarketWatch) -- Federal regulators shut down a bank in Southern California and another in the Atlanta area on Friday, bringing the number of U.S. failures this year to eight, while marking the 33rd collapse since the recession began.

McDonough, Ga.-based FirstBank Financial Services and Culver City, Calif.-based Alliance Bank were seized, according to the Federal Deposit Insurance Corp.

more...

Still want to keep money in the banks?

2009-02-05T10:35:00.000-08:00

Still want to keep money in the banks?

Banks Sitting On An Inventory Time Bomb
Posted By: Diana Olick | CNBC Real Estate Reporter
cnbc.com
| 28 Jan 2009 | 04:01 PM ET

An interesting little factoid from RealtyTrac, the online foreclosure sale site that tracks all kinds of foreclosure data.

Apparently about 70 percent of foreclosures in its database have not yet been listed on the MLS. I'm wondering why? Why are the banks sitting on all these properties instead of listing them for sale?

Okay, a couple of posibilities:
# The inventory of foreclosed properties has just exploded so rapidly and in such high volumes that the banks can't process it all as fast as they would like to.
# In a lot of cases it's taking longer to process the foreclosures themselves and the homes are getting trashed. Before the bank puts the house up for sale it has to do all the repair work, and now more repair work is needed.

Now here's a possibility that is a bit more disturbing. Rick Sharga of RealtyTrac says he can't get anyone to confirm it but he can't get anyone to deny it either:

"The lenders are simply trying to defer the losses to a later date, because having to recognize the losses short term might pose severe risks to the banks in question."

What does that mean? Well, when the properties are taken back by the bank at auction, they are often taken back for the value of the mortgage on the property. The bank puts in the bid for the value of the current mortgage and essentially pays itself back what it lost on the loan, and of course gets the house for all its trouble. In good times, the bank could profit by selling that house for more than the value of the loan, but not these days. The trouble now is just the opposite. On so many of these foreclosed homes, the property is actually worth far less than the mortgage on it. So the bank is taking it back at the mortgage value and not writing it down.

"Untold numbers of these properties sitting on banks accounting ledgers where the imputed value is considerably higher than the market value," says Sharga. And unfortunately nobody knows what that market number is.

Questions? Comments? RealtyCheck@cnbc.com
© 2009 CNBC, Inc. All Rights Reserved

URL: http://www.cnbc.com/id/28898377/

Devaluation - a Global Fad...

2009-02-04T13:29:00.000-08:00

and a recipe for Global Inflation...

Kazakhstan devalues currency amid banking crisis
By Polya Lesova, MarketWatch
Last update: 1:33 p.m. EST Feb. 4, 2009

NEW YORK (MarketWatch) -- Kazakhstan devalued its currency by about 18% Wednesday, as the mineral-rich, central Asian country struggles to contain a banking crisis and deal with the impact of tumbling oil prices.

The National Bank of Kazakhstan decided to allow the country's currency, the tenge, to fall by around 18%. The central bank set a new target rate for the tenge at 150 versus the U.S. dollar, allowing the currency to fluctuate within 3%, up or down, from that level.

The devaluation comes only days after the Kazakh government vastly expanded its role in the financial sector by nationalizing two of the four largest banks and taking 25% stakes in two other lenders. The move also follows currency devaluations in Russia, Ukraine and Belarus.

Read more.

U.S. dollar devaluation on its way

2009-02-03T21:30:00.000-08:00

U.S. dollar devaluation on its way
Posted: February 02, 2009, 4:01 PM by Diane Francis
Greed, Canadian Politics, U.S. Politics, economy

In 1992, I was given what became my favorite hotel bill keepsake when I stayed in Mexico City and was charged one million for a brief business stay.

It wasn’t a mistake. That was one million pesos and the Mexican peso was becoming worthless. By 1993, then-President Carlos Salinas de Gortari stripped three zeros from the currency and renamed it the Nuevo (or New) Peso.

The transition from worthless to one Nuevo Peso to one U.S. dollar was done in three years from January 1, 1993 to January 1, 1996. The word "nuevo" was removed from the currency and it returned to be called "peso".

Now it is 2009 and what appears to be looming, according to one authoritative press report this weekend, is a massive pre-emptive devaluation of the U.S. dollar as Team Obama readies itself to announce the “Big Bang” – a gigantic bailout of the frozen U.S. economy involving trillions of dollars.

So far, Washington has allocated US$750 billion for banking rescues and another US$825 billion for job creation projects. But that’s nothing.

Full Story

AUDIT AFTER GOLD DEALER'S SUICIDE SUGGESTS CUSTOMERS LOST MILLIONS

2009-02-03T21:17:00.000-08:00

This happened in 1983 - it can and will happen again - make sure you take physical possession of your precious metals!

AUDIT AFTER GOLD DEALER'S SUICIDE SUGGESTS CUSTOMERS LOST MILLIONS
By ROBERT J. COLE
October 5, 1983

Some $60 million worth of gold, silver and platinum sold to thousands of individuals and then supposedly stored in Rocky Mountain vaults may never have existed, an investigation suggested yesterday.

The possibility emerged in an audit conducted by the accounting firm of Touche Ross & Company in connection with the suicide last Wednesday of Alan David Saxon, 39-year-old chairman of Bullion Reserve of North America, a gold dealer with offices in Los Angeles, Dallas and Hong Kong.

Bullion Reserve has 30,000 to 35,000 customers. If the missing assets cannot be found, most of their investments may be lost.

Vaults Near Salt Lake City

Lawyers for the company said the audit showed that a depository, owned by Perpetual Storage Inc. of Salt Lake City and buried 200 feet in a nearby mountain range, contained only about $900,000 in bullion and coins. Another $140,000 to $150,000 worth of coins were found at Brinks Inc. of Los Angeles, another Bullion Reserve storage center.

The discovery, made over the weekend, prompted Bullion Reserve to file a bankruptcy petition Monday in Los Angeles, seeking court protection from its creditors.

Patrick Lynch, president of the Salt Lake City company, said that in the three years he had stored bullion for Mr. Saxon, the most he had ever seen in the vaults was about $3 million. He said it was standard practice for his company to register the bars by their serial numbers.

A Brinks executive in Los Angeles said he had been advised by his lawyers not to comment.

Where the millions of dollars in customers' money went is unclear.

Robert Abrams, Attorney General of New York, said his office had been flooded with calls about the company. His office has been investigating Bullion Reserve, which advertised heavily in the New York area, for several weeks, and the investigation is continuing.

There were reports from Mr. Abrams's office that Mr. Saxon, his wife and others closely identified with the gold dealer had received $41 million in loans from the company. And the auditors' report said ''millions of dollars'' in loans had been made to Mr. Saxon. But a laywer retained by the company said he had no such informa tion.Lawsuits have been filed seeking to recover $23 million in cash, jewelry and other assets from the company. The largest seeks to seize $16.4 million in assets, including three luxury cars and two condominiums owned by Mr. Saxon's wife and his estate.

One of the lawsuits named Arnold Kopelson and Michael Miller, officers of the now-defunct California Commercial Bank. Mr. Saxon had served briefly on the bank's board last year. The defendants were charged with receiving unauthorized transfers from Bullion Reserve of $1.7 million. The bank, closed by state regulators in May, is the subject of an investigation by the Federal Bureau of Investigation.

As related by Mr. Abrams in an interview, the events leading to Mr. Saxon's suicide and the subsequent bankruptcy of his company began a few weeks ago when the Attorney General heard a radio commercial for Bullion Reserve.

Parallels With Earlier Case

''What they were saying,'' Mr. Abrams said, ''was exactly analagous to International Gold Bullion Exchange in Florida.''

A New York State grand jury last summer indicted International Gold's two top executives, William and James Alderdice, on charges of securities fraud and grand larceny; investors in the now-defunct company lost between $20 million and $40 million.

The gist of the ads, Mr. Abrams said, was that customers could ''come and buy gold and silver bullion, have a safe and secure investment, capitalize on the appreciation of these precious metals and store them safely and securely in our own vaults in Utah.'' Although his office had not received any complaints, he said, he asked his staff to investigate.

By last Wednesday, a company lawyer had met in New York with Mr. Abrams' staff and had agreed to furnish within 24 hours financial data about the company and detailed records of its sales in New York.

Death Ruled a Suicide

That same morning, however, Mr. Saxon's body was discovered in the sauna of his $680,000 beach-front condominium in Venice, Calif. A rubber hose connected to a motorcyle's exhaust had been run inside the small enclosure and a tape had been found nearby. The Los Angeles coroner's office did not disclose the tape's contents but called the death a suicide.

Bullion Reserve named a prominent Beverly Hills law firm, Finley Kumble Wagner Heine Underberg Manley & Casey, to conduct its own investigation. The law firm, in turn, appointed Touche Ross to undertake the audit.

Mr. Abrams said he understood that Mr. Saxon's taped message said he was going to commit suicide because of financial reverses and his inability to cover recent losses.

News of the suicide touched off a brief drop in gold prices last week because traders reasoned that vast amounts of gold might be dumped on the market.

Offices Closed

All offices of Bullion Reserve have been closed since Thursday, but tape recordings promise customers that the office will open today. The firm's lawyers, however, said operations would not be resumed soon.

The events left many questions unanswered. For one, how could companies like Bullion Reserve operate so long without detection?

Attorney General Abrams criticized two Government agencies - the Securities and Exchange Commission and the Commodity Futures Trading Commission - for ''timidity and lack of enforcement'' of such companies.

Responding to Mr. Abrams, a commodities commission spokesman said in Washington that the commission had not received any complaints from Bullion Reserve's customers, that the firm was not registered with the agency and that it did not believe the firm was subject to its regulations.

Response by S.E.C.

An S.E.C. spokesman said that when the securities commission found a fraud within its jurisdiction, it pursued it. But, the spokesman added, ''not every fraud is a securities matter'' and states ''also have an important law enforcement role.''

But the central question is where Bullion Reserve's $60 million in assets went, and what Mr. Saxon's role was in its apparent disappearance.

Interviews with several suppliers and others with whom Mr. Saxon did business suggest that he was bright, charming, reserved and fairly prompt in paying his bills.

An official of Conti Commodities Inc. of Chicago said Mr. Saxon's account with that trading firm was handled ''in a businesslike manner.'' Johnson Matthey & Company of Toronto, a gold bullion supplier, dealt with Mr. Saxon regularly through its Los Angeles office.

Perpetual Storage said it had investigated Mr. Saxon's background before storing his gold and took his business ''because he didn't have anything in his file to show he was ever connected with a fraud.''

Neighbors of Mr. Saxon in Venice said that he drove a Maserati and a Porsche, but showed no other signs of affluence. He kept to himself, often walking a dog in the neighborhood, wearing cowboy boots.

Mr. Saxon moved to the condominium a few months ago, from one nearby that he had shared with his wife. He told acquaintances that he was separated from his wife and that they were getting a divorce.

Zimbabwe knocks 12 zeroes off inflation-hit dollar

2009-02-03T17:12:00.000-08:00

Zimbabwe knocks 12 zeroes off inflation-hit dollar
Mon Feb 2, 2009 7:33am EST

By Nelson Banya

HARARE (Reuters) - Zimbabwe's central bank revalued its dollar again on Monday, lopping another 12 zeros off its battered currency to try to tame hyperinflation and avert total economic collapse.

The crisis has been worsened by political stalemate between President Robert Mugabe and his rival Morgan Tsvangirai, but the opposition last week agreed to join a coalition government, raising prospects the economy could be saved from further ruin.

The southern African country is battling the world's highest inflation rate, officially put at 231 million percent, and acute shortages of food and foreign exchange.

Reserve Bank of Zimbabwe Governor Gideon Gono announced the new currency moves on Monday, adding that some foreign exchange controls will be relaxed and gold producers now can sell bullion directly and not to the central bank as in the past.

"This Monetary Policy Statement unveils yet another necessary program of revaluing our local currency, through the removal of 12 zeroes, with immediate effect," Gono said in his MPC statement.

Late last month the country allowed businesses to charge in foreign currencies in a bid to tackle inflation and Gono said those businesses could pay their workers in foreign currency.

The country's stock exchange, which has not traded for two months, would also be licensed to trade in foreign currency once listed firms and the exchange provide evaluation criteria.

Gono gave no updated inflation figures but said broad money supply growth rose from 81,000 percent in January to 658 billion percent in December.

"His statement does contain some positive measures but it does not go far enough. It would appear he is trying to restore the Zimbabwean dollar, but given the choice of multiple currencies, who would want to trade in Zimbabwe dollars?" John Robertson, a leading Harare-based economist said.

Tsvangirai, who had been under heavy pressure from southern African leaders to implement a September 15 power-sharing pact with Mugabe, is now set to become prime minister.

The unity government may be a step toward saving a once prosperous country where over half of the people now need food aid and a cholera epidemic has killed 3,229 people and infected 62,909 others -- Africa's deadliest outbreak in 15 years.

Gono said production in every major economic sector had taken a plunge.

Output of gold, the country's single major foreign currency earner, plunged by 50 percent in 2008 as companies grappled with rising costs and electricity shortages.

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Gold ends at six-month high on safe-haven buying

2009-01-30T15:35:00.000-08:00

Holdings in the largest gold ETF have leaped 8% in one month to record high

By Moming Zhou, MarketWatch

Last update: 2:32 p.m. EST Jan. 30, 2009

NEW YORK (MarketWatch) -- Gold futures rose Friday, ending the week at their highest level in six months as investors sought the safety of the metal following government data that showed the U.S. economy contracted the most in 27 years during the fourth quarter.

Rising demand for the metal has pushed holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by gold, to a new record level.

Gold for February delivery closed up $22.20, or 2.4%, at $927.30 an ounce on the Comex division of the New York Mercantile Exchange, the loftiest closing level for a front-month contract since July.

The benchmark contract has risen 3.5% this week and 4.9% this month.

"Demand remains very high internationally for ETFs, gold certificates and bullion coins and bars," said Mark O'Byrne, executive director at Gold and Silver Investments. We've seen "continuing safe haven demand for gold" due to "sharp deterioration in the global economy."

Spurring the safe-haven moves into gold, the government reported that the nation's gross domestic product contracted at a 3.8% annualized rate in the fourth quarter. That shrinkage is the largest on record since the first quarter of 1982.

Most economists expected that GDP would shrink at a 5.5% annual rate.

However, the decline would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth. Excluding the inventory buildup, GDP contracted at a 5.1% pace. See Economic Report on GDP data.

In spot trading, the London afternoon gold-fixing price -- a benchmark for gold traded directly between big institutions -- stood at $919.50 an ounce Friday, up $27.25 from the previous day.

SPDR holdings

On Thursday alone, holdings in the SPDR gold fund rose 10.49 tons, or 1.3%, to reach the new high of 843.59 tons, according to latest data from the fund. SPDR gold holdings have jumped 63 tons, or 8%, in January.

The fund's gold holdings are now nearly 80 tons higher than official gold holdings in Japan, the world's seventh-largest official gold holder.

The SPDR Gold Trust .

In other economic news, U.S. employment costs rose at the slowest pace in at least 26 years in 2008, the Labor Department reported, a sign that rising unemployment has been keeping a lid on wages and benefits. See Economic Report on unemployment.

Also on the Nymex Friday, March copper rose 0.8% to $1.4685 a pound, while March silver rose 3.5% to $12.565 an ounce. March palladium gained 1.3% to $193.30 an ounce, while April platinum gained 1.7% to $991.30 an ounce.

Among gold miners, shares of Barrick Gold Corp. , the world's largest gold mining company, fell 1.8% to $37.88. Goldcorp Inc. gained 0.8% to $29.73, and South Africa's Gold Fields Ltd. lost 0.8% to $10.56.

In other equities, the Amex Gold Bugs Index , which tracks the share prices of major gold companies, rose 2.4% to 309.15.

The iShares Gold Trust ETF added 1.8% to $91.18, while the iShares Silver Trust ETF gained 1.5% to $12.44.

The Market Vectors-Gold Miners ETF rose 2% to $35.10.

Moming Zhou is a MarketWatch reporter based in New York.

3 More Banks Fail Today

2009-01-30T15:33:00.000-08:00

Per the FDIC website:

Ocala National Bank, Ocala, FL
Suburban Federal Savings Bank, Crofton, MD
MagnetBank, Salt Lake City, UT

Zimbabwe abandons its currency

2009-01-29T21:08:00.000-08:00

Zimbabwe abandons its currency

Zimbabweans will be allowed to conduct business in other currencies, alongside the Zimbabwe dollar, in an effort to stem the country's runaway inflation.

The announcement was made by acting Finance Minister Patrick Chinamasa.

BBC southern Africa correspondent Peter Biles says the Zimbabwean dollar has become a laughing stock. A Z$100 trillion note was recently introduced.

Until now only licensed businesses could accept foreign currencies, although it was common practice.

The country is also facing a deepening humanitarian crisis as well.

A cholera outbreak has killed over 3,000 people according to the World Health Organization (WHO).

And the World Food Programme (WFP) has revised up the number of people it says need food aid.

It now says seven million Zimbabweans are in need of food aid, up from 5.1 million in June.

WFP regional spokesman Richard Lee said the situation had deteriorated rapidly.

"The economic situation has worsened more dramatically than we had anticipated," he told AFP.

"The agency is being forced to halve the cereal rations given to hungry Zimbabweans so that all the people in need can receive aid."

Hyperinflation

Mr Chinamasa made the announcement as he delivered the annual budget to parliament.

"In line with the prevailing practices by the general public, [the] government is therefore allowing the use of multiple foreign currencies for business transactions alongside the Zimbabwean dollar," he said.

The country is in the grip of world-record hyperinflation which has left the Zimbabwean dollar virtually worthless - 231m% in July 2008, the most recent figure released.

Teachers, doctors and civil servants have gone on strike complaining that their salaries - which equal trillions of Zimbabwean dollars - are not even enough to catch the bus to work each day.

Worthless

A 40-year-old Zimbabwean primary school teacher from the capital Harare, told the BBC news website earlier this week it cost nearly US$2 a day to travel to work, but inflation had reduced the average teacher's wage to the equivalent of US$1 a month.

He said he now made a living reselling maize to families in high density areas, as it made more money than teaching.

Before the announcement, shops in Zimbabwe were increasingly demanding payment in US dollars - a reality acknowledged by Mr Chinamasa.

"In the hyper-inflationary environment characterising the economy, our people are now using multiple currencies alongside the Zimbabwean dollar. These include the [South African] rand, US dollar, Botswana pula, euro and British pound among others."

A Harare resident said even street vendors were refusing to accept Zimbabwean notes.

Last year, the Central Bank was forced to slash 10 zeros from the local unit in an effort to make the currency more manageable.

Correspondents say that although the local currency will still be printed, all prices will be set in US dollars, making the Zimbabwe dollar irrelevant.

The country's economy is now on the brink of collapse - a situation worsened by the political crisis that resulted from last year's disputed presidential elections.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/africa/7859033.stm

Published: 2009/01/29 19:01:38 GMT

© BBC MMIX

Jim Sinclair's Important Comments on Systemic Corruption

2009-01-29T10:24:00.000-08:00

When there is no ethics or transparency in government, confidence collapses and so does the U.S. dollar as people convert their money to more honest "stores of value" such as gold and silver.

Read Jim's comments here:

http://jsmineset.com/index.php/2009/01/29/in-the-news-today-97/

The Myth that Laissez Faire Is Responsible for Our Financial Crisis

2009-01-29T08:46:00.001-08:00

This is an excellent piece that can be found here.

Ron Paul tells it like it is...

2009-01-29T08:34:00.001-08:00

...but they still don't get it.

Iceland's PM: Government Has Collapsed

2009-01-28T10:43:00.000-08:00

Iceland's PM: Government Has Collapsed

Iceland's prime minister says his ruling coalition has collapsed under pressure from the global financial crisis. Geir Haarde said he will speak to the president, Olafur Ragnar Grimsson, Monday in an effort to dissolve the government.

Mr. Haarde's government, a coalition featuring his Independence party and the Social Democratic Alliance, has been under mounting public pressure since the crisis hit the island-nation in October.

Last week, the prime minister, who suffers from cancer, called early national elections in May and said he would not run. At the time, analysts questioned whether the government could survive four more months.

The situation worsened Sunday, when Commerce Minister Bjorgvin Sigurdsson quit, citing his role in the economic collapse and growing public demands that the government resign immediately.

Sigurdsson acknowledged that Icelanders have lost faith in their government, and he said he wants to share in the responsibility for the economic collapse.

The meltdown forced the government last year to take control of three of the country's biggest banks.

Iceland also secured billions of dollars in assistance from the International Monetary Fund and other countries, to avert a collapse of its once-booming economy.

Some information for this report was provided by AP and Reuters.

VOA News

url: http://english.chosun.com/w21data/html/news/200901/200901270009.html

Day the banks were just three hours from collapse

2009-01-26T10:18:00.000-08:00

Revealed: Day the banks were just three hours from collapse

By Glen Owen
Last updated at 11:21 PM on 24th January 2009

The Bank of England

Narrow escape: The Bank of England was forced to contact RBS's creditors abroad to persuade them not to withdraw their funds

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.

But 60-year-old Lord Myners was accused last night of being 'completely irresponsible' for admitting the scale of the crisis while the recession was still deepening and major institutions such as Barclays remain under intense pressure.

The build-up to 'Black Friday' started on Monday, October 6, when the FTSE 100 dropped by nearly eight per cent as bad news on the economy started to multiply.

The following day, Chancellor Alistair Darling began all-night talks ahead of an announcement on the Wednesday that billions of pounds of taxpayers' money would be used to pour liquidity into the system.

But shares continued to plummet, turning into a rout on the Friday when the FTSE crashed by ten per cent within minutes of opening.

Both Royal Bank of Scotland and HBOS were nearing complete collapse - but Lord Myners, who built up his fortune during a long career in the City, said the problems ran far wider.

'There were two or three hours when things felt very bad, nervous and fragile,' he said. 'Major depositors were trying to withdraw - and willing to pay penalties for early withdrawal - from a number of large banks.'
Lord Myners

Lord Myners: 'There were two or three hours when things felt very bad, nervous and fragile'

The threat to the system was so severe that the Bank of England was forced to contact RBS's creditors in New York and Tokyo to persuade them not to withdraw their funds, but it is not known which other banks faced a run on their reserves.

'We faced the very real problem of how banks could stop depositors from withdrawing their money,' a Treasury source said yesterday.

'The banks themselves were selling their shareholdings, accelerating the stock-market falls, and preparing to shut up shop. Mortgages would have been sold on and savers would have been spooked, to put it mildly. It would have been chaos.'

After a weekend of crisis talks, which concluded at dawn on the Monday, it was announced that Lloyds TSB was taking over HBOS, supported by £17billion of taxpayers' money, and RBS would receive an injection of £20billion - prompting the resignation of RBS's infamous chief executive, Sir Fred 'the shred' Goodwin. Share prices at last started a small rally.

Ruth Lea, economic adviser to the Arbuthnot Banking Group, said last night that it was 'highly irresponsible' for Lord Myners to reveal the scale of the problems because it could serve to further wreck already fragile levels of confidence.

'We are not out of the woods yet,' she said. 'I fear for Barclays, after the fall in its share price, and Lloyds has been damaged by the HBOS takeover.'

She added: 'If it was panning out in that way, then the Government would have had no choice but to step in and nationalise the entire financial system.'

Angela Knight, chief executive of the British Bankers Association, said: 'The issues related only to HBOS and RBS. To imply that all the banks would have gone under is wrong. It is complicated.'

Lord Myners also said that bank executives had been 'grossly over-rewarded' during the 'golden days' of big bonuses. 'They are people who have no sense of the broader society around them,' he said. 'There is quite a lot of annoyance and much of that is justified.'

Find this story at www.dailymail.co.uk/news/article-1127278/Revealed-Day-banks-just-hours-collapse.html

Another Bank Bites the Dust

2009-01-24T09:59:00.000-08:00

California-based 1st Centennial Bank fails
By MarketWatch

Last update: 1:13 a.m. EST Jan. 24, 2009
SAN FRANCISCO (MarketWatch) -- 1st Centennial Bank of Redlands, Calif. was seized by the Federal Deposit Insurance Corp. and state regulators on Friday. It was the third bank failure this year, and brings to 28 the number of banks that have closed since the beginning of the current credit crisis.
First California Bank, based in Westlake Village, Calif., will assume the bank's insured deposits, the FDIC said in a statement.

The six branches of 1st Centennial will reopen on Monday as branches of First California Bank. Depositors of the failed bank will automatically become depositors of First California.
As of Jan. 9, 1st Centennial had total assets of $803.3 million and total deposits of $676.9 million, of which there were approximately $12.8 million that exceeded the insurance limits. 1st Centennial also had approximately $362 million in brokered deposits that are not part of Friday's transaction. The FDIC said it will pay the brokers for the amount of their insured funds.

The FDIC said First California agreed to assume the insured deposits for a 5.29% premium. It will also purchase approximately $293 million of the failed bank's assets. The assets are mainly cash, cash equivalents and marketable securities. The FDIC will retain the remaining assets for later disposition.

The cost to the FDIC's Deposit Insurance Fund is estimated to be $227 million. End of Story

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More on Gun Control: Learn from the Brits

2009-01-21T10:19:00.001-08:00

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Carrying Several Passports? It’s Not Just for Spies

2009-01-21T05:35:00.000-08:00

January 20, 2009
Carrying Several Passports? It’s Not Just for Spies
By MICHAEL T. LUONGO
NY Times

Alessandro Pappalardo, an artist in New York, holds passports from Italy and Argentina and, last year, added an American one. Previously an executive with Aerolíneas Argentinas, he said, “I used to go a lot to Brazil, and I would always decide what passport to show depending on what line was shorter.”

Stefan Stefanov, a citizen of the United States and Bulgaria who works for FirstApex Group in Warsaw, said he decided which passport to use depending on where he was going. “Of course, I don’t hide that I am a U.S. citizen,” Mr. Stefanov said. “But I don’t parade it either.”

Dual passports are no longer the sole province of people who grew up in more than one country. Millions of American citizens potentially qualify for various reasons — ethnic heritage, religion, country of birth or where their spouse was born.

“The fact is people don’t think about it until it is pointed out to them,” said Jan Dvorak, president of Travisa, a passport services company in Washington. Some Americans, he said, “don’t realize that they actually have dual nationality.”

While there are no hard numbers, more Americans seem to be trying to qualify for additional passports. “Savvy travelers and business travelers want to make sure they have two passports based on nationality because there are certain advantages,” Mr. Dvorak said.

Among those is the ability to work without restriction in various countries, particularly with passports from countries in the European Union. Also, Mr. Dvorak said, it is “a way of hiding where one has been,” when traveling among countries with soured relations.

Christopher Davis, the chief executive of G3 Visas & Passports in Washington, said that his company regularly processes British passports. For clients who become dual nationals, he said, “there are distinct benefits to it, especially now that the E.U. has grown in size and scope, especially if you need to take an assignment there.”

Mr. Davis said foreign passport applications can be complicated, particularly for Italy and France, at times requiring a long series of documents to “show the progression of the genealogy.”

He also cautioned that for Americans, “it doesn’t matter how many passports you have, you must enter and leave with a U.S. passport.”

In addition, he recommended that anyone considering dual passports think first of the tax consequences and the potential for military service, though, he added, “you can get exemptions for all of this because you’re a U.S. citizen.”

Israel allows anyone of Jewish heritage to use what is called aliyah, or the Law of Return, to become a citizen, but the military draft can be an issue. Noam Greenberg, a press officer with the Israeli Consulate in New York, said that the maximum age for the draft is 28 for men and 22 for women, although married women are exempt at any age. Americans can apply for exemptions.

The draft was an issue for Abdullah Daglioglu, an actor whose stage name is Neil Malik Abdullah. Born in Austria to parents from Turkey, he has both nationalities, but avoided Turkey because, he said, “I would have to do the military.” He lives in Germany and works on films throughout the European Union. “I can act in movies all over Europe,” he said. “There’s no visa necessary.”

Mr. Daglioglu, who played one of the Sept. 11 terrorists, Ahmed al-Haznawi, in the British television movie “Hamburg Cell,” said he used his Austrian passport for the United States visa that he needed for part of the filming in Florida.

On paper, there was “no background showing I am actually Turkish,” Mr. Daglioglu said. “It’s easier to travel with the Austrian passport because it is European, rather than the Turkish passport. Everybody makes a problem when your last name is Abdullah.”

Ruth Yoffe also has dual passports. She started Reloop Designs, a company that hires handicapped people in Cambodia to weave colorful baskets from recycled plastic bags.

A citizen of the United States and New Zealand, she travels frequently throughout Southeast Asia. “For obvious safety reasons, I always try and travel and put my visas on my New Zealand passport,” she said via e-mail. “On a plane, I don’t want to be identified as an American if I have that choice, depending on where I am heading.”

Visas are also cheaper for New Zealanders. “They assume anyone else from any other country can’t be as rich” as Americans, Ms. Yoffe said.

Alex Thomas, the corporate manager of Travel Document Systems, a visa and passport services company in Washington, said that some of his clients are “uneasy traveling with a U.S. passport, and if they have an additional passport, they prefer to use it.”

In fact, in the terrorist attacks in November in Mumbai, the terrorists specifically sought out American and British passport holders, releasing some tourists with other passports.

Mr. Thomas cited globalization and marriage to immigrants as reasons that more Americans are getting dual citizenship, but the wars in Afghanistan and Iraq and the recent economic collapse also came up as issues for some dual nationals.

Mr. Thomas said there are “four or five people a month who ask specifically what they need to do to get a passport” for another country. “Because of the way things are going in the world,” he said, he expects that number to rise.
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Buy Gold & Silver

Jim Rogers: 'Sell sterling, take cash out of Britain'

2009-01-20T21:14:00.000-08:00

From The Times
January 21, 2009
'Sell sterling, take cash out of Britain'

Patrick Hosking, Banking and Finance Editor

Outside frontline politics, few people can move financial markets simply by opening their mouths. One such is Jim Rogers, an American investment guru who yesterday pushed Britain deeper into gloom and austerity with apocalyptic words about the pound and the country's economy.

Hours after the Prime Minister pledged hundreds of billions of pounds to sustain Britain's banks, Mr Rogers added vinegar to the already souring international sentiment about the rescue plan, its impact on the public purse and its capacity to cure the sickening economy.

“I would urge you to sell any sterling you might have,” Mr Rogers advised his army of investment followers. “It's finished. I hate to say it, but I would not put any money in the UK.”

The reaction was instant - though it is impossible to say how much was attributable to Mr Rogers. The pound slumped, by almost 4 per cent at one point, falling to a seven-year low against the dollar and an all-time low against the Japanese yen.

Not since Black Wednesday in 1992, when the currency was expelled from the European Exchange Rate Mechanism, had there been such a steep fall in a day.

Worries intensified yesterday that the vast liabilities of Britain's wobbling banks could swamp the public finances. Between them, Royal Bank of Scotland, Lloyds and Barclays have total liabilities of £4.5 trillion. That is about twice the country's entire output and 40 times current government borrowing.

The shaky reputation of Britain's financial system took a further pulverising, with bank shares hammered again. Lloyds Banking Group, now 43 per cent owned by the taxpayer, bore the brunt of investor worries, slumping by as much as 48 per cent yesterday. They ended the day at 44.8p, down 31 per cent on the day. Barclays was down 17 per cent and RBS, whch is 70 per cent owned by the state, fell another 11 per cent on top of Monday's collapse.

Analysts yesterday were starting to suggest the previously unthinkable: that Britain might lose its AAA rating - a measure of impeccable creditworthiness from international credit ratings agencies that ensures the Government can borrow at rock-bottom interest rates.

The Chancellor did little to soothe financial market jitters when he gave his strongest hint yet that his November forecast of a contraction in the economy of no more than 1.5 per cent this year might be too optimistic. Alistair Darling admitted there had been a further, substantial, deterioration in the economy since that prediction.

He refused to answer questions about the sharp fall in the pound or accept that the country's finances might be compromised by the latest bailout of banks. “Markets have been volatile for some time now. We don't provide a running commentary on them,” he said.

Mr Rogers gave no further reasons for his contemptuous assessment of Britain's prospects, but his view of America's bail-ut plan, which is similar to Britain's in many respects, probably explains his scepticism.

“The idea that you can fix a period of excess borrowing and excess consumption by more borrowing and more consumption to me is just ludicrous,” he has said.

He is also deeply gloomy about the time it will take to resolve the problems of the credit crunch. “Most Americans alive today won't be around by the time the last of this credit market mess is finally cleared away,” he said last August.

The echoes of Black Wednesday are apposite: George Soros, the hedge fund manager estimated to have made £1 billion betting against the pound back then, was a former business partner of Mr Rogers. In the 1970s, the two men set up the phenomenally successful Quantum hedge fund.

They parted company long ago, but Mr Rogers's reputation as an investment genius still rests largely on that ten-year period, when he and Mr Soros multipled their clients' money a spectacular 43 times over.

Now 66, Mr Rogers splits his time between investing, book-writing and the world lecture circuit, where his prognoses of ruin from some investments and untold riches from others has helped him win many fans. In a world where most investment analysts are timid, mealy-mouthed and intent on sticking close to the consensus, Mr Rogers stands out as a man prepared to make bold forecasts.

With his trademark bow tie and Alabaman twang, Mr Rogers is ubiquitous on the financial TV networks. Like a beardless Branson, he plays to the gallery, once climbing on to a full-size replica pig to illustrate his upbeat prospectus on farm product prices.

He backs his ideas with his own cash, and more. In 2006 Mr Rogers put his $16 million mansion in New York up for sale to move with his young family to Singapore, so convinced was he of America's long-term decline and Asia's economic rise. His young daughters are looked after by a Chinese nanny who schools them in Mandarin.

Born in Wetumpka, Alabama, in 1942, the eldest of five brothers, he demonstrated a precocious talent for moneymaking, selling peanuts and sodas at the age of five at the local high school's Friday night games.

He won a scholarship to Yale and, later accepted a scholarship to Balliol College, Oxford. There he coxed in the Varsity boat race. Returning to the United States, he spent two years in the Army, at one point helping to invest his base commander's money, according to Fortune magazine. He left for Wall Street and soon met Mr Soros.

After their ten-year partnership at Quantum, he embarked on a series of travelling adventures, including a 100,000 mile motorbike trip, which he detailed in his book Investment Biker.
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The Constitution of No Authority

2009-01-20T08:39:00.000-08:00

Reason. The ability to reason is a special quality. It is the ability to think things through logically without the biases and presuppositions that most people are burdened with. It is the ability to examine the facts and make logical conclusions. This ability was profoundly demonstrated by Lysander Spooner in his essay "No Treason IV: The Constitution of No Authority".

Lysander Spooner was an American individualist anarchist, entrepreneur, political philosopher, abolitionist, supporter of the labor movement, and legal theorist of the 19th century. In his essay referenced above, he eloquently exposes the illegitimacy of the U.S. Constitution. He shows that the Constitution was nothing more than a statement of ideas and beliefs that had no binding effect on anyone.

The reason the Constitution had no binding effect was two-fold: First, the 39 people who put their name to the document only did so as "witnesses" and did in no way agree to be bound by it in proper legal form. Second, even if the original 39 people did enter into a legitimate contract - they could do so only with each other. They could not bind all the people living at that time, much less you or I and the millions of others who weren't even born yet because we were not parties to the contract.

The document starts out in the preamble "We the people...establish this Constitution...". Logically, ask yourself who are "we the people" and where are their signatures signifying their voluntary consent to be bound by this statement of ideas written upon a piece of paper?

The truth is that the only way this government gets its power is by force. If you do not obey their dictates you risk your life, liberty and property.

It is time to recognize those in government office for what they are: killers, thieves, and liars. Unfortunately, most are so intellectually lazy that they honestly believe that their existence is legitimate and, instead of being a liar, they are simply ignorant. These are the most dangerous.

If you have not read Lysander Spooner's essay, I highly recommend it. It not only exposes the fallacy of the current form of government, but it also exposes all of its derivatives such as taxation, voting, and police protection.

Another good resource is http://www.voluntaryist.com. Voluntaryism is the belief that all social interactions must be based on mutual voluntary consent (without threat, duress, or coercion). Anything to the contrary is illegitimate and immoral. Here is the Statement of Purpose from their site:

Statement of Purpose: Voluntaryists are advocates of non-political, non-violent strategies to achieve a free society. We reject electoral politics, in theory and in practice, as incompatible with libertarian principles. Governments must cloak their actions in an aura of moral legitimacy in order to sustain their power, and political methods invariably strengthen that legitimacy. Voluntaryists seek instead to delegitimize the State through education, and we advocate withdrawal of the cooperation and tacit consent on which State power ultimately depends.

Another great exercise in logic and reason is the excellent book by Marc Stevens entitled Adventures in Legal Land. This book gives you some great strategies for dealing with bureaucrats.

To conclude today's post I challenge you to begin exercising reason. Question every opinion offered to you - especially those opinions that are presented as facts. Question my opinions. This quote from Rudyard Kipling says it well:

I keep six honest serving-men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who.

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President Obama's First Lie

2009-01-20T08:27:00.000-08:00

Any intelligent person who takes a moment, and really thinks about it, knows that the U.S. Constitution has no legitimate authority (see "The Constitution of No Authority"). Nonetheless, Obama will put his hand on the Bible today and swear to uphold the Constitution. Here is where his first lie comes in. Bill Bonner of The Daily Reckoning says it best:

The founding charter of the U.S.A. made no allowance for going into the banking business…nor the auto business…nor any other kind of business. Neither did it allow invasions of foreign countries, without a declaration of war…or imagine a standing army that costs about as much as all the rest of the world's armies put together.

In the beginning, the U.S. government was specifically limited in what it could do. Now, very little remains that it can't do. But in all matters - big or small…torturing people or taking their money - government leaders must pretend to be acting in the national interest. It's a low-down, dirty business that usually attracts people of the same sort. People like George W. Bush and Joseph Biden…people with no sense or no principles - or neither. People who don't know a lie when they hear it or…don't mind telling one.

That's why we're sorry to seem Obama in the trade; he seems like such a nice fellow.

But politics…alas, someone's got to do it. As the old Latin expression puts it: The voters want to be deceived; then let them be deceived.

Yes, it's possible that Obama can try to reverse these things but it just can't happen when the system is corrupt from its inception. For this reason, I will continue to buy gold & silver.
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http://www.pacificbullion.com

Flow White's Money Bomb

2009-01-19T22:56:00.001-08:00

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Depositors lose 39 million with Bank Closure

2009-01-19T19:26:00.000-08:00

If they had their money in gold or silver they would be okay. I know I keep driving this point home - and that I'm preaching to choir most of the time - but we need to expose these risks to our loved ones so they don't become victims too.

Bank of Clark County to reopen as Umpqua
Portland Business Journal
Monday, January 19, 2009, 2:08pm PST | Modified: Monday, January 19, 2009, 4:59pm

Following state and federal regulators’ takeover of Bank of Clark County on Jan. 16, the Vancouver bank’s two branches will open on Tuesday as new branches of Umpqua Bank.

Umpqua Holdings Corp. (NASDAQ: UMPQ), the Portland-based parent of Umpqua Bank, agreed to take the insured deposits of Bank of Clark County, as well as the locations, at the request of the Federal Deposit Insurance Corp. and the Washington Department of Financial Institutions.

The state agency said regulators decided to close the bank because it had inadequate capital and liquidity. Bank of Clark County had $446.5 million in assets as of Jan. 13.

The bank had $39.3 million in uninsured deposits in approximately 138 accounts, out of total deposits of $366.5 million. An account owner can have up to $250,000 in FDIC-insured deposits at any bank. Anything over that is uninsured.

The uninsured deposits are under the FDIC’s control. The people or businesses that placed the deposits at Bank of Clark County will become creditors of the Bank of Clark County.

Any deposits in excess of $250,000 that were placed by public bodies such as city or state government are protected by Washington’s Public Deposit Protection Act.

Umpqua, which received a $214 million investment from the U.S. Treasury as part of its Troubled Asset Relief Program, is taking over about $185 million in insured deposits. The actual cash the bank receives from the FDIC will be net of the assets the bank gets along with Bank of Clark County’s two branches.

“We don’t know the final amount yet,” said Ray Davis, CEO of Umpqua. “We’ll put the cash to work so we can make money.”

Umpqua’s stock rose slightly on the news, to close at $9.38 on Monday, up from $9.16 on Friday. The bank’s stock has traded between $8.57 and $20.35 over the past 52 weeks.

At the end of September, Bank of Clark County’s capital ratio was just below the level of a well-capitalized bank.

But problems at the bank escalated quickly after September, said Brad Williamson, director of the Division of Banks at Washington’s Department of Financial Institutions.

“They had rapid and severe credit problems that were identified late in the year,” Williamson said. “It was surprising how rapidly the deterioration occurred. It was almost unprecedented.”

Last summer, when analysts were beginning to look askance at many banks, Bank of Clark County attracted attention because its level of delinquent loans to total loans was high. Analysts also wondered whether the bank had sufficient reserves to cover its delinquent loans.

At the end of September, 79 percent of the bank’s loans were in real estate. The decline in house prices has hit Clark County harder than Portland, largely because houses closer to city centers have been selling more quickly and for better prices than equivalent houses that are further from commercial centers.

The liquidity problems mentioned in public statements weren’t as extreme as the runs on deposits that California-based IndyMac or Seattle-based Washington Mutual experienced.

But in the last few days before regulators took it over, Bank of Clark County did have “major issues of that nature,” Williamson said.

“I think somehow word got out that they were having problems over the last day or two.”

One liquidity issue was the high percentage of brokered deposits that Bank of Clark County had.

Out of $366.5 million in total deposits, the bank had $117.8 million in brokered deposits, or deposits from “non-core” customers who don’t have other business with the bank, such as checking accounts or loans.

Banks normally don’t seek brokered deposits, which they attract by offering high interest rates, unless they lack sufficient deposits from “core” customers.

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Buy Gold & Silver

Mustang Ranch

2009-01-19T11:30:00.001-08:00

I received the following e-mail that speaks for itself:

Mustang Ranch and $850 billion bail-out

Back in 1990, the Government seized the Mustang Ranch brothel in Nevada for tax evasion and, as required by law, tried to run it.

They failed and it closed. Now, we are trusting the economy of our country and 850+ Billion Dollars to a pack of nit-wits who couldn't make money running a whore house and selling booze.

Now if that don't make you nervous, what does??? "

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Buy Gold & Silver

Ruble Drops to Pre-1998 Crisis Low on 6th Devaluation This Year

2009-01-19T07:40:00.000-08:00

Ruble Drops to Pre-1998 Crisis Low on 6th Devaluation This Year

By Emma O’Brien

Jan. 19 (Bloomberg) -- The ruble fell below the weakest level seen in the 1998 Russian crisis after the central bank devalued for the sixth time in seven days to protect reserves.

The currency slid to as little as 33.0455 per dollar today, the lowest since early 1998, before the government defaulted on $40 billion of debt. The ruble has lost 7.3 percent since official trading resumed this year, extending the decline to 29 percent since August.

Prime Minister Vladimir Putin pledged last month to use the nation’s foreign-exchange reserves to avoid “sharp” currency swings, after the 71 percent decline against the dollar in 1998 caused investors to flee and savers to pull bank deposits. Investors have withdrawn $245 billion from Russia since August as a 69 percent drop in oil, Russia’s war with Georgia and the disruption to gas exports exacerbated the effect of the global financial crisis, according to BNP Paribas SA data.

“Fear of another devaluation means nobody wants to buy rubles right now,” said Lars Rasmussen, an emerging markets analyst in Copenhagen at Danske Bank A/S, which rates itself among the five biggest traders of ruble in the world through Finnish subsidiary Sampo Bank Plc. “The ruble has begun to look more and more overvalued because of the fall in the oil price.”

Russia’s reserves, the world’s third-largest, have dropped by $171.6 billion to $426.5 billion since August, as policy makers sold currency.

The ruble weakened 1.4 percent to 37.8179 against the basket by 1:29 p.m. in Moscow, extending this year’s drop to 6.8 percent.

Lowered Forecast

Danske lowered its forecast for the ruble today, seeing a further 15 percent depreciation versus the basket to 44.45 in three months, down from a prediction of 38.6 in December.

The quickened pace of devaluations is encouraging investors to place so-called short positions on the ruble-basket rate, Rasmussen said. A short is a wager a security is going to decline.

Non-deliverable forwards predict an 11 percent decline in the ruble to 36.93 per dollar in the next three months. NDFs fix a currency at a particular level at a future date and are used by companies to protect against foreign-exchange fluctuations.

Bank Rossii, which manages the currency against a basket of about 55 percent dollars and the rest euros, widened its target range today, a bank official said. The currency has fallen 29 percent versus the basket since Aug. 1.

The ruble fell to 43.8880 per euro, the lowest since the common currency’s introduction in 1999, and is down 6.1 percent this year.

Crude Prices

Urals crude, Russia’s main export blend, has declined 69 percent to $44.43 a barrel from a record in July, below the $70 a barrel needed to balance the budget this year.

Russia’s MosPrime rate, the average interest rate banks charge to lend money to each other, rose to a two-month high of 12.5 percent today, according to the central bank.

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net

Last Updated: January 19, 2009 05:39 EST

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Hyperinflation Rap

2009-01-18T22:22:00.000-08:00

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The accelerating trend of bank failures

2009-01-17T08:23:00.000-08:00

Per the FDIC website here is the number of Bank Failures since the year 2000. Remember, this list does not include those banks that were bailed out when they were technically insolvent.

Year/Bank Failures

2000 - 2
2001 - 4
2002 - 11
2003 - 3
2004 - 4
2005 - 0
2006 - 0
2007 - 3
2008 - 25

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2,000 year old gold coins found

2009-01-17T08:12:00.000-08:00

The irony is that this gold was found near the town of Milton Keynes. Remember, it was John Maynard Keynes (no relation) the economist who's theories are to blame for the current financial fiasco. It is he who glibly stated "In the long run, we are all dead". It looks like he is the one who is dead and gold is still around as money after 2,000 years.

Boudicca's gold hoard unearthed
January 17, 2009
The Independent

The largest hoard of prehistoric gold coins in Britain in modern times has been discovered by a metal detectorist in East Anglia. The 824 gold staters, worth the modern equivalent of up to £1m when they were in circulation, were in a field near Wickham Market, Suffolk. Almost all the coins were minted by royal predecessors of Boudicca, the warrior queen of the Iceni tribe who revolted against Rome in AD 60.

The solid gold staters – each weighing just over five grams – were made between 40BC and AD 15, most of them in the final 35 years of that period. They were buried in a plain, wheel-thrown pottery vessel, possibly inside some sort of rectilinear religious compound, between 15 and AD 20. Although it has not yet been proved, it is likely that the hoard represented part of the accumulated wealth of an individual or community and that it was buried as a votive offering at a time of a political stress, drought or other natural disaster.

Although this is the first major Icenian gold coin hoard found, the tribe did have a tradition of making votive offerings of other gold objects. At one of their major religious centres, Snettisham in northern Norfolk, the tribe buried at least 30kg of gold and silver jewellery, mainly neck and arm torcs. Significantly, these were also buried within a rectilinear enclosure.

The new discovery is particularly important because it highlights the probable political, economic and religious importance of an area on the southern fringe of Icenian territory, near its border with the neighbouring Trinovantian tribal kingdom. The Wickham Market area of south-east Suffolk where the hoard was found seems to have been of great importance in Iron Age times. Within just a few miles of the find spot are two other important Iron Age sites. The larger was a vast, triple-ditched, quasi-urban centre where metal and textile manufacturers worked, with evidence of mysterious rituals, involving human skulls.

The second site was a probable market where dozens of Iron Age silver and silver-plated, mainly Icenian coins, have been found over the years.

"The [new] hoard is absolutely unique," said Ian Leins, the British Museum's curator of Iron Age coins. "It is the largest hoard of British Iron Age gold coins to be studied in its entirety."

The find is the most substantial Iron Age gold coin hoard discovered in Britain since 1849, when a farm worker unearthed between 800 and 2,000 gold staters in a field near Milton Keynes.

The latest coins themselves bear an assortment of motifs, most of which were derived ultimately from Macedonian coins minted by Alexander the Great's father, Philip II in the 4th century BC. Nearly all bear images of horses portrayed in a highly stylised Celtic manner, totally different from the motif's distant Macedonian precursor. But one motif – two crescent moons – which appears on almost half the coins are a purely Icenian numismatic device, possibly associated with the importance of the moon in Iron Age Druidic religion.

To protect the site, archaeologists from Suffolk County Council kept the discovery under wraps for months while they made secret excavations, funded by the British Museum. The area was thoroughly investigated using advanced metal detection equipment to ensure all the coins had been retrieved before the discovery was announced.

It was this excavation, directed by archaeologists John Newman and Jude Plouviez, that led to the discovery of Iron Age and Romano-British earthworks (potentially a sacred enclosure) near where the metal detectorist had found the gold coins.

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2nd Bank Closure of the Year

2009-01-17T07:07:00.000-08:00

FDIC, regulators shut down two banks

By John Letzing, MarketWatch
Last update: 1:57 a.m. EST Jan. 17, 2009

SAN FRANCISCO (MarketWatch) - The Federal Deposit Insurance Corporation and state regulators on Friday shut down banks in Illinois and Washington - the first bank failures of the year and the 26th and 27th since the start of the current credit crisis.

Berkeley, Ill.-based National Bank of Commerce was shut down and he FDIC said Republic Bank of Chicago will assume all of National Bank of Commerce's deposits. The two locations of National Bank of Commerce will reopen Saturday as branches of Republic Bank, the FDIC said.

The last Illinois bank to fail was Eldred-based Meridian Bank, in October, the FDIC said.

National Commerce Bank had total deposits of $402.1 million as of Jan. 7, and total assets of $430.9 million, the FDIC said.
Republic Bank has agreed to buy roughly $366.6 million in National Commerce Bank's assets at a discount of $44.9 million.

The FDIC estimated that the cost of National Commerce Bank's failure to the Deposit Insurance Fund will be $97.1 million.
Also on Friday, the Bank of Clark County, Vancouver, Wash. was shut down and the FDIC was named receiver. The FDIC said Umpqua Bank, based in Roseville, Ore., will assume the insured deposits.

Bank of Clark County had total assets of $446.5 million and total deposits of $366.5 million. At the time of closing, there were approximately $39.3 million in uninsured deposits held in approximately 138 accounts that potentially exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.

Umpqua will not assume the approximately $117.8 million in brokered deposits. The FDIC will pay the brokers directly for the amount of their insured funds. End of Story

John Letzing is a MarketWatch reporter based in San Francisco.

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California goes bankrupt

2009-01-17T06:56:00.000-08:00

First, they take your money by force (via taxation) and then they renege on their promise to give you some of it back. Anyone surprised?

California may delay tax refunds

State's cash shortfall could slow payments to businesses, disabled residents

By Andrea Coombes, MarketWatch
Last update: 2:38 p.m. EST Jan. 16, 2009

SAN FRANCISCO (MarketWatch) -- Facing a severe cash crunch, California may delay sending out tax refunds, aid to needy residents, money for some state services and payments to businesses, the state's controller said Friday.

State controller John Chiang said in a press release that expected cash shortages in February "will force him to delay some critical payments next month," including money owed to businesses for services provided to the state, rent and food aid for older and disabled Californians. Money for certain state services and tax refunds for 2008 taxes will also be affected.

Payments for education and debt service have first claim on the state's general fund under the state constitution, federal law and court rulings. If state lawmakers don't address the budget situation, failing to delay certain other payments will put the state $346 million in the red in February and $5.2 billion in the red by April, the controller said. See more on payment delays on California state controller's Web site.

Governor Arnold Schwarzenegger on Thursday called on state lawmakers to close the state's steep budget deficit, expected to hit $42 billion over the next 18 months.

During this difficult economic time, the payment delays will be particularly bad news for some state residents, many of whom are likely hoping for a quick tax refund payment.

Under state law, the state has until May 30 to start paying tax refunds, said Hallye Jordan, spokeswoman for the state controller, in a telephone interview. "Traditionally the state has encouraged people to file early and get their refunds quickly. It's been more of a practice that established the quick turnaround, rather than a legal requirement," she said.

The payment delays will go into effect in February if the state legislature and governor don't address the budget issues by Feb. 1, the controller said. If the budget situation isn't rectified, people may eventually start receiving IOUs instead of their expected checks.

"For months, I have warned state leaders that our cash flow will be in serious danger this spring. Without corrective action from the governor and legislature, there is no way to make it through February unscathed," Chiang said.

"I take this action with great reluctance. I know it will put many California families who rightfully expect their state tax refunds in a desperate position. Individuals who already are vulnerable will be hit hard. Small businesses that don't get paid may have to lay off more workers. Rather than helping stimulate the economy, withholding money from Californians will prolong our pain and delay our economic recovery," he said. End of Story

Andrea Coombes is an assistant personal finance editor for MarketWatch, based in San Francisco.

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Zimbabwe to launch Z100 trillion dollar note

2009-01-17T06:50:00.000-08:00

Zimbabwe to launch Z100 trillion dollar note

Nelson Banya
Reuters North American News Service

Jan 16, 2009 13:51 EST

HARARE, Jan 16 (Reuters) - Zimbabwe's central bank will issue a 100 trillion Zimbabwe dollar banknote, worth about $33 on the black market, to try to ease desperate cash shortages, state-run media said on Friday.

Prices are doubling every day and food and fuel are in short supply. A cholera epidemic has killed more than 2,000 people and a deadlock between President Robert Mugabe and the opposition over power sharing has dampened hopes of ending the crisis.

Hyper-inflation has forced the central bank to keep issuing new banknotes which quickly become almost worthless. There is an official exchange rate, but most Zimbabweans resort to the informal market for currency transactions.

As well as the Z$100 trillion dollar note, the Reserve Bank of Zimbabwe plans to launch Z$10 trillion, Z$20 trillion and Z$50 trillion notes, the Herald newspaper reported.

"... the Reserve Bank of Zimbabwe has introduced a new family of banknotes which will gradually come into circulation, starting with the Z$10 trillion," the Herald said, citing a central bank statement.

Previous banknote issues have done little to ease the plight of Zimbabweans who often line up for hours outside banks to withdraw barely enough to buy a loaf of bread.

Critics blame the economic meltdown on government mismanagement, including the seizure and redistribution of thousands of white-owned farms. The once-thriving farm sector has fallen into ruin.

Mugabe, 84, in power since independence from Britain in 1980, says Western sanctions are the main cause of the economic crisis and worsening humanitarian situation.

A worsening cholera epidemic has piled pressure on politicians to bury their differences and try to ease the suffering of millions. The disease has killed 2,225 people out of 42,675 cases, U.N. figures show.

Political analysts say the establishment of a unity government between Mugabe's ZANU-PF party and the opposition Movement for Democratic Change (MDC) is the best hope of reversing the economic slide and the humanitarian crisis.

But power-sharing talks are deadlocked over the control of key ministries. Tsvangirai accuses Mugabe of trying to assign the MDC a junior role and has demanded the release of detained opposition members and activists.

Detainees include rights campaigner Jestina Mukoko, accused with others of plotting to topple Mugabe. A court gave her permission on Friday to ask the Constitutional Court to release her.

In neighbouring South Africa, European and South African ministers called on the Zimbabwean parties to implement their agreement.

"Ministers expressed grave concern at the ongoing violence and abductions and recognised that a political solution to Zimbabwe's problems is critical to bringing an end to this cycle," they said in a statement.

The presidents of South Africa and Mozambique meet Zimbabwean political parties on Monday in a new push to break the impasse.

Source: Reuters North American News Service

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Buy Gold & Silver

Illinois-based Nat'l Bank of Commerce closed

2009-01-16T17:05:00.000-08:00

The first of the year if you don't count B of A going back for more TARP handouts:

Illinois-based Nat'l Bank of Commerce closed
By John Letzing, MarketWatch
Last update: 7:48 p.m. EST Jan. 16, 2009

SAN FRANCISCO (MarketWatch) -- Berkeley, Ill.-based National Bank of Commerce was closed by regulators Friday, marking the first bank failure of 2009, the Federal Deposit Insurance Corporation said in a statement.

Republic Bank of Chicago will assume all of National Bank of Commerce's deposits, while the two locations of National Bank of Commerce will reopen Saturday as branches of Republic Bank, the FDIC said.

While the bank's failure is the first of this year in the U.S., more than two dozen banks last year succumbed to the ongoing financial crisis. The last Illinois bank to fail was Eldred-based Meridian Bank, in October, the FDIC said.

National Commerce Bank had total deposits of $402.1 million as of Jan. 7, and total assets of $430.9 million, the FDIC said.
Republic Bank has agreed to buy roughly $366.6 million in National Commerce Bank's assets at a discount of $44.9 million.

The FDIC estimated that the cost of National Commerce Bank's failure to the Deposit Insurance Fund will be $97.1 million. End of Story

John Letzing is a MarketWatch reporter based in San Francisco.

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Buy Gold & Silver

Latvia is shaken by riots over its weak economy

2009-01-14T22:21:00.000-08:00

Coming to a town near you?

Latvia is shaken by riots over its weak economy (click link)

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Obama Unveils New Grand Plan for the Economy

2009-01-13T21:33:00.000-08:00

Obama Unveils New Grand Plan for the Economy

by David Bardallis
LewRockwell.com

WASHINGTON – President-Elect Barack Obama called on Congress to quickly pass a new fiscal stimulus package that would provide nearly $100,000 trazillion gaquillion frijillion in an effort to revive the U.S. economy, which some experts believe has entered a recession.

"Every economist I've ever heard of agrees what we need now is significantly more government investment to offset the negative effects of whatever it is that is happening," Obama said at his Monday press conference. "Accordingly, I and my team of advisors have developed a comprehensive plan that will shore up our financial institutions, put jobless Americans back to work, allow everyone in a house to keep it no matter what, rescue any failing bank or business, provide a hot meal to anyone who is hungry, improve the well being of all citizens, and give a puppy or kitten to every child who wants one.

"But Congress must put ideology aside and act now in a bipartisan manner before some other even worse stuff happens," he added, wiggling the fingers on both his hands to indicate "scary."

Details of the plan were presented by Lawrence Summers, Obama's top economic advisor and one of the plan's key architects. Using a colorful chart with squiggly lines, Summers estimated that 845 jiggashillion new jobs would be created in the plan's first year, with another 491 dubbadillion to follow over the next four years.

"Every American will be able to work two, three, four – heck, 10 or 20 jobs if he or she wants to," said Summers. "And the best part is the income taxes generated from all these new jobs will actually pay for the plan."

Obama emphasized that not only will all the new spending not impose any additional burdens on the middle class, the plan actually targets tax cuts toward politically favored constituencies and whomever else it seems most expedient to target.

"The American people have spoken," said Obama. "They demand change, and I promise that I and every one of my former Clinton administration appointees will work hard to deliver that change." He also said something about hope and sacrifice and believing.

Other highlights of the plan include:

* $43 nurpillion for job training
* $89 bibblydefrillion for community reinvestment
* $505 frappakrillion for infrastructure and public works
* $732 hominavillion for health care and education
* $986 giggitysquillion for Goldman Sachs

Some prominent voices have criticized the plan, however. "It's a good start, but the president-elect doesn't go nearly far enough," Nobel laureate Paul Krugman, Nobel-winning winner of the Nobel Prize in economics wrote today in his New York Times column. "We're talking about the need for another $344 grillion chillion beebopaloobillion, at the very least, to get this economy moving again. Also, tax cuts for anybody: Ick."

Congressional reaction was mixed, as House speaker Nancy Pelosi (D-CA) vowed to pass the stimulus package "even if I have to go around and push the 'yes' button for every member of this chamber myself, and don't think I won't" while some senators cautioned that more debate may be needed.

"A schlopparazillion here, a dreedilyhillion there, and pretty soon we're talking about real money," said Senate Minority Leader Mitch McConnell (R-KY).

But Majority Leader Harry Reid (D-NV) was optimistic about the bill's passage, noting that the Senate has already adopted legislation increasing the national debt ceiling to $4,000 pigglywigglyjibbityjabbityfrippityfroppitybadaboomillion.

When asked what safeguards would be put in place to ensure that none of the unprecedented $100,000 trazillion gaquillion frijillion was lost to waste, fraud, and abuse, Obama pointed behind the press corps, said "Oh my GOD! LOOK!" then quickly exited the room.

January 14, 2009

David Bardallis [send him mail]vents his various frustrations on his blog.

Copyright © 2009 LewRockwell.com

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Saturday Night Live's Answer to Debt

2009-01-12T17:24:00.000-08:00

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Twinkies for Obama

2009-01-10T21:00:00.001-08:00

This is too funny...

Twinkies for Obama

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When freedom in illegal

2009-01-10T19:56:00.000-08:00

"When freedom is illegal,
criminals make laws
and
Outlaws make freedom."

- Claire Wolfe, The Freedom Outlaws Handbook - 179 Things To Do 'Til the Revolution

Protecting Yourself – The Final Steps

2009-01-10T18:00:00.000-08:00

From Jim Sinclair:

Protecting Yourself – The Final Steps
Posted: Jan 10 2009 By: Jim Sinclair
Post Edited: January 10, 2009 at 10:22 pm

Filed under: General Editorial

Dear Friends,

Having secured your finances by insuring them with gold and distancing your assets from your financial agents to the greatest degree possible, there comes one more task that you should put some thought into: securing yourself.

There is no question at all that as the jobless rate rises, civil disorder will begin to manifest itself in society.

No matter if you live in NYC or in Flat, Alaska it would behoove everyone to review and improve their home security. You have nothing to lose by being objective. Here are a few ways to achieve a high level of home security:

(1) Install an external intercom so you can talk with people coming to your home without unlocking or opening the door. Itinerant door knockers don’t need to see you or have personal contact with you nor do they need to see inside your home. Door-to-door solicitors, like telemarketers, need to be politely but abruptly, dismissed. Provide them with no information!

(2) Electronic security: Don’t buy a cheap system. It costs several thousand dollars for a competent, monitored system. Once installed, use it! It needs to be activated every night and every time you leave the house. Make it personal policy!

(3) Dogs serve many purposes, the first of which is companionship without conditions. Even a total wimp like Mr. Freddie (my wife’s legacy to me) can raise the alarm when required. Mia not only raised the alarm but also the roof and walls. She chased Victoria’s kids out of my office. She bit my African daughter which made me remind her, like it or not, that Mia is the family dog and her action might be a comment on how often Marlene is home.

Of course, I am kidding. Mia was very sternly reprimanded for that one. Mia was a tough situation as I loved her dearly, but she felt her duty was to protect me from everything and everybody. This is why Barbara changed her name from "Mia" to "My Damn Dog." In sum, Mia fulfilled her self appointed duty by being one mean b—h, (referred to as a female of her species).

(4) If you live like I do in a rustic and somewhat isolated area, then metal detectors at all entrances are a good option. They make excellent wireless systems that now transmit 1,250 feet to the receiver. You can obtain tunes for different entrances.

(5) Automatic perimeter lighting that is triggered either by laser interruption or infrared is also an option to consider. Also, very cheap devices are available now.

Spend no less than 2 1/2 percent of your liquid net assets on home protection, electronics, communication and power generation. Even a small Honda portable generator on the porch of a metropolitan apartment - legal or not -will come in handy when you need it.

Then pray all this is totally unnecessary.

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Buy Gold & Silver

Platinum's turn to shine

2009-01-10T16:08:00.000-08:00

Platinum's turn to shine

Don Vialoux, Financial Post Published: Saturday, January 10, 2009

A worker casts an ingot of platinum at the Krastsvetmet nonferrous metals plant in the Siberian city of Krasnoyarsk. The platinum price has plunged but incentives to revitalize the auto industry ...

Ilya Naymushin, Reuters Files

The outlook for platinum is improving. Thackray's 2009 Investor's Guide notes that platinum has a period of seasonal strength from the end of December to the end of May. The trade has been profitable in 17 of the past 22 periods; the average gain per period was 8.3%.

In contrast, the average gain for gold during the same period was only 0.9%.

TECHNICAL INFLUENCES

Technical prospects for platinum have turned positive. A strong recovery rally is due. Platinum fell 67% from its high at US$2,299 per ounce in February to its low at $752.10 in October.

Platinum recently broke above a double bottom pattern on a move above resistance at US$896 and has established an intermediate uptrend. Next intermediate technical target is US$1,200.

The chart shows the optimal entry points over the past seven years.

Other precious metals (gold, silver, palladium) also have developed positive intermediate technical profiles. Platinum will "piggy back" on their strength into spring.

FUNDAMENTAL INFLUENCES

Fundamental prospects for platinum are just starting to turn positive. Demand for Platinum mainly comes from jewellery (40% of demand) and catalytic converters used in the auto industry (37%).

The main reason for the price decline during the past year has been a drop in demand for platinum used in catalytic converters. U. S. auto sales virtually collapsed but the low point appears to have been reached. Canadian and U. S. government support of the auto industry will kick-start demand for autos in the first quarter of 2009.

Demand for platinum by the auto industry will recover as the year progresses. Meanwhile, demand for platinum for jewellery purposes has started to recover due to its current low price relative to gold.

A direct way to invest in platinum for the current period of seasonal strength is to own iPath platinum Exchange Traded Notes (PGM/ NYSE). Technicals on PGM are almost identical to technicals for the commodity.

Platinum equities also are available; consult your advisor for specific recommendations. But avoid junior non-producing companies in the sector.

--- - Don Vialoux, chartered market technician, is the author of a free daily report on equity markets, sectors, commodities, equities and exchange-traded funds. Reports are available at www.timingthemarket.ca. Mr. Vialoux does not own platinum ETFs or stocks mentioned in this report.

'Atlas Shrugged': From Fiction to Fact in 52 Years

2009-01-10T14:57:00.000-08:00

Have you read Atlas Shrugged yet?

'Atlas Shrugged': From Fiction to Fact in 52 Years

By STEPHEN MOORE
WSJ.com

Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read "Atlas Shrugged" a "virgin." Being conversant in Ayn Rand's classic novel about the economic carnage caused by big government run amok was practically a job requirement. If only "Atlas" were required reading for every member of Congress and political appointee in the Obama administration. I'm confident that we'd get out of the current financial mess a lot faster.

Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit.

Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in their lives, behind only the Bible.

For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

In the book, these relentless wealth redistributionists and their programs are disparaged as "the looters and their laws." Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the "Anti-Greed Act" to redistribute income (sounds like Charlie Rangel's promises soak-the-rich tax bill) and the "Equalization of Opportunity Act" to prevent people from starting more than one business (to give other people a chance). My personal favorite, the "Anti Dog-Eat-Dog Act," aims to restrict cut-throat competition between firms and thus slow the wave of business bankruptcies. Why didn't Hank Paulson think of that?

These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008. We already have been served up the $700 billion "Emergency Economic Stabilization Act" and the "Auto Industry Financing and Restructuring Act." Now that Barack Obama is in town, he will soon sign into law with great urgency the "American Recovery and Reinvestment Plan." This latest Hail Mary pass will increase the federal budget (which has already expanded by $1.5 trillion in eight years under George Bush) by an additional $1 trillion -- in roughly his first 100 days in office.

The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls."

When Rand was writing in the 1950s, one of the pillars of American industrial might was the railroads. In her novel the railroad owner, Dagny Taggart, an enterprising industrialist, has a FedEx-like vision for expansion and first-rate service by rail. But she is continuously badgered, cajoled, taxed, ruled and regulated -- always in the public interest -- into bankruptcy. Sound far-fetched? On the day I sat down to write this ode to "Atlas," a Wall Street Journal headline blared: "Rail Shippers Ask Congress to Regulate Freight Prices."

In one chapter of the book, an entrepreneur invents a new miracle metal -- stronger but lighter than steel. The government immediately appropriates the invention in "the public good." The politicians demand that the metal inventor come to Washington and sign over ownership of his invention or lose everything.

The scene is eerily similar to an event late last year when six bank presidents were summoned by Treasury Secretary Hank Paulson to Washington, and then shuttled into a conference room and told, in effect, that they could not leave until they collectively signed a document handing over percentages of their future profits to the government. The Treasury folks insisted that this shakedown, too, was all in "the public interest."

Ultimately, "Atlas Shrugged" is a celebration of the entrepreneur, the risk taker and the cultivator of wealth through human intellect. Critics dismissed the novel as simple-minded, and even some of Rand's political admirers complained that she lacked compassion. Yet one pertinent warning resounds throughout the book: When profits and wealth and creativity are denigrated in society, they start to disappear -- leaving everyone the poorer.

One memorable moment in "Atlas" occurs near the very end, when the economy has been rendered comatose by all the great economic minds in Washington. Finally, and out of desperation, the politicians come to the heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the economy back on track. The discussion sounds much like what would happen today:

Galt: "You want me to be Economic Dictator?"

Mr. Thompson: "Yes!"

"And you'll obey any order I give?"

"Implicitly!"

"Then start by abolishing all income taxes."

"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"

"Fire your government employees."

"Oh, no!"

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the Democrats in Washington want to do the opposite: to raise the income tax "for purposes of fairness" as Barack Obama puts it.

David Kelley, the president of the Atlas Society, which is dedicated to promoting Rand's ideas, explains that "the older the book gets, the more timely its message." He tells me that there are plans to make "Atlas Shrugged" into a major motion picture -- it is the only classic novel of recent decades that was never made into a movie. "We don't need to make a movie out of the book," Mr. Kelley jokes. "We are living it right now."

Mr. Moore is senior economics writer for The Wall Street Journal editorial page.

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Merrill Lynch says rich turning to gold bars for safety

2009-01-09T15:08:00.000-08:00

FYI:

Merrill Lynch says rich turning to gold bars for safety

Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.

By Ambrose Evans-Pritchard
Last Updated: 10:32AM GMT 09 Jan 2009
Telegraph

Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses.

"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.

Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.

The metal should do well whatever happens. If deflation sets in and rocks the economic system it will serve as a safe-haven, but if massive monetary stimulus gains traction and sets off inflation once again it will also come into its own as a store of value. "It's win-win either way," said Mr Dugan.

He added that deflation may prove the greater risk in coming months. "It's very difficult to get the deflation psychology out of the human brain once prices start falling. People stop buying things because they think it will be cheaper if they wait."

Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate. "Don't start selling your government bonds," Mr Dugan said, dismissing talk of a bond bubble as misguided.

He warned that the eurozone was likely to come under strain this year as slump deepens. "There is going to be friction as governments in the south start talking politically about coming out of the euro.
I don't see the tensions in Greece as a one-off. It is a sign of social strain in countries that have lost competitiveness."

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Obama Nominates a Socialist

2009-01-09T14:09:00.000-08:00

From Bob Murphy's site:

Obama Nominates a Socialist

President-elect Obama has tapped former EPA head Carol Browner to take "on a broad new portfolio with responsibility for Obama's ambitious agenda on the environment, energy and climate change."

Guess what? She's a socialist. Really.

I grant you, she's no longer listed at the Socialist International website, but she used to be. "Oh, back in college I suppose, right, you rabid right-winger?!"

Actually, more like, earlier this week (HT2 Dan Simmons):

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Parody of Central Banking

2009-01-08T18:14:00.001-08:00

Australian TV: Parody of Central Banking:

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(un)Common Sense from Ron Paul on CNN

2009-01-08T09:25:00.000-08:00

Excellent video clip of Ron Paul on CNN:

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A Unique Retirement Stategy for Baby Boomers

2009-01-08T07:57:00.001-08:00

BENEFIT FROM BEING A BABY BOOMER
by Nathan Lewis

People sometimes ask me: "What should I do with my retirement account?" I often tell them to consider ways of retiring that are not dependent on financial abstractions and various corporate/government promises, such as Social Security or corporate pensions. This usually gets some puzzlement because they've been trained for decades to think only in terms of financial products.

Let's look at a specific example. This is for my own parents, who turned 65 last year. (That puts them just before the Baby Boomers.) They live in a nice suburb outside of New York City, on the coast of Connecticut. Like many older people, they would like to stay in the house they have owned for about 20 years now, in the community they are accustomed to, and near the friends they have. It's not so easy to start over when you're over 65.

Even people who have been able to accumulate significant assets, pensions etc., might be a little nervous. Trying to depend, for the next 20 or even 30 years perhaps, on financial abstractions and government promises would be a little scary. I usually tell them that they should be scared! Or, at least don't put too much faith in various Wall Street promises (and pensions are ultimately Wall Street promises too). You aren't going to make a smooth 8% per year in your 401(k) just because some financial advisor told you so. But, I guess you've figured that out now. Anything can happen. Particularly as we are sort of in a depression right now. Owning a big house in a nice neighborhood is not cheap, even if it is 100% owned with no mortgage. The annual costs of a house look something like this:

Property tax: $8000 (and that could go up)
Insurance: $2000 (could be higher)
Maintenance: $2000 (could be higher)
Utilities (phone, internet, cable, electric, trash collection) per month: $200 or $2400/year.
Heating oil: $2000 per year (could be higher).

Total: $16,400. That is probably on the low side. So, let's just budget it at $18,000.

Then, you've got a car and all the other expenses of living. And what happens when you get a little frail, and want living assistance?

Have you seen the prices for nursing homes?

It's not that these burdens are unbearable. It's rather that they are burdensome. Just house-related costs could chew up most of your Social Security check right there. And, if things really go to hell in the future, they might become unbearable. Who knows what things will look like in 20 years? Only your financal advisor knows for sure.

Let's look at it from the financial side. Maybe you can get 3% of cashflow from a "safe" muni bond portfolio, or dividends from stocks. And, you have to take into account inflation … over the next twenty years. How do we "take into account" the unknowable? What happens if there's not enough fifteen years from now, and I'm still alive? To get $18,000 of income would take $600,000 of muni bonds. And, muni bonds are looking kinda risky these days. Dividends from stocks might take more than $600,000, because you have to pay taxes on dividends. Stocks go up and down a lot too. Sickening.

Now, like I said, they've been living in the area for a while and have some good friends, who are about the same age and in similar circumstances.

So, here's the plan:

You get together with your friends. You say: "We're all retired now. I've got a big empty house. You do too I suppose. Maybe we can think of living together. That would help reduce our living expenses. Plus, it might be fun, and it would be a good way to keep an eye on each other. That can be important when you're getting older."

Everyone is repulsed at first, because we Americans are all taught that we have to live as far away from each other as possible. But, they remember that, when they were in college, they used to share houses, and it was kind of fun. Also, everyone is older now and a lot better behaved than when they were in college. And, it is true that it might be good to have someone keeping an eye on you.

So, everyone decides to move into one house, owned by the Owner. The people who move in, two other retired couples, are the Renters. The Renters pay the Owner $800 a month to rent a bedroom, and agree to pay 1/3 of the utility and heating bills. The Renters' cost of living looks something like this:

Rent: $800 * 12 = $9600
Utilities: $100/month = $1200
Heat: $700

Total annual costs: $11,500.

Now, indeed renting turns out to be cheaper than owning the big house, even when the big house is fully paid for. They could sell their big houses if they wanted to. But, they are nervous about just selling the house they have owned for twenty years, and moving in with someone else. It might not work out. Let's not burn any bridges. So, instead of selling their now-empty houses, they rent them out.

Rent: $3500 per month = $42,000 per year (typical, actually a little low). Heckuva lot cheaper than paying the mortgage on a million-dollar house. Just the thing for a Wall Streeter with a family that needs to downsize quickly. Real quickly. Utilities are paid for by the renters.

Costs:
Property tax: $8000
Maintenance: $3000 (higher with renters)
Insurance: $2000
Total: $13,000

Net cashflow: $42,000 - $13,000 = $29,000.

Now, they're getting $29,000 in rent net of property expenses. Then, they pay their $11,500 it costs to live in the shared house.

$29,000 - $11,500 = $17,500.

Now, look at the renters:

Before: $18,000 per year of housing costs.

After: Housing and utilities are paid for, and an extra $17,500 per year of free cashflow, plus probably some tax benefits.

Wow, all of a sudden, you're living for free, and getting paid too! You just created, out of thin air, the equivalent of a $1,200,000 muni bond portfolio. Maybe more, if you consider tax benefits (rental properties can charge depreciation.) And, you still own your house.

For the Owner, it looks like this:

House costs: $13,000
Utilities: $1200 (1/3)
Heat: $700 (1/3)
Total: $14,900

Rental Income: $800 * 2 * 12 = $19,200

Net cashflow: $19,200 - $14,900 = $4,300.

So, the Owner is also living for free! However, their cashflow is not as high as the Renters. That's probably the way it should be, because the Renters will probably want a little extra incentive to move out of their house into someone else's.

So, now where are we? All three couples are now living for free, and getting some extra cash on top of that. And, there are things you can do in a shared house, like splitting cooking duties. Instead of cooking every night for two, the cook can cook twice a week for six. That's a lot easier, and would probably result in a more ambitious menu, and would resolve the question of how three people can cook in one kitchen. If the men are smart, they will encourage a little friendly competition among their wives, to "keep up the pace" for their two dinners a week. You can finally use that formal dining room every day. Then, everyone has a house's worth of furnishings. The antiques, boutiquey stuff, art and heirlooms, and the grand piano, all goes into the house where everyone is living. The more generic, replaceable stuff can go into the houses that are being rented out. Maybe you can charge an extra $500 a month for a furnished house. $500 a month is $6000 per year. That's another $200,000 muni bond portfolio-equivalent, that you created out of some used furniture. You would have had to save $400,000 before income taxes, to get a $200,000 portfolio after taxes.

After a while, in a shared house, there is always the issue of who does what house chores, and do they do it adequately, and so forth. The easy way to solve this problem is to get a housekeeper to come in one day a week, and do the vacuuming, laundry, bathrooms and all that. It's $100 a week, or $5,200 a year, or $1,735 per couple per year. Covered by their extra cashflow. Over time, people are over 70 and a little frail. Maybe they would like a little more help with shopping or even cooking, or they are no longer able to drive safely by themselves.

So, they get a live-in full-time housekeeper. The housekeeper lives in the fourth bedroom. The housekeeper gets room and board and use of a car, plus $1,000 a month in salary. Not a bad deal for a housekeeper. That's $12,000 per year or $4,000 per couple. That is also within their net cashflow. So, now everyone has their housing and utilities and a live-in housekeeper paid for. Make it $2,000 a month and you could get a registered nurse, probably. Now you've got a private nursing home.

Being older with lots of free time, it would probably be good to get outside for some light exercise. The house sits on two acres, of which perhaps there is one full acre of lawn. Instead of growing grass, let's grow some vegetables. This is prime farm country, or it was in the colonial days. You can grow a lot of vegetables on a full acre. Heck, you can grow a lot of vegetables on a tenth of an acre. A tenth of an acre is 4,356 square feet, or 43 feet by 100 feet. Not a small garden, that. So, you drop some seeds in the ground, and have fresh vegetables all summer. You even do some canning and put some away for winter. It's all organic, you get some exercise, and no more big-ticket trips to Whole Foods.

So, now, instead of paying out $18,000 a year in housing expenses, you're living for free, with your friends, with a live-in housekeeper, with some extra cashflow on top of that, and a lot of your food costs are covered as well. What is there to be worried about? Pass the 401(k) on to your kids. Don't worry about the corporate pension. Consider the Social Security check to be your entertainment budget. If there's inflation, just raise your rents.

And all it took was a little cooperation among friends, to make better use of what they already own.

Regards,

Nathan Lewis
for The Daily Reckoning

Editor's Note: Nathan Lewis is the author of Gold: the Once and Future Money (2007), published by Agora Book Publishing and John Wiley. Get your copy here.

You can read more from Nathan Lewis at his website.

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Courage and Guns

2009-01-08T06:56:00.000-08:00

Do you have the courage?

Courage and Guns

by Michael Gaddy

"One of the ordinary modes, by which tyrants accomplish their purposes without resistance, is, by disarming the people, and making it an offense to keep arms."

~ Constitutional scholar and Supreme Court Justice Joseph Story

I was somewhat surprised in the email responses to my article here at the number of inquiries from would be first-time gun purchasers asking for advice on firearm selection, training and concealed carry permits. Obviously there are many in the freedom crowd out there who has yet to arm themselves.

I believe that many first-time gun buyers have a tendency to put the cart before the horse. Many long-time gun owners fit in the same category. Before one purchases a firearm for defense of life and property, it is imperative they realize one must first possess the courage to use this tool of liberty, up to and including deadly force. The firearm should never be the source of that courage. An inanimate object is a poor substitute for character.

True courage is in short supply in this nation’s gun culture. Supposed strong advocates of the Second Amendment routinely vote for politicians with anti-gun voting records because they are members of their chosen political party.

Authors of books on the rights of citizens to keep and bear arms routinely vote for the same anti-gun politicians. One in particular emailed me that he could not support Ron Paul in the 2008 election because he was "unelectable." This author then spoke of having to "hold his nose" when he voted for John McCain. Great courage, this one!

The majority of gun magazines routinely carry many more articles on firearms for "military and police" than they do for Joe Citizen. An editor for one of these magazines chastised me in an email for having the audacity to suggest his publication support Ron Paul for president because he too saw him as "unelectable." He opined that those who would vote for Ron Paul were actually helping the greater of two evils get elected. When I asked him whom he would vote for if his choices were Stalin or Hitler, he replied that it would never come to that in America. I promptly cancelled my subscription to his magazine. Cowardice and ignorance in the same package is hard to support.

Then there are those bastions of liberty in the pro-gun crowd who question why anyone would want to own an AK-47 or any other of those dastardly assault weapons. They contend there is no "legitimate" reason to own one. Let me make this as simple as I can: I own a legal AK-47 and several other assault weapons so I can assault the tyrant who seeks to deprive me of my rights granted by my creator, or any other criminal who attempts to take that which is mine, or harm me and those I love. Simple enough?

From past experience I know I am going to catch a lot of flak for my opinion of concealed carry laws, because I believe them to be another form of registration. Gun owners who claim they are totally against "registration" of firearms have no problem in registering themselves as gun owners. Most egregious is their paying the state to bestow on them the rights they already possess as free men.

If the true purpose of the Second Amendment is to provide the means to resist a tyrannical government, where is the logic in begging and paying that same government to allow us to possess the weapons to protect ourselves from their tyrannical pursuits? Groveling at the feet of tyrants is no reflection of courage.

Not only do concealed carry permit holders place themselves in a database available to all bureaucrats whose goal is to disarm everyone, they place themselves in the database of all law enforcement agencies. How convenient it must be for the cop who runs your drivers or vehicle license number to immediately know you are armed, what you drive, where you live, and in some cases, what type firearm you have.

Next on my list of things to anger the average gun guy is my total disdain for the organization that presents itself as the true champion of the right to keep and bear arms: the NRA, better known as the National Republican Association – Oops, sorry, National Rifle Association. Author and American Patriot L. Neil Smith, eloquently states his reasons for not trusting the NRA here.

If you are a potential owner of a new firearm, or possess several, please reexamine your commitment to liberty or give your weapons to a true patriot now rather than the tyrant when he comes for them.

Guard with jealous attention the public liberty. Suspect everyone who comes near that precious jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined.

~ Patrick Henry

January 8, 2009

Michael Gaddy [send him mail], an Army veteran of Vietnam, Grenada, and Beirut, lives in the Four Corners area of the American Southwest.

Copyright © 2009 LewRockwell.com

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All that Shimmers is Gold

2009-01-07T11:18:00.000-08:00

Great Video regarding Gold:

All That Shimmers is Gold (click here to watch video)
The safe haven status of gold is starting to shine brighter and brighter, according to Jurg Kiener, CEO of Swiss Asia Capital. He explains his bullish outlook on the precious metal to CNBC's Oriel Morrison.

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Don't count on law enforcement to protect you

2009-01-06T10:36:00.000-08:00

The following article reminds me of the saying, "a gun in the hand is worth more than a cop on the phone" (this is in reference to dialing 911). Notice how the guy in the article called his armed relatives instead of the police for help.

For Middle-Class Pakistanis, a Gun Is a Must-Have Accessory

With Kidnappings and Violence on the Rise, Demand for Weapons Permits Grows

By PETER WONACOTT
WSJ.com

LAHORE, Pakistan -- After escaping kidnappers who chained him to a bed for 25 days, Mohammad Javed Afridi pressed Pakistani law enforcement for swift justice. The police offered him something else: temporary permits for four automatic assault rifles.
[Mohammad Javed Afridi]

Mohammad Javed Afridi

Since Mr. Afridi's ordeal ended in mid-October, police in his hometown of Peshawar, in northwestern Pakistan, haven't made an arrest in his case. They raided the kidnappers' hide-out, but the captors got away, a senior Peshawar police official says.

So the cops allowed Mr. Afridi to arm himself against future abductions. The 35-year-old journalist now carries an AK-47 to work and back home to his wife and five children. Relatives rotate duty as his bodyguards. If his car is again stopped by armed men on a dark road, Mr. Afridi vows to shoot first.

"I'm not going through that again," he said in an interview in this city in northeastern Pakistan.

Guns have long been part of Pakistan's traditional culture, especially in the rugged northwestern part of the country. Handed down through generations, rifles have been used for hunting and for firing celebratory fusillades. Now, however, modern assault rifles and handguns have come into vogue among middle-class Pakistanis, and gun registration has jumped.

This proliferation reflects many urbanites' dwindling faith that the country's new civilian government can protect them. Over the past year, Pakistan has endured the assassination of popular political leader Benazir Bhutto, a spreading Islamist insurgency and the bombing of Islamabad's Marriott Hotel. November's deadly terror attacks in Mumbai, allegedly carried out by 10 Pakistani militants trained here, further frayed nerves.

But more than heightened terrorist threats, many Pakistanis fear the surge in violent kidnappings, extortions and robberies that target those who look like they might have money. The 11,758 murders recorded in the first 11 months of 2008 were the highest in Pakistan in at least a decade, say Islamabad police, who compile nationwide crime statistics.

"People buy weapons because they're insecure," said a senior Interior Ministry official. "No need denying it."

Arms licenses are issued by numerous Pakistani agencies. Local authorities and police hand out permits for weapons that can be used only within their states. The Interior Ministry licenses nonautomatic weapons that can be carried across borders between Pakistan's states. The prime minister's office gives clearance for automatic assault weapons that can be used throughout the country.

Firearm licenses issued by the Interior Ministry rose sharply in 2008. Licenses for 12-gauge pump-action shotguns, used by private security guards and also duck hunters, more than doubled over 2007, according to ministry figures compiled through year's end. Over the same period, the ministry granted 47% more licenses for 30-bore pistols and 53% more for 9mm handguns.
[Pakistani police in July with arms and ammunitions seized in Karachi. Rising violence has prompted many middle-class families in Pakistan to seek weapons permits.] AFP/Getty Images

Pakistani police in July with arms and ammunitions seized in Karachi. Rising violence has prompted many middle-class families in Pakistan to seek weapons permits.

The ministry's chief spokesman didn't respond to requests for comment about the surge in gun licenses.

Some middle-class Pakistanis have appealed to politicians for help in obtaining licenses. On a recent morning at the Interior Ministry's Arms License Issuance Center in Islamabad, a scrum of applicants waved papers in clerks' impassive faces. One man carried a letter from a member of Pakistan's National Assembly, the country's top lawmaking body, asking that officials facilitate shotgun and pistol licenses for nine of his supporters.

Others say the government isn't doing enough to get arms in the hands of those who need them. "Criminals don't have licenses, so why do we need to get a license?" asked Tariq Rana, who on a recent day was buying an illegal 12-gauge shotgun after he was robbed of his cellphone, watch and cash the night before. "I couldn't get an arms license because I don't know any politicians."

Many licensed arms are sold in the military city of Rawalpindi, a half hour outside Islamabad. Down the street from the city's Liaquat National Bagh -- the park where Pakistan's first prime minister was assassinated a half-century ago and where Ms. Bhutto was killed last December -- small arms shops, their walls lined with shotguns and long-barreled pistols, are scattered amid mom-and-pop stores.

"A gun can be your friend," said one gun-shopper, Sifarish Khan. A few years ago, the government clerk was shot in the hand by his brother-in-law after an argument. He shows off a scar in the webbing between his fingers. Having a gun, he says, is like having loyal defenders at his side. "More bullets, more friends," he says.

Weapons purchased legally in the Rawalpindi shops are typically 10 times as expensive as those readily available on the black market in Northwest Frontier Province and its capital, Peshawar, a historical hub for weapon smuggling from Afghanistan. But urban Pakistanis tend to shun the illegal arms bazaars in an area known for tribal codes, bandits and Islamic insurgents.

Islamabad-based lawyer Muhammad Ali Saif, who comes from the country's northwest, says he wants an assault rifle for protection when he goes home on visits. He's no stranger to firearms. In the early 1980s, Mr. Saif says he was shot in the stomach fighting invading Soviet soldiers in Afghanistan. Mr. Saif has since publicly criticized his former Taliban comrades, however, and defended unpopular former President Pervez Musharraf in several court cases. The prominent lawyer says he won't feel secure until he's toting a weapon that matches those carried by potential assailants.

Mr. Saif submitted his AK-47 application to the prime minister's office eight months ago, and continues to wait for approval. He says the licensing process has become too politicized. "The AK-47 is a sign of privilege and prestige, which the government wants to confine to top-level officials," he said.

The prime minister's office didn't respond to requests for comment.

Meanwhile, Mr. Afridi, the journalist, is trying to get over the kidnapping that spurred a desire to carry his own weapon.

On the evening of Sept. 24, Mr. Afridi was driving home from his job as a reporter for a national newspaper. On the road, a group of young men motioned him to stop his Toyota. When he didn't, they fired a bullet that went in the passenger-side window and exited near his head. Instinctively, he braked. The men piled into his car, he said, and pressed a pistol to his temple.

The gang took Mr. Afridi to an abandoned house outside of Peshawar. They demanded a $100,000 ransom from his family, but gradually reduced the price for his release.

As negotiations dragged on for weeks, his guards relaxed. They gave Mr. Afridi scissors to trim his moustache. Eventually, he used the scissors to pick the lock that chained him to his bed. On Oct. 18, Mr. Afridi escaped out a window, leaving clothing and a sleeping cap lumped in the bed to fool his guards.

Mr. Afridi determined where he was and telephoned for help -- not to police, but to heavily armed relatives. Guns and revenge, he notes, are both part of the Afridi clan's tribal culture.

Mr. Afridi later used a map from Google Earth to direct police to the hideout, but they failed to find his kidnappers there. The senior superintendent of police in Peshawar, Kashif Alam, said the suspects escaped to a neighboring tribal region beyond their jurisdiction. Treating the episode as "a special case," Mr. Alam added, police gave Mr. Afridi four one-year permits to carry assault weapons.

The licenses were sufficient to arm a few cousins and an uncle. Now when he goes out on interviews, Mr. Afridi says, at least one of his relatives waits in the car for him, a Kalashnikov on his lap.

His family already had the assault weapons, he said, so it was only a matter of receiving clearance to carry them. "I don't even like guns," Mr. Afridi said. But he added: "We've become targets. Every wealthy person in Pakistan is a target."
—Waseem Ahmed Qadri in Islamabad and Khalid Kheshgi in Peshawar contributed to this article.

Write to Peter Wonacott at peter.wonacott@wsj.com

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Willem Buiter warns of massive dollar collapse

2009-01-06T08:09:00.000-08:00

Willem Buiter warns of massive dollar collapse

Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.

By Edmund Conway, Economics Editor, Telegraph
Last Updated: 3:05PM GMT 06 Jan 2009

The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.

Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.

The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.

Writing on his blog , Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."

He said that the dollar had been kept elevated in recent years by what some called "dark matter" or "American alpha" - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.

"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally," he said. "Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed."

He said investors would, rightly, suspect that the US would have to generate major inflation to whittle away its debt and this dollar collapse means that the US has less leeway for major spending plans than politicians realise.

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Guns & Ammo...

2009-01-05T10:27:00.000-08:00

For your consideration...

Buy, Buy, Buy
by Michael Gaddy
LewRockwell.com

Before a standing army can rule, the people must be disarmed; as they are in almost every kingdom in Europe. The supreme power in America cannot enforce unjust laws by the sword; because the whole body of the people are armed, and constitute a force superior to any band of regular troops that can be, on any pretence, raised in the United States. A military force, at the command of Congress, can execute no laws, but such as the people perceive to be just and constitutional; for they will possess the power, and jealousy will instantly inspire the inclination, to resist the execution of a law which appears to them unjust and oppressive.

~ Noah Webster

While we stumble along economically with bailouts, buyouts, and poor sales in almost all sectors, two products in America are seeing dramatic increases in sales: guns and ammo. People who never owned a gun before are buying; people are buying multiples of military style weapons and ammo is being bought by the case instead of by the box.

Many explain this away as folks simply worried that Obama will move to ban certain firearms, especially those referred to by the ignorant as "assault weapons," I believe the motivation to buy firearms and ammunition goes much deeper.

More and more Americans are becoming increasingly aware of the storm that is brewing on the horizon, a storm driven by the possibility of a complete economic collapse.

The more astute are reading the handwriting on the wall: military combat units being assigned for stateside duty to quell domestic disturbances, a militarization of law enforcement, and the fear of what will happen when the state is no longer able to provide monthly checks to the millions currently living on government handouts labeled as "entitlements."

A strong possibility exists, when the checks stop, those who no longer have will seek to forcibly take from those who do. The scenes from New Orleans after Katrina have not disappeared from the public memory.

Regardless, legislation has been pre-planned and is now in place to be implemented just as soon as we have another tragedy involving a criminal idiot with guns.

Most are unaware that Congressional representative, Carolyn McCarthy from New York, introduced H.R. 1022 in February 2007. This draconian, unconstitutional piece of socialist baloney would ban a multitude of firearms currently available, including the Ruger 10/22, one of the most popular .22 caliber rifles on the market. .22 caliber rifles are commonly used for small game hunting, plinking and target practice; none are in use either in the military or law enforcement as the caliber is considered too small and underpowered for use on targets larger than small game or predators; a fact that somehow escaped the intelligence of Ms. McCarthy. Proof positive that politicians don’t really care what type of weapon you have; it is the simple fact they do not want you to have any weapon at all.

Representative McCarthy’s husband Dennis was shot and killed by Colin Ferguson on the Long Island Railroad in December of 1993. Her son, Kevin, was also seriously injured.

The logic that has escaped Ms. McCarthy is: if her husband had possessed a weapon, he could have possibly saved his life and the lives of others that fateful day. Instead, those who were prohibited by the laws of the state from protecting themselves were hopelessly slaughtered and maimed by a madman who cared not about those laws, and thanks to the liberal laws of New York, is still breathing good air.

Ms. McCarthy won election to congress based on her anti-gun position. Ironic, is it not, that one can be elected to congress by proposing laws contrary to the constitution and then take an oath pledging to "support and defend the Constitution of the United States against all enemies, foreign or domestic…"

McCarthy reportedly was inspired to run for congress because her predecessor, Congressman Dan Frisa, supported the Constitution and voted against an assault weapons bill. Leave it up to New Yorkers to defeat those who support the constitution and elect those who seek to destroy it.

Comrade McCarthy displayed her true colors when she filed a lawsuit against the Olin Corporation, makers of the ammunition used by Ferguson, but never filed suit against Ferguson himself. Obviously, McCarthy sought to profit from the death of her husband and the injuries to her son by accusing the manufacturers of an inanimate object of the crimes. Of course the company who manufactured this inanimate object had much "deeper pockets" than Mr. Ferguson, the person who actually loaded the ammunition into a firearm and pulled the trigger, killing six people and wounding nineteen. Thank goodness her frivolous lawsuit failed.

Americans are purchasing firearms and ammunition in record numbers, not because they believe 2009 will offer unusually good duck hunting, but because they fear the fallout from the coming economic storm and the state’s reaction to that fallout.

The larger question is: how many of those who have gone out and purchased firearms and ammo will actually use them? I believe a large number would bring those weapons to bear against criminals who would steal and threaten their families and property, but, how many would use them against the criminal state as it moves to seize their weapons, as was done in New Orleans, when the next "emergency" occurs, be it an economic meltdown or terrorist attack?

Rest assured, there will be a great majority who will not stand against tyranny. Those who have "gone along to get along" and those who have continually voted for the "lesser of two evils" will capitulate and surrender their weapons, as cowards normally do. They will rue the day they failed to support those who stood for liberty such as Ron Paul. Remember, they were offered liberty, but chose instead to support the status quo, because, in their eyes, liberty could not be elected.

Those among us who are afraid to be free will surrender their guns, their families, and their freedom to tyranny. Do not place your freedom or trust in their hands or depend on them to cover your six.

January 5, 2009

Michael Gaddy, an Army veteran of Vietnam, Grenada, and Beirut, lives in the Four Corners area of the American Southwest.

Copyright © 2009 LewRockwell.com

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U.S. to get New Currency by June, 2012

2009-01-02T06:54:00.000-08:00

When Jim Sinclair speaks, I listen. He is predicting a currency collapse or hyperinflationary event resulting in a new currency by June, 2012. I recommend reading his post and all the posts by Alf Field in their entirety:

A gift from Jim

Jim's comments on Alf Field's Gold Price Predictions

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A sign of the time, safe sales up

2009-01-02T06:46:00.000-08:00

Just remember to hold most of your funds in gold & silver if you want protection from inflation.

A sign of the time, safe sales up
News 4, Tuscon, AZ

In these troubled financial times, locksmiths say that safes are flying off the shelves. Nationally and locally sales are up. However, choosing the right safe is the difference between keeping your valuables safe and being an easy target for burglars.

Bruce Fairchild who owns Bruce's Safes Unlimited in Tucson, says his sales are up 30%.

"I have a lot of people coming saying they're pulling out cash and they want to hang on to cash because they're not sure which direction the country's going to take," Fairchild said.

That's why some safe owners like Gavin Douglas, say locking up your valuables is more important than ever.

"People steal everything they can get their hands on, as quickly as they can and now with the bad economy it's even worse," Douglas said.

However, choosing a safe can be tricky. Some safes are a lot easier to break into than others, giving buyers a false sense of security.

Fairchild says look for a burglary safe. Many consumers incorrectly purchase a fire safe which isn't designed to prevent forced entry. He says you need a safe with thick plate steel. Also look for one with a drill resistant hard plate, meaning they can't drill into the lock. Lastly, look for a safe with top and bottom locking bolts.

Fairchild says talk to a professional and make sure you bolt your safe to the ground.

"Because if someone gets a safe out of your house, they can go close their garage door and they can work on it until the cows come home," Fairchild said.

Also, the more it's hidden the better.

"Out of sight out of mind, again, is one of your best deterrents," Fairchild said.

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Video: How Iceland Collapsed

2008-12-27T21:31:00.000-08:00

How Iceland Collapsed

12/26/2008

WSJ's Andy Jordan examines how Iceland's economic miracle came to an abrupt end and explains why the world should care about the collapse of the small country's financial system.

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How to “Inflation Proof” your earnings

2008-12-27T13:47:00.000-08:00

How to “Inflation Proof” your earnings

[The following has not been verified with a tax professional and is offered for informational purposes only. Use this information at your own risk and seek competent, professional advice for your own personal situation.]

With the prospect of high inflation on the horizon it is now more important than ever to protect your assets and your earnings.

Here is a unique way that you can do this:

Simply ask your employer to pay you in One Dollar Silver American Eagles or Fifty Dollar Gold American Eagles instead of paper dollars. These coins are legal tender and are fully acceptable in commerce.

Example: Let's say you currently earn $2,000 per month from your job. The current price of a One Dollar Silver American Eagle is approximately $16 (as of 12/27/08). Divide $16 into $2,000 and you get 125 X One Dollar Silver Eagles. This is what you would ask your employer to pay you: $125 per month in the form of One Dollar Silver Eagles!

Now here is where it gets interesting...Your monthly earnings are now only $125! Suggest to your employer that your new withholdings be based upon $125 instead of the $2,000! Could it be that you can now claim only $125 per month in income and get a reduction in your income tax liability?

If you cash in these Silver Eagles for paper dollars then you could have a capital gain and be subject to additional tax. But what if you offered to pay your expenses with One Dollar Silver Eagles instead of paper dollars? When buying a $16 (paper dollar) item why not offer a One Dollar Silver Eagle instead? If they accept it, ask them to give you a receipt for “One Dollar”.

How can you make it easy for your employer to pay you this way? They certainly do not want to run around scouring coin shops to buy Silver Eagles and then try to deal with the transport, storage and security before they pay you. There is a better way. Each pay period simply have your employer order from an online coin dealer and have the coins drop-shipped to your doorstep. No hassles.

For your employer, might it be presumed that they bought the assets (silver dollars) for $16 each and then traded them to you for $1 resulting in a $15 loss on their books?

Now what if you own your own business? The same concept can apply and it is probably easier. Price your products and services in One Dollar Silver Eagles and have your customers pay you via the drop-ship method as well. Also, why not go ahead and pay your employees the same way? They may work a little harder and stick around a little longer knowing that you are looking out for their best interests!

Of course this is all easier said than done but I hope I have given you ideas on how you can protect the purchasing power of your earnings.

If all else fails, take your regular pay and buy silver and gold. When you see the price of these metals rising start asking for pay raises (if employed) or raise your prices (if you own your own business).

To your success!
The Bullion Insider

Woes on Wall Street coincide with gold coin rush

2008-12-25T08:51:00.000-08:00

Woes on Wall Street coincide with gold coin rush

By SANDY SHORE

DENVER (AP) — Investors who have forsaken shaky financial markets for the safety of gold must feel a little bit like prospectors.

As the worst recession in at least a generation spreads, so too does the clamor for gold bars and coins, assets less likely to go up on smoke like so many derivatives and asset-backed securities.

"I've never seen a case where demand was so high and supply was so short," said Chicago coin dealer Harlan Berk, who has been in the business 44 years.

Spikes in demand for gold coins this year appear to run parallel with the mounting woes on Wall Street.

In August, as the Federal Reserve pumped $62 billion into the U.S. banking system and rejected requests for mortgage finance giants Fannie Mae and Freddie Mac to take on more debt, sales of the popular American Eagle coin were suspended for a week.

The U.S. Mint was unable to get enough gold blanks from suppliers to match demand, Mint spokesman Michael White said.

In late September, when a massive bailout for the nation's biggest banks failed, sales of the American Buffalo coin were suspended until Nov. 3 because of shortages.

Yet even before the full extent of the financial crisis was known, investors had begun to load up on gold and other assets that could be held in the hand.

By early spring, investors were snapping up precious metals such as gold, silver and platinum, said Beth Deisher, editor of Coin World trade magazine.

Gold for April delivery shot up to a record of $1,033.90 an ounce on the New York Mercantile Exchange March 17. According to a report by the National Bureau of Economic Research released this month, that was just three months into the U.S. recession.

That correlation continued throughout the year as Wall Street institutions fell.

"People sensed there was something going on that they didn't quite understand," Deisher said.

In the third quarter, when the U.S. bailed out Fannie Mae and Freddie Mac, the Fed gathered the chiefs of major banks on Wall Street to plot a rescue, and Lehman Brothers descended into bankruptcy protection, gold sales went into high gear, said Natalie Dempster, head of the World Gold Council's North American investment unit.

U.S. demand for gold coins and small bars jumped 600 percent and international demand rose 121 percent, according to the council.

"The fact that gold is nobody else's liability was really an extremely important trait for investors in Q3 that were growing increasingly mistrustful of financial institutions in general," Dempster said.

To get gold as stocks began to fall, investors were willing to pay.

"You saw people paying premiums to get coins and small bars," Dempster said. "The refiners, et cetera, just wouldn't have been set up to produce that amount of gold, the same way as any other product."

Compounding the shortage somewhat, Deisher said, was a decision years ago to offshore some of the tasks that go into making U.S. gold coins.

Under the law, gold used in U.S. coins must be mined domestically. However, the government contracts with private companies to fabricate blank coins for striking with images such as the American Eagle. One of those companies is Gold Corp., owned by the government of Western Australia and operator of the Perth Mint.

Demand for gold coins continued to grow as economic news from Wall Street and Washington grew more ominous.

In early October, the Dow Jones industrial average closed below 10,000 points for the first time since 2004. At the same time, coin dealers saw demand a hit a peak, and bullion coins were fetching huge premiums, said Larry Shepherd, executive director of the American Numismatic Association.

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British Tourist unearths treasure

2008-12-24T16:07:00.000-08:00

This is awesome! Proof that gold is superior money. Any paper money that would have been stashed away this long would be dust by now.

Click Here for this story

Can you say "Revolution"?

2008-12-23T19:45:00.000-08:00

And the grumblings of discontent are growing...

LEGITIMACY DWINDLES
by James Howard Kunstler

Zounds! Public sentiment toward the accelerating economic fiasco has shifted, seemingly overnight, from a mood of nauseated amazement to one of panicked grievance as the United States moves closer to an apparent comprehensive collapse - and so ill-timed, wouldn't you know it, to coincide with the annual rigors of Santa Claus. The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake. It's like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve. And out in the heartland, of course, there is the spectacle of Illinois governor Rod Blagojevich trying to desperately dodge a racketeering rap behind an implausible hairdo.

What seems to spook people now is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system. Not even the legions of Obama are immune as his reliance on Wall Street capos Robert Rubin, Tim Geithner, and Larry Summers seem tainted by the same reckless thinking that brought on the fiasco. His pick last week for chief of the SEC, Mary Shapiro, is already being dissed as a shill for the Big Bank status quo. In a few days we'll discover what kind of bonuses are being ladled out by the remaining Wall Street banks with TARP money and a new chorus of howls will ring out.

This is very dangerous territory. In dollar terms, the numbers being applied to the various problems are so colossal - trillions! - that the death of our currency seems assured. And in defiance of congress's express intentions, none of the TARP "money" has been applied to its targeted purpose of buying up "toxic" (i.e. fraudulent) securities hidden in the vaults of banks, pension funds, and municipal portfolios.

George W, Bush's personal bailout of General Motors and Chrysler is designed solely to postpone their bankruptcy and mass job layoffs until after the holidays. Otherwise, the $17.4 billion will probably be used by the companies to underwrite the extensive legal work required for the moment they must declare bankruptcy - when Mr. Obama is in the White House. Meanwhile, the President-elect has ramped up his job-creation target overnight from two to three million, and some observers are catching a whiff of Soviet-style economic engineering ("…we pretend to work and they pretend to pay us….").

The years since Jimmy Carter have produced an astoundingly flaccid public, sunk in various addictions and distractions, but this is about to change. The darkling mood of political protest and violent activism that saturated my own young adult years is scudding up again on the horizon. Mr. Obama's pick for attorney general, the mild-looking Eric Holder, may be the key figure in the early months of the new government. If he doesn't commence some aggressive investigations and prosecutions - beginning with Henry Paulson for insider trading when he was in charge of Goldman Sachs and shorting his own company's mortgage-backed securities - then the whole Obama enterprise could fall under suspicion of illegitimacy. The bums who ran the US banking sector into a ditch have to account for their turpitudes. They can't be allowed to hide under a TARP.

Unfortunately, the legal system, and probably the legislative system, will be so buried in procedural bullshit from the unwind of countless enterprises and institutions, and the sorting out of the remnants, that it remains to be seen whether this generation of people-in-charge can even embark on a fresh start of anything connected to real everyday life in America. All this is starting to alarm the tattered residue of the middle classes, and from here it's a very short path to them being really pissed off.

When legitimacy erodes, anything goes. Nothing is respected including rules and personalities. The center doesn't hold and the new vacuum there is a tumultuous place. The same crisis of authority and legitimacy is spreading from nation to nation now. Soon, China will contend with a discontented army of the unemployed. Greece has been in an uproar for two weeks. Belgium's government just collapsed. Trade barriers are going up. Exports are falling away. The world's energy markets are not immune to these disorders. I would expect problems with the currently seamless supply lines that bring America two-thirds of the oil we use. Even a mild disruption of oil supplies could attach an anvil to the ankle of an economy already falling off a cliff.

Right now, the overwhelming sentiment is to get this country back to where we were, say, ten years ago, when everything was humming nicely: Clinton nostalgia. We're definitely not gong back there, though. It's an idle wish. And any set of policies designed to lead in that direction will prove very disappointing. Our destination is a land of much smaller-scaled local economies. We could retain our federal ties if the federal government can scale back appropriately from the bloated, feckless enterprise it has become. Otherwise, it might only get in the way and make matters worse, and the public in one region or another of North America might reach a decision that they are better off without it. That would be what's called a revolution.

Regards,

James Howard Kunstler
for The Daily Reckoning

Editor's Note: James Kunstler has worked as a reporter and feature writer for a number of newspapers, and finally as a staff writer for Rolling Stone Magazine. In 1975, he dropped out to write books on a full-time basis.

His latest nonfiction book, The Long Emergency describes the changes that American society faces in the 21st century. Discerning an imminent future of protracted socioeconomic crisis, Kunstler foresees the progressive dilapidation of subdivisions and strip malls, the depopulation of the American Southwest, and, amid a world at war over oil, military invasions of the West Coast; when the convulsion subsides, Americans will live in smaller places and eat locally grown food.

-- Posted Tuesday, 23 December 2008 | Digg This Article | Source: GoldSeek.com

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UPDATE: Hedge Fund Manager Found Dead

2008-12-23T17:31:00.000-08:00

MarketWatch reports:

Villehuchet, 65, was found sitting at his desk with both wrists slashed, the Associated Press said, citing NYPD spokesman Paul Browne.

A box cutter was found on the floor along with a bottle of sleeping pills on his desk, but no suicide note was found, it said.

Villehuchet co-founded Access International Advisors LLC, which specializes in managing hedged and structured-investment portfolios.

He had been trying for a week to recover at least $1.5 billion in European funds that Access International had invested through Madoff's business, The Wall Street Journal reported.
Villehuchet once worked for the capital markets division of Credit Lyonnais SA as founder, chairman and chief executive officer of Credit Lyonnais Securities (U.S.A.), it reported, citing a company statement.

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Hedge Fund Manager Found Dead

2008-12-23T14:26:00.000-08:00

Fund manager tied to Madoff loss found dead: reports
By Wallace Witkowski
MarketWatch

Last update: 1:49 p.m. EST Dec. 23, 2008

SAN FRANCISCO (MarketWatch) -- Thierry Magon de la Villehuchet, a fund manager who reportedly lost large sums in Bernard Madoff's alleged $50 billion Ponzi scheme, was found dead in a New York office building, according to media reports Tuesday. A New York City Medical Examiner spokeswoman told Reuters that de la Villehuchet, 65, was pronounced dead at 8 am Eastern, and that the cause of death was not known. He co-founded Access International Advisors LLC, which specializes in managing hedged and structured-investment portfolios.

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Peter Schiff on the coming Hyperinflation

2008-12-23T08:26:00.000-08:00

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Dollar Collapse: Peter Schiff vs. Steve Forbes

2008-12-23T07:05:00.000-08:00

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Gold Backwardation - what does it mean?

2008-12-23T06:58:00.001-08:00

Watch that printing press

2008-12-23T06:05:00.001-08:00

Mr. Kellner contemplates where the next bubble will form. In other words, where will all this money flow to? We believe a large portion of it will flow to gold & silver.

Watch that printing press

Commentary: Money supply will soar once banks loosen purse strings

By Irwin Kellner, MarketWatch
Last update: 12:01 a.m. EST Dec. 23, 2008

PORT WASHINGTON, N.Y. (MarketWatch) -- As 2008 draws to a close, one of our chief concerns is deflation. A year from now, the nation's No. 1 problem might well be inflation.
Last week's statement by the Federal Reserve indicated that, when it comes to interest-rate cuts, the central bank has gone about as far as it can go.

The Fed acknowledged that the actual federal funds rate was well below its target because it has injected massive amounts of liquidity into the economy. So it made this rate its new target, and said that it would concentrate instead on pumping gobs of money into the system.

Not that the central bank has been exactly resting on its oars.

On the contrary, according to the Federal Reserve Bank of St. Louis, the monetary base (the raw material for the money supply) has risen at a seasonally adjusted annual rate of 86% over the past year. Bad enough, but over the past three months this has skyrocketed to an annual rate of almost 1,000%!

Adjusted reserves have ballooned from $100 billion to $700 billion since mid-September, while the Fed's balance sheet has more than doubled over this period of time, from about $900 billion to a thumping $2.2 trillion.

These funds are beginning to show up in the Fed's two measures of the money supply. M2 has risen 8% over the past year, while MZM, the St. Louis Fed's measure of liquid money, is up more than 10% during the same period.

This is with the banks still reluctant to lend. Once they loosen their purse strings, the money supply will soar.

When this happens, don't be surprised if the Fed stops reporting these numbers. This is what it did several years ago, when it stopped reporting M3, which apparently was rising too fast for the Fed's comfort.

While virtually no one is raising prices in today's depressed economy, all this liquidity will soon become an accident looking for a place to happen.

While virtually no one is raising prices in today's depressed economy, all this liquidity will soon become an accident looking for a place to happen. The trick then, for the Fed, is to drain this excess liquidity before it turns into inflation.

This is easier said than done, because the Fed will have to begin weaning us off easy money long before the recession ends. By the way, this could happen sooner than you think.

Besides easy money, the sharp plunge in oil prices since midyear has put billions of (after-tax) dollars back into the pockets of consumers, business and governments -- by some estimates as much as $250 billion.

Add to this the $150 billion in tax rebates that Washington mailed out over the summer, and this economy already has received stimulus equal to almost 3% of GDP. When the new administration takes over in January, you may expect additional fiscal stimulus of as much as 5% of GDP.

Such a push could easily jump-start the economy -- right into another round of inflation.

For its part, the Fed may find it difficult to reverse course. This is because in the process of blowing up its balance sheet, the central bank has bought lots of instruments for which there are few ready buyers.

Thus we are likely to witness the formation of a new bubble, possibly as soon as a year from now. The question is where.

It will be a while before shell-shocked retailers and others try to raise prices. Oil is unlikely to go up either, in view of the imbalance between supply and demand. The same goes for housing. The jobless rate is likely to be too high to tempt labor to go for big pay increases (at least in most sectors).

But workers might have some leverage when it comes to rebuilding the country's infrastructure -- one of the president-elect's top priorities. In addition, prices of such commodities as steel, cement and construction equipment could also soar as tons of money land in this sector literally overnight. End of Story

Irwin Kellner is chief economist for MarketWatch, and is Distinguished Scholar of Economics at Dowling College in Oakdale, N.Y.

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The Fed Makes Money

2008-12-23T05:51:00.000-08:00

The Fed Makes Money

By Nicholas von Hoffman
The Nation

December 22, 2008

"Quantitative easing," don't you love it? It's the latest business-economics euphemism designed to mislead. I do not know who they think they're fooling: it's like doctors calling excruciating pain "discomfort."

Quantitative easing is the government's way of saying it is printing money. The Federal Reserve Board is printing the money, incalculably large amounts of it, to drive interest rates down to the zero range and ramp up business activity.

The New York Times summed up what that crew of economists, professors and Wall Street operators in Washington are undertaking: "the Fed bluntly announced that it would print as much money as necessary to revive the frozen credit markets and fight what is shaping up as the nation's worst economic downturn since World War II.

"In effect, the Fed is stepping in as a substitute for banks and other lenders and acting more like a bank itself. 'The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth,' it said. Those tools include buying 'large quantities' of mortgage-related bonds, longer-term Treasury bonds, corporate debt

The money for buying these billions or trillions of loans, mortgages, bonds and every other sort of debt does not come out of your pocket now, although it may come out of your hide later on. These are not tax dollars; they are not borrowed dollars; they are not dollars generated by anyone's earnings. They represent no ratio to anything of value. You cannot even say that they have been created out of whole cloth, which would mean that they derive from some kind of antecedent of value. These are dollars plucked from nowhere.

The rationale for the alchemic generation of money out of the thinnest of air is that the economy is starving for greenbacks but is like a sick person who cannot take nourishment by mouth. It must be injected à la an intravenous line into a body with a collapsed circulatory system. What we do not know is if this procedure is akin to pumping blood into a corpse or if the patient will sit up and start feeling better.

Either way, the United States of America's currency is being depreciated. This will not be the first time and, if history is any guide, do not expect miracles. It was tried in the early 1930s in hopes that it would ignite an inflationary surge in prices and, by making American goods selling for depreciated dollars cheaper, our exports would perk up. Neither happened.

But other things did. Other trading nations depreciated their money so that their export goods would be cheaper and, as did the United States, raised tariff barriers to keep other nation's exports out. You cannot find a better example of a zero-sum game.

It looks like we are seeing at least a partial repeat of seventy-five years ago. Washington, instead of raising tariffs on imports, is taking to subsidizing at least one major American industry threatened by foreign competition, the automobile industry. They are doing the same in Russia, where the natives in Vladivostok were so upset at the prospect of prohibitive tariff increases on imported foreign cars that they rioted. Japan and China, for much the same reasons as here, are dropping their interest rates.

As of now the EU is less enamored with lowering interest rates. Apparently somebody on the continent has figured out that individuals and businesses without jobs or customers are not going to borrow money at any interest rate, regardless of how low it might be.

Even before the Fed announced it was going in for quantitative easing, the value of the dollar plunged. People, businesses and nations buy US government bonds because they believe such bonds keep their money safe and earn a modest amount of interest. If American money is no longer going to be safe because it is being devalued and US bonds are going to be paying close to zero interest, foreigners will stop buying them. Since we have been living off borrowed money to pay for our gasoline, our cars and our clothes, quantitative easing, instead of getting business going again, may be the shovel we do not need to dig ourselves into a deeper hole.

If the dollar is debased past a certain point, foreign investors will panic, sell their dollar-denominated bonds at any price they can get, bolt for the doors and leave us with a godawful depression and an inflation such as you won't believe until you go to the supermarket and pay $100 for a quart of milk. Something of this sort happened in Argentina a few years ago, literally pauperizing that nation's middle class.

Cheapening the dollar runs risks and poses serious problems in every direction. The dollar as the international reserve currency, the money that is accepted everywhere as the preferred means of payment, is the foundation of American power and influence around the world. We will be presenting ourselves with a major national security problem if we continue to undermine our own currency.

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Buy Gold & Silver

Is your Cell Phone spying on you?

2008-12-22T21:38:00.000-08:00

Cell Phone Spying

The News On 6 found that anyone can listen to your conversations, read your text messages and even turn your phone into a microphone.

Cell phones are essential for most of us; they're a life line to work, family and friends, but could they be used to spy on you? Last fall, News On 6 crime reporter Lori Fullbright introduced us to a woman being stalked by her ex-boyfriend. She was convinced he was using her cell phone to learn things about her that were private. Her idea seemed far-fetched and police were stumped, but The News On 6 did some digging and found out that anyone can listen to your conversations, read your text messages and even turn the phone into a microphone. News On 6 crime reporter Lori Fullbright reports cell phone spies can take control of your cell phone from anywhere and you would never know.

Cell phones let us keep in touch, check email, exchange messages and be connected to the world. Who would ever think it could be turned against you?

Carla Robinson's ex-boyfriend has stalked her for three years. Nobody could figure out how he was able to track her every move, her every conversation, especially when he was often out of state.

Full Story...

"Buy our cars whether you like it or not"

2008-12-22T20:54:00.001-08:00

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Protectionist dominoes are beginning to tumble across the world The riots have begun. Civil protest is breaking out in cities across Russia, China, an

2008-12-22T20:50:00.000-08:00

Ready or not, here it comes...

Protectionist dominoes are beginning to tumble across the world
The riots have begun. Civil protest is breaking out in cities across Russia, China, and beyond.

By Ambrose Evans-Pritchard
Last Updated: 10:30AM GMT 22 Dec 2008

Comments 65 | Comment on this article

Greece has been in turmoil for 11 days. The mood seems to have turned "pre-insurrectionary" in parts of Athens - to borrow from the Marxist handbook.

This is a foretaste of what the world may face as the "crisis of capitalism" - another Marxist phase making a comeback - starts to turn two hundred million lives upside down.

We are advancing to the political stage of this global train wreck. Regimes are being tested. Those relying on perma-boom to mask a lack of democratic or ancestral legitimacy may try to gain time by the usual methods: trade barriers, sabre-rattling, and barbed wire.

Dominique Strauss-Kahn, the head of the International Monetary Fund, is worried enough to ditch a half-century of IMF orthodoxy, calling for a fiscal boost worth 2pc of world GDP to "prevent global depression".

"If we are not able to do that, then social unrest may happen in many countries, including advanced economies. We are facing an unprecedented decline in output. All around the planet, the people have reacted with feelings going from surprise to anger, and from anger to fear," he said.

Russia has begun to shut down trade as it adjusts to the shock of Urals oil below $40 a barrel. It has imposed import tariffs of 30pc on cars, 15pc on farm kit, and 95pc on poultry (above quota levels). "It is possible during the financial crisis to support domestic producers by raising customs duties," said Premier Vladimir Putin.

Russia is not alone. India and Vietnam have imposed steel tariffs. Indonesia is resorting to special "licences" to choke off imports.

The Kremlin is alarmed by a 13pc fall in industrial output over the last five months. There have been street protests in Moscow, St Petersburg, Kaliningrad, Vladivostok and Barnaul. Police crushed "Dissent Marchers" holding copies of Russia's constitution above their heads in Moscow's Triumfalnaya Square.

"Russia has not seen anything like these nationwide protests before," said Boris Kagarlitsky from Moscow's Globalization Institute.

The Duma is widening the treason law to catch most forms of political dissent, and unwelcome forms of journalism. Jury trials for state crimes are to be abolished.

Yevgeny Kiseloyov at the Moscow Times said it feels eerily like December 1 1934 when Stalin unveiled his "Enemies of the People" law, kicking off the Great Terror.

The omens are not good in China either. Taxis are being bugged by state police. The great unknown is how Beijing will respond as its state-directed export strategy hits a brick wall, leaving exposed a vast eyesore of concrete and excess plant.

Exports fell 2.2pc in November. Toy, textile, footwear, and furniture plants are being closed across Guangdong, now the riot hub of South China. Some 40m Chinese workers are expected to lose their jobs. Party officials have warned of "mass-scale social turmoil".

The Politburo is giving mixed signals. We don't yet know how much of the country's plan to boost domestic demand through a $586bn stimulus package is real, and how much is a wish-list sent to party bosses in the hinterland without funding.

Shortly after President Hu Jintao said China is "losing competitive edge in the world market", we saw a move towards export subsidies for the steel industry and a dip in the yuan peg - even though China already has the world's biggest reserves ($2 trillion) and the biggest trade surplus ($40bn a month).

So is the Communist Party mulling a 1930s "beggar-thy-neighbour" strategy of devaluation to export its way out of trouble? Such raw mercantilism can only draw a sharp retort from Washington and Brussels in this climate.

"During a global slowdown, you can't have countries trying to take advantage of others by manipulating their currencies," said Frank Vargo from the US National Association of Manufacturers.

It is a view shared entirely by President-elect Barack Obama. "China must change its currency practices. Because it pegs its currency at an artificially low rate, China is running massive current account surpluses. This is not good for American firms and workers, not good for the world," he said in October. The new intake of radical Democrats on Capitol Hill will hold him to it.

There has been much talk lately of America's Smoot-Hawley Tariff Act, which set off the protectionist dominoes in 1930. It is usually invoked by free traders to make the wrong point. The relevant message of Smoot-Hawley is that America was then the big exporter, playing the China role. By resorting to tariffs, it set off retaliation, and was the biggest victim of its own folly.

Britain and the Dominions retreated into Imperial Preference. Other countries joined. This became the "growth bloc" of the 1930s, free from the deflation constraints of the Gold Standard. High tariffs stopped the stimulus leaking out.

It was a successful strategy - given the awful alternatives - and was the key reason why Britain's economy contracted by just 5pc during the Depression, against 15pc for France, and 30pc for the US.

Could we see such a closed "growth bloc" emerging now, this time led by the US, entailing a massive rupture of world's trading system? Perhaps.

This crisis has already brought us a monetary revolution as interest rates approach zero across the G10. It may overturn the "New World Order" as well, unless we move with great care in grim months ahead. This is where events turn dangerous.

The last great era of globalisation peaked just before 1914. You know the rest of the story.

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Buy Gold & Silver

Ariz. police say they are prepared as War College warns military must prep for unrest; IMF warns of economic riots

2008-12-22T20:48:00.000-08:00

Phoenix Business Journal - December 17, 2008
http://phoenix.bizjournals.com/phoenix/stories/2008/12/15/daily34.html

Wednesday, December 17, 2008
Ariz. police say they are prepared as War College warns military must prep for unrest; IMF warns of economic riots
Phoenix Business Journal - by Mike Sunnucks

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security,” said the War College report.

The study says economic collapse, terrorism and loss of legal order are among possible domestic shocks that might require military action within the U.S.

International Monetary Fund Managing Director Dominique Strauss-Kahn warned Wednesday of economy-related riots and unrest in various global markets if the financial crisis is not addressed and lower-income households are hurt by credit constraints and rising unemployment.

U.S. Sen. James Inhofe, R-Okla., and U.S. Rep. Brad Sherman, D-Calif., both said U.S. Treasury Secretary Henry Paulson brought up a worst-case scenario as he pushed for the Wall Street bailout in September. Paulson, former Goldman Sachs CEO, said that might even require a declaration of martial law, the two noted.

State and local police in Arizona say they have broad plans to deal with social unrest, including trouble resulting from economic distress. The security and police agencies declined to give specifics, but said they would employ existing and generalized emergency responses to civil unrest that arises for any reason.

“The Phoenix Police Department is not expecting any civil unrest at this time, but we always train to prepare for any civil unrest issue. We have a Tactical Response Unit that trains continually and has deployed on many occasions for any potential civil unrest issue,” said Phoenix Police spokesman Andy Hill.

“We have well established plans in place for such civil unrest,” said Scottsdale Police spokesman Mark Clark.

Clark, Hill and other local police officials said the region did plenty of planning and emergency management training for the Super Bowl in February in Glendale.

“We’re prepared,” said Maricopa County Sheriff Deputy Chief Dave Trombi citing his office’s past dealings with immigration marches and major events.

Super Bowl security efforts included personnel and resources from the U.S. Department of Homeland Security and U.S. military’s Northern Command, which coordinated with Arizona officials. The Northern Command was created after 9/11 to have troops and Defense Department resources ready to respond to security problems, terrorism and natural disasters.

Northern Command spokesman Michael Kucharek and Arizona Army National Guard Major. Paul Aguirre said they are not aware of any new planning for domestic situations related to the economy.

Nick Dranias, director of constitutional government at the libertarian Goldwater Institute, said a declaration of marital law would be an extraordinary event and give military control over civilian authorities and institutions. Dranias said the Posse Comitatus Act restricts the U.S. military’s role in domestic law enforcement. But he points to a 1994 U.S. Defense Department Directive (DODD 3025) he says allows military commanders to take emergency actions in domestic situations to save lives, prevent suffering or mitigate great property damage.

Dranias said such an emergency declaration could worsen the economic situation and doubts extreme measures will been taken. “I don’t think it’s likely. But it’s not impossible,” he said.

The economy is in recession. Consumer spending is down, foreclosures are up and a host of businesses are laying off workers and struggling with tight credit and the troubled housing and financial markets. The U.S. Federal Reserve Bank and U.S. Treasury Department have pumped more than $8.5 trillion into the economy via equity purchases of bank stocks, liquidity infusions, Wall Street and bank bailouts and taxpayer rebates. U.S. automakers are seeking more than $14 billion in federal loans with fears they could fall into bankruptcy without a bailout. The U.S. housing and subprime lending-induced recession also has hit economies in Europe, Japan and China.

Gov. Janet Napolitano’s office declined comment on emergency planning and possible civil unrest. Napolitano is president-elect Barack Obama’s pick for secretary of Homeland Security, an agency that oversees airport security, disaster response, border security, customs and anti-terrorism efforts.

As governor, Napolitano sent National Guard troops to Palo Verde Nuclear Generating Station in 2003 in response to terrorism threats.

Glendale Police spokesman Jim Toomey said the West Valley suburb developed new emergency plans with the approach of Y2K computer changeovers leading up to the year 2000 and police have updated those plans several times including after 9/11. Toomey said strategies to deal with public unrest usually involve deploying personnel and equipment to deal with specific incidents while still providing usual services.

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Buy Gold & Silver

Teens exploit Speed Camera weakness...

2008-12-22T20:35:00.000-08:00

WEB EXCLUSIVE -- Local teens claim pranks on county's Speed Cams

By Joe Slaninka

Special to the Sentinel

As a prank, students from local high schools have been taking advantage of the county's Speed Camera Program in order to exact revenge on people who they believe have wronged them in the past, including other students and even teachers.

Students from Richard Montgomery High School dubbed the prank the Speed Camera "Pimping" game, according to a parent of a student enrolled at one of the high schools.

Originating from Wootton High School, the parent said, students duplicate the license plates by printing plate numbers on glossy photo paper, using fonts from certain websites that "mimic" those on Maryland license plates. They tape the duplicate plate over the existing plate on the back of their car and purposefully speed through a speed camera, the parent said. The victim then receives a citation in the mail days later.

Students are even obtaining vehicles from their friends that are similar or identical to the make and model of the car owned by the targeted victim, according to the parent.

"This game is very disturbing," the parent said. "Especially since unsuspecting parents will also be victimized through receipt of unwarranted photo speed tickets.

The parent said that "our civil rights are exploited," and the entire premise behind the Speed Camera Program is called into question as a result of the growing this fad among students.

The Speed Camera Program was implemented in March of this year and used for the purpose of reducing traffic and pedestrian collisions in the county. Cameras are located in residential areas and school zones where the posted speed limit is 35 miles per hour or lower. A $40 citation is mailed to the owner of the car for violating the speed limit in these areas.

The Montgomery County Police said they have not seen or heard of this prank occurring but said they will keep an eye out for people committing the crime.

"I hope the public at large will complain loudly enough that local Montgomery County government officials will change their policy of using these cameras for monetary gain," the parent said. "The practice of sending speeding tickets to faceless recipients without any type of verification is unwarranted and an exploitation of our rights."

Edward Owusu, Assistant Principal at Wootton High School, said that he heard of local students pulling the prank when the school received a call from a parent informing them of its occurrence. "I have not heard of this happening among students at Wootton," Osuwu said. "It is unfortunate that kids have a lot of time on their hands that they can think of doing such a thing."

Montgomery County Council President Phil Andrews said that the issue is troubling in several respects. "I am concerned that someone could get hurt, first of all, because they are speeding in areas where they know speeding is a problem," he said.

Andrews also said that this could hurt the integrity of the Speed Camera Program. "It will cause potential problems for the Speed Camera Program in terms of the confidence in it," he said.

He said he is glad someone caught it before it becomes more widespread and he said he hopes that the word get out to the people participating in this that there will be consequences.

Revenge against speeding tickets...

2008-12-22T20:28:00.000-08:00

Will printing money help the economy?

2008-12-18T08:49:00.000-08:00

Of course, we side with Brian Doherty...

Will printing money help the economy?
What's the wisdom behind the Fed's recent actions? Doug Henwood and Brian Doherty debate.

December 17, 2008 - LATimes.com

Today's question: Critics say that the Federal Reserve -- which will buy up to $800-billion worth of troubled mortgage and consumer-credit assets -- is effectively printing money to fix the economy. What's the wisdom behind the Fed's actions? Doug Henwood and Brian Doherty debate the consequences of federal monetary policy.

It's better to inflate than deflate.

Point: Doug Henwood

It's not just critics who say the Fed is printing money to fix the economy. That's what it's doing, and I don't see what's wrong with it.

Back in 2002, Federal Reserve Chairman Ben S. Bernanke gave a speech reflecting on what a central bank might do if faced with the threat of deflation -- an extended period of falling prices. Falling prices might sound nice, but over the last century, they've generally accompanied severe economic crises, like Japan in the 1990s or, worse, the U.S in the 1930s. A deflation turning into a depression is a central banker's worst nightmare. And we're at risk for one of those today.

In that speech, Bernanke -- who made his academic reputation by studying the role of bank failures and other financial troubles in propagating the Depression -- said that everything should be done to prevent a deflation from taking hold, and if one took hold, everything should be done to reverse it. Speaking six years ago, Bernanke laid out the framework for what the Fed is doing today -- deep cuts in interest rates, unorthodox purchases of securities (not the short-term U.S. Treasury paper the Fed usually trades in but long-term bonds, mortgage bonds and even private securities) and financing a big fiscal stimulus by printing money. "If we do fall into deflation ... we can take comfort that the logic of the printing press ... must assert itself, and sufficient injections of money will ultimately always reverse a deflation," he said.

For further perspective on current events, we can turn to a classic 1933 paper on debt deflations by economist Irving Fisher. His model boils down to this: Some shock hits the economy, resulting in an increase in pessimism and asset sales. Asset sales drive down prices, leading to more pessimism and distress selling. That results in a shrinkage in the money supply and a decline in velocity (the speed at which money turns over, a function of how quickly people spend). Prices for goods and services fall, hitting profits and raising the real value of debts. Businesses go bust. Managers of surviving firms cut production and employment.

This deepens pessimism, leading those with cash to hoard it. Repeat in a vicious cycle. The point of Bernanke's printing press is to arrest and reverse this process.

Fisher, writing when the New Deal was only months old, noted that FDR's early policies of imposing a bank holiday (after 10,000 had failed) and going off the gold standard quickly reversed the deflation and marked the beginning of an economic recovery. After contracting by 27% between 1929 and 1933, the economy grew 43% from 1933 to 1937.

Sure, printing money sounds awful, but not as bad as watching the unemployment rate hit 25%, as it did in 1933.

Libertarians consider this an interference with the self-adjusting beauties of the free market. Some even argue that the New Deal made the Depression worse, by not allowing the system's excesses to be purged, through some economic equivalent of a high colonic. Bernanke doesn't agree, and I'm glad for that.

Doug Henwood edits the Left Business Observer and does a weekly radio show on WBAI-FM in New York and KPFA-FM in Berkeley.

Runaway inflation would cause far more misery than a bit of deflation.

Counterpoint: Brian Doherty

Deflations can be grim, and inflations can be grim. As a way to help ameliorate -- though not eliminate -- these often damaging fluctuations in currency value, I'm going to speak up for a line of thought I've long been sympathetic to: the hard money school of economics (the Austrian variety is my favorite) which posits that the best way to "manage" the money supply is to remove from political authorities the ability to make more of it willy-nilly.

The most dire eventuality of government's ability to inflate its way out of perceived problems (as I fear Bernanke is gearing up to do today) dwarfs even the difficulties in America in the 1930s or 1990s Japan (more on that in a minute). See the hyperinflations of Germany in the 1920s, Hungary in the 1940s and, more recently, Zimbabwe.

Given Bernanke's firmly stated beliefs, and the fear of the early '30s deflation you mention, we have far more reason to fear inflation out of control than rampant deflation. Inflation out of control means, among other evils, the wiping out of most savings and most Americans seeing their real resources gradually shrink even with apparent monetary gain.

Deflation, especially of the mild variety we might be seeing right now, need not lead to the looping downward spiral of Fisher's model. In the last half of the 19th century, for example, America saw overall price deflation combined with overall healthy economic growth (with some ups and downs along the way). See this data sheet from the St. Louis Federal Reserve Bank on how deflationary episodes can correspond with economic growth and health.

Even if Fed money supply looseness doesn't lead to a repeat of a 1923 Germany horror show, I think we have recent evidence indicating that a Bernanke inflation solution might not save us. Although Doug has elsewhere argued that the problem was Japanese authorities not acting quickly enough, I think the experience of Japan in the 1990s -- where at least 10 attempts at massive fiscal stimulus, lowering interest rates to rock bottom and raising the money supply all failed to propel the nation from recessionary doldrums -- should at least make us wonder if Bernanke's policy is worth the risk.

Yes, deflationary hangover adjustments from years of cheap credit and money growth can be painful, which is why free-market, hard-money types advocate eschewing willy-nilly credit and money growth in the first place. One big worry arising from Bernanke's current intentions is that if we seem hellbent on increasing the quantity of these mysterious paper things to get out of today's mess, those things are going to be worth less -- far less -- even if that inflationary action solves an apparent short-term problem.

And that could hasten the day when the people who lend the U.S. money in the hopes of getting back something that's worth close to what they lent us will stop. Which, as gold goes up and the dollar down, leads us to tomorrow's topic, roughly: How much government debt is too much?

Brian Doherty is a senior editor at Reason magazine and author of "Radicals for Capitalism" and "Gun Control on Trial."

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and a little humor...

2008-12-17T07:57:00.000-08:00

Nervy investors spur rush at Swiss gold refiners

2008-12-16T21:43:00.000-08:00

Wed Dec 17, 2008 9:50am IST

By Arnd Wiegmann and Lisa Jucca

MENDRISIO/ZURICH, Switzerland (Reuters) - Sealed off by grey concrete walls and barbed wire, the workmen in protective glasses and steel-toed boots at this smelter cannot work fast enough to meet demand from the nervous rich for gold.

This refinery near Lake Lugano in the Alps is running day and night as people worried about recession rush to switch their assets into something that may hold its value.

"I have been in the gold business for 30 years and I have never experienced anything like this," said Bernhard Schnellmann, director for precious metal services at the refiner Argor-Heraeus, one of the world's three largest.

"Production has dramatically increased since the middle of the year. We cannot cope with demand," said Schnellman, wearing a gold watch on his wrist.

Spot gold hit a record $1,030.80 an ounce on March 17. It fell below $700 in late October, partly because investors sold their holdings to cover losses in equity and bond markets hit by the credit crisis, and is now around $830 an ounce.

The trigger for the price to rise again could come from a much weaker dollar, making gold cheaper for holders of other currencies, and a renewed aversion to paper assets as governments and central banks pump large amounts of cash into the economy, stoking inflation.

Smoke billows as the molten gold, like glowing butter, is poured. To cool it, the worker drops it into water. It hisses as it hits. Once hardened in moulds, the gold bars are embossed with the refinery's seal. Workers wearing white gloves stack them into boxes like domino pieces.

Though Switzerland is not a gold miner, it is home to some of the world's largest refineries, which process an estimated 40 percent of all newly mined gold.

Argor-Heraeus is part-owned by the Austrian Mint and a subsidiary of Germany's Commerzbank. Commercial and central banks are its chief customers and it says it processes some 350-400 tonnes of gold and 350 tonnes of silver per year.

Customers buying gold bars, which can weigh more than 10 kg each, have to wait roughly a month, taking into account the year-end holiday season.

For those buying coins or ingots, which can fit into the palm of a hand, the delay is six to eight weeks. A year ago, these small products could be had within a couple of days.

Worries about the banking system globally have boosted worldwide demand for physical gold, the Gold Council said.

"Many (people) are afraid of leaving their money in banks," said Sandra Conway, managing director at ATS Bullion in London, which sells bullion and gold coins to institutions and the retail market.

"It's difficult to quantify, but I would say our turnover over the last three months has certainly doubled compared to the previous three months," she said.

FULL CAPACITY

Other Swiss gold refiners also say business is booming.

"Since the summer we have experienced a sharp rise in demand for certain gold products. The one-kilo bar has become very popular," said Fiorenzo Arbini, in charge of health and safety at Pamp, another large Swiss refiner.

"People used to buy certificates, now they want physical gold."

Schnellmann said the Argor-Heraeus smelter is operating at full capacity, three eight-hour shifts a day. Conquering the backlog by hiring is difficult, because each candidate has to undergo a security check.

Gold refiners were established in Switzerland to supply the watch industry and, later, jewellery-makers in Italy.

Switzerland's largest banks stepped in to replace a void in gold trading while the London gold market was shut after World War Two and again during a brief closure in 1968.

The former Soviet Union, another top gold producer, chose Zurich banks to handle most of its gold sales in the 1970s and 1980s.

"Gold has an image of being the asset of last resort. This could be viewed as old-fashioned but this is how enough people with enough money to matter think," said Stephen Briggs, a metals strategist at RBS Global Banking & Markets.

GOLD TOUCH

India, China and the Middle East remain the biggest gold importers, particularly for jewellery. But demand for physical gold has exploded also in Europe, the Gold Council said.

In Switzerland, home to the world's largest private banking industry, demand for gold bars and coins shot up six-fold to 21 tonnes in the third quarter of 2008, more than in any other European country.

Retail investment in gold rose 121 percent in the third quarter of 2008, an important contributor to the overall increase in global demand, the Gold Council said.

In that period purchases of gold bars by retail investors, who often buy through commercial banks, rose nearly 60 percent, notably in Switzerland, Germany, and the United States.

There was a surge of interest among professional investors shortly after the collapse of Lehman Brothers in September.

Private bank Julius Baer in October launched a fund to invest exclusively in gold bars stored in highly secured vaults in Switzerland.

"The fascination with gold has been there since the beginning of civilisation," said Schnellmann. "It cannot be explained: you can't eat gold, you cannot build anything resistant with it and yet people want to hoard it."

(Additional reporting by Pratima Desai in London)\

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The Truth about Keynesianism

2008-12-16T19:21:00.000-08:00

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Buy Gold & Silver

Bailout Madoff!

2008-12-16T07:35:00.000-08:00

Bailout Madoff!

By: Brady Willett, FallStreet.com

-- Posted Tuesday, 16 December 2008

With the financial markets already in a state of panic and the global recession expected to worsen in 2009, we can ill afford to allow the financial institutions, charities, and rich idiots that entrusted Bernard Madoff with their money to go bust. As for the widespread contention that since Mr. Madoff committed fraud he deserves to go to jail, do not think of Madoff as operating a ponzi scheme so much as a Strong Armed Perception Fund (SAP Fund), and don’t think of him as breaking the law so much breaking new ground in the arena of fictitious returns.

In short, there needs to be a new bailout effort entitled the Criminal Reprieve Assistance Program (CRAP) to provide ingenious criminals like Madoff the tools required to help kick start the faltering U.S. economy. By investing $100 billion with Madoff so that he can start-up a new and improved SAP Fund and make current clients whole, the CRAP would immediately help restore confidence in the marketplace. Concurrent with the Madoff bailout pieces of CRAP could also be used to expedite the release of jailed mortgage brokers so that they can help stabilize the collapsing U.S. housing market by doing what they do best - underwriting crappy mortgages.

What we have failed to learn time and time again is that the Madoffs’ of this world take risks that ordinary investors do not, and only when these criminals amass enough capital and clout does the average investor stand to benefit. If adopted the CRAP can effectively flush out the safety-crazed attitudes of investors now taking root and allow unlawful innovation and the temporary perception of wealth to flourish once again. It goes without saying that the only alternative if the CRAP sinks and Madoff doesn’t get bailed out is financial Armageddon, millions of jobs losses, and another Great Depression.

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Buy Gold & Silver

Another Hedge Fund freezes redemptions

2008-12-14T21:49:00.000-08:00

Get your money out of the financial system while you still can...convert it to real value: gold & silver.

Citadel locks up investors’ funds
Posted by Stacy-Marie Ishmael on Dec 15 05:35.

Citadel Investment Group has joined the rush of hedge funds suspending redemptions to investors, a development that is in effect locking up hundreds of billions of dollars in cash during a volatile period in global markets. Ken Griffin, Citadel’s founder, sent a letter on Friday to investors in the group’s flagship Kensington and Wellington funds telling them that the group had decided to hold on to their money at least until March. Citadel has about $15bn under management after suffering big recent losses, and by imposing this lock-up joins a growing list of hedge fund groups - including Tudor, Farallon and DE Shaw - that have imposed restrictions on the ability of investors to withdraw money, the FT said.

This entry was posted by Stacy-Marie Ishmael on Monday, December 15th, 2008 at 5:35 and is filed under Capital markets, Hedge funds. Tagged with citadel.

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The Bullion Insider

Announcing: The Austrian Investor

More Wisdom from Peter Schiff

FDIC Friday - 2 more banks fail

Ponzi Scheme in Gold

FDIC Friday - Silver Falls Bank fails

What a tangled web they weave...

And the Dominoes continue to fall...

Banks kicking you while you're down

Awesome video of Rick Santelli telling it like it is!

A Humerous Illustration of TARP

The End of Swiss Bank Secrecy

First Iceland collapses...now Ireland?

You are being watched...

Job Losses Pose a Threat to Stability Worldwide

FDIC Friday - 4 more banks bite the dust

John Williams: $100 Bills Will Become Worthless

Hyperinflation Video

Jim Rogers: Failing banks don't need money

Dr. Marc Faber cracks me up!

Are you Servant or Master?

The Coming Great Depression. Why Government Is Powerless

U.S. Debt Default, Dollar Collapse Altogether Likely

Correction: 3 banks closed last Friday - not 2

United States Progresses Down the Path to Depression

FDIC Friday - 2 more banks fail

Still want to keep money in the banks?

Devaluation - a Global Fad...

U.S. dollar devaluation on its way

AUDIT AFTER GOLD DEALER'S SUICIDE SUGGESTS CUSTOMERS LOST MILLIONS

Zimbabwe knocks 12 zeroes off inflation-hit dollar

Gold ends at six-month high on safe-haven buying

Holdings in the largest gold ETF have leaped 8% in one month to record high

3 More Banks Fail Today

Zimbabwe abandons its currency

Jim Sinclair's Important Comments on Systemic Corruption

The Myth that Laissez Faire Is Responsible for Our Financial Crisis

Ron Paul tells it like it is...

Iceland's PM: Government Has Collapsed

Day the banks were just three hours from collapse

Another Bank Bites the Dust

More on Gun Control: Learn from the Brits

Carrying Several Passports? It’s Not Just for Spies

Jim Rogers: 'Sell sterling, take cash out of Britain'

The Constitution of No Authority

President Obama's First Lie

Flow White's Money Bomb

Depositors lose 39 million with Bank Closure

Mustang Ranch

Ruble Drops to Pre-1998 Crisis Low on 6th Devaluation This Year

Hyperinflation Rap

The accelerating trend of bank failures

2,000 year old gold coins found

2nd Bank Closure of the Year

California goes bankrupt

Zimbabwe to launch Z100 trillion dollar note

Illinois-based Nat'l Bank of Commerce closed

Latvia is shaken by riots over its weak economy

Latvia is shaken by riots over its weak economy (click link)-------------------------------------------Buy Gold & Silver

Obama Unveils New Grand Plan for the Economy

Saturday Night Live's Answer to Debt

Twinkies for Obama

When freedom in illegal

Protecting Yourself – The Final Steps

Platinum's turn to shine

Platinum's turn to shine

'Atlas Shrugged': From Fiction to Fact in 52 Years

Merrill Lynch says rich turning to gold bars for safety

Obama Nominates a Socialist

Obama Nominates a Socialist

Parody of Central Banking

(un)Common Sense from Ron Paul on CNN

A Unique Retirement Stategy for Baby Boomers

Courage and Guns

All that Shimmers is Gold

Don't count on law enforcement to protect you

Willem Buiter warns of massive dollar collapse

Guns & Ammo...

U.S. to get New Currency by June, 2012

A sign of the time, safe sales up

Latvia is shaken by riots over its weak economy (click link)

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