Wednesday, May 14, 2014

De-Dollarization: Russia Is On The Verge Of Dealing A Massive Blow To The Petrodollar

By Michael Snyder
The U.S. Dollar - Photo by Pen Waggener
Is the petrodollar monopoly about to be shattered?  When U.S. politicians started slapping economic sanctions on Russia, they probably never even imagined that there might be serious consequences for the United States.  But now the Russian media is reporting that the Russian Ministry of Finance is getting ready to pull the trigger on a “de-dollarization” plan.  For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars.  As I will explain below, this has been a massive advantage for the U.S. economy.  In recent years, there have been rumblings by nations such as Russia and China about the need to change to a new system, but nobody has really had a big reason to upset the status quo.  However, that has now changed.  The struggle over Ukraine has caused Russia to completely reevaluate the financial relationship that it has with the United States.  If it starts trading a lot of oil and natural gas for currencies other than the U.S. dollar, that will be a massive blow for the petrodollar, and it could end up dramatically changing the global economic landscape.
The fact that the Russian government has held a meeting to discuss “getting rid of the US dollar in Russian export operations” should be front page news on every mainstream news website in the United States.  That is how big this is.  But instead, we have heard nothing from the big mainstream news networks about this so far.  Instead, we have only heard about this from Russian news sources such as the Voice of Russia
Russian press reports that the country’s Ministry of Finance is ready to greenlight a plan to radically increase the role of the Russian ruble in export operations while reducing the share of dollar-denominated transactions. Governmental sources believe that the Russian banking sector is “ready to handle the increased number of ruble-denominated transactions”.
According to the Prime news agency, on April 24th the government organized a special meeting dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.
The “de-dollarization meeting” was chaired by FirstDeputy Prime Minister of the Russian Federation Igor Shuvalov, proving that Moscow is very serious in its intention to stop using the dollar.
So will Russia go through with this?
After all, this wouldn’t just be a slap in the face.  This would essentially be like slamming an economic fist into our nose.
You see, Russia is not just a small player when it comes to trading oil and natural gas.  The truth is that Russia is the largest exporter of natural gas and the second largest exporter of oil in the world.
If Russia starts asking for payment in currencies other than the U.S. dollar, that will essentially end the monopoly of the petrodollar.
In order to do this, Russia will need trading partners willing to go along.  In the article quoted above, the Voice of Russia listed Iran and China as two nations that would potentially be willing to make the switch…
Of course, the success of Moscow’s campaign to switch its trading to rubles or other regional currencies will depend on the willingness of its trading partners to get rid of the dollar. Sources cited by mentioned two countries who would be willing to support Russia: Iran and China. Given that Vladimir Putin will visit Beijing on May 20, it can be speculated that the gas and oil contracts that are going to be signed between Russia and China will be denominated in rubles and yuan, not dollars.
And the reality of the matter is that China has seemed ready to move away from the U.S. dollar for quite some time.  In a previous article, I included a quote from a French news source that discussed how China’s official news agency has even called for a “new international reserve currency… to replace the dominant US dollar”…
For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback’s role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China’s official Xinhua news agency called for a “de-Americanised” world.
It also urged the creation of a “new international reserve currency… to replace the dominant US dollar”.
For much more on what China is thinking, please see my previous article entitled “9 Signs That China Is Making A Move Against The U.S. Dollar“.
So why is the petrodollar so important?
Well, it creates a tremendous amount of demand for the U.S. dollar all over the globe.  Since everyone has needed it to trade with one another, that has created an endless global appetite for the currency.  That has kept the value of the dollar artificially high, and it has enabled us to import trillions of dollars of super cheap products from other countries.  If other nations stopped using the dollar to trade with one another, the value of the dollar would plummet dramatically and we would have to pay much, much more for the trinkets that we buy at the dollar store and Wal-Mart.
In addition, since the U.S. dollar is essentially the de facto global currency, this has also increased demand for our debt.  Major exporting nations such as China and Saudi Arabia end up with giant piles of our dollars.  Instead of just letting them sit there and do nothing, those nations often reinvest their dollars into securities that can rapidly be changed back into dollars if needed.  One of the most popular ways to do this has been to invest those dollars in U.S. Treasuries.  This has driven down interest rates on U.S. debt over the years and has enabled the U.S. government to borrow trillions upon trillions of dollars for next to nothing.
But if the rest of the world starts moving away from the U.S. dollar, all of this could change.
In order for our current standard of living to continue, it is absolutely imperative that everyone else around the globe continues to use our currency.
So if Russia really does pull the trigger on a “de-dollarization” strategy, that would be huge – especially if the rest of the planet started following their lead.
The U.S. economy is already teetering on the brink of another major downturn, and there are a whole host of indications that big trouble is on the horizon.  For much more on this, please see the article that I posted on Monday entitled “If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States“.
Just about the last thing that we need right now is for our petrodollar monopoly to be threatened.
It would be nice if things would calm down in Ukraine and the relationship between the United States and Russia could go back to normal.
Sadly, that does not appear likely any time soon.
In fact, the Ukrainian government has already admitted that “we are essentially at war“, and on Tuesday six Ukrainian soldiers were killedand eight were wounded in a convoy attack in eastern Ukraine.
The regions in eastern Ukraine that have just declared independence have given the government in Kiev until Wednesday to pull their forces out of eastern Ukraine or else face war.
If a full blown civil war does erupt in Ukraine, it is going to take this crisis to a completely new level.
Unfortunately, most Americans are incredibly apathetic at this point and know very little about what is going on.
But in the end, this could have dramatic implications for all of us.

Russian Economic Power Driving Wedge Between Indebted Western Governments

by GoldCore
Today’s AM fix was USD 1,292.75, EUR 939.91 and GBP 766.67 per ounce.
Yesterday’s AM fix was USD 1,292.75, EUR 938.95 and GBP 765.08 per ounce.
Gold climbed $8.00 or 0.62% yesterday to $1,296.70/oz. Silver surged $0.40 or 2.09% to $19.55/oz.

Spot Gold Price in U.S. Dollars, Daily Candle – 2014 YTD (Thomson Reuters)
Gold fell marginally today despite escalating tension in Ukraine and between the U.S., EU and Russia. Dollar gains were cited for the fall.
The government in Kiev has been given a deadline to pay for Russian gas to prevent a supply cut off.
The U.S. is holding a massive nuclear weapons exercise this week from yesterday May 12 to Friday May 16. It is being held in coordination with other combatant commands, services, and appropriate U.S. government agencies, “to deter and detect strategic attacks,” days after a similar Russian drill.
Eastern Ukraine states voted in a plebiscite to join Russia but the referendums have been disputed.
Bullion for immediate delivery declined 0.4% to $1,290.44 an ounce, Singapore gold traded at $1,292.03 by 2:40 p.m., according to Bloomberg and their generic pricing. Silver for immediate delivery declined 0.6% to $19.426 an ounce after yesterday’s gain. Platinum lost 0.1% to $1,435.75/oz, while palladium slid 0.1% but remained over $800/oz at $805.61/oz.

Spot Gold Price in U.S. Dollars, Monthly Candle – 8 Years (Thomson Reuters)
The dollar climbed to the highest in a week versus the yen and traded near the strongest in a month against the euro. Data today is forecast to show U.S. retail sales rose for a third month. A worse than expected sales number should see gold make gains and a better than expected number may see gold fall.
Gold has rallied 7.5% this year, partly due to safe haven demand as tensions rise between Russia and the West.
Russian Economic Power Driving Wedge Between Indebted Western GovernmentsOfficials in the U.S. and European Union are having second thoughts about punishing Russia with sanctions targeting entire industries and the Russian economy, opting instead to focus on tightening pressure by targeting more individuals and companies.
Policy makers say they are concerned that broad-brush sanctions on Russia’s energy and financial sectors, the two areas mentioned as possible targets, risk provoking economically costly retaliation by Russia according to Bloomberg.
Gazprom, Russia’s massive gas-export monopoly, yesterday threatened to cut off supplies to Ukraine, a reminder of the power Russia wields over energy supplies to the rest of Europe.
A gas cutoff by Russia would wipe out half of Ukraine’s supply and could severely disrupt supplies to the EU. The EU, Turkey, Norway, Switzerland and the Balkan countries received 30% of the natural gas they burned from Russia last year, according to the U.S. Energy Department.
“We have to be very careful not to hurt ourselves more than we hurt the other side,” Polish Foreign Minister Radoslaw Sikorski said yesterday in a speech in Brussels, echoing comments made by U.S. Treasury Secretary Jacob J. Lew last week.
In a sign of Russia’s ability to use its economic power to drive a wedge between its former G20 allies, France’s government said this week it will deliver Mistral helicopter carrier warships to Russia as planned, thus rejecting requests from its European and U.S. allies to cancel the sale.
There are also significant dependencies on Russian grain exports, particularly in the EU.
It looks the pragmatists and non ideologues may be gaining the upper hand over the  more hawkish western voices who were risking conflict with Russia, potentially militarily.
Russia is powerful both in terms of natural resources and in terms of finances given their very significant foreign exchange reserves. Ukraine is bankrupt and on the verge of hyperinflation as we pointed out here.  Ukraine desperately needs some $20 billion to avoid financial collapse.
With Western nations heavily indebted including the hugely indebted U.S.,  Russia looks like the only realistic source of such funds.
Geopolitical risk remains very much underestimated and there remains the risk of financial, economic and currency wars where the Russians use gold as a geopolitical weapon to undermine the dollar.

Global COLLAPSE Occurring Right Now: German ZEW Crushed, China Missing Across The Board, Sales at U.S. Retailers Slow Sharply in April!!!

German ZEW Crushed, China Missing Across The Board? Have No Fear – It’s Tuesday
If, in the New Normal, newsflow and facts mattered, facts such as the German Zew Investor Expectations index crashing from 43.2 to 33.1, smashing expectations of a 40.0 print to the downside and down to the lowest since January 2013 nearly half the 7 year half reported as recently as December confirming Germany can no longer be Europe’s growth dynamo courtesy of a still nosebleed high EURUSD, or facts such as overnight Chinese data missed in every category with industrial output up 8.7% y/y in April vs an estimated 8.9%, retail sales up 11.9% below the estimated 12.2% rise and ; Jan.-April fixed-asset investment growing 17.3% vs est. 17.7%, then futures may just posted a downtick. However, since it is a Tuesday, with a ~$1 billion POMO, one can ignore the fundamentals and proceed straight to buying anything and everything with indiscriminate abandon. The only question is whether the NY Fed orders Citadel to slam the VIX under 11 to start off the morning S&P rampage which should push the broad market index above Goldman’s 1900 price target for the end of the 2014.
Taking at look at some other headlines, Reuters is reporting that the ECB has made some small concessions to European banks to allow them to meet deadlines so that the central bank can complete its bank review by October. The concessions have reportedly resulted in a data reduction from around 300 spreadsheet cells per loan to a “significantly reduced amount” according to the article. Reuters is also reporting that although there are signs that the Japanese economy has weathered through the initial impact of the sales tax hike relatively well, weak exports could be the catalyst to spur the BoJ into further action in coming months. The article says at the moment, exports remain the biggest risk to the central bank’s outlook.
Turning to the day ahead, it’s likely that most of the attention will be centred on US April retail sales as well as their revisions. The Fed’s Lacker will be speaking today on the credit markets.
Bulletin Overnight Summary:
  • Source comments pointing to Buba being more open to ECB easing in June weighed heavily on EUR and prompted further flattening of the Euribor curve, with stocks (Eurostoxx 50, +0.11%) also rallying on prospect of more policy easing
  • Looking ahead for the session the US retail sales report, coupled with Fed’s Lacker, look to be the market moving events participants will get to digest
  • Treasuries gain, led by 10Y-30Y sector, as German investor confidence fell for a fifth month in May, rebels in Ukraine seek to secede; retail sales due at 8:30am.
  • China’s economic slowdown deepened with unexpected decelerations in industrial-output and investment growth and a decline in home sales, testing policy makers’ reluctance to step up monetary stimulus
  • Chinese central bank told officials from 15 banks yesterday that they should approve and distribute qualified home mortgages in timely manner, according to a statement on its website
  • ZEW’s index of investor and analyst expectations fell to 33.1 in May from 43.2, lowest level since Jan 2013; ZEW said there are signs Germany will not retain fast pace of growth
  • The Bundesbank is willing to back an array of ECB stimulus measures, including negative deposit rate, cut in lending rate, some ABS purchases; remains resistant to large-scale purchases of public and private debt, WSJ reported, citing person familiar with the matter
  • Russia called disputed referendums in eastern Ukraine a sign of “deep crisis” in its neighbor as rebels there sought to secede and gas export monopoly OAO Gazprom gave Kiev a deadline to pay or risk being cut off
  • Facing a military assault by Ukrainian government troops, the self-styled Donetsk People’s Republic on the border with Russia declared itself a sovereign state yesterday
  • Obama is missing something in this election season: a corporate bad boy to rail against and whip up the ire of Democratic voters, with oil companies, Wall Street executives and even PACs off-limits because of unique political dynamics in the 2014 midterms
  • Sovereign yields mixed. Nikkei +1.95%, Shanghai -0.1%. European equity markets mixed, U.S. stock futures rise. WTI crude higher, gold and copper lower
Sales at U.S. retailers slow sharply in April
WASHINGTON (MarketWatch) – Americans shopped less in April after splurging in March, with retail sales rising a scant 0.1%, the government reported Tuesday. Economists polled by MarketWatch had forecast retail sales to rise a seasonally adjusted 0.4% last month after a revised 1.5% gain in March. The increase in March was originally reported as 1.1%. Excluding the auto sector, retail sales were unchanged, the Commerce Department said. So-called core or control group sales fell 0.2%….
Only 17% of US college grads have a job lined up
While members of the Class of 2014 have some cause to celebrate, they also know they are a few short months away from starting to pay down their share of the $1 trillion-plus student-loan debt.
The most shocking number of all is that only 17 percent of these soon-to-be grads have a job lined up, according to AfterCollege Inc., which crunches these numbers and also tries to help match employers with recent graduates.
Despite our being a year further along on the road to economic recovery, this year’s 17 percent is actually down from the Class of 2013’s 20 percent who had a job lined up before graduating.
Most kids who go to college do so to get skills for work after graduation. It’s never going to be 100 percent or even 90 percent of graduates who have job offers waiting, but it shouldn’t be that 83 percent of seniors have nothing lined up, either — especially when 73 percent say they were actively looking for work.
Oddly, even 82 percent of supposedly more “marketable” majors (engineering, technology, math) were still empty-handed.
Cash is king again as investors shy from risk: BofA ML  
Global investors have hiked their cash holdings close to a two-year high and cut equity exposure as the Ukraine crisis rages on and volatility dominates markets.
Global COLLAPSE Occurring Right Now! Here’s Why.

The GDP report suggested the economy grew at a 0.1 percent annual pace
Xi Says China Must Adapt to ‘New Normal’ of Slower Growth
Eurozone GDP growth of 1% in 2014
Brace for life in slow growth lane, says IMF
OECD Cuts Global Growth Forecast as Emerging Markets Cool

Former banking boss in prison

Banking scandal
Former banking boss in prison

The banker responsible for Austria's biggest post-war financial scandal is finally in prison.
Wolfgang Kulterer, the former CEO of the Hypo Alpe Adria state bank, is in prison for six and a half years for embezzlement and fraud. 
His sentence was supposed to start last September in Klagenfurt. However a shoulder operation (after a horse riding accident) meant he could apply for a postponement.
In spring, he and his lawyer tried to postpone the sentence again, but judges appeared to have lost their patience and rejected his request. 
The jail in Klagenfurt, Carinthia is starting to become something of a 'celebrity prison'. Kulterer has joined Hans-Jörg Megymorez, the former CEO of Carinthian Holding (KLH) and Josef Martinz, the former Carinthian chairman of the conservative Austrian People’s Party (ÖVP), both of whom were jailed for their respective roles in the Hypo scandal. 
The Österreich tabloid noted that Kulterer has had to swap his champagne and caviar lifestyle for a menu of noodles and mushroom sauce, a thin mattress and a wash-basin, rather than a luxury en-suite bathroom. 
The Hypo bank has become a national bogeyman for a country fed up with the government's failure to resolve the issue.
And its problems have leaked beyond Austria's borders. It's a story that sounds a little like a detective movie from the 1970s - involving money laundering, connections to various mafia groups in south-east Europe, secret party funds, and a chronic lack of accountability.
It all goes back to Jörg Haider, Carinthia's former governor and leader of the far-right Freedom Party of Austria (FPÖ), who died in a car crash in 2008. 
The bank was literally his 'personal wallet' and the most successful tool for illegally financing the FPÖ until Haider's death. 
Wolfgang Kulterer told Kurier newspaper: "My condemnation in public has been very controlled: I'm guilty because Haider is no longer here". 
Many of the bank's hidden transactions were designed and implemented via a “triangle of friends” which included Haider, Kulterer and the former Croatian Prime Minister Ivo Sanader. 
The politicians and the bank manager had created the perfect scheme to launder money.
In 2007 the German Bayerische Landesbank (BayernLB) bought a majority share in Hypo and began investing fresh capital. But two years later it was forced to sell Hypo back to the Austrian government to prevent financial collapse. The Austrian government has continued to inject huge amounts of money to save the crumbling institution. 
It is expected that between 12 and 19 billion euros of outstanding loans will never be paid back.
To avoid bankruptcy, Austrian taxpayers have had to cover these losses, and the backlash from being told they will foot most, if not all, of the bill for winding down the ailing bank while bearing the brunt of spending cuts has been swift. 
A Facebook campaign by a parents' group against school spending cuts shows a hippo - the bank's symbol - flattening a pupil.
Observers, financial experts and politicians have concluded that the affair threatens not only Hypo's creditors, but also Austria's credit rating. Furthermore the close ties Austrian banks appear to have with the country's political parties have been shown to be some of the most opaque in the EU.
More than four years after the state's emergency takeover, Hypo has become a lightning rod for grass-roots criticism of both banks and the government ahead of European elections on May 22nd.
It's an issue which is not going to go away in a hurry. 
Staff reporter (

Velocity Of Money Has Collapsed

Dr Jim Whillie tears his hair out in frustration in this audio He discusses shady dealings in the Ukraine, the impotence of the USA Navy when confronted by the Russians and other frustrations.
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years.

My own take is that the Maidan Massacre was a classic Terrorist operation. Horrific and media worthy. Someone is trying to stir up the masses.

Russian Bank Lures German Savers As Russians Yank Out Money

Smart Russians are voting with their bank accounts, dumping rubles, and buying dollars and euros. Total demand rose to $14.9 billion in March, 1.5 times larger than in February. The highest since January 2009 during the chaos of the financial crisis. “Amid the continued weakening of the ruble against major world currencies and the uncertainty of expecting further declines, the aggregate demand for foreign currency has increased dramatically,” is how the Central Bank explained the phenomenon in a statement, asReuters reported. And they yanked a record $6.9 billion, roughly half in euros and half in dollars, out of their banks.
That mini-run on Russian banks continues even as Russian state-TV is already discussing the carving up of the “Ukrainian pie” (screenshot by Shaun Walker, Moscow correspondent of the Guardian). A couple of weeks ago, the IMF had sounded the alarm, estimating that $100 billion in foreign exchange might flee Russia in 2014. Capital flight is not a new phenomenon in Russia as the debacle of the Cypriot banks has shown. These cesspools of corruption took down much of the Russian “black money” with them.
Russian banks are now getting desperate to procure these foreign currencies, and one place where they can go to pick up euros is Germany. That’s what VTB Bank did, a subsidiary of VTB Group, one of Russia’s largest financial institutions with operations around the world, majority-owned, as so many outfits, by the Russian state. A couple of weeks ago, Standard and Poor’s lowered VTB to BBB-, one notch above junk, with negative outlook. So not exactly a paragon of financial stability.
Turns out, in early May VTB made a big splash in Germany, offering phenomenal interest rates of up to 2.5% for 5-year CDs to German savers if they open an internet account [screenshot]. Phenomenal only in these crazy times of interest rate repression where frantic German savers, driven to near insanity by the low rates all around, think it’s a good deal to lend money to a near-junk rated bank at 2.5% for five years – a rate that topped the list of internet rankings.
Why the aggressive rate move? To bring some relief to the tortured savers? Nope. The bank has an explanation:
“VTB Bank Direct celebrates its birthday,” wrote the Frankfurt branch on its homepage, as the Spiegel reported at the time, though any reference to the birthday ruse has since been purged from the website. May marks the third anniversary that VTB has been plying the German internet banking market. So the article wondered, “Is the money of German savers flowing to Moscow?”
A toppling foreign bank coming after the euros that Germans have squirrelled away is not a new strategy. Iceland’s Kaupthing Bank made such a foray in March 2008, under its internet banking brand Kaupthing Edge, desperate as it was, just as other investors were bailing out. It collapsed a few months later after it had fleeced 30,800 German depositors of €308 million.
So now VTB is trying its luck. But the sums are much higher. The Frankfurt branch is organized under the Austrian subsidiary VTB Austria. In 2012, it already had about €2.5 billion in deposits from German savers. The amounts for 2013 are not yet available as the bank was still trying to straighten out its books, or something, the bank told the Spiegel.
The reasons might be benign – though “might be” is not a good term when it comes to banking. Since it started operating in Germany three years ago, the first major wave of CDs is maturing, and the bank might want to replace the old money with new money, or hang on to the old money. Sort of as the bank claimed, a birthday celebration.
But that seems unlikely. VTB is heavily invested in Ukraine which, in addition to all its other problems, is sinking deeper into an economic fiasco. So VTB is contemplating massive losses. Then there’s the escalating sanction spiral. It’s causing a lot of gray hairs among VTB’s international and Russian customers, and they’re trying to pull their euros and dollars out – something the Central Bank has now confirmed. VTB needs to replace this money with new money that has to stick it out. Hence CDs.
The bank, when the Spiegel inquired, denied this, of course. It claimed that the deposits of the German savers would not head east, but that the “overwhelming majority” – without specifying what that was – would fund its Western European loan portfolio.
The Kremlin and the Central Bank felt forced to announce that they would support the state-owned banks, which might give German savers the illusion of security. VTB Austria is already under special observation by Austrian bank regulators, the Spiegel has “heard”; under EU rules, in the worst case scenario, which isn’t that unlikely anymore, it would be the Austrian government that would have to deal with the red-hot tempers of stiffed German depositors.
They’d done what the ECB had wanted them to do: go out to the thin end of that risk limb and chase yield and ignore the dangers. This is what allowed Spain and Italy to borrow money at record low yields, and it’s what allows a teetering Russian bank to fill the holes left behind by its wise customers in Russia with still dirt-cheap euros from Germany.
Putin is a master at this game. Even as the sanction spiral is supposed to strangle his ambitions for the Ukraine, he set up a photo op of incomparable ingenuity. And his confidant, former Chancellor of Germany Gerhard Schröder and some other ranking German politicians stepped into it with gusto. Read….. Putin Parties With German Ex-Chancellor, Sanctions Be Damned

This American Empire, It Too Will Collapse

A faded American pride
Here is my sense; like all empires before it this American one reached its apex after WWII. It’s on a downward trajectory and will eventually fall or be overtaken.
And I believe most Americans will be taken by surprise as in “How could this happen”?
That’s because most Americans are in the words of Paul Craig Roberts “insouciant”, without a care, too passively indifferent, too besotted with technological gadgetry, have feelings of entitlement and believe in American exceptionalism to bother to notice their government has become sinister-which most others in the world recognize, but their governments too intimidated or blackmailed into following us or they will be demonized. Think Iran, Iraq under Saddam-though earlier an ally in his war with Iran in the 80′s-now the newly announced new cold war with Russia and soon to be China.
As for us Americans take an honest look at what passes for our modern American “culture” nowadays-and contributes to maintaining domestic tranquility at all costs. In no particular order:
Consumerism-excessive and beyond all need. And in conjunction with it
Corporatism and commercialization of the public square i.e. the “mallization” of America.
Sports mania, particularly over Pro football and its marketing.
Popular movies featuring gore, crashes, mayhem, aliens, illusion, “virtual” characters replacing real people.
Celebrity gossip as “news”.
Government surveillance by way of technological gadgetry-cell phones, ipods, computers, email, GPS, EZ pass, toll cameras.
MSM becoming complicit in government actions and its propaganda
Addiction with drugs and alcohol
Incarceration-the highest rates of all 1 st world industrialized democraci
Militarization of local and state police
A trillion dollars in college student debt.
Though certainly not contributing to maintaining domestic tranquility, throw in the bailouts of the big banks too big to fail, income inequality worse than the 1920′s and clearly articulated in the 2011 occupy movement that coined the disparity between the 1% and the 99%, no single payer universal health insurance coverage for all, ignoring global warming and the further despoiling of the environment, the demise of domestic manufacturing, the outsourcing of jobs, home foreclosures and bankruptcy stemming from unscrupulous lenders et al and domestically its an America becoming unrecognizable to these old eyes.
As for the policies and actions of our government that unmistakably reveals its true nature, here again in no particular order are:
  • The war industry-the trillion dollar military/corporate/political complex and its revolving door of key players that move seamlessly between each to maintain its control. The other key element is the creation of,
  • “Enemies” contrived such as the “global war on terror”, and the new “cold war” with Russia.
  • Initiating unnecessary and illegal wars and occupations in Afghanistan and Iraq
  • CIA coups, assassinations to create instability to promote endless war
  • NSA surveillance of everyone in the world through “back doors” of computers and software
  • Absolute control of the political agenda and the enacting of laws, regulations oversight and enforcement to the benefit of corporate interests
  • Justice Department lawyers writing memos “legalizing” all executive actions but kept secret for reasons of national security with no oversight by the Congress or the courts
  • Exercise hegemony worldwide, surround Iran, Russia with “allies”, NATO, a thousand military bases worldwide and a floating armada of carrier task forces
  • Initiate cyberwarfare as was done in Iran in 2010 and its enrichment of uranium
  • Engage in extraordinary rendition, indefinite detention and torture of suspects
  • Targeting and prosecuting whistleblowers, hounding Edward Snowden for exposing the NSA‘s illegal surveillance practices.
These domestic and foreign policies and actions are not those of a government that is representative of the people in a democratic republic. These are policies and actions of a plutocracy of oligarchs and an empire willing to go to any length to maintain its hegemony worldwide and control domestically.
Incredibly, what’s propping up this edifice of domestic indulgence and propaganda and foreign villainy is the FED printing money, selling billions in treasury notes to China, Japan, even Russia underpinned by what else, our previous debt in the trillions and all based on the assumption these countries will continue to buy our debt. But it’s a form of blackmail these other countries have accepted, at least for the present. That can’t last forever.
For sure one can’t predict the actual demise of an empire, even the American one. But hubris, American exceptionalism, the sense of entitlement and the idea of it being the “indispensible nation” surely won’t save it from the trash heap of other empires long gone. Such illusions may contribute, even hasten that inevitable collapse.

The Detroit model: Permanent rule by the banks

The Michigan legislature is debating a series of bills to impose a financial authority on Detroit that would remain in place long after the city emerges from bankruptcy. An unelected financial “oversight” committee, known as the Michigan Settlement Administration Authority (MSAA), would run the city for two decades, effectively usurping the local government.
When the governor of Michigan installed Emergency Manager Kevyn Orr in Detroit last March, it was presented as a temporary measure, lasting 18 months at most. Now, according to the restructuring plan submitted by Orr, a bankruptcy lawyer with close ties to Wall Street, a new body “composed of individuals with recognized financial competence and experience” will have the authority to limit city borrowing and expenditures and tear up labor agreements.
The authority is to be charged with ensuring that the city “continues to implement financial and operational reforms” outlined in the restructuring plan. This includes an effective 30 percent cut in pensions and health care benefits for more than 30,000 current and retired public employees. The “robust governance structure” outlined in Orr’s plan will promote “long-term public confidence in the fiscal health and stability of Detroit, in particular with financial markets.”
It could hardly be stated more clearly: the proposed body will be accountable solely to Wall Street. It will remain in power indefinitely and will not be subject to a popular vote or recall.
The state of Michigan has been at the forefront of establishing anti-democratic forms of rule. Twelve Michigan cities and school districts—all ravaged by decades of deindustrialization, corporate tax cuts and financial manipulation—are currently under the control of emergency managers.
Orr, who has described himself as a “benevolent dictator,” has outlined a plan to attack public employees, override constitutional protections for pensions, and hand over city-owned assets—including the Detroit Institute of Arts and the streetlight, electrical grid, and water and sewerage systems—to private interests and big investors.
What is happening in Detroit is a model for cities and states across the country that are looking to unload pensions to pay off the debts stemming from the financial crisis of 2008 and the years of economic stagnation. “If this city gets it right, it’s going to lay a nice foundation for other cities, other municipalities to go forward,” said, Martha Kopacz, the “turnaround expert” hired by the bankruptcy court to review Detroit’s financial plan.
As Detroit was driven into bankruptcy, the Obama administration explicitly rejected a bailout and opposed all efforts to block the intervention of the courts. The White House has given its full support to the bankruptcy, which it sees as a setting a national precedent for the destruction of the jobs, pensions and health benefits of public employees across the US.
The naked rule of the banks, dispensing with political forms that can in any way be affected by popular pressure, is part of an international process. In country after country, newspaper editorialists, academics and other mouthpieces for the financial aristocracy are echoing the comments of right-wing columnist George Will, who declared last year that “self government has failed” in Detroit.
Instead, they say, what is needed are financial experts and technocrats who will be free to impose unpopular austerity measures without concern that they will be thrown out by voters who do not understand the need for “hard choices.”
In Europe, the so-called “Troika” of the European Commission, the European Central Bank and the International Monetary Fund has brought down elected governments as part of an unrelenting drive to wipe out public-sector jobs, increase the age of retirement, gut health care and pensions, lower minimum wages and introduce “labor flexibility.” This has been accompanied by the banning of strikes and the encouragement of right-wing and fascistic movements to suppress popular opposition.
The banks are imposing a historic reversal in conditions for the working class in Greece, Spain, Portugal, Italy, Ireland and other countries, with joblessness, hunger and disease returning to levels not seen since the Great Depression and World War II. Meanwhile, the ruling elites of Europe, with the encouragement of the US, are rearming and preparing for a catastrophic military conflict with Russia.
Behind the collapse of democracy is the immense growth of social inequality and the unprecedented concentration of wealth in the hands of a tiny minority of the population. Well aware of the deep working class hostility to its anti-social measures and growing increasingly anxious that the discredited political parties and trade unions will not be able to contain popular resistance much longer, the corporate and financial ruling elite is dispensing with democratic trappings and turning to authoritarian forms of rule.
The Obama administration has overseen a massive expansion of police state measures, including NSA spying, drone assassinations of US citizens, and the frame-up of political dissenters. Its targets have included Edward Snowden, Julian Assange and Chelsea Bradley Manning, as well as anti-NATO protesters in Chicago and Occupy Wall Street protesters in New York City.
What is happening in Detroit reveals the social purpose of these measures. Political forms are being restructured in accordance with the reality of social relations, which are characterized by an immense chasm between a super-rich minority and the vast majority of the population.
The pension cuts and other austerity measures included in Orr’s plan of adjustment for Detroit are only the beginning. The Wall Street banks and their political front-men are preparing even deeper attacks in Detroit, as shown by the plans to establish a permanent bankers’ dictatorship. This Detroit precedent will be used to accelerate the social counterrevolution against the working class throughout the US and internationally.
The only force capable of defending democratic rights is the working class. This requires the independent political mobilization of workers and young people in Detroit, throughout the US and internationally to break the stranglehold of the financial plutocracy. The aim of such a movement must be the establishment of a workers’ government and the socialist reorganization of economic life to meet the needs of the majority, not the wealthy few.
Jerry White writes for WSWS.

Washington‘s Shale Boom Going Bust

234234To read the headlines, it seems that the USA has emerged out of the blue to the point of becoming the world’s oil and gas production giant. All thanks to the Shale Revolution. Recently President Obama made various noises that the US could solve the Ukraine gas dependency on Russian gas because of the spectacular growth of extracting natural gas, and more recently, oil, from shale rock formations across the US. There’s only one thing wrong with this picture—“It ain’t gonna happen…”
The surface numbers are indeed impressive to a layman or politician. According to US Government Energy Information Administration data, between 2005 and 2010 the contribution from shale gas to total US marketed gas production rose from less than 2% to more than 20%. And 2011 set an all-time record for US production as the result of shale gas growth.
However the shale gas comes from a small number of areas with significant and viable shale rock formations that have trapped gas and oil in the interstices of the sedimentary shale rocks. The main shale gas areas are the Barnett shale in Texas’
Fort Worth basin; the Fayetteville and Woodford shales of the Arkoma basin in Arkansas and Oklahoma; the Haynesville shale on the Texas Louisiana boarder; the Marcellus shale in the Appalachian basin, and the most recently exploited, the Eagle Ford shale in southwest Texas.
Two metrics widely used in describing shale well performance are the initial production (IP) rate and the production decline rate which together determine the ultimate recovery (UR) from a well, an essential number in determining economic viability. A group at MIT university in Massachusetts carried out an analysis of production data from the major US shale regions. What they found is sobering. While initial production from most shale gas plays was unusually high, an essential component of the Wall Street shale gas bubble hype, the same gas regions declined dramatically within a year. They found “in general, shale well output tends to drop by 60% or more from the Initial Production rate level over the first 12 months. The second is that the available longer-term production data suggests that levels of production decline in later years are moderate, often less than 20% per year.”
Translated, that means on average after only four years, you have only 20% of your initial gas volume available from a given horizontal drilling investment with fracking. After seven years, only 10%. The real volume shale gas boom appeared in 2009. That means in the fields where significant drilling was present by 2009 are already dramatically depleted by 80% and soon by 90%. The only way oil or gas drillers have managed to maintain production volume has been to drill ever more wells, spending ever more money, taking on ever more debt in hopes of a sharp rise in the depressed US domestic gas price. As a whole shale energy companies spend more than they are making in net profit, creating a bubble of “junk” bond debt to keep the Ponzi game going. That bubble will pop the second the Fed hints interest rates will rise, or even sooner.
The industry tries hard to pump the prospects of the shale revolution. One of the most outspoken recently was the CEO of Conoco/Philips, Ryan Lance. Taking a baseball analogy, he recently told an energy conference in Houston that the shale gas “revolution” in the country is only just beginning and there should be several decades left of successful energy production: “We’re in the first inning of a nine-inning game on the shale revolution in the United States.He did not make clear what the scientific connection between baseball and shale gas was.
The reality of the shale gas boom is increasingly being shown to be quite different. According to Arthur Berman, a petroleum geologist of 34 years’ experience who has studied production and other aspects of the shale gas and oil boom, “forecasts show production in shale plays from North Dakota’s Bakken to Texas’s Eagle Ford will peak around 2020. Those investing with the expectation that the boom will last for decades are “way out of line.”
To be concrete, the major shale formations in the US, and there are not that many geologically-speaking, will begin an absolute production decline in less than six or seven years. Unlike conventional gas or oil fields, shale is an unconventional and difficult way to extract energy by the highly controversial and toxic practice of “fracking” or hydraulic fracturing of the shale formations. As the shale runs horizontally, perfection of new horizontal drilling techniques in the 1990’s opened commercial prospects for shale gas for the first time.
Fracking the Bakken Formation in North Dakota
The hydraulic fracture is formed by pumping a fracturing fluid—typically highly toxic and exempt, thanks to then-Vice President Cheney’s Congressional influence, from EPA Clean Water Act regulations—into to the wellbore at a rate sufficient to increase pressure down-hole at the target zone. The rock cracks and the fracture fluid continues further into the rock, extending the crack still further, and so on. Often up to 70% of the toxic fracking fluids leak and in many cases in Pennsylvania and elsewhere seep into the ground water.
Even the US Government’s EIA projects that US oil output will peak at 9.61 million barrels a day in 2019. They see tight-oil or shale oil topping at 4.8 million barrels in 2021. That’s only seven years out. And if the US Government is trying to fast-track approval of LNG gas export terminals on coastal ports to allow US gas companies to export their gas, completion of such complex terminals including environmental impact approvals typically takes seven years. Hmmmm.
Wall Street easy money
No one expects the President of the US to have the time or the scientific background to delve into the geophysical complexities of shale energy. He naturally relies on competent advisers. What if the advisers, instead of being competent, like in so many government agencies today, are in the sway (and sometimes perhaps pay) of the shale energy companies and their Wall Street investment bankers who have hundreds of billions of dollars riding on promoting the shale hype?
The current US Shale boom is being sustained on steroids, otherwise known as the Fed’s never-ending Quantitative Easing zero-interest-rate policy, a stance that shows no sign of reverting to normal interest rate levels as the economy continues to be depressed since the collapse of the 2007 real estate mortgage securitization bubble. In effect, shale drillers are able to keep in business only because Wall Street and other investors continue to throw money at them like it was falling from trees. Tim Gramatovich, chief investment manager for Peritus Asset Management LLC, an $800 million fund, notes, “There’s a lot of Kool-Aid that’s being drunk now by investors. People lose their discipline. They stop doing the math. They stop doing the accounting. They’re just dreaming the dream, and that’s what’s happening with the shale boom.”
Given the endless zero interest rate regime of the Fed, investment funds are desperate to find investments that yield higher interest. They are so desperate they are pouring money into shale gas and shale or tight oil companies like never before. The companies are operating at losses, loaded with debt and the credit rating agencies rate their debt as “junk”, i.e. in a market downturn, likely to default. One such company, Rice Energy, sold its bonds in April with a rating of CCC+ by Standard & Poor’s, seven steps below investment grade. That is below the minimum risk/quality level that major investors, such as pension funds and insurance companies, are allowed to buy. S&P says debt rated in the CCC range is “currently vulnerable to nonpayment.” Despite that, Rice Energy was able to borrow at an astonishingly low 6.25 percent.
“This is a melting ice cube business,” said Mike Kelly, at Global Hunter Securities in Houston. “If you’re not growing production, you’re dying.” Of the 97 energy exploration and production companies rated by S&P, 75 are “junk” or below investment grade.  The shale “revolution” is but a Ponzi Scheme disguised as an energy revolution.
F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics , exclusively for the online magazine “New Eastern Outlook”

Isn’t It Time To Get As Mad As Hell?

With the Chinese on the verge of owning your possessions and you and this arrangement was agreed to by people who were elected to “protect and defend the Constitution”, isn’t it time to get mad, mad as hell? In response to my four part series on the Chinese takeover of the country, many of you have written to me and expressed some very heartfelt consternation of the present set of affairs.
There can be little doubt that America needs a rallying call to action if we are to reverse the destructive path we have embarked upon. The middle class is in desperate need of a spokesperson, somebody who could awaken the masses and spur an apathetic America to action. Who could provide this much needed clarion call? Will it be Glenn Beck? Or, maybe, Rush Limbaugh will heed the call and step forward. NOT LIKELY!
Perhaps it will be Hannity. No way! Every one of these media figures are too mainstream and too entrenched in the existing system to effectively take the torch and lead America out of the abyss that it finds itself in. What if America did find its spokesperson? What would it sound like? What form would it take? Who could ever forget the classic moveNetwork and the mythical broadcaster, Howard Beale, and his impassioned attempt to get America “as mad as hell” and not “to take it anymore!”
What if Howard Beale were to attempt to call America to action today? What would it sound like? It might go something like the following: “I don’t have to tell you that things are bad. Everybody knows things are bad. We are in the greatest depression of all time. Seven hundred thousand Americans lost their jobs last month and several million more afraid of losing their jobs. Thanks to the FED, the dollar buys a penny’s worth; your local bank is only still open through the forced “generosity” of your hard-earned tax dollars in the form of bailouts in the biggest wealth distribution plan in all of recorded history.
Americans are ferociously collecting and storing massive amounts of ammunition in advance of the passage of the legislative gun control bill, emanating from the United Nations which has the full support of Obama. The government, too, is  rightfully afraid, afraid of the people that have recently purchased 1.6 billion rounds of ammunition for DHS. Yet, amazingly, very few Americans are even bothering to ask why the government is so intent on separating Americans from their last remaining firewall of protection from its government, namely, their guns.
History shows that gun confiscation often precedes genocide. We know the air is unfit to breathe, we are being sprayed by Chemtrails and our genetically modified food is unfit to eat. And we sit watching our TV’s as some local newscaster tells us that the Dow is approaching 6,000, the FDIC and Social Security are near insolvency, because of the NDAA, the government can secretly snatch you off the street and nobody knows what to do about it. We know things are bad—worse than bad—they’re crazy! It’s like everything, everywhere is going crazy. So, we don’t go out anymore because we cannot afford the photo radar tickets and the toll road fees. We sit in our soon-to-be foreclosed homes and slowly the world we’re living in is getting smaller, and all we say is, “Please, at least leave us alone in our living rooms. Let me have my satellite TV and my MP3 and my smartphone, and I won’t say anything.
Just leave us alone.” “Well, I’m not going to leave you alone. I want you to get mad!” “I don’t want you to protest the new DARPA weapons that would render the effort futile. I don’t want you to riot, NORTHCOM lies in wait. I don’t want you to write to your Congressman, because they are already bought and paid for by the forces that are already at work trying to enslave you. I don’t know what to do about the depression, the Russians and the Chinese and neither does Obama. I also don’t know what to do about inflation, your lost pension and the crime in the streets.” All I know is that first, you’ve got to get mad. You’ve gotta say, “I’m a human being, (bleep)! My life has value!” “So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it, and stick your head out and yell, “I’m as mad as hell, and I’m not going to take this anymore!!” Fortunately, most Americans are angry, terribly angry as evidenced by Congress’ 9% approval rating. Unfortunately, most of America does not know where to direct their anger or who is responsible for our declining fortunes and we are quickly running out of time.
Where is Howard Beale when we need him the most? Look in the mirror, YOU are Howard Beale and it is time to get as mad as hell!

Dave Hodges is the host of the popular weekly talk show, The Common Sense Show, which airs on Sunday nights from 9pm – Midnight (central) on the Republic Broadcasting Network and its 29 affiliate stations. Dave also hosts a website ( in which he writes daily articles on the geopolitical state of affairs both nationally and internationally. The theme of Dave’s show and website centers around exposing the corruption and treason which has invaded the presidency and Congress as well as their corporate and banking benefactors. Dave is an award winning psychology, sociology, statistics and research professor. He is also a former college basketball coach who retired as the winningest coach in his college’s history. A mental health therapist by training, Dave brings a broad based perspective in his fight against the corrupt central banking cartels which have hijacked the US government. Dave and his wife, Nora have one son and they presently reside in rural Arizona approximately 25 miles north of the greater Phoenix area. Dave was drawn to the fight for freedom when the globalist central banking forces, led by Senator John McCain, attempted to seize his home and property and that of 300 of his neighbors, without one dime being offered in compensation. This attempted public theft of private property was conducted for the purpose of securing cheap land in which the globalists intended on putting in an international highway through their area known as the Canamex Corridor. Dave’s community appointed him the spokesperson and eventually his community won their fight against the bankers and their front man, Senator McCain. This event launched Dave’s career as a broadcaster and an investigative journalist. Dave’s website presently enjoys over a half a million visitors every month.

Monsanto’s Shocking Power Grab Continues

Monsanto Moves Towards Total Dominance of the World’s Food Supply, and They’re Making Sure You’re None the Wiser

On Friday, we reported that agribusiness behemoth Monsanto was in the position to become immune to USDA oversight—as did a few food activist blogs, and essentially no mainstream sources—outside of a middle-of-the-road report on NPR.
Mainstream blogs are also conspicuously silent—yesterday saw a stunning pro-GMO apologia from io9, a blog in the Gawker network, which I’ve also seen running what appears to be utterly obnoxious paid content for McDonald’s at their Lifehacker blog (they have a whole McDonald’s section).
io9 had this to say: “opponents of genetically modified organisms have been labeled the climate skeptics of the left, and for good reason: many of these criticisms are largely unfounded, and most miss the real issue entirely.”
You have got to be kidding me.
The article shouts the praises of GMO potatoes, by the way—one of Monsanto’s big products. Monsanto supplies the potatoes to McDonald’s for their french fries—how odd, then, that the same blog network that would consistently run McDonald’s ad content at Lifehacker would also run PR spin for GMO potatoes at io9.
It’s all coming on the heels of a very public hit campaign against prominent seed activist Vandana Shiva, who was torn down by the media for comparing GMOs to rape on her Twitter.
Well, when you own 90% of the world’s GMO food supply, paying off the media isn’t a problem, one guesses. Especially when you’re getting in position to own the rest of the 10% you don’t control yet.
It’s small potatoes compared to buying the government, for instance, as we saw in Monsanto’s power-jockeying over the USDA. And—how “odd” is this?—the very same week that Monsanto makes its move with the USDA, the Obama administration is pushing out Kathleen Merrigan, the USDA’s deputy secretary—the administration’s biggest and most powerful supporter of local and organic food. Her departure was described as “abrupt,” and could lead to “the end of local food at USDA.” How… strange.

Want the raw information on Monsanto and how to avoid GMOs for good? Check out the new Ultraculture book MONSANTO VS. THE WORLD.

But pocketing the government and public opinion are minor efforts compared to the even bigger battle Monsanto won today: Reuters reports that Monsanto has settled with its main competitor, DuPont, over GMO seed technology, and that the two behemoths are now planning collaboration (with Monsanto driving). DuPont will now be allowed to produce Monsanto’s seeds, and have to pay royalty payments to do so; their stock dropped while Monsanto’s rose.
Via Reuters:
Monsanto Co and DuPont have settled a bitter legal battle over rights to technology for genetically modified seeds and will drop antitrust and patent claims against each other while forging a new collaboration, the companies said on Tuesday.
The deal tosses out a $1 billion jury verdict DuPont was ordered to pay Monsanto last August. Instead, the companies agreed that DuPont would make at least $1.75 billion in royalty payments over several years in exchange for broad access to develop products using Monsanto’s leading genetic technology.
Monsanto shares rose nearly 4 percent on the news, while DuPont shares fell nearly 1 percent.
All this means that Monsanto may soon control literally everything you eat—and no, io9, GMO products are not god’s gift to world hunger. Take a recent study of GMO corn—of which Monsanto owns 85% of worldwide, and growing. When fed to rats, the corn disrupted and destroyed their kidneys and livers in every instance.
Seems legit.

Want the raw information on Monsanto and how to avoid GMOs for good? Check out the new Ultraculture book MONSANTO VS. THE WORLD.

The Curious Case of the GLD | Ferguson with SilverDoctors…’s T. Ferguson joins the show this week to discuss:
The Vaults Are EMPTY- why claims of a physical gold shortage is not stacker hysteria, but rather the COLD HARD TRUTH!
PM Sentiment sucks by design: Cartel fears Western investment demand with vaults vastly depleted- vigorously capping any and all price rallies
Big picture outlook: Summer stock market decline & tapering halt
Doc sees the first signs of renewed PHYSICAL SILVER SHORTAGE- 90% silver premiums leap as supply dries-upThe SD Weekly Metals & Markets With The Doc, Eric Dubin, & T. Ferguson!
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