Economic Stage Set To Fail By Design

The Intel Hub
Shepard Ambellas
August 27, 2011
The world’s economic stage, pace, and policies have been set up (by design) as part of a scripted, predetermined (desired) outcome by tyrannical oligarch’s that have been dominating the minds and souls of many for hundreds of years.
Major players like the IMF Bank set the pace on a grand scale.
The fiat currency (paper or electronic) that you hold in your wallet or bank account is really just an illusion, a hologram, to control the masses.
What makes that paper or electronic data worth anything at all?
A good example is of how the scam works is as follows (using a construction loan for an example);
To build a new home can sometimes be a challenge, especially when it comes to the cost.
First the bank lends the borrower a pre-approved amount based on the credit rating and down payment of the customer at interest.
So lets say the customer gets a $300,000 construction loan to build a home, then hires a General Contractor to build the home.
First of all the customer more than likely put around 10% of the total loan amount down or more as a deposit on the bank loan (fiat). So by the bank lending the money through electronic means (i.e. paper checks from a loan account), the bank has no out of pocket expense and just collected a minimum of $30,000 dollars that the bank will turn around and reinvest and make even more money off of.
Once the loan was initiated and the construction process begins the contractor will get paid through a series of draws. During the entire process and after the house is completed the customer will be making monthlyloan payments — making the bank even more money out of thin air.
Ah, but here is the kicker.
After the home is complete if the customer defaults on payment for 90 days the bank will then repo a “tangible asset” that was built at no cost to them, while the bank profited the whole way.
Read More: http://theintelhub.com/2011/08/27/economic-stage-set-to-fail-by-design/

Buffett’s Bank of America Stake Reaps $1.3 Billion Paper Profit on Day One

Warren Buffett may have earned $1.3 billion in one day on his $5 billion investment in Bank of America Corp. (BAC)

The preferred shares Buffett’s Berkshire Hathaway Inc. (BRK/A) bought are worth about $3.53 billion, Phil Jacoby, chief investment officer at Spectrum Asset Management Inc. in Stamford, Connecticut, estimated. Warrants included in the deal are worth about $2.73 billion, based on Bank of America’s share price of $7.65 as of 4:15 p.m. in New York trading, said Clay Struve, a partner with Chicago-based CSS LLC.
The 25 percent first-day return -- more than 9,000 percent on an annualized basis -- shows the premium Bank of America Chief Executive Officer Brian T. Moynihan was willing to pay to attract Buffett as an investor. As Berkshire’s CEO, Buffett has garnered a reputation as one of the world’s best investors, with shareholder returns over the past decade that are more than double those of the Standard & Poor’s 500 Index.
“I’m sure Warren cut a pretty good deal,” said Linus Wilson, assistant professor of finance at the University of Louisiana at Lafayette. “For Bank of America, you get the endorsement of Warren Buffett, and it’s going to make it a lot easier if Bank of America wants to raise more capital from other investors.”
Under the terms of the deal, Omaha, Nebraska-based Berkshire will invest $5 billion in Bank of America, the Charlotte, North Carolina-based bank said today in a statement.
Preferred Dividend
In exchange, Berkshire will receive 50,000 perpetual preferred shares with a liquidation value of $100,000 each, according to the statement. The preferred shares pay a dividend of 6 percent per year, and are redeemable at any time by Bank of America at a 5 percent premium. The dividends are cumulative, meaning Bank of America would have to catch up if it skipped any payments.
Berkshire also will get warrants -- a type of options -- to buy 700 million common shares at a strike price of $7.14 each. Investors who value warrants weigh a company’s stock price, share volatility and the expiration date.
The Bank of America warrants are good for 10 years, according to the statement. The bank’s shares, which had declined 48 percent this year through yesterday, surged as much as 26 percent today.
“It’s a package deal,” said Jacoby, whose firm specializes in preferred shares. For Bank of America, deciding how much to pay Buffett was probably “a process of how much value do you feel you need to give away in order to change the mood of the market.”
Bank of America’s closing price yesterday was $6.99 a share.
Goldman Deal
When Buffett bought $5 billion of preferred stock in Goldman Sachs Group Inc. in 2008, he received a 10 percent dividend and a 10 percent premium when the firm redeemed the stock. He also received warrants that gave him the right to purchase $5 billion of common stock at a strike price of $115 at any point within five years.
Those warrants were in the money when the deal was announced. Goldman Sachs disclosed the investment after the market closed on Sept. 23, 2008, with a share price of $125.05. The stock rallied 6.4 percent the next day to $133. Goldman redeemed the preferred shares in April, paying the 10 percent premium, or $500 million.
The warrants are no longer in the money, because the shares have fallen 35 percent this year to $108.62. Buffett said in May that he plans to hold the Goldman warrants, which expire in 2013, “very close to their expiration.”
GE Stock
Berkshire also received a 10 percent dividend and a 10 percent premium when it agreed to buy $3 billion of perpetual preferred stock in General Electric Co. on Oct. 1, 2008. Buffett got warrants, which expire in 2013, to buy $3 billion of common shares at $22.25 per share, lower than the previous day’s close of $25.50.
GE shares plunged 9.6 percent the day after the investment to $22.15. They have yet to reach a higher closing price in the almost three years since then, ending trading yesterday at $15.72.
In a 2009 interview, Buffett said the warrants in the GE and Goldman Sachs deals would allow him to profit if the stock surged.
“I wanted a possible kicker,” he said, adding that he didn’t know if Berkshire would make money by exercising the warrants in either company. “I think the odds are reasonably good we do them. Maybe we’ll do it on one and not the other, but in the end I was satisfied with the preferred I was getting.”
To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Donal Griffin in New York at dgriffin10@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net
To contact the editor responsible for this story: David Scheer in New York at dscheer@bloomberg.net.

INSIDE JOB - Dylan Ratigan Interviews Director Charles Ferguson - How Wall Street Took Over Government

Watch Video

Watch at least the first 2 minutes.  Ratigan is on fire.  Below is an editorial from Ferguson submitted to us for publication.

By Inisde Job Director Charles Ferguson
Why economists are part of the problem
Both Glenn Hubbard and Laura Tyson have played major roles in American economic policy, and both also, unfortunately, exemplify the disturbing, opaque conflicts of interest that pervade the economics discipline.
Over the last thirty years, academic economics has been penetrated by special interests, particularly financial services, in the same way that America’s political and regulatory systems have been compromised by campaign contributions and the revolving door.  In fact, the “revolving door” is now a triangular trip between industry, government, and academia.
Prominent economists are now routinely paid to testify in antitrust cases, criminal trials, and regulatory proceedings; to testify in Congress; to give speeches to the industries and firms they study; to serve on boards of directors and as advisors; and to write supposedly objective analyses of industries, companies and policies. These payments and the conflicts of interest they generate are rarely disclosed, except when required by Federal law.
These activities are not marginal; they are now, literally, a billion dollar industry, managed by firms such as the Law and Economics Consulting Group (LECG), The Analysis Group, Compass Lexecon, Charles River Associates, and others.  Professors’ income from such groups often dwarfs their academic salaries.  That neither universities nor most publications require such disclosure was one of the most shocking facts I learned while making Inside Job, my documentary on the financial crisis.
From 2001 to 2003, Glenn Hubbard was chair of the Council of Economic Advisors in the George W. Bush administration.  He was a major force behind the Bush administration’s tax cuts, over half of whose benefits went to the wealthiest 1% of the American population.  Since becoming dean of Columbia Business School, Hubbard has written and spoken widely on financial regulation, and has served as co-chair of the Committee on Capital Markets Regulation, whose other co-chair is John Thornton, who is chairman of the Brookings Institution – and the former president of Goldman Sachs.  Hubbard’s recent or current affiliations include but are not limited to Met Life ($250,000 per year), Capmark (a major commercial mortgage firm during the bubble, which went bankrupt in 2009), KKR, and Black Rock.  In our on-camera interview, Hubbard refused to disclose his current consulting clients.
In 2004, Hubbard co-wrote a paper with William C. Dudley, then the chief economist of Goldman Sachs, entitled “How Capital Markets Enhance Economic Performance and Facilitate Job Creation.”  The paper praises securitization and the rise of credit derivatives (particularly credit default swaps), saying that they have increased economic growth, reduced systemic risks, and reduced both the size and duration of recessions.  Hubbard refused to answer when we asked him by letter whether he was paid to write the paper, and also refused to disclose whether he had ever received any payments from Goldman Sachs.
Laura Tyson was chair of the Council of Economic Advisors, and then director of the National Economic Council, in the Clinton Administration.  Shortly after leaving government and returning to U.C., Berkeley, she joined the board of directors of Morgan Stanley, which pays her $350,000 per year.  She also joined the board of AT&T and became a principal of the Law and Economics Consulting Group.  She agreed to be interviewed for my film, but then stopped responding to email and phone calls, so we were unable to interview her.  In general, she has confined her remarks on the financial crisis to extremely vague statements about “greed,” “human nature,” etc.
Other prominent economists heavily dependent upon financial services income over the past decade, and whose behavior is examined in my film, have included Larry Summers (hedge funds, investment banks), Martin Feldstein (AIG), Richard Portes (Icelandic banks), and Frederic Mishkin (Icelandic banks, unnamed U.S. financial services firms), all of whom have played prominent roles in public debate and policy.  So, unfortunately, Hubbard and Tyson are in prominent company.

Watch the film trailer here...

• INSIDE JOB - How Wall Street Became A Criminal Enterprise And Took Over Government - Feature Film Trailer, Winner At Cannes 2010

Federal Reserve Admits "We Have No Gold"

The following exchange between Congressman Ron Paul (R-TX) and the Fed's attorney Scott Alvarez proves, without a shadow of a doubt, that The Federal Reserve has no gold backing the US dollar.

Most in the alternative news sphere suspected it - now it's fact.

Watch Video Federal Reserve Admits "We Have No Gold"

The Inexplicable War on Lemonade Stands

I’m beginning to think that there’s a nation-wide government conspiracy against either lemonade or children, because these lemonade stand shutdowns seem to be getting more and more common. If you set up a stand for your kids, just be prepared for a visit from the cops. In Coralville, Iowa police shut down 4-year-old Abigail Krstinger’s lemonade stand after it had been up for half an hour. Dustin Krustinger told reporters that his daughter was selling lemonade at 25 cents a cup during the Register’s Annual Great Bicycle Race Across Iowa (or RAGBRAI), and couldn’t have made more than five dollars, adding “If the line is drawn to the point where a four-year-old eight blocks away can’t sell a couple glasses of lemonade for 25 cents, than I think the line has been drawn at the wrong spot.”
Nearby, mother Bobbie Nelson had her kids’ lemonade stand shutdown as well. Police informed her that a permit would cost $400.
Meanwhile, in Georgia, police shutdown a lemonade stand run by three girls who were saving money to go to a water park. Police said the girls needed a business license, a peddler’s permit, and a food permit to operate the stand, which cost $50 per day or $180 per year each, sums that would quickly cut into any possible profit-margin.
In Appleton, Wisconsin the city council recently passed an ordinance preventing vendors from selling products within two blocks of local events – including kids who want to sell lemonade or cookies.
These are hardly isolated incidents. From slapping parents with $500 fines for letting their kids run unlicensed lemonade stands (though this was later waived after public outcry), to government officials calling the cops on kids selling cupcakes, the list goes on and on and on.
Nor does it stop with kids. Food Trucks are also under the gun of regulators and city governments across the country. This isn’t to say that food trucks don’t need any regulations at all, but many of the regulations that come down the pipeline are pushed by brick-and-mortar competitors who want to keep competition at a minimum.

But it’s the shutdown of lemonade stands that I find so inexplicable. Who stands to lose from a couple of six-year-olds selling lemonade? Who stands to gain from shutting them down? Do local governments really think parents are going to pay for $400 vendor permits, or that kids can scrape together the money for food permits? Are there any actual safety risks? Kids have been selling lemonade for decades without permits of any sort. They often set the stands up just for fun, but many lemonade stands (or bake sales) are used to raise money for schools, cancer, or sick pets. Lemonade stands represent the most innocent, optimistic side of capitalism out there.
Fortunately, August 20th is now unofficially National Lemonade Freedom Day, because when life gives you overbearing government regulations…make lemonade, or something.
A map of lemonade stand crackdowns can be found here. They’re spread out pretty much all across the country.
Hat tip to Radley Balko and the Reason team for many of these stories, so many of which sound like they’ve been pulled straight from The Onion.
Image: Young entrepreneurs collect money at their lemonade stand outside of the site for the U.S. Open Championship golf tournament in Bethesda, Md. , Friday, June 17, 2011. The stand, originally setup up near the main entrance of the golf course, was forced to move and fined $500, The fine was later rescinded. Via Daylife.

Fear Sets In, Panic Begins, Ruin Perceived, Prepare for Gold $2100

Something big is going on in the United States in a sentiment change, an altered state of psychology, a growing sense of panic. My opinion is that the nation has entered the early stage of comprehension among the population of systemic failure. The most immediate measures are the rash of heavy selling down days in the US Stock market, the strong purchases in Gold, as well as the reactions to constant news of sovereign debt in trouble, and the big banks teetering. Several other softer measures have been noted, made overwhelming by their sheer numbers. A perception wave has taken hold of a toxic USEconomy, a toxic US financial sector, a toxic US housing sector, a toxic economic brain trust in the US towers. A sense of doom is creeping into the nation's living rooms and board rooms, that the nation is in deterioration. Worse, they are realizing how US Federal Reserve is toothless, unable to address or treat the problems.
The citizenry is not adept or gifted enough to conclude that the problem is national insolvency, whose errant prescription has been a flood of liquidity. But they sense something is horribly wrong, and worse, that no current treatment will fix anything. They detect the backfire of the blunt banker solution and the misfired futility of the federal government solution. Witness the rooted perception and horrifying awareness that the United States is moving gradually and unavoidably into a systemic failure. The perception is that neither governments nor bankers have any solutions to help the people, who must impose their own gold standard. The Gold price registered a new high over $1900 per ounce, this after mental midget clowns and propaganda wags in May pronounced the bull market as finished. Their opinions are worthless. Watch them vanish behind the tall shrubbery when Gold surpasses $2000 this autumn.
ROOT OF NATIONAL ILLNESS
In my view, the national illness is a toxic USEconomy dominated by pervasive profound grotesque insolvency. In the early part of the 2000 decade, a strong hint of near-term future failure was obvious. The USEconomy shed its industry to Asia since the 1980 decade. In the early years of last decade, the migration of factories was to China. In its place, the US consumers relied upon home equity withdrawal, blessed as good by the American economists and high priest of heretical ideology Alan Greenspasm. The hint to sound money economists such as the Jackass from the dependence shift was a clear signal of ruin in a few years, as in now. It came on time. In my view, the national illness is a toxic US financial sector dominated by pervasive insolvency and massive fraud. The FASB accounting rule change permitted grotesque falsification of the bank balance sheets, reflected in market capitalizations above zero. The value zero has been and still is more accurate, still is the price target. The big US banks continue to fight off the powerful forces of a housing market in resumed chronic decline, sovereign bonds overseas beset by heavy losses, and a spate of bond investor lawsuits that rack up. All attempts to limit lawsuit exposure have failed. Litigants line up in court like Wal-Mart shoppers on a big sale. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.
The Achilles Heel, the broken leg, the ruined road, and the toxic field is HOUSING & MORTGAGES. The contaminated blood, the leaking gangrene into the circulation system, the sewer line in the water supply is BANKING & FINANCE. The USEconomy grew dependent upon the two-sided asset bubble. No resolution or remedy or liquidation means rotting flesh and gangrene on the body economic. Americans have noticed. The US banking system remains insolvent, worse each quarter from toxic assets. Home prices have resumed their decline, despite all incorrect announcements by banking, political, and economic leaders over public address propaganda loudspeakers. The crowd control devices are not working, as the people are deeply worried. The banks are plagued by an REO inventory bloat extended from home foreclosures, where they do not dare release all the homes onto the already bloated market for sale. The banks are peppered in attacks by bond investor lawsuits, which work to resolve the bond fraud from misrepresentation of mortgages packaged in AAA toxic bundles. They lost 30% to 60% in a matter of months and a few years. The banks have a dirty secret of hundreds of thousands of home loans operating in strategic default, whether the homeowners refuse to pay anything more on their mortgages, often demanding to see the proper title on the property. The news media will not cover this story. In every court challenge, the banks have lost the cases, resulting in the homeowners taking clear title with the loan fully forgiven. The newest threat to the banks is the next Option ARM wave, the second round of adjustable rate mortgage that will continue in a storm until 2013 ends. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.
No meaningful home loan balance scheme conducted by the USGovt means the housing mass & mortgage connective tissue circle the toilet in a flush. The reason is simple. Home loan balance reductions would expose gigantic bond fraud in tracing the mortgage bonds to home loans with title registrations. It would result in exposure of Fannie Mae counterfeit bonds having circulated widely. It would result in forced bank asset writedowns amidst the pervasive accounting fiction at work on the balance sheets, blessed as good by the FASB. It would expose MERS as a fraudulent device to hold titles without legal standing. It would embolden half the nation into civil disobedience, as in outright refusal to pay banks on home loans. It would expose the nation as insolvent generally. It might interfere with some perverse national plan to use Fannie Mae as some devious device to become landlord to one third of the nation's homes, a plan of collectivism that Karl Marx might approve. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.
PANHANDLE DOCTRINE & PARASITE DOCTRINE
The tragedy that struck the US nation has a great connection to toxic economic thought from its economic brain trust. It is thoroughly toxic, corrupted, and destructive ideology woven in an acidic blanket with rampant impairment to working capital. It earns a D grade on economics effectiveness, and in fairness is not what Keynes prescribed. It is toxic thinking. It seems to have elevated the Voodoo Economics of the 1980 decade to the Fascist Business Model in the 2000 decade. The license to engage in fraudulent activity is engrained in the pact between big business (led by big banks) and the USGovt policy making groups which are dominated by Wall Street firms (led by Goldman Sachs). The summary line is vividly clear to astute adept students of economics: the United States no longer has any concept of capitalism, and has undergone three decades of capital destruction. The crescendo of the capital destruction has taken place in the last three or four years, whose climax tune is the shrill Quantitative Easing. The cast of American economists is wedded deeply to the notion of credit dispensation and monetary growth under the illusion of control. They do not comprehend capital formation anymore, relying instead upon what the Jackass calls with bitter intended mockery the Panhandle Doctrine applied to consumers, matched by a Parasite Doctrine applied to banks. If you give a street bum money, he will buy coffee and maybe a sandwich. The USEconomy is based upon coffee and sandwiches, not much more, as the consumer is given money in pockets and purses to spend. The depravity of economic thought is shocking. The stock market & housing sector (FIRE) replaced industry & factories with tragic outcome. FIRE means finance, insurance, and real estate, a great ironic moniker since the fires burned capital at a rapid rate.
A prevailing belief exists among American economists that if the consumer picks up, then industry will expand with big capital spending and job hires. The belief is entirely backwards, a symptom of American economist ignorance and stupidity. The consumer (street bum) relies upon tax breaks, reduced Social Security & Medicare contributions, extended jobless benefits, clunker car gifts, first time home buyer tax credits, and more. They are all examples of the Panhandle Doctrine from which the USEconomy have grown dependent upon. Observe the toxic American economist ideology. For banks, a parallel Parasite Doctrine hard at work has gutted the financial sector. The regular fare offered as examples as strategic crutches to a broken sector are sponsored USTreasury carry trade (aided steered by Interest Rate Swaps), betting on their own stocks lifted by phony FASB accounting rules, participation in USFed frequent flyer programs like the Money Market giveaways, flash stock trading (High Frequency Games) done with impunity, short stock sale bans (Goldman Sachs given an exemption), and naked selling of USTBonds (grandaddy fraud). See failures to deliver, buttressed by Interest Rate Swap artificial end demand that serves to cover the other end and qualify as a bonafide bucket shop.
Thanks to Aaron Krowne and his Mortgage Implode website, for the intrepid work on the mortgage market and recently on the USTreasury market. He provided the graph on Failures to Deliver on USTBonds. See the ML Implode article (CLICK HERE). The total is roughly $1 trillion in bond fraud, an ongoing figure. The story broke in mid-2009, only to disappear with organized suppression. The Wall Street firms lost their investment banking business, but found a fertile source of liquidity from naked short sales of USTBonds, whose buyers were the artificial factory of Interest Rate Swaps. Without this naked shorting line of liquidity, the Wall Street job cuts would have been much worse, equal to the London and European bank sector job cuts. The Parasite Doctrine has a poster boy project with these fraudulent sales given cover by the Securities & Exchange Commission, whose official ranks are filled by Wall Street henchmen.

THE CONFIDENCE GAME RUSE
The American public is told that confidence is the root cause of the absent woefully low business spending. The confidence took on damage after the vacant USGovt & USCongress budget deal and debt extension to be sure. But the true source of absent business capital investment is broad deep insolvency, the poor business risk, extending from the broken housing market, the wrecked banking sector, and the inadequate industrial base. The government finance requirements serve to crowd out the bond market, which in a normal system would rely upon the financial sector for capital formation, business development, and construction of platforms that offer job growth. In the US financial sector, the innovation is with carry trade speculation, exploitation of easy money facilities, and profound bond fraud, hardly the stuff of growth mechanisms. Big banks do not lend when they can reliably make money on the USTreasury Bond carry trade. The American corporate sector has responded to the liquidity flood, aka monetary hyper-inflation, and the corresponding acidic undermine to capital, by moving investment overseas. See Cisco, General Electric, and Hewlett Packard, which is instead raising a white flag to Asian PC makers. The most glaring consequence to the monetary policy, marred (not aided) by QE and QE-Lite and QE2 and Secret Global QE, has been the entire cost structure has risen, without benefit of rising incomes.
Furthermore check Economics 201, Chairman Bernanke. Low interest rates suppress the USEconomy, not stimulate it. Almost twice as much interest income is earned versus interest costs paid. The pensioners and retirees are struggling with inadequate income, spending less. The bond investors sought out higher yields in mortgage bonds, only to be burned by 25% to 40% losses in principal. Pension fund income is way down. Of course the motive has been to support and stimulate speculation in Wall Street, where the USFed primary loyalty lies, surely not with Main Street and business interests.
FEAR SETS IN, PANIC BEGINS, RUIN PERCEIVED
A confluence of major perceptual factors is flowing in the national mindset. Fear is setting in. The early stage of panic is evident. A growing perception of ruin can be spotted. People are responding to numerous high profile stories, each of which is important in painting a mosaic of extremes, none of which would have occurred in the 1990 decade. The chorus of crisis is loud and shrill. Here are some important events that the American public must examine.

• The broken USGovt budget and upcoming huger deficits. With tax receipts trending down, and the need for economic stimulus programs clear, the USGovt deficit next year will be larger, not smaller, despite what the errant Govt Accountability Office statement reads.
• The blatantly obvious USeconomic recession, whose billboard signs litter the highway, the latest being the Richmond Fed down 10% (called good), and the Philly Fed down 37 (could not be called anything but horrible). The Philly Fed forecast was minus 2 by the intrepid marketing prop carnival barker American economists.
• The EUR 850 billion bailout by the Euro Central Bank, intended to cover the mountain of Italian and Spanish Govt bonds. But the bailout will accomplish nothing, just like Greece, where numerous bank bond bandaids have been applied. And besides, the Germans have refused to offer any more bailout funds, calling Italy and Spain too big to bail out, quite properly.
• The creepy feeling of a global monetary system breakdown. The major currencies are being debased to such a grand extent that even the less gifted American public can notice. They see the onslaught of sovereign bonds overseas, and might harbor more distrust for USTreasury Bonds that the media reports. They might be buying gold & silver coins from the USMint, which cannot keep up with demand.
• The anticipated QE3 heresy is certain to continue. It has already come in Global QE form, as the Jackass expected. My forecast is that the USFed will formally support the US Stock market and violate its charter. But the move will be applauded and serve as the next heroin injection to the body economic, with certain additional capital destruction and rising cost structure.
• The Swiss and Japanese central bank futile actions, designed to halt their rising Franc and Yen currencies. The lesson learned is that all major central banks have turned toothless, their policies ineffective, wasteful, and destructive. The Competing Currency War is making all of them big losers. Their economies suffer.
• The pitiful paltry puny USTreasury long-term yield of 2.0% to 2.2% does not offer the American saver the proper incentive to save, nor the proper return on investment, certainly not an adequate yield to reflect the risk taken. The yield now stands at 7% to 8% below the true CPI rate.

SINKING INTO THE AMERICAN PEOPLE MINDSET IS THAT THIS IS 2008 ALL OVER AGAIN, BUT TWICE AS BAD, SINCE THE SOLUTION HAS FAILED AND TRUE REMEDY IS SEEN AS IMPOSSIBLE!!  The USGovt and USFed and Wall Street policy makers and league of Rasputins have thrown $3 trillion at the problem, have bailed out the big US banks, have conducted numerous liquidity programs, have made Swap Lines to Europe, have completed a few mickey mouse stimulus initiatives (clunker cars, first time home buyers), have extended but terminated aid to states, have extended jobless benefits, have given SS/Medicare relief, have operated gigantic debt monetization programs (QE's), but the USEconomy is rolling over into a recession anyway. The confirmation of the recession is the many denials with shorter frequency between denials
THE SHAPE OF QE3
As the Jackson Hole Conference is set to begin in the spectacular picturesque mountains of Wyoming, anticipation and anxiety rise. The Grand Tetons serve as a fitting location to announce the renewed dependence from the USFed teats, the monetary spigot. Where the spigot is directed remains the main question in debate. Given the robust supposed USTreasury Bond rally, it hardly seems suitable to direct QE3 toward more USTBond buying, unless they wish to avoid USTreasury auction failures. The ultra-low yield combined with ultra-high supply makes for extremely high risk. Bond investors might not show up at all. A failed auction would be highly embarrassing as a event after the highly publicized bond rally, an irony worthy of Rolling Stone exposure or a Saturday Night Live comedy segment. The USGovt minions and Wall Street made men had crowed that the bond rally contradicted the Standard & Poors downgrade for the USGovt debt. My forecast is that the QE3, when it comes, will be designed and intended openly to support the Stock market. It will not arrive this week. It will arrive with full bore announcement in response to the next round of deep US stock market declines. History will be made. The spin on the USTBond rally to 2% on the 10-yr is deafening and deceptive. We are told the bond market anticipates QE3 but that is patently false. The bond market smells with great dread the next USEconomic recession, or more accurately, recognition of the ongoing chronic powerful recession that began in 2008 and never ended. The bond market smells unfixable recession, all current tools having failed. The bond market detects correctly that the US Stock market from mid-2010 has been propped by QE initiatives, now absent.
The irony, intrigue, and corruption is both bizarre and macabre. The Standard & Poors President Deven Sharma has decided to step down only three weeks after the agency downgraded the US credit rating. What a predictable move. The post will be occupied by Douglas Peterson, chief operating officer of Citibank, to take effect on September 12th. Business as usual on Wall Street. The S&P lead role will be in capable hands. One might wonder if the outgoing officer will be charged with child pornography or a rape in a hotel. That event might not be needed.
GOLD MAKES RECORD HIGHS
This week has been tumultuous. The best summary in my view is to conclude that the Gold price set a record high, and fully revealed what direction it will take this autumn. In the low volume vacation dominated days of summer, an opportunity to engineer a selloff has begun in earnest. Gold has gone down to $1765 and Silver to $40 flat, still way up on the year. Hats off to Ben Davies, who has been impressively accurate in his precious metals forecasts. He nailed the silver forecast in April, expecting a steep pullback to $35. We saw it!! In June, when Gold was trading in the low $1500 level, Davies boldly forecasted that Gold would break above $2000 by yearend 2011. The strong upward moves seen so far in August have captured global attention. After action last week, Davies fine tuned his 2011 gold call, stating he expects Gold to reach $2100 by the end of December after first a correction to $1675. Today we saw it!! The hefty pullback will lose some faithful followers, but offer savvy investors a great chance to add to their positions. The cartel is busy making countless grateful Chinese, Indians, and Asians who have not stopped buying precious metals in defense of rapid inflation. They see the American bankers as the inflation villains. The sudden pullback has assured the last fire sale before the autumn gold bull romp, a great trampling event to come. It is written, it will happen. See the King World News interview (CLICK HERE).

The compromised clowns have been busy citing how the Gold price is $150 to $200 too high based upon price inflation, or even 50% over-valued based on some cockeyed Fed Business Model. They overlook the broken distorted market is the USTBonds, supported by powerful usage of Interest Rate Swaps, aided by USFed monetization still and the migration from stocks to bonds. The volatile moves in the Gold market can be interpreted with high predictability. The big down move today signals even bigger upward moves in the next few months. The money is moving quickly today on Wednesday. The 10-yr USTreasury has rallied on the TNX from 2.14% to 2.21% as a decent move. The crude oil price is up from $85.40 to $86.1 as a modest move. Nobody can deny that panic has hit the stock market, as the recession can be seen without rose colored glasses. Expect much more debasement of the USDollar, as tax revenues fall and stimulus costs rise. The bigger USGovt deficits must be financed, during a truly hostile climate. The complete ruin of major global currencies is in progress, not stoppable. Money is being ruined to such an extent that people are bewildered, wondering what constitutes money if sovereign bonds are being attacked and losing value. The tainted USTreasury Bond market has become almost a source of great amusement. The entire major currency market is in turmoil. See the Swiss Franc, the Japanese Yen, and their rapid rise several standard deviations above their norms or trendlines. Havoc has taken root.
The Libyan chapter will be properly told in a year or two. Tyrant Qaddafi wanted to install a Gold Dinar for North African usage, a similar sin committed by Saddam Hussein. These guys never learn that a challenge to the USDollar is met with armed resistance. The US & UK forces entered the fray. The secondary goal might have been to take oil producing capacity offline, thus lifting the crude oil price. Big Oil interests do not want the global recession to rock the crude oil price too much. The other benefits have been the $50 billion in funds frozen solid in US & London banks. Another $50 billion is frozen in European banks. Expect it to remain out of reach by Libya's new leaders, despite talk. It is too badly needed within the Anglo banking system. See Oslo. The search is on not only for Qaddafi, who is surely comfortable somewhere in a desert bunker, but also well fed, and well medicated with his usual fare of psycho-tropic drugs. The hunt is also on for Libyan gold bullion. The Anglo bankers need it, since the COMEX and LBMA are just about bone dry, and the big US & UK banks are insolvent on the edge of failure. See their Credit Default Swap rates on debt insurance. For the greater good of the Anglo Empire, gold must be found and secured and locked up in the banking system, regardless of the propaganda messages put forth.
Prepare for $2100 gold by January, and $60 silver by January. The last open door is being made possible in the final days of August. Like last year, the months of September through January will be ones for the history books. The start of big bank failures in the United States, London, and Europe should add to the gold run. Contagion has hit Italy, Spain, and France (the newest PIGS lookalike). The breakdown will be broad, deep, and frightening in the next few months. The twisted thinking is probably that gold must be brought down as much as possible, to make a lower base before the next gigantic upward moves beyond the $2000 level and probably past $2100. The gold breakout will capture global attention and make major headline news. This is 2008 all over again, but much worse!! The story line will be that nothing was fixed, but that nothing can be fixed, and much more debasement of money will come. The Gold Meter will rise in direct reflection. THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
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Bank job cuts top 60,000 after ABN Amro axes thousands

ABN Amro has become the latest bank to announce thousands of staff cuts as the total number of jobs lost in the banking sector in recent months rose above 60,000. 

The Dutch bank said it will cut 2,350 staff, or just under 10pc of its workforce, over the next three to four years as part of a wholesale restructuring of its business designed to saved hundreds of millions of euros in costs.

Taking the cuts announced by ABN into account, the total number of banking sector job losses announced in recent months now exceeds 60,000 or roughly 5pc of the industry headcount.

ABN said 1,500 jobs would be cut through redundancies and a further 850 through natural attrition, costing the bank €200m (£176m) in restructuring costs, according to its financial results for the first half of the year published today.

Earlier this week, UBS confirmed speculation that it was to cut several thousand jobs, announcing the layoff of 3,500 staff, or which about 300 are expected to come from the bank’s London office.

All of Britain’s major banks, with the exception of Standard Chartered, have already cut or are cutting thousands of staff. Barclays has already cut 1,400 staff this year and plans to cut as many as 3,000 more jobs within the next 18 months.

HSBC has announced the cull of about 30,000 staff by the end of 2013, or about one in 10 jobs, as part of its own cost drive, and state-backed lender Royal Bank of Scotland is expected to reduce the workforce in its investment banking division by 2,000 within the next year.
The largest cuts have come as Lloyds Banking Group, which announced 15,000 “role reductions” as part of its strategy review, which will take the total number of jobs lost at the lender since its taxpayer bailout to about 40,000 – roughly equal to the size of the entire workforce of engineering company Rolls Royce.
“When managements resort to headcount reductions, these are a powerful signal that firms think the revenue outlook has weakened beyond just normal volatility,” said analysts at Barclays Capital in a note to clients published this month.
Nearly all of Europe's major banks have announced year-on-year falls in revenues for the first half of the year as markets have deteriorated.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8724643/Bank-job-cuts-top-60000-after-ABN-Amro-axes-thousands.html

Why Iceland Should Be in the News, But Is Not

By Deena Stryker

An Italian radio program's story about Iceland’s on-going revolution is a stunning example of how little our media tells us about the rest of the world. Americans may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt.  The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.
As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example. Here's why:
Five years of a pure neo-liberal regime had made Iceland, (population 320 thousand, no army), one of the richest countries in the world. In 2003 all the country’s banks were privatized, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many English and Dutch small investors.  But as investments grew, so did the banks’ foreign debt.  In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent.  The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro.  At the end of the year Iceland declared bankruptcy.
Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution.  But only after much pain.
Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures.  The FMI and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.
Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros.  This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.
What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.
Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country.  As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF.  The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North.  But if we had accepted, we would have become the Haiti of the North.” (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)
In the March 2010 referendum, 93% voted against repayment of the debt.  The IMF immediately froze its loan.  But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis.  Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.
But Icelanders didn't stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money.  (The one in use had been written when Iceland gained its independence from Denmark, in 1918, the only difference with the Danish constitution being that the word ‘president’ replaced the word ‘king’.)
To write the new constitution, the people of Iceland elected twenty-five citizens from among 522 adults not belonging to any political party but recommended by at least thirty citizens. This document was not the work of a handful of politicians, but was written on the internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.
Some readers will remember that Iceland’s ninth century agrarian collapse was featured in Jared Diamond’s book by the same name. Today, that country is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution.  And those of Italy, Spain and Portugal are facing the same threat.
They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.    
That’s why it is not in the news anymore.
Stryker is an American writer that has lived in six different countries, is fluent in four languages and a published writer in three. She looks at the big picture from a systems and spiritual point of view.
This article was originally published by the Daily Kos. SACSIS cannot authorise its republication.

Read more articles tagged with: Iceland, revolution, global financial crisis.

Celente: Banksters, NATO, Big Oil and Media Whores

DE GAULLE predicted the US monetary crisis in 1965

alan greenspan's use of "fedspeak"

Gold, silver bounce back on global cues

Mumbai, Aug. 26: 

Snapping its three-day falling streak, gold bounced back smartly by Rs 1,135/10 gm here on Friday on hectic speculative buying by investors triggered by recovery in global markets.

Silver also jumped on foot-step with the precious metal.

Heavy buyout

The recent sharp fall in gold mainly attracted investors and traders for heavy buyout amidst rebound at the overseas.

The metal lost Rs 2,475 in three days from its Tuesday's record level of Rs 28,145 per 10 gm.

German factor

The metal also got a push from rumours that Germany might be downgraded by the rating agencies on sovereign debt concerns.

Standard gold (99.5 purity) shot up by Rs 1,135 per 10 gm to end at Rs 26,805 from Thursday's closing level of Rs 25,670.

Pure gold (99.9 purity) also zoomed by a similar margin of Rs 1,135 per 10 gm to finish at Rs 26,930 from overnight closing level of Rs 25,795.

Silver ready (.999 fineness) galloped by Rs 2,940 per kg to conclude at Rs 63,485 from Rs 60,545 previously.

Keywords: Gold, Silver, Commodity,

Wall Street Aristocracy Got $1.2 Trillion In Secret Loans From Bernanke's Federal Reserve Slush Fund (VIDEO)

(Watch VIDEO)

The Helicopter was working overtime behind the scenes.
---
Read the entire story at Bloomberg...

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.
By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.
Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”
(View the Bloomberg interactive graphic to chart the Fed’s financial bailout.)

Foreign Borrowers

It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS, which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.
The largest borrowers also included Dexia, Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.
The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.
The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.
“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” said James Clouse, deputy director of the Fed’s division of monetary affairs in Washington. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”
While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.
Continue reading at Bloomberg...

CHART - Just 58% Of Americans Over 16 Have A Job

NEW YORK (CNNMoney) -- The U.S. labor force is shrinking, as more Americans are giving up hope.  Last month, only 58.1% of Americans age 16 and over were employed, a significant drop from before the recession and the lowest since 1983.
That's especially worrisome to economists, who say a steady increase in those dropping out of the work force and not being counted in the unemployment rate is disguising just how bad the labor market really is.
"People are dropping out of labor force for all types of reasons," said Robert Brusca of FAO Economics. "And it's not a good trend. A good part of the wealth of a nation has to do with the proportion of population that works."
Continue reading at CNN...

CHART: CBO's Laughably Optimistic Jobs Prediction

Back down to 5% in 3 years...that's how CBO came up with their rosy deficit scenario.
Here's the full CBO Report from yesterday.
---
Here's the truth on jobs:

CHART: The REAL Unemployment Rate Is 22%

CHART: Just 58% Of Americans Over 16 Have A Job

CO - Quake causes new kind of aftershock

Homeowners in Las Animas County continue to experience aftershocks and tremors from Monday's 5.3 magnitude earthquake, but the biggest rumble won't shake the ground, just their pocketbooks.   While the temblor caused a wide variety of damage in town and in the smaller communities to the west, most citizens have found out that their insurance does not cover earthquakes.
  No help will be coming directly to them from the state government either.
  State monies will not be available for individuals, businesses, or governments for individual or public assistance, said Public Information Officer Linda Rice of the Colorado Department of Local Affairs.
  More state emergency management assistance could be forthcoming, if Las Animas County officials declare a local emergency disaster or request emergency department assistance, said Rice. She said the state funds a "recovery manager" position, when required, following a state disaster declaration.
  Rice said the local affairs office already has provided technical assistance including geological analysis, aerial photography, satellite imagery and water quality testing.
  Eric Brown, a spokesman for Gov. John Hickenlooper, expressed concern for the earthquake victims.
  "Our hearts and thoughts are with anyone who suffers a loss as a result of a fire, flood, earthquake or other natural disaster," said Brown. "We continue to be in contact with local officials in the area of this week's earthquake and stand ready to assist if needed."
  The quake on Monday was the state's largest since 1967. There were no injuries.
read more

Anonymous Announces Wall Street Occupation - Sep. 17

Watch Video

We can sit on our collective petards, or we can fight peacefully through protest.  The decision is for all of us to make.
Anonymous has now joined forces with AdBusters in calling for a non-violent occupation of Wall Street beginning on September 17th.  Simultaneous occupations of financial districts are now being planned in New York City, Madrid, Milan, London, Paris and San Francisco.

MAP OF THE DAY: Food Inflation Riots Around The World

The first map is a disturbing illustration of food and inflation riots around the globe in 2011 (updated through Feb. 19) that I came across on Google.

Most of the inflation riots and protests are concentrated in the MENA (Middle East and North Africa) region, but as you can see on the Google map, they are starting to migrate into Europe, as well as China and India.
In the U.S., anemic growth, an ongoing housing depression, high unemployment and two rounds of quantitative easing (QE) probably have laid a pretty solid foundation for a similar riot map if Chairman Bernanke decides to grace us with QE3. I guess we shall find out when he delivers his speech at Jackson Hole on Friday morning, Aug. 16.

Adding to the food inflation riot is the international military action against Libya.  It looks like Muammar Qaddafi's 42-year rule of Libya has finally come to an end.  As the rebels put up a $1.7 million bounty on Gaddafi, the mystery of the day is the whereabouts of Gadaffi who's last known to be still in Tripoli.

Regardless, it might take some time to restore Libya to the pre-NATO state, which undoubtedly would give oil speculators plenty of excuse to drive up oil prices touting the Sweet Libyan Crude shortage myth.  

Google Map Legend


Fist = Overthrown Governments
Flames = Actual food / inflation riots
Police = Protests / other riots
$ = Price increase announcements / Price Controls / Stock market issues
! = Strike in inflation / food related industries
Phone = Internet/ Twitter /shutdown

View Inflation Riots and Protests 2011 in a larger map

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Read more: http://feedproxy.google.com/~r/EconForecastFullFeed/~3/UbXTpqZ-OhI/by-econmatters-first-map-is-disturbing.html#ixzz1WFsUKXVi

The Secret of Oz - Winner, Best Docu of 2010 v.1.09.11

US budget deficit to hit new high

US federal govermnet budget deficit hits USD 1.28 trillion in 2011, CBO SAYS.

US federal government's budget deficit will hit USD 1.28 trillion for fiscal year 2011, the third largest deficit in the past 65 years, US Congressional budget Office (CBO) says.

"The United States is facing profound budgetary and economic challenges," said the CBO, APTN reported.

The nonpartisan agency also projects that slow growth of the US economy will continue.

"Although economic output began to expand again two years ago, the pace of the recovery has been slow, and the economy remains in a severe slump," the office added.

The USD 1.28 trillion budget deficit projected for 2011 stands at 8.5 percent of US gross domestic product (GDP), exceeding only by the deficits of the preceding two years.

In 2009, the US federal government's fiscal imbalance recorded an all time high level of 1.41 trillion dollars and fell slightly to 1.29 trillion dollars in 2010.

US unemployment rate is projected to remain above 8 percent until 2014.

The agency added that under current law, federal tax and spending policies will impose substantial restraint on the US economy till 2013

PG/JR

Bernanke offers no new stimulus in key speech

Bernanke called on political
leaders to do more to boost
jobs and the housing market
© AFP/File Chris Kleponis

AFP

WASHINGTON (AFP) - US central bank chief Ben Bernanke called on political leaders to do more to boost jobs and the housing market, saying the Federal Reserve could do little at this time to support economic growth.

In a speech much-awaited for news of new stimulus moves, Bernanke offered no hints that the Fed would adjust monetary policy to give the near-stagnant economy a shot of adrenalin.

Instead, he pushed the ball back to the government and fiscal policy, while adding a warning that politicians should not reprise their months-long political battle over spending and debt which he said could "seriously jeopardize" future growth.

"In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow," Bernanke said in prepared remarks for a meeting of central bankers in Jackson Hole, Wyoming.

"Notwithstanding this observation... most of the economic policies that support robust economic growth in the long run are outside the province of the central bank."

At the same time, Bernanke said the Fed did have policy tools to help out and would be reviewing them at an expanded meeting of the Federal Open Market Committee (FOMC) policy board on September 20-21.

The Fed "is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability," he said.

Bernanke said he expected growth in the second half of the year to improve after a first half in which expansion was nearly stagnant, at a rate of less than one percent.

But, against deep hopes in markets that he would at least hint that the Federal Reserve would adjust monetary policies to add some fuel to the economy, he stressed that the work would have to be done by politicians using admittedly tightly constrained budgetary resources.

"Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery," he said.

Some analysts and investors had hoped that, with worries that the economy was sinking into recession, Bernanke might repeat what he did in a speech at the same venue almost exactly a year ago.

At that time, with the economic recovery also appearing stalled, he signaled that the Fed would move to ease monetary conditions, in what became the "QE2" "quantitative easing" program, which injected $600 billion into the economy via Treasury bond purchases.

That move sent markets into a nine-month bull run, but ultimately failed to generate a self-sustaining recovery.

While not offering up a "QE3", on Friday Bernanke suggested he was more confident that growth was resuming, after a second-quarter expansion estimated at just 1.0 percent.

He did not repeat the sober description of the FOMC of August 9 when it forecast growth at a "somewhat slower pace" over the coming quarters than it had earlier estimated, and warned of increasing "downside risks" to the economic outlook.

Stock markets took the news in stride, falling first but then moving into positive territory within a hour.

Analysts said Bernanke's speech had mainly served to put off expectations for another three weeks, giving time to see what economic data shows about growth.

"Bernanke affirmed that policy is not made on the hoof at Jackson Hole but at the FOMC, by adding to the importance of the September meeting, that will now be a two-day meeting discussing alternative tools," said economist Alan Ruskin of Deutsche Bank.

© AFP -- Published at Activist Post with license

Bernanke's Jackson Hole Speech - Full Text & Highlights

Bernanke punts all discussion of QE3 and other efforts at monetary stimulus until the Sep. 20 FOMC meeting.  This was what we expected after boldy proclaiming in June that the Fed was finished with quantitative easing.
You can read excerpts HERE.

• BERNANKE SAYS FED HAS LIMITED ABILITY TO ENSURE LONG-RUN GROWTH
• BERNANKE DOESN'T SIGNAL NEW STEPS FOR PROMOTING U.S. GROWTH
• BERNANKE SAYS EXTRA DAY TO ALLOW `FULLER DISCUSSION' OF TOOLS
• BERNANKE SAYS FED TO EXTEND SEPT. FOMC MEETING TO TWO DAYS
• BERNANKE SAYS FED HAS `RANGE OF TOOLS' FOR STIMULATING GROWTH
• BERNANKE SAYS `FINANCIAL STRESS' WILL BE A `DRAG' ON RECOVERY

Video - Bernanke's failed economic predictions.
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Jackson Hole Speech - August 26, 2011
The Near and Longer-Term Prospects for the U.S. Economy
Good morning. As always, thanks are due to the Federal Reserve Bank of Kansas City for organizing this conference. This year's topic, long-term economic growth, is indeed pertinent--as has so often been the case at this symposium in past years. In particular, the financial crisis and the subsequent slow recovery have caused some to question whether the United States, notwithstanding its long-term record of vigorous economic growth, might not now be facing a prolonged period of stagnation, regardless of its public policy choices. Might not the very slow pace of economic expansion of the past few years, not only in the United States but also in a number of other advanced economies, morph into something far more long-lasting?
I can certainly appreciate these concerns and am fully aware of the challenges that we face in restoring economic and financial conditions conducive to healthy growth, some of which I will comment on today. With respect to longer-run prospects, however, my own view is more optimistic. As I will discuss, although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years. It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals. In the interim, however, the challenges for U.S. economic policymakers are twofold: first, to help our economy further recover from the crisis and the ensuing recession, and second, to do so in a way that will allow the economy to realize its longer-term growth potential. Economic policies should be evaluated in light of both of those objectives.
This morning I will offer some thoughts on why the pace of recovery in the United States has, for the most part, proved disappointing thus far, and I will discuss the Federal Reserve's policy response. I will then turn briefly to the longer-term prospects of our economy and the need for our country's economic policies to be effective from both a shorter-term and longer-term perspective.
Near-Term Prospects for the Economy and Policy
In discussing the prospects for the economy and for policy in the near term, it bears recalling briefly how we got here. The financial crisis that gripped global markets in 2008 and 2009 was more severe than any since the Great Depression. Economic policymakers around the world saw the mounting risks of a global financial meltdown in the fall of 2008 and understood the extraordinarily dire economic consequences that such an event could have. As I have described in previous remarks at this forum, governments and central banks worked forcefully and in close coordination to avert the looming collapse. The actions to stabilize the financial system were accompanied, both in the United States and abroad, by substantial monetary and fiscal stimulus. But notwithstanding these strong and concerted efforts, severe damage to the global economy could not be avoided. The freezing of credit, the sharp drops in asset prices, dysfunction in financial markets, and the resulting blows to confidence sent global production and trade into free fall in late 2008 and early 2009.
We meet here today almost exactly three years since the beginning of the most intense phase of the financial crisis and a bit more than two years since the National Bureau of Economic Research's date for the start of the economic recovery. Where do we stand?
There have been some positive developments over the past few years, particularly when considered in the light of economic prospects as viewed at the depth of the crisis. Overall, the global economy has seen significant growth, led by the emerging-market economies. In the United States, a cyclical recovery, though a modest one by historical standards, is in its ninth quarter. In the financial sphere, the U.S. banking system is generally much healthier now, with banks holding substantially more capital. Credit availability from banks has improved, though it remains tight in categories--such as small business lending--in which the balance sheets of potential borrowers remain impaired. Companies with access to the public bond markets have had no difficulty obtaining credit on favorable terms. Importantly, structural reform is moving forward in the financial sector, with ambitious domestic and international efforts underway to enhance the capital and liquidity of banks, especially the most systemically important banks; to improve risk management and transparency; to strengthen market infrastructure; and to introduce a more systemic, or macroprudential, approach to financial regulation and supervision.
In the broader economy, manufacturing production in the United States has risen nearly 15 percent since its trough, driven substantially by growth in exports. Indeed, the U.S. trade deficit has been notably lower recently than it was before the crisis, reflecting in part the improved competitiveness of U.S. goods and services. Business investment in equipment and software has continued to expand, and productivity gains in some industries have been impressive, though new data have reduced estimates of overall productivity improvement in recent years. Households also have made some progress in repairing their balance sheets--saving more, borrowing less, and reducing their burdens of interest payments and debt. Commodity prices have come off their highs, which will reduce the cost pressures facing businesses and help increase household purchasing power.
Notwithstanding these more positive developments, however, it is clear that the recovery from the crisis has been much less robust than we had hoped. From the latest comprehensive revisions to the national accounts as well as the most recent estimates of growth in the first half of this year, we have learned that the recession was even deeper and the recovery even weaker than we had thought; indeed, aggregate output in the United States still has not returned to the level that it attained before the crisis. Importantly, economic growth has for the most part been at rates insufficient to achieve sustained reductions in unemployment, which has recently been fluctuating a bit above 9 percent. Temporary factors, including the effects of the run-up in commodity prices on consumer and business budgets and the effect of the Japanese disaster on global supply chains and production, were part of the reason for the weak performance of the economy in the first half of 2011; accordingly, growth in the second half looks likely to improve as their influence recedes. However, the incoming data suggest that other, more persistent factors also have been at work.
Why has the recovery from the crisis been so slow and erratic? Historically, recessions have typically sowed the seeds of their own recoveries as reduced spending on investment, housing, and consumer durables generates pent-up demand. As the business cycle bottoms out and confidence returns, this pent-up demand, often augmented by the effects of stimulative monetary and fiscal policies, is met through increased production and hiring. Increased production in turn boosts business revenues and household incomes and provides further impetus to business and household spending. Improving income prospects and balance sheets also make households and businesses more creditworthy, and financial institutions become more willing to lend. Normally, these developments create a virtuous circle of rising incomes and profits, more supportive financial and credit conditions, and lower uncertainty, allowing the process of recovery to develop momentum.
These restorative forces are at work today, and they will continue to promote recovery over time. Unfortunately, the recession, besides being extraordinarily severe as well as global in scope, was also unusual in being associated with both a very deep slump in the housing market and a historic financial crisis. These two features of the downturn, individually and in combination, have acted to slow the natural recovery process.
Notably, the housing sector has been a significant driver of recovery from most recessions in the United States since World War II, but this time--with an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines--the rate of new home construction has remained at less than one-third of its pre-crisis level. The low level of construction has implications not only for builders but for providers of a wide range of goods and services related to housing and homebuilding. Moreover, even as tight credit for some borrowers has been one of the factors restraining housing recovery, the weakness of the housing sector has in turn had adverse effects on financial markets and on the flow of credit. For example, the sharp declines in house prices in some areas have left many homeowners "underwater" on their mortgages, creating financial hardship for households and, through their effects on rates of mortgage delinquency and default, stress for financial institutions as well. Financial pressures on financial institutions and households have contributed, in turn, to greater caution in the extension of credit and to slower growth in consumer spending.
I have already noted the central role of the financial crisis of 2008 and 2009 in sparking the recession. As I also noted, a great deal has been done and is being done to address the causes and effects of the crisis, including a substantial program of financial reform, and conditions in the U.S. banking system and financial markets have improved significantly overall. Nevertheless, financial stress has been and continues to be a significant drag on the recovery, both here and abroad. Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about both European sovereign debts and developments related to the U.S. fiscal situation, including the recent downgrade of the U.S. long-term credit rating by one of the major rating agencies and the controversy concerning the raising of the U.S. federal debt ceiling. It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth. The Federal Reserve continues to monitor developments in financial markets and institutions closely and is in frequent contact with policymakers in Europe and elsewhere.
Monetary policy must be responsive to changes in the economy and, in particular, to the outlook for growth and inflation. As I mentioned earlier, the recent data have indicated that economic growth during the first half of this year was considerably slower than the Federal Open Market Committee had been expecting, and that temporary factors can account for only a portion of the economic weakness that we have observed. Consequently, although we expect a moderate recovery to continue and indeed to strengthen over time, the Committee has marked down its outlook for the likely pace of growth over coming quarters. With commodity prices and other import prices moderating and with longer-term inflation expectations remaining stable, we expect inflation to settle, over coming quarters, at levels at or below the rate of 2 percent, or a bit less, that most Committee participants view as being consistent with our dual mandate.
In light of its current outlook, the Committee recently decided to provide more specific forward guidance about its expectations for the future path of the federal funds rate. In particular, in the statement following our meeting earlier this month, we indicated that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. That is, in what the Committee judges to be the most likely scenarios for resource utilization and inflation in the medium term, the target for the federal funds rate would be held at its current low levels for at least two more years.
In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.
Economic Policy and Longer-Term Growth in the United States
The financial crisis and its aftermath have posed severe challenges around the globe, particularly in the advanced industrial economies. Thus far I have reviewed some of those challenges, offered some diagnoses for the slow economic recovery in the United States, and briefly discussed the policy response by the Federal Reserve. However, this conference is focused on longer-run economic growth, and appropriately so, given the fundamental importance of long-term growth rates in the determination of living standards. In that spirit, let me turn now to a brief discussion of the longer-run prospects for the U.S. economy and the role of economic policy in shaping those prospects.
Notwithstanding the severe difficulties we currently face, I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if--and I stress if--our country takes the necessary steps to secure that outcome. Good, proactive housing policies could help speed that process. Financial markets and institutions have already made considerable progress toward normalization, and I anticipate that the financial sector will continue to adapt to ongoing reforms while still performing its vital intermediation functions. Households will continue to strengthen their balance sheets, a process that will be sped up considerably if the recovery accelerates but that will move forward in any case. Businesses will continue to invest in new capital, adopt new technologies, and build on the productivity gains of the past several years. I have confidence that our European colleagues fully appreciate what is at stake in the difficult issues they are now confronting and that, over time, they will take all necessary and appropriate steps to address those issues effectively and comprehensively.
This economic healing will take a while, and there may be setbacks along the way. Moreover, we will need to remain alert to risks to the recovery, including financial risks. However, with one possible exception on which I will elaborate in a moment, the healing process should not leave major scars. Notwithstanding the trauma of the crisis and the recession, the U.S. economy remains the largest in the world, with a highly diverse mix of industries and a degree of international competitiveness that, if anything, has improved in recent years. Our economy retains its traditional advantages of a strong market orientation, a robust entrepreneurial culture, and flexible capital and labor markets. And our country remains a technological leader, with many of the world's leading research universities and the highest spending on research and development of any nation.
Of course, the United States faces many growth challenges. Our population is aging, like those of many other advanced economies, and our society will have to adapt over time to an older workforce. Our K-12 educational system, despite considerable strengths, poorly serves a substantial portion of our population. The costs of health care in the United States are the highest in the world, without fully commensurate results in terms of health outcomes. But all of these long-term issues were well known before the crisis; efforts to address these problems have been ongoing, and these efforts will continue and, I hope, intensify.
The quality of economic policymaking in the United States will heavily influence the nation's longer-term prospects. To allow the economy to grow at its full potential, policymakers must work to promote macroeconomic and financial stability; adopt effective tax, trade, and regulatory policies; foster the development of a skilled workforce; encourage productive investment, both private and public; and provide appropriate support for research and development and for the adoption of new technologies.
The Federal Reserve has a role in promoting the longer-term performance of the economy. Most importantly, monetary policy that ensures that inflation remains low and stable over time contributes to long-run macroeconomic and financial stability. Low and stable inflation improves the functioning of markets, making them more effective at allocating resources; and it allows households and businesses to plan for the future without having to be unduly concerned with unpredictable movements in the general level of prices. The Federal Reserve also fosters macroeconomic and financial stability in its role as a financial regulator, a monitor of overall financial stability, and a liquidity provider of last resort.
Normally, monetary or fiscal policies aimed primarily at promoting a faster pace of economic recovery in the near term would not be expected to significantly affect the longer-term performance of the economy. However, current circumstances may be an exception to that standard view--the exception to which I alluded earlier. Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well. In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow. In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment.
Notwithstanding this observation, which adds urgency to the need to achieve a cyclical recovery in employment, most of the economic policies that support robust economic growth in the long run are outside the province of the central bank. We have heard a great deal lately about federal fiscal policy in the United States, so I will close with some thoughts on that topic, focusing on the role of fiscal policy in promoting stability and growth.
To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time. As I have emphasized on previous occasions, without significant policy changes, the finances of the federal government will inevitably spiral out of control, risking severe economic and financial damage.¹The increasing fiscal burden that will be associated with the aging of the population and the ongoing rise in the costs of health care make prompt and decisive action in this area all the more critical.
Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery. Fortunately, the two goals of achieving fiscal sustainability--which is the result of responsible policies set in place for the longer term--and avoiding the creation of fiscal headwinds for the current recovery are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives.
Fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs. To the fullest extent possible, our nation's tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. We cannot expect our economy to grow its way out of our fiscal imbalances, but a more productive economy will ease the tradeoffs that we face.
Finally, and perhaps most challenging, the country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses. Although details would have to be negotiated, fiscal policymakers could consider developing a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals. Of course, formal budget goals and mechanisms do not replace the need for fiscal policymakers to make the difficult choices that are needed to put the country's fiscal house in order, which means that public understanding of and support for the goals of fiscal policy are crucial.
Economic policymakers face a range of difficult decisions, relating to both the short-run and long-run challenges we face. I have no doubt, however, that those challenges can be met, and that the fundamental strengths of our economy will ultimately reassert themselves. The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in a context of price stability.