How Wall Street Fraudsters Plunder Public Finances, And 5 Ways to Fight Back

Editor’s note: This article is part of an ongoing AlterNet series, “The Age of Fraud,” edited by Lynn Stuart Parramore.

Say your town needs a new bridge. It might turn to Wall Street to come up with strategies to finance the project. This is supposed to be a win-win arrangement, but in the lucrative municipal finance business, one side has turned out to be the big loser. Guess which?
Nearly five years after Wall Street’s shady activities triggered massive funding crises for cities, states, and municipalities, the $3.7 trillion municipal finance cesspool has yet to be dredged.  Banks continue to profit from their bad — or even fraudulent — advice that cost billions of dollars of taxpayer money. Meanwhile, the rest of us must tighten our belts, or pay higher taxes, or see services slide.
Let’s take a look at how bankers cooked up scams to drain the public coffers and why they continue to get away with it.

How your community became Wall Street prey
Many municipalities invested in flawed “structured finance” deals on the advice of bankers who said these complex transactions would give them a better deal than simpler, traditional products. So trusting public finance officials lined up to follow their advice — only to be told later that advice was not to be relied upon.
Tellingly, few (if any) corporations used similar structures to meet their funding needs. Nor did the banks themselves. Unfortunately, these products didn’t work as advertised, and public funding costs exploded as a result.
The financial structures bankers inflicted on the public are not easy to understand, but please try and stick with us: Banks rely on this complexity to obscure just how badly cities and states that followed their advice were hosed.
One common structure combined three key pieces: variable rate demand bonds (VRDBs), letters of credit and interest rate swaps. Municipal treasurers were looking to achieve the equivalent of a fixed rate financing— think of a 30-year mortgage—at lower than the market rate. And they signed on the dotted line in record numbers for these deals, with issuances of these complex bonds peaking in 2008.
Bankers realized that many professional investors — such as money market fund managers — cannot hold long-term debt, and instead prefer investments that can be dumped quickly when market conditions change. So bankers created VRDBs, which were “putable”— allowing buyers to get their money back, in most cases, every week, if they chose. Bankers thought these bonds, which in effect came with a money-back guarantee, would appeal to money market fund investors. At first, they did.
Alas, there’s no such thing as a free lunch. A bond that can be returned, with no penalty charges, every week doesn’t sound at all like the long-term infrastructure financing the city or state wanted. So banks promised municipal clients that if investors wanted to return bonds, the bank would find another buyer. Sounds like it might work out okay, right?
But what would happen if no one wanted to buy these returned bonds? To avoid leaving its municipal client and investors in a lurch, the bank created a guarantee, a letter of credit, that would provide alternative financing. Think of this letter of credit as insurance that would allow the city or state to continue to pay its bills if the market for its bonds dried up, while providing assurance to bond investors that the bond could be redeemed on demand.
The final piece of the structured contraption was a complex derivative, an interest rate swap. It was supposed to convert the weekly variable interest rate on the bonds to a fixed interest rate. This was another form of insurance that was meant to protect the public authority if interest rates went up.
This article originally appeared on: AlterNet

Detroit officials find $286 million to subsidize new sports arena

Detroit’s Downtown Development Authority (DDA) has approved a $650 million plan that will allow Mike Ilitch to build a new sports and entertainment district just north of downtown Detroit. Nearly half of the cost will be covered by public funds.
The announcement comes just two days after Emergency Manager Kevyn Orr said the public coffers are empty when it comes paying the pensions and healthcare benefits owed to city workers. Orr has threatened to pay as little as 10 cents on every dollar owed to pension funds and force retired workers to get health care through the federal Medicare program or President Obama’s cut-rate medical exchanges.
A more callous slap in the face could not be imagined for pensioners and other city residents facing the gutting of essential services and the selling off of city parks, zoos and art museums. There is supposedly no money for the needs of the city’s working class population, but several hundred million can easily be found to subsidize a new arena for a billionaire sports franchise owner. The project has been sanctioned by Orr, who has final say over how the city’s finances are managed.

The area north of downtown Detroit slated to become the "entertainment district"

The new arena—for Ilitch’s Red Wings hockey team—will be 650,000 square feet and house 18,000 spectators—few enough, comments the Free Press, to make the tickets more expensive than average. Other nearby development will include a hotel and 265,000 square feet of new or renovated office, retail and residential space.
The city will contribute 44 percent of the funds for the new stadium, or around $286 million. The rest will be financed by private sources, including Mike Ilitch.
The stadium will be built in a 45-block “entertainment district” a few streets away from the Henry Street apartments, where hundreds of low-income residents are facing eviction by the end of the month. Although the new owner of the apartment complex has been kept secret, residents all along speculated that Ilitch was behind their evictions. Many of those being thrown out have lived in the apartments for decades.
Simultaneously, residents at the Griswold, a nearby apartment tower housing mostly retirees, also face eviction come next March. This is in keeping with the stated goal of the city planners: the entire area is to be gentrified, with low income tenants being pushed out to make way for rarified lofts and office spaces.
The stadium district is intended to be the centerpiece of the new upscale “Arena District,” which spans the gap between midtown and downtown. Currently, the impoverished area is a stark reminder of the devastation wrought on Detroit by big business. The new development will encompass “office, retail and residential” space.
In addition to Ilitch, the founder of mortgage lender Quicken Loans, billionaire Dan Gilbert, has been a primary advocate of the plans to remake Detroit’s downtown. Gilbert has bought up more than 30 buildings around the city at low prices. He stands to make a fortune on rising property values in the downtown. Ilitch has also begun buying properties in downtown Detroit and is rumored to have been the buyer of the Griswold building.
The construction of the stadium is a part of a policy by the city government to “revitalize” Detroit. This means, in practice, clearing downtown and midtown of poorer residents by raising the land value—and thus the rents—and making an enclave of wealth at the center of America’s poorest big city. The office workers who labor in the new downtown, of course, will have to pay the inflated rents. To this end, the Detroit Free Press cites the “successful redevelopment” of the David Broderick Tower, which rents penthouse suites for $5,100 a month.
Current rents in the downtown area are around $1.25 per square foot, and the developers’ goal is to raise this number to at least $2.00.
The gentrification of Detroit is not intended to improve the city as a whole, nor will it. It is a part of the broader attack on the living conditions of working people. As “undesirables” are shooed away from the city center, Orr and other city officials are shutting down whole areas of the city deemed too poor to invest in and forcing residents to abandon neighborhoods by cutting off street lights, closing schools and ending fire protection.
As usual, the arena is being justified to the people of Detroit with the claim that it will create thousands of jobs. Taking the city’s generous figure of 8,300 new jobs at face value, this is cold comfort to Detroit’s residents. The same was said for the city casinos built more than a decade ago. Low wage service jobs are poor replacement for the dismembered auto industry, and the incoming white-collar workers at Quicken Loans and other downtown companies will be highly exploited and gouged by the city’s new billionaire landlords.

Student Loan Proposal Would Avert Deadline, But Raise Borrowing Costs, Boosting Government Profit

WASHINGTON -- Student borrowers and their families would pay more to finance college under a proposal pushed by a bipartisan group of senators, increasing the federal government’s profits despite warnings over record student debt levels.
The proposal comes as the federal government has been recording mounting profit off the backs of students and their families, raising questions about the lawmakers’ claims to help students afford higher education. The Department of Education has booked nearly $120 billion in profit over the last five fiscal years thanks to record spreads between what it costs the government to borrow and what the government charges students and their families.
The proposal by Sens. Angus King (I-Maine), Joe Manchin (D-W.Va.), Tom Coburn (R-Okla.) and Richard Burr (R-N.C.) would tie student loan interest rates to the government’s cost to borrow for 10 years -- the 10-year Treasury notes. Beginning sometime in 2016 or 2017, according to projections by the nonpartisan Congressional Budget Office, the proposal as currently drafted would raise the cost to borrow for most households, compared with loans under existing law.
Lawmakers and the White House have been trying to forge an agreement resetting student loan interest rates in part because they anticipate a political backlash on July 1, when the rate on a small subset of new loans available to some undergraduates is set to double to 6.8 percent. The deadline is largely artificial, as the vast majority of students begin taking out loans in August and September.
The bipartisan Senate plan, according to a draft obtained by the Huffington Post, would put the annual rate for undergraduate Stafford loans at 2 percentage points above the yield on the 10-year Treasury note. Stafford loans for graduate students would be set at 3.5 percentage points above the 10-year Treasury. PLUS loans -- used by graduate students who exhaust Stafford limits and by parents of undergraduates who need additional funds to finance ever-expensive college tuition -- would be set at 4.5 percentage points above 10-year notes.
The yield on the 10-year note closed Thursday at 2.41 percent. Most Stafford loans now carry interest rates of 6.8 percent. PLUS loans are set at 7.9 percent.
The draft legislation would make loans cheaper for student loan borrowers for roughly three years, according to the Congressional Budget Office forecast. It would be more expensive for students and their families thereafter as the economy improves and interest rates rise. The yield on the 10-year Treasury is forecast to average 4.1 percent in the 2016 fiscal year before rising to 4.9 percent in the 2017 fiscal year. Yields will then increase to 5.2 percent, according to CBO forecasts.

The CBO estimated in a June 10 report that the government would generate $184 billion in profit for loans made from this fiscal year to 2023, not including $15 billion in profit the government booked this year from loans made in previous years.
If the Senate compromise proposal becomes law, it would increase the federal government’s profit over the next decade by an additional $8 billion, congressional aides said the CBO has projected.
Crystal Canney, a spokeswoman for King, said: “Nothing has been finalized. There is still a great deal of negotiating underway. Our goal is to get the best deal for students as possible and avoid the doubling of rates now scheduled for July 1st.”
Representatives for Manchin and Coburn did not respond to requests for comment.
The scheduled July 1 interest rate hike would affect about one-quarter of new federal student loan dollars. The doubled rates would cost affected borrowers, who come from middle- and lower-income households, about $1,000 more over the average 12-year life of each loan.
Representatives of top Democratic lawmakers said the proposal had little chance of becoming law. Senior White House officials met with lawmakers on Thursday in hopes of striking a deal.
Reaction from student advocates was swift and unsparing. Groups have been mobilizing to prevent rates for some borrowers from doubling, and at the same time have been trying to reform the government’s student loan program and reduce overall borrowing costs.
“Congress must preserve its historical commitment to protecting students from outrageous interest rates now and in the future,” Sen. Tom Harkin, chairman of the chamber’s education committee, said through a spokeswoman.
“This plan serves up nothing but leftovers,” said Christine Lindstrom, higher education program director for U.S. Public Interest Research Group student chapters. “It increases costs to students above and beyond what they would pay on July 1 if the rate doubles.”
Lindstrom added: “We can't accept any deal as serious unless it delivers lower costs to borrowers than what they would pay if nothing happens and the rate doubles on July 1. And this plan fails to deliver."
The proposal comes as the Obama administration is forecast to generate a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation's most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.
The CBO estimate places the government’s profit above that of Exxon Mobil Corp., the nation's most profitable company, which reported about $45 billion in net income last year. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $52 billion in profit last year.
Congress sets interest rates on federal student loans. But the rates have not kept pace with the significant decline in borrowing costs that have occurred since the onset of the financial crisis.
Compared with a benchmark interest rate -- the yield on the 10-year Treasury note -- student borrowers have never paid more for loans, increasing the burden of their student debt as wage increases and yields on investments and bank accounts fail to keep up with the relative increase in student loan interest payments.
At $1.1 trillion, student debt eclipses all other forms of household debt, except for home mortgages, according to federal regulators. It's the only kind of consumer debt that has increased since the onset of the financial crisis, according to the Federal Reserve Bank of New York.
Washington policymakers increasingly have focused on soaring student debt levels and the record relative interest rates that borrowers pay as a potential impediment to economic growth. Regulators and officials at agencies that include the Federal Reserve, Treasury Department, Consumer Financial Protection Bureau and New York Fed have warned that student borrowing may dampen consumption, depress the economy, limit credit creation or pose a threat to financial stability.
Officials have said they are worried that overly indebted student borrowers are unable to save enough to purchase a home, take out loans for new cars, start a business or save for retirement.
Last month, President Barack Obama noted that the average new college graduate carries more than $26,000 in student debt.
“That doesn’t just hold back our young graduates. It holds back our entire middle class,” Obama said. Student loan payments “can last for years, even decades, which means young people are putting off buying their first car or their first house -- the things that grow our economy and create new jobs.”
The outline of the bipartisan deal comes after weeks of partisan fist-waving over the scheduled doubling of rates.
The standoff escalated Thursday, when House Speaker John Boehner (R-Ohio) sent a letter to Obama chastising Senate Democrats for putting student loan rates at risk. The House passed a Republican measure that also is forecast to increase students’ borrowing costs in a few years.
"Frankly, there is no evidence that Democrats are making a sincere effort to get a bill passed in the Senate," Boehner wrote. "With Republicans and you in general agreement on the policy, it is difficult to identify any motivation other than politics to explain why a solution has not already been signed into law."
The White House also proposes to tie student loan interest rates to the yield on the 10-year Treasury note. But under Obama’s plan, the difference between student loan rates and the yield on the 10-year Treasury is far less than in the bipartisan Senate proposal or in the House Republicans' bill.
House Minority Leader Nancy Pelosi (D-Calif.), flanked by college students, said Thursday that House Democrats would place blame squarely on Republicans for allowing rates on some student loans to rise.
Critics said House leaders' political grandstanding showed they have little appetite for resolution.

Greek leftists quit coalition government after public media shutdown

Topics: coalition government ♦ Democratic Left party

 

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Greece’s moderate Democratic Left party will withdraw from the coalition government, one of the party’s ministers confirmed on Friday after a week-long crisis sparked by the shock closure of the country’s state broadcaster.
“Following the party’s decision to withdraw from the government and withdraw its ministers I will table my resignation to the prime minister,” outgoing administrative reform minister Antonis Manitakis told reporters.

Time To Pay For Messing With The Markets?

Can you smell that?  It is the smell of panic in the air.  As I have noted before, when financial markets catch up to economic reality they tend to do so very rapidly.  Normally we don’t see virtually all asset classes get slammed at the same time, but the bucket of cold water that Federal Reserve Chairman Ben Bernanke threw on global financial markets on Wednesday has set off an epic temper tantrum.  On Thursday, U.S. stocks (NYSEARCA:SPY), European stocks (NYSEARCA:VGK), Asian stocks, gold (NYSEARCA:IAU), silver (NYSEARCA:SLV) and government bonds all over the planet all got absolutely shredded.  This is not normal market activity.  Unfortunately, there is nothing “normal” about our financial markets anymore.  Over the past several years they have been grossly twisted and distorted by the Federal Reserve and by the other major central banks around the globe.  Did the central bankers really believe that there wouldn’t be a great price to pay for messing with the markets?  The behavior that we have been watching this week is the kind of behavior that one would expect at the beginning of a financial panic.  Dick Bove, the vice president of equity research at Rafferty Capital Markets, told CNBC that what we are witnessing right now “is not normal. It is not normal for all markets to move in the same direction at the same point in time due to the same development.”  The overriding emotion in the financial world right now is fear.  And fear can cause investors to do some crazy things.  So will global financial markets continue to drop, or will things stabilize for now?  That is a very good question.  But even if there is a respite for a while, it will only be temporary.  More carnage is coming at some point.
What we have witnessed this week very much has the feeling of a turning point.  The euphoria that drove the Dow Jones Industrial Average (INDEXDJX:.DJI) well over the 15,000 mark is now gone, and investors all over the planet are going into crisis mode.  The following is a summary of the damage that was done on Thursday…
-U.S. stocks had their worst day of the year by a good margin.  The Dow fell 354 points, and that was the biggest one day drop that we have seen since November 2011.  Overall, the Dow has lost more than 550 points over the past two days.

-Thursday was the eighth trading day in a row that we have seen a triple digit move in the Dow either up or down.  That is the longest such streak since October 2011.
-The yield on 10 year U.S. Treasuries went as high as 2.47% before settling back to 2.42%.  That was a level that we have not seen since August 2011, and the 10 year yield is now a full point above the all-time low of 1.4% that we saw back in July 2012.
- The yield on 30 year U.S. Treasuries hit 3.53 percent on Thursday.  That was the first time it had been that high since September 2011.
-The CBOE Volatility Index (NYSEARCA:VXX) jumped 28 percent on Thursday.  It hit 20.49, and this was the first time in 2013 that it has risen above 20.  When volatility rises, that means that the markets are getting stressed.
-European stocks got slammed too.  The Bloomberg Europe 500 index fell more than 3 percent on Thursday.  It was the worst day for European stocks (NYSEARCA:VGK)  in 20 months.
-In London, the FTSE fell about 3 percent.  In Germany(NYSEARCA:EWG), the DAX fell 3.3 percent.  In France, the CAC-40 fell 3.7 percent.
-Things continue to get even worse in Japan (NYSEARCA:EWJ).  The Nikkei has fallen close to 17 percent over the past month.
-Brazilian stocks (NYSEARCA:EWZ) have fallen by about 15 percent over the past month.
-On Thursday the price of gold (NYSEARCA:GLD) got absolutely hammered.  Gold was down nearly $100 an ounce.  As I am writing this, it is trading at $1273.60.
-Silver (NYSEARCA:SLV) got slammed even more than gold did.  It fell more than 8 percent.  At the moment it is trading at $19.57.  That is ridiculously low.  I have a feeling that anyone that gets into silver now is going to be extremely happy in the long-term if they are able to handle the wild fluctuations in the short-term.
-Manufacturing activity in China (NYSEARCA:FXI) is contracting at a rate that we haven’t seen since the middle of the last recession.
-For the week ending June 15th, initial claims for unemployment benefits in the United States rose by about 18,000 from the previous week to 354,000.  This is a number that investors are going to be watching closely in the months ahead.
Needless to say, Thursday was the type of day that investors don’t see too often.  The following is what one stock trader told CNBC…

“It’s freaking, crazy now,” said one stock trader during the 3 p.m. ET hour as the Dow sunk more than 350 points. “Even defensive sectors are getting smoked. The super broad-based sell off between commodities, bonds, equities – I wouldn’t say it’s panic, but we’ve seen aggressive selling on the lows.”

Unfortunately, this may just be the beginning.
In fact, Mark J. Grant has suggested that we may see even more panic in the short-term…

Yesterday was the first day of the reversal. There will be more days to come.
What you are seeing, in the first instance, is leverage coming off the table. With short term interest rates right off of Kelvin’s absolute Zero there was been massive leverage utilized in both the bond and equity markets. While it cannot be quantified I can tell you, dealing with so many institutional investors, that the amount of leverage on the books is giant and is now going to get covered. It will not be pretty and it will be a rush through the exit doors as the fire alarm has been pulled by the Fed and the alarms are ringing. There is also an additional problem here.
The Street is not what it was. There is not enough liquidity in the major Wall Street banks, any longer, to deal with the amount of securities that will be thrown at them and I expect the down cycle to get exacerbated by this very real issue. Bernanke is no longer at the gate and the Barbarians are going to be out in force.

If we see global interest rates start to shift in a major way, that is going to be huge.
Why?
Well, it is because there are literally hundreds of trillions of dollars worth of interest rate derivatives contracts sitting out there…

The interest rate derivatives market is the largest derivatives market in the world. The Bank for International Settlements estimates that the notional amount outstanding in June 2009 were US$437 trillion for OTC interest rate contracts, and US$342 trillion for OTC interest rate swaps. According to the International Swaps and Derivatives Association, 80% of the world’s top 500 companies as of April 2003 used interest rate derivatives to control their cashflows. This compares with 75% for foreign exchange options, 25% for commodity options and 10% for stock options.

If interest rates begin to swing wildly, that could burst the derivatives bubble that I keep talking about.
And when that house of cards starts falling, we are going to see panic that is going to absolutely dwarf anything that we have seen this week.
So keep watching interest rates, and keep listening for any mention of a problem with “derivatives” in the mainstream media.
When the next great financial crash comes, global credit markets are going to freeze up just like they did in 2008.  That will cause economic activity to grind to a standstill and a period of deflation will be upon us.  Yes, the way that the Federal Reserve and the federal government respond to such a crisis will ultimately cause tremendous inflation, but as I have written about before, deflation will come first.
It would be wise to build up your emergency fund while you still can.  When the next great financial crisis fully erupts a lot of people are going to lose their jobs and for a while it will seem like hardly anyone has any extra money.  If you have stashed some cash away, you will be in better shape than most people.
This article is brought to you courtesy of Michael Snyder from The Economic Collapse Blog.

The Terror Con: How Keeping Americans Terrified Is Making Corporations Big Bucks

The name of the game is threat inflation.

June 19, 2013  |  

 

For defense contractors, the government officials who write them mega checks, and the hawks in the media who cheer them on, the name of the game is threat inflation. And no one has been better at it than the folks at Booz Allen Hamilton, the inventors of the new boondoggle called cyber warfare.

That’s the company, under contract with the National Security Agency, that employed whistle-blower Edward Snowden, the information security engineer whose revelation of Booz Allen’s enormously profitable and pervasive spying on Americans now threatens the firm’s profitability and that of its parent hedge fund, the Carlyle Group.

Booz Allen, whose top personnel served in key positions at the NSA and vice versa after the inconvenient collapse of the Cold War, has been attempting to substitute terrorist for communist as the enemy of choice. A difficult switch indeed for the military-industrial complex about which Dwight Eisenhower, the general-turned-president, had so eloquently warned us. 

But just when the good times for war profiteers seemed to be forever in the past, there came 9/11 and the terrorist enemy, the gift that keeps on giving, for acts of terror always will occur in a less than perfect world, serving as an ideal excuse for squandering resources, as well as our freedoms.

Just ask New York Times columnists Thomas Friedman and Bill Keller. Rising to the defense of NSA snooping on a scale never before imagined in human history, they warn us that if there was a second 9/11-type attack, we would lose all of our civil liberties, so we should be grateful for this trade-off.

“I believe that if there is one more 9/11—or worse, an attack involving nuclear material—it could lead to the end of the open society as we know it,” Friedman wrote in his June 11 column. 

No nation in history has ever possessed such an imbalance of military superiority and the ability to ward off foreign threats without sacrificing its core values. Never has this country been as vulnerable to foreign attacks as when the founders approved our Constitution with its Fourth Amendment and other protections of individual sovereignty against an intrusive government. They did so out of the conviction that individual freedom makes us stronger rather than weaker as a nation. In short, they trusted in the essential wisdom of the people as opposed to the pundits who deride it.

Defending Friedman’s column, Keller wrote  Sunday:

“Tom’s important point was that the gravest threat to our civil liberties is not the NSA but another 9/11-scale catastrophe that could leave a panicky public willing to ratchet up the security state, even beyond the war-on-terror excesses that followed the last big attack.”

So it’s the panicky public’s fault and not the ill-informed work of establishment journalists like Friedman, who led the charge to war with Iraq based on phony claims about terrorism.

Once again, Friedman has a misplaced faith in the work of the intelligence community. The NSA snooping was quite extensive before 9/11 and certainly in full force prior to the Boston Marathon attack, but did not prevent either event. Indeed, our much-vaunted spy agencies still have not come up with an explanation of how 19 hijackers, 15 from our ally Saudi Arabia, managed to legally enter this country and learn flying skills while under our government’s watch.

Nor have those intelligence agencies explained why the only three countries that recognized the Taliban government sponsors of al-Qaida were that same Saudi Arabia as well as our other friends in Pakistan and the United Arab Emirates. For information on the UAE connection, the NSA might check with its buddies at Booz Allen Hamilton. 

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Every Asset That Depends On Cheap, Abundant Credit (Housing, Bonds, Stocks) Is Doomed

by Charles Hugh-Smith of OfTwoMinds blog,
Four words: financialization, debtocracy, diminishing returns.

About a month ago I asked What If Stocks, Bonds and Housing All Go Down Together? (May 24, 2013). Why would such an outrageous thought even occur to me?

Four words: financialization, debtocracy, diminishing returns. The entire global economy, developed and developing nations alike, is now dependent on cheap, abundant credit for everything: for “growth,” for asset inflation, and ultimately for central state deficit spending, which props up all the cartels, rentier arrangements, fiefdoms and armies of toadies, lackeys, apparatchiks and embezzlers that suck off the Status Quo.

I have long endeavored to explain the harsh reality of neofeudal, neocolonial financialization: Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012) and the neofeudal debtocracy that depends on low yields (interest rates) to enable enormous deficit spending: Why Krugman and the Keynesians Are Lackeys for the Neofeudal Debtocracy (April 24, 2013).

The wheels fall off the entire financialized debtocracy wagon once yields rise.There’s nothing mysterious about this:

1. As interest rates/yields rise, all the existing bonds paying next to nothing plummet in market value

2. As mortgage rates rise, there’s nobody left who can afford Housing Bubble 2.0 prices, so home prices fall off a cliff

3. Once you can get 5+% yield on cash again, few people are willing to risk capital in the equities markets in the hopes that they can earn more than 5% yield before the next crash wipes out 40% of their equity

4. As asset classes decline, lenders are wary of loaning money against these assets; if the collateral for the loan (real estate, bonds, stocks, etc.) are in a waterfall decline, no sane lender will risk capital on a bet that the collateral will be sufficient to cover losses should the borrower default.

Let’s take a look at four charts about housing and household net worth. For the middle class, the home remains the key asset, so housing and household net worth are correlated.

Here is a chart of mortgage rates since 1970. Rates were pushed to 17+% to snuff inflation in the early 1980s, and they’ve dropped over the past 30 years to historic lows: the rate for a fixed-rate 30-year conventional mortgage was about 3.5% a few weeks ago. It has now risen above 4%.

In the golden age of growth from 1991 to 2002, mortgages rates bounced between about 7% and 9%. The band from 1970 to 1979 was about 7.5% to 10%.

In other words, in eras of strong growth and low inflation, mortgage rates have been around 7% to 9%. So what happens to the monthly payments when the mortgage rate doubles from 4% to 8%? The payments double, too. And what happens to the price of houses when rates double? They fall to the point that households borrowing money at 7.5% – 8% can afford to buy a house, i.e. a price much lower than today’s Housing Bubble 2.0 prices.

Here’s mortgage debt. If mortgage debt had expanded at the previous rate, total debt would be closer to $5 trillion instead of $10 trillion.

You see what happens when debt becomes cheap and abundant: debt rises faster than wages or assets.

But hasn’t household wealth increased mightily in the past decades? Here is a chart that plots the relationship of household net worth and total credit owed, i.e. debt:

Household wealth may be rising, but what this chart reveals is debt is rising even faster–that’s why the line is declining. Put another way, every dollar of new debt is generating less and less wealth.

You might think that The Federal Reserve’s policy of making credit cheap and abundant would goose people to consume and invest more money. Alas, the velocity of money is hitting historic lows: the Fed may be creating credit but people and enterprises aren’t putting that money into circulation.

It’s called diminishing returns: every dollar of debt creates interest payments, but it’s no longer doing households or enterprises any good. The Fatal Disease of the Status Quo: Diminishing Returns (May 1, 2013).

That’s why all asset classes that depend on cheap, abundant credit are doomed: once yields/rates rise, the valuations of those assets implode. And once valuations implode, there’s not enough collateral left to support the loans used buy all those cheap-credit-inflated assets. So the financial system also implodes.

US Treasury Bonds are Junk Bonds? Is America Defaulting on Its Debt? Where to Hide?

US Treasury Bonds are Junk Bonds? Is America Defaulting on Its Sovereign Debt? 
Recently, I wrote an article explaining why US Treasury Bonds
are junk bonds and why rating agencies cannot be trusted at all,
because they have been up to their eyeballs in fraudulent activities.
I wrote that what I am stating may seem outlandish but it
reflected reality – that the US as well as its ally in crime, the United
Kingdom (UK) are bankrupt. Very few economists dare assert such a
conclusion because it would be a death sentence for their careers.
So, who can you trust anymore?
But, does it require so much courage to expose the ugly truth when
there are so much evidence to support what I have stated in my articles
which can be gathered even from the mainstream media?
It was taboo to suggest before the Global Financial Tsunami that America
was a bankrupt state and does not deserve an AAA rating. Yet, it took a
rating agency from China in early 2011 to break the taboo,
China’s Dagong credit rating agency says the U.S has already defaulted.
http://www.liveleak.com/view?i=8f2_1371061970#dBiMtR9ZiJEyCFbX.99
U.S. Treasury Bond Bubble Red Alert, QE Taper Talk Puts Bonds at Risk – Where to Hide?
Our internal best bubble indicator is triggered when an asset, or asset class, exhibits volatility below its historic norm. That is, money flows into an asset not appreciating the risks that are embraced. Think tech stocks in the late 1990s. Think housing in the run-up to the financial crisis. Or think Treasuries. The long-end of the yield curve (longer dated Treasury securities) is historically a rather volatile place. In recent years, however, it’s been eerily quiet. This isn’t limited to U.S. Treasuries, but both domestic and many international fixed income markets have rewarded investors with yield, but relatively low levels of volatility. In our assessment, we don’t need the Chinese to dump their Treasuries, but merely for historic levels of volatility to return to the Treasury markets for there to be a rude awakening. That’s because bond prices can fall; an investor in a bond fund is subject to interest rate risk, i.e. the risk of bond prices falling as higher interest rates are anticipated. A lot of yield chasers and other “weak hands” may be holding Treasuries that might flee this market should heightened volatility persist.

The recent “taper talk”, i.e. the talk about the Federal Reserve (Fed) reducing its Treasury purchases has provided a first taste of how increased volatility affects bond investors. The Fed has worked hard to contain the long end of the yield curve, amongst others, by communicating to keep rates low for an extended period; by buying Treasuries; by engaging in Operation Twist; and finally, by shifting the Fed’s focus from inflation to unemployment. However, as recent volatility in Japan’s government bonds (JGBs) has shown, it may be harder going forward to smooth talk the markets.
Merk Insights
http://www.marketoracle.co.uk/Article40960.html
Is there a chance America could default on its debts?
According to federal budget analysts at the Bipartisan Policy Center, the Treasury would only be able to make a slight majority of its 80 million monthly payments in August. Treasury Secretary Timothy Geithner would likely be put in the same position as a struggling consumer low on cash and behind on his bills: he would have to selectively decide which debts to pay for the month and which to ignore.

Should August 2 come and go without a solution, Congress’s inaction (and Geithner’s subsequent decisions) would have dramatic global repercussions. Most likely, his big priority would be to pay off bond investors so that a formal default wouldn’t occur. Yet even if these institutional investors are assuaged, the Treasury would still have to postpone millions of payments at home … payments to Social Security recipients, federal employees, contractors and soldiers possibly among them.
So technically, America wouldn’t actually default come August 2 – certain federal payments would be delayed. The federal government’s existing revenue stream is decent enough so that it could still pay interest and principal on unpaid debts.
That said, the postponed federal payments would have a dramatic impact on cash flow, consumer spending, consumer credit and even interest rates.
http://www.faithbasedinvestor.com/blog/item/60-is-there-a-chance-america-could-default-on-its-debts

While Claiming Battle Gains Against Rebels, Syria’s Assad Is Facing Currency Crisis

Even as President Bashar al-Assad of Syria is proclaiming battlefield momentum against the insurgency with the help of his Hezbollah ally, he appears to be facing a new threat: a rapidly weakening currency that has unnerved many Syrians.

The currency, the Syrian pound, fell about 30 percent in value against the dollar over the weekend, partly on news that the United States intended to arm some elements of the rebellion seeking to topple Mr. Assad.

Money traders and economists said the plunge might have been accelerated by the apparent unwillingness — or inability — of Syria’s Central Bank to halt it by buying pounds with dollars or euros, suggesting the government’s supply of foreign exchange reserves is running low.

The Central Bank governor, Adib Mayalah, announced Tuesday that to help stabilize the pound, Syria would tap into a $1 billion credit line provided by Iran. That appeared to be helping on Wednesday. But the effects of that aid are considered temporary at best, as Iran is facing its own severe financial constraints.

For Mr. Assad, a number of basic financial problems appear to be coalescing after more than two years of conflict: Western sanctions that have collapsed Syria’s main money-earning industries of oil and tourism, a near-collapse of regular commerce inside the country and the cost of fighting the insurgency, which has left more than 93,000 people dead and millions displaced.

The pound, which traded at about 47 per dollar before the uprising against Mr. Assad began in March 2011, has been eroding gradually since then and was trading at 170 per dollar last week. Money traders in Syria and the United States said it nose-dived starting last Friday and had weakened to 220 per dollar by Monday, reflecting some chaotic selling by Syrians worried that the pound could weaken further and wipe out their savings if they did not convert to dollars or euros.

Syria experts who once estimated the Central Bank had at least $17 billion in foreign exchange reserves before the conflict now believe that, because of Mr. Assad’s international isolation and the cost of the war, that amount has dwindled to as little as $2 billion.

“Syria’s government doesn’t have cash,” said Andrew J. Tabler, a Syria scholar at the Washington Institute for Near East Policy. “They might be good at shooting people, but they’re not so good at the economic stuff.”

Others said the Central Bank’s effort this week to arrest the pound’s decline had strengthened it to about 190 per dollar by Wednesday, but they suspected the pound would resume falling.

Some were suggesting it could go to 500 to the dollar, which could cause enormous inflation problems in Syria.

A Syrian expatriate currency market trader, who spoke on condition of anonymity because he has relatives in the country, said he believed the credit line from Iran was a short-term psychological tool and might not even exist. A further strengthening of the pound would be a telling indicator.

“Unless they’re able to knock it back to 150, I would imagine it would just be a cosmetic process,” he said. “I’m personally extremely skeptical.”

In a separate possible signal of Iran’s frugality, officials of the Palestinian militant organization Hamas, which governs the Gaza Strip, said Wednesday that Iranian financial assistance had declined sharply in recent months. They attributed it to Hamas’s decision to break with Mr. Assad over his efforts to crush the Syria uprising.

“We are suffering from a financial crisis and we are trying to go beyond the problem,” said Ghazi Hamad, deputy minister of foreign affairs in the Hamas government.

Officials in Gaza refused to disclose figures, but experts in Gaza estimated that Iran had been channeling about $20 million a month to Gaza.

Fares Akram contributed reporting from Gaza.

This article has been revised to reflect the following correction:
Correction: June 20, 2013
An earlier version of this article misstated the exchange rate of the Syrian pound before March 2011. It was about 47 to the dollar, not 70 to the dollar.

A version of this article appeared in print on June 20, 2013, on page A4 of the New York edition with the headline: While Claiming Battle Gains Against Rebels, Syria’s Assad Is Facing Currency Crisis.

David Morgan: Mines can’t produce silver for under $20/oz

Fact of the matter it costs over $20/oz to produce silver. That fact alone show that TPTB have the fix in.
Stack now. Don’t be a fiatard!

Matt Taibbi: The Last Mystery of the Financial Crisis

By Matt Taibbi


What about the ratings agencies?
That's what "they" always say about the financial crisis and the teeming rat's nest of corruption it left behind. Everybody else got plenty of blame: the greed-fattened banks, the sleeping regulators, the unscrupulous mortgage hucksters like spray-tanned Countrywide ex-CEO Angelo Mozilo.
But what about the ratings agencies? Isn't it true that almost none of the fraud that's swallowed Wall Street in the past decade could have taken place without companies like Moody's and Standard & Poor's rubber-stamping it? Aren't they guilty, too?
Man, are they ever. And a lot more than even the least generous of us suspected.
Thanks to a mountain of evidence gathered for a pair of major lawsuits, documents that for the most part have never been seen by the general public, we now know that the nation's two top ratings companies, Moody's and S&P, have for many years been shameless tools for the banks, willing to give just about anything a high rating in exchange for cash.
In incriminating e-mail after incriminating e-mail, executives and analysts from these companies are caught admitting their entire business model is crooked.

Tensions Over Trade: European Union and China take Dispute to WTO

The European Commission made an interim anti-dumping measure on imports of many of China’s panel products which comprised of solar panels, wafers and cells. The duty was set at 11.8 percent for all imports. China on the other hand, has been investigating the solar-grade poly silicon from the European Union. This dispute has been further triggered by the European Commission because of the high-grade steel tariff which has been placed by China, and a complaint was raised with the World Trade Organization. Further, Beijing has also been accused for imposing tax on imported steel. According to the WTO’s legal policy, China has been given a period of 60 days within which it has to come to a peaceful conclusion with EU. The root of the issue lies in the September complaint issued by the European Union Pro-Sun.
For over 50 years, Germany has been one of the most trustful and judicious supporters in making the European Union expand in terms of geographical extent in the scope of issues that it faces. The European companies in China are also concerned over the worsening of the situation.
But with the Union trade officials of both countries at each other’s throat, Germany has decided to go in the Chinese direction. Europe’s Trade Commissioner, Baroness Ashton, said that the Chinese restrictions on raw materials distort competition with the global price rise. This has further down trended the economy. Germany which has a number of companies relying on Europe has feared that such disputes might trigger a large scale war and the result might affect Germany badly.
A confidential technical-level talk has already begun in Brussels between the EU and Chinese experts to find a solution for the solar product dispute. The EU Trade Spokesman John Clancy said that EU aims on settling the issue but stressed that negotiation is still going on. With the conflict still unsettled, Karel De Gucht and Gao Hucheng, the Chinese Commerce Minister and the European Trade Commissioner set up a meeting in Beijing. The Commission has been put in an uncomfortable position with Germany supporting China and France backing the European Union. The issue will be discussed in the annual EU-China Joint Committee.
The focus of this meeting will revolve around market access barrier, licensing, rights to use the telecommunication services as well as the financial services. Ways to further improve the enforcement and cooperation with the intellectual property rights will also be discussed. Shen has insisted that both EU and China maintain cooperation and use this opportunity to unite their efforts and come to a mutually acceptable agreement. Experts say that EU and China needs to explore new ways to further deepen the bilateral cooperation. China’s vice minister, Zhong Shan has stated that if the EU goes ahead with the anti-dumping duties, “the Chinese government will not sit in the sideline and watch, but will stand up and defend the interests of the Nation.”
Eddie Miller, is a blogger, technologist, trader and the Man Behind BinaryPedia.com.

Why Neocons Are Freaking Out Over Lincoln

When Obama went before the United Nations on September 12, 2012 to declare that the Syrian regime "must end" and threatened U.S. military intervention to achieve that end he did not cite the U.S. Constitution as his authority. No American president ever does when threatening military intervention. Instead, he invoked the rhetoric of Abraham Lincoln or what the late Professor Mel Bradford called "the rhetoric of continuing revolution." More specifically, in his U.N. speech he paraphrased Lincoln’s Gettysburg Address to say that U.S. military intervention is warranted because "government of the people, by the people, and for the people is more likely to bring about the stability, prosperity, and individual opportunity that serve as a basis for peace in the world."
Obama repeated this hoary theme – that Lincoln’s rhetoric "justifies" or "legitimizes" endless American military interventionism all over the world – in his first inaugural address. "What makes us exceptional," he shouted, "is our allegiance to an idea articulated in a declaration made more than two centuries ago . . ." This "idea" was not, of course, the Constitution and not even the Declaration of Independence, but a few words from the Declaration taken out of historical context. The words are the "all men are created equal" phrase.
Nothing could be further from the truth than Lincoln’s notion that America was founded on the idea of egalitarianism. The essential principles of the Constitution were based on the freedom of individuals from governmental control of their lives, not "equality" however it may be defined. If government is to have a role in society, said the founders, it is to protect lives, liberty and property, not to promote "equality" (which Lincoln unequivocally did not believe in in any case).
It is this "rhetoric of continuing revolution" that the American state has invoked for more than a century now to "legitimize" all of its powers, especially its endless aggressive wars. It is the opponents of endless military interventionism, men like Ron Paul, who alternatively invoke the Constitution as defining the legitimate role of government in society. The myths, legends, and superstitions surrounding the story of Abraham Lincoln ("Father Abraham," as the neocons are fond of calling him) are what are used to legitimize the power of the American warfare/welfare state, not the Constitution.
This fact explains the odd but perfectly predictable occurrence of recent hysteria among the neocons, especially one Rich Lowry of National Review magazine, over criticisms of the Lincoln dictatorship by yours truly and many others. They have become strangely unglued and freaked out over the fact that many young Americans, especially, no longer buy into the standard propaganda line that is always invoked to "justify" more war, more killing, more debt, taxes, inflation, spying, and other attacks on civil liberties. The neocons are still punch drunk, in other words, from how the Ron Paul phenomenon, during the congressman’s two attempts at securing the Republican Party presidential nomination, captured the imaginations of millions of young people and continues to do so.
One of the clearest examples of the importance the neocons assign to the Lincoln legend in supporting never-ending war is a small book by an American Enterprise Institute neocon named Walter Berns. His book is entitled Making Patriots. In an important chapter on Lincoln mythology Berns bemoans the fact that too many of today’s youth are too hesitant to join in the neocons’ crusades to overthrow governments in place like Syria, Lebanon, Iran, North Korea, and elsewhere. They are too selfish and self-centered, says Berns, being so preoccupied with their own education, careers, and families. They must be mesmerized into the fascist/neocon militaristic mindset by some kind of "national poet," says Walter Berns. "Fortunately," he says, we already have such a "poet" in the political rhetoric of Abraham Lincoln. "Making Cannon Fodder" would thus be a more appropriate title for Berns’ book.
In his essay on "The Nature of the State" Murray Rothbard pointed out that all states, no matter how tyrannical they may be, rely crucially on inculcating in the minds of the public the alleged grandiosity of the state and the alleged failures of private enterprise and the civil society. That’s why the state and its court historians and other apologists (such as the neocon magazine writers, talking heads, and court intellectuals) spend so much time and effort trying to dominate the educational system and the domain of "acceptable" public discourse.
Such propaganda is essential to statism, said Rothbard, because it is essentially an economical way to get the public to acquiesce in being enslaved by the state. It is much cheaper and less risky than other historical means, such as terrorizing and mass murdering one’s own citizens, thereby risking a violent revolution (See Death by Government by R.J. Rummel). Lincoln mythology is the propagandistic cornerstone of American statism and has been for generations. It is why politicians like Obama always fall back on the rhetoric of "American exceptionalism" to "justify" their endless wars and military adventurism.
The neocons are becoming unglued and freaked out because they no longer control the culture of ideas among "conservatives" as they did when the former CIA employee William F. Buckley, Jr. was at the helm of their flagship magazine. No longer can the ideas of a Frank Meyer, one of the founders of National Review who was a harsh critic of Lincoln, be thrown down the memory hole. There are too many independent scholars who are more interested in pursuing the truth than in "spinning" 150-year-old political rhetoric to "justify" the scheming plans of the military/industrial/congressional complex. Young people especially are concerned about the erosion of civil liberties and have become highly suspicious of tired old, belligerent neocons like Harry Jaffa and his followers (like Rich Lowry) who assure them that NSA spying, warrantless wiretaps, state snooping on all financial transactions, censorship of the internet, and intimidation of the media is all kosher because, after all, "Father Abraham" suspended Habeas Corpus, censored telegraph communications, and shut down opposition newspapers.
A prerequisite for the final collapse of the Soviet Union was the widespread disbelief in all the lies, myths and superstitions about socialism that the people of the Soviet empire had been brainwashed into accepting. Once no one any longer believed in socialism, the system was doomed despite all of its military might and all of the willingness of communist politicians to brutalize their own people.
As Rothbard said, all state power ultimately rests on a body of ideas that occupy the minds of the citizens. That is what so terrifies the neocons like Rich Lowry: They know how absurd it sounds to America’s youth to hear Obama invoke THEIR rhetoric about the Declaration, government of the people, by the people, etc., and "American exceptionalism" to make his case for yet another war in yet another Middle East country that poses no threat whatsoever to them. More and more young Americans have come to understand that it is the warfare state, propped up by the neocon propaganda apparatus, that is the biggest threat to themselves and their futures.

June 21, 2013

Thomas J. DiLorenzo

Europe's space hub to open its doors on 6 October

The European Space Technology and Research Centre, ESTEC - ESA's single largest establishment, nestling beside the sand dunes of Noordwijk, the Netherlands. In place for more than half a century, ESTEC is the incubator of the European space effort, where most ESA projects are born and where they are guided through development. Involvement may start with initial mission planning, research projects or laboratory support, extending to the testing of entire spacecraft in the ESTEC Test Centre, the largest facility of its kind in Europe. Image courtesy ESA-Anneke Le Floc'h.

From the latest space ferry to the very first Alphasat, Europe has never been more active in space, with a crowded manifest of ESA launches across the rest of the year. But where are all these varied missions born? See for yourself this October, as ESA's ESTEC research and technology centre opens its doors to the public.
No sooner has Luca Parmitano joined the International Space Station than ESA's latest space truck is resupplying the orbital outpost. Meanwhile, the May-launched Proba-V is returning its first maps of global vegetation, while the high-power Alphasat telecoms satellite is being prepared for launch. The Gaia satellite will soon begin charting a billion stars in 3D in our Galaxy, while the next batch of Galileo navigation satellites will also fly this year.
All very different space missions with diverse goals, but their origins can all be traced back behind the doors of a single location: the European Space Technology and Research Centre, ESTEC - ESA's single largest establishment, nestling beside the sand dunes of Noordwijk, the Netherlands.
In place for more than half a century, ESTEC is the incubator of the European space effort, where most ESA projects are born and where they are guided through development. Involvement may start with initial mission planning, research projects or laboratory support, extending to the testing of entire spacecraft in the ESTEC Test Centre, the largest facility of its kind in Europe. And ESTEC's Erasmus is the leading European repository of human spaceflight expertise.
ESTEC's Space Expo visitor centre is open year-round but on 6 October this year, for one day only from 10:00 to 17:00, the entire establishment is being opened to the public - provided you book early enough.
This year's Open Day is taking place as part of the Netherlands' national Weekend of Science.
This will be your chance to meet ESA astronauts, talk to space scientists and engineers, view specialist laboratories and test equipment simulating every aspect of the orbital environment, look at satellites being tested for space and touch hardware that has already flown in space.
Not to mention all the additional space exhibitions, videos and lectures, ESA merchandise for sale and dedicated children's activities planned for the Open Day.

Russia agrees $270 billion oil deal with China

Russia agrees $270 billion oil deal with China 21 June 2013, by James Marson - St. Petersburg (MarketWatch) http://www.marketwatch.com/story/russia-agrees-270-billion-oil-deal-with-china-2013-06-21 Russia--Russian oil major OAO Rosneft has agreed on a 25-year contract with China to deliver 365 million tons of oil to the country in a deal worth $270 billion. Russia already supplies China with 15 million tons of oil annually. Rosneft also signed a deal with PKN Orlen SA , Poland's largest oil refiner, to deliver crude oil via pipeline Druzhba to the Czech Republic, the two companies said at the St. Petersburg International Economic Forum Friday. The contract of up to approximately $7 billion estimate the agreed volume of deliveries at up to 8 million tons. The deliveries will be carried out until June 30, 2016. Rosneft and Trafigura, one of the world's largest commodities trading houses, also signed an up to a $1.5 billion contract to have Rosneft export up to 10.11 million tons of crude oil and petroleum products via Russian ports to Trafigura. In late April a person familiar with the situation told Dow Jones Newswires that "a chunk" of traders from TNK-BP, a 95% stake in which had been purchased by Rosneft, will be joining the new Trafigura business in Russia. Additionally, Rosneft signed an agreement to create a joint venture on crude oil and petroleum products trading with Saras S.p.A. , an Italian refinery, which owns the Sarroch refinery, on the southern tip of Sardinia, one of Europe's largest. Among the joint venture's future key activities are trading operations involving both parties' assets as well as entering new markets using both companies' potential. The 50/50 joint venture is expected to begin operations in 2014 upon getting regulators' approvals. Rosneft and SANORS petrochemical holding company signed an agreement to create a joint venture that will incorporate Rosneft's gas processing assets and SANORS' petrochemical assets in Orenburg and Samara regions. It's expected that Rosneft's stake in JV will be no less than 50%, while Sanors' stake won't exceed 50%. The parties plan to further negotiate formation of the joint venture and sign binding documents by the end of 2013.

MUST BE RIGGED: FED PRINTING but SILVER FALLING – Silver Doctors

Ron Paul: Gold Will “Go To Infinity, Because the Dollar Will Collapse Totally”

TheDailySheeple
The long-term is something you can get a handle on.
The short-term… I was never very good on short-term, whether it’s the stock market or what government will do. It’s just all over the place.
I think if you look at the record of the value of the dollar since the Fed’s been in existence, we have about a 2 cent dollar. You know, gold used to be $20 an ounce, so I would say the record is rather clear on the side of commodity money.
And, history is on our side… like 6,000 years of history shows that it maintains value and paper always self destructs.
I would say, long-term, as long as we have excessive spending and excessive computerized money, you’re going to see gold go up… and it could go to infinity because the dollar could collapse totally.

Epic Rick Santelli Rant – Why can’t we get out of crisis management mode?

If you pull it away and the stock market goes down, where does it say in the Constitution that some form of the government has to guarantee that stocks go up? Or guarantee that you have a house?
They don’t. Where have we gone off the rails? Enough is enough!
…
Why don’t these people kick the tires?
They take a press release from the Federal Reserve and they think it was written by God.

Marc Faber – Personally Buying Physical Gold Here… Peter Schiff – ‘Vicious’ Gold Rally Is Coming

Marc is personally buying gold as well as gold stocks, in addition, emerging markets also central banks and individuals continue to accumulate gold, physical gold.

Schiff – ‘Vicious’ Gold Rally Is Coming

Peter Schiff of Euro Pacific Capital argues that the Fed won’t be able to taper quantitative easing — actually, they’ll have to increase it. He expects that will cause a “vicious” rally in gold.

The Waste List: 66 Crazy Ways That The U.S. Government Is Wasting Your Hard-Earned Money

It would be a good time to do some reading up on what’s about to hit the USA by researching the Weimar Republic of Germany in the 1920′s.
They, like GW Bush and Company, and Obama also decided to go to war by borrowing the money needed and not raising taxes.  Here’s a hint: Be sure you have a wheelbarrow to carry your worthless Fed notes in to the store to shop for groceries.  
The Economic Collapse – by Michael
Why did the U.S. government spend 2.6 million dollars to train Chinese prostitutes to drink responsibly?  Why did the U.S. government spend $175,587 “to determine if cocaine makes Japanese quail engage in sexually risky behavior”?  Why did the U.S. government spend nearly a million dollars on a new soccer field for detainees being held at Guantanamo Bay?  This week when I saw that the IRS was about to pay out 70 million dollars in bonuses to their employees and that the U.S. government was going to be leaving 7 billion dollars worth of military equipment behind in Afghanistan, it caused me to reflect on all of the other crazy ways that the government has been wasting our money in recent years.  So I decided to go back through my previous articles and put together a list.  I call it “The Waste List”.  Even though our politicians insist that there is very little that can still be cut out of the budget, the truth is that the federal budget is absolutely drowning in pork.  The following are 66 crazy ways that the U.S. government is wasting your hard-earned money…
#1 The IRS is about to pay out 70 million dollars in bonuses to employees even though discretionary bonuses are supposed to be cancelled due to the sequester.
#2 According to the Washington Post, the U.S. government is going to leave 7 billion dollars worth of military equipment behind in Afghanistan.
#3 It is being projected that the trip that the Obamas will be making to Africa will cost U.S. taxpayers $100,000,000.
#4 The NIH plans to spend $509,840 on a study that “will send text messages in ‘gay lingo’ to methamphetamine addicts to try to persuade them to use fewer drugs and more condoms.”
#5 The National Science Foundation has given $384,949 to Yale University to do a study on “Sexual Conflict, Social Behavior and the Evolution of Waterfowl Genitalia”.  Try not to laugh, but much of this research involves examining and measuring the reproductive organs of male ducks.
#6 The IRS spent $60,000 on a film parody of “Star Trek” and a film parody of “Gilligan’s Island”.  Internal Revenue Service employees were the actors in the two parodies, so as you can imagine the acting was really bad.
#7 The NIH has given $1.5 million to Brigham and Women’s Hospital in Boston, Massachusetts to study why “three-quarters” of lesbians in the United States are overweight and why most gay males are not.
#8 The NIH has also spent $2.7 million to study why lesbians have more “vulnerability to hazardous drinking”.
#9 The U.S. government is giving sixteen F-16s and 200 Abrams tanks to the Muslim Brotherhood in Egypt even though the new president of Egypt, Mohammed Morsi (a member of the Muslim Brotherhood), constantly makes statements such as the following…

“Dear brothers, we must not forget to nurse our children and grandchildren on hatred towards those Zionists and Jews, and all those who support them”

#10 During 2012, the salaries of Barack Obama’s three climate change advisers combined came to a grand total of more than $370,000.
#11 Overall, 139 different White House staffers were making at least $100,000 during 2012, and there were 20 staffers that made the maximum of $172,200.
#12 Amazingly, U.S. taxpayers spend more than 1.4 billion dollars a year on the Obamas.  Meanwhile, British taxpayers only spend about 58 million dollars on the entire royal family.
#13 During 2012, $25,000 of federal money was spent on a promotional tour for the Alabama Watermelon Queen.
#14 The U.S. government spent $505,000 “to promote specialty hair and beauty products for cats and dogs” in 2012.
#15 NASA spends close to a million dollars a year developing a menu of food for a manned mission to Mars even though it is being projected that a manned mission to Mars is still decades away.
#16 During 2012, the federal government spent 15 million dollars to help the Russians recruit nuclear scientists.
#17 Over the past 15 years, a total of approximately $5.25 million has been spent on hair care services for the U.S. Senate.
#18 The U.S. government spent 27 million dollars to teach Moroccans how to design and make pottery in 2012.
#19 At a time when we have an epidemic of unemployment in the United States, the U.S. Department of Education is spending $1.3 millionto “reduce linguistic, academic, and employment barriers for skilled and low-skilled immigrants and refugees, and to integrate them into the U.S. workforce and professions.”
#20 The federal government still sends about 20 million dollars a year to the surviving family members of veterans of World War I, even though World War I ended 94 years ago.
#21 The U.S. government is spending approximately 3.6 million dollarsa year to support the lavish lifestyles of former presidents such as George W. Bush and Bill Clinton.
#22 During fiscal 2012, the National Science Foundation gave researchers at Purdue University $350,000.  They used part of that money to help fund a study that discovered that if golfers imagine that a hole is bigger it will help them with their putting.
#23 The U.S. government is giving hundreds of millions of dollars to the Palestinian Authority every single year.
#24 Federal agencies have purchased a total of approximately 2 billion rounds of ammunition over the past couple of years.  It is claimed that all of this ammunition is needed for “training purposes”.
#25 During 2012, the National Science Foundation spent $516,000 on the creation of a video game called “Prom Week” which apparently simulates “all the social interactions of the event.”
#26 If you can believe it, $10,000 of U.S. taxpayer money was actually used to purchase talking urinal cakes up in Michigan.
#27 When Joe Biden and his staff took a trip to London, the hotel bill cost U.S. taxpayers $459,388.65.
#28 Joe Biden and his staff also stopped in Paris for one night.  The hotel bill for that one night came to $585,000.50.
#29 If you can believe it, close to 15,000 retired federal employees are currently collecting federal pensions for life worth at least $100,000 annually.  That list includes such names as Newt Gingrich, Bob Dole, Trent Lott, Dick Gephardt and Dick Cheney.
#30 The U.S. Department of Agriculture has spent $300,000 to encourage Americans to eat caviar.
#31 The National Institutes of Health recently gave $666,905 to a group of researchers that is conducting a study on the benefits of watching reruns on television.
#32 The National Science Foundation has given 1.2 million dollars to a team of “scientists” that is spending part of that money on a study that is seeking to determine whether elderly Americans would benefit from playing World of Warcraft or not.
#33 The National Institutes of Health recently gave $548,731 to a team of researchers that concluded that those that drink heavily in their thirties also tend to feel more immature.
#34 The National Science Foundation recently spent $30,000 on a study to determine if “gaydar” actually exists.  This is the conclusion that the researchers reached at the end of the study….

“Gaydar is indeed real and… its accuracy is driven by sensitivity to individual facial features”

#35 In 2011, the National Institutes of Health spent $592,527 on a study that sought to figure out once and for all why chimpanzees throw poop.
#36 The National Institutes of Health has spent more than 5 million dollars on a website called Sexpulse that is targeted at “men who use the Internet to seek sex with men”.  According to Fox News, the website “includes pornographic images of homosexual sex as well as naked and scantily clad men” and features “a Space Invaders-style interactive game that uses a penis-shaped blaster to shoot down gay epithets.”
#37 The General Services Administration spent $822,751 on a “training conference” for 300 west coast employees at the M Resort and Casino in Las Vegas.  The following is how the Washington Post described some of the wasteful expenses that happened during this “conference”…

Among the “excessive, wasteful and in some cases impermissable” spending the inspector general documented: $5,600 for three semi-private catered in-room parties and $44 per person daily breakfasts; $75,000 for a “team-building” exercise — the goal was to build a bicycle; $146,000 on catered food and drinks; and $6,325 on commemorative coins in velvet boxes to reward all participants for their work on stimulus projects. The $31,208 “networking” reception featured a $19-per-person artisanal cheese display and $7,000 of sushi. At the conference’s closing-night dinner, employees received “yearbooks” with their pictures, at a cost of $8,130.

You can see some stunning pictures of GSA employees living the high life in Las Vegas right here.
#38 Do you remember when credit rating agency Egan Jones downgraded U.S. government debt from AA+ to AA?  Well, someone in the federal government apparently did not like that at all.  Accordingto Zero Hedge, the SEC planned to file charges against Egan Jones for “misstatements” on a regulatory application with the SEC.
Normally, the SEC does not go after anyone.  After all, when is the last time a major banker went to prison?
No, the truth is that the SEC is usually just a huge waste of taxpayer money.  According to ABC News, one investigation found that 17 senior SEC officials had been regularly viewing pornography while at work.  While the American people were paying their salaries, this is what senior SEC officials were busy doing…

One senior attorney at SEC headquarters in Washington spent up to eight hours a day accessing Internet porn, according to the report, which has yet to be released. When he filled all the space on his government computer with pornographic images, he downloaded more to CDs and DVDs that accumulated in boxes in his offices.
An SEC accountant attempted to access porn websites 1,800 times in a two-week period and had 600 pornographic images on her computer hard drive.
Another SEC accountant used his SEC-issued computer to upload his own sexually explicit videos onto porn websites he joined.
And another SEC accountant attempted to access porn sites 16,000 times in a single month.

#39 According to InformationWeek, the federal government is spending “millions of dollars” to train Asian call center workers.
#40 If you can believe it, the federal government has actually spent$750,000 on a new soccer field for detainees held at Guantanamo Bay.
#41 The U.S. Agency for International Development spent 10 million dollars to create a version of “Sesame Street” for Pakistani television.
#42 The Obama administration has plans to spend between 16 and 20 million dollars to help students from Indonesia get master’s degrees.
#43 The National Science Foundation spent $198,000 on a University of California-Riverside study that explored “motivations, expectations and goal pursuit in social media.” One of the questions the study sought an answer to was the following: “Do unhappy people spend more time on Twitter or Facebook?”
#44 In 2011, $147,138 was given to the American Museum of Magic in Marshall, Michigan.  Their best magic trick is making U.S. taxpayer dollars disappear.
#45 The federal government recently spent $74,000 to help Michigan “increase awareness about the role Michigan plays in the production of trees and poinsettias.”
#46 In 2011, the federal government gave $550,000 toward the making of a documentary about how rock and roll contributed to the fall of the Soviet Union.
#47 The National Institutes of Health has contributed $55,382 toward a study of “hookah smoking habits” in the country of Jordan.
#48 The federal government gave $606,000 to researchers at Columbia University to study how heterosexuals use the Internet to find love.
#49 A total of $133,277 was recently given to the International Center for the History of Electronic Games for video game preservation.  The International Center for the History of Electronic Games says that it “collects, studies, and interprets video games, other electronic games, and related materials and the ways in which electronic games are changing how people play, learn, and connect with each other, including across boundaries of culture and geography.”
#50 The federal government has given approximately $3 million to researchers at the University of California at Irvine to fund their “research” into video games such as World of Warcraft.
#51 In 2011, the National Science Foundation gave one team of researchers $149,990 to create a video game called “RapidGuppy” for cell phones and other mobile devices.
#52 In 2011, $936,818 was spent developing an online soap opera entitled “Diary of a Single Mom”.  The show “chronicles the lives and challenges of three single mothers and their families trying to get ahead despite obstacles that all single mothers face, such as childcare, healthcare, education, and finances.”
#53 Last year, the federal government spent $96,000 to buy iPads for kindergarten students in Maine.
#54 The U.S. Postal Service once spent $13,500 for a single dinner at Ruth’s Chris Steakhouse.
#55 In 2011, the Air Force Academy completed work on an outdoor worship area for pagans and Wiccans.  The worship area consists of “a small Stonehenge-like circle of boulders with [a] propane fire pit” and it cost $51,474 to build.  The worship area is “for the handful of current or future cadets whose religions fall under the broad category of ‘Earth-based’, which includes Wiccans, druids and pagans.”  At this point, that only includes 3 current students at the Air Force Academy.
#56 The National Institutes of Health once gave researchers $400,000to study why gay men in Argentina engage in risky sexual behavior when they are drunk.
#57 The National Institutes of Health once gave researchers $442,340to study the behavior of male prostitutes in Vietnam.
#58 The National Institutes of Health once spent $800,000 in “stimulus funds” to study the impact of a “genital-washing program” on men in South Africa.
#59 The National Science Foundation recently spent $200,000 on a study that examined how voters react when politicians change their stances on climate change.
#60 The federal government recently spent $484,000 to help build a Mellow Mushroom pizzeria in Arlington, Texas.
#61 At this point, China is holding over a trillion dollars of U.S. government debt.  But that didn’t stop the United States from sending17.8 million dollars in foreign aid to China in 2011.
#62 The U.S. Department of Agriculture gave the largest snack food maker in the world (PepsiCo Inc.) a total of 1.3 million dollars in corporate welfare that was used to help build “a Greek yogurt factory in New York.”
#63 The National Science Foundation recently gave a whopping$697,177 to a New York City-based theater company to produce a musical about climate change.
#64 The federal government once shelled out $2.6 million to train Chinese prostitutes to drink responsibly.
#65 The U.S. Department of Agriculture once handed researchers at the University of New Hampshire $700,000 to study methane gas emissions from dairy cows.
#66 The federal government has spent $175,587 ”to determine if cocaine makes Japanese quail engage in sexually risky behavior”.