Friday, January 30, 2015

Bank of England chief 'delusional' to claim UK escaped debt trap - economist

Mark Carney, Governor of the Bank of England. (Reuters / Ruben Sprich)
Mark Carney, Governor of the Bank of England. (Reuters / Ruben Sprich)

Mark Carney’s claim that Britain has escaped a “debt trap” common to Eurozone states has been dismissed by UK economist Michael Burke as “delusional.” Burke says Britain's debt has merely been transferred from private firms to UK homeowners.
Speaking at a conference in Dublin on Wednesday, Mark Carney, Governor of the Bank of England (BoE), said all major advanced economies have experienced a debt trap since the 2008 financial crisis.
He suggested states’ debt burdens had been exacerbated by low levels of growth and the private sector’s tendency to cut spending in difficult economic times.
Carney contrasted the economic outlook of Eurozone states with that of Britain.
He said that while certain Eurozone states are “sinking deeper” into debt, Britain has escaped this vicious cycle.
The governor claimed that this great escape resulted from a specific set of economic and fiscal policies.
He summarized these measures as: a fully integrated financial system that directs savings toward investment; more flexible fiscal policies than those common to Eurozone states; and the cultivation of a flexible and open economy.
UK economist and anti-austerity campaigner Michael Burke rejected Carney’s claim that Britain had escaped its debt trap. The former Citibank economist said Britons remain deep in debt, and that people are borrowing more than ever.
“Mark Carney is delusional if he thinks Britain and the US have found a way out of the debt trap,” Burke told RT.
“They have transferred debt, from companies to households. Household debt in both countries is among the highest in the world.”

‘Struggling Eurozone states need debt forgiveness’

Speaking in Dublin, Carney sharply criticized austerity policies common to the Eurozone states, warning the single-currency area was constrained by strangulating levels of debt that could plunge it into years of stagnation.
Carney argued the Eurozone needs to soften its budgetary policies and follow a swift path toward fiscal integration. He said a fiscal union would aid in the transfer of resources from wealthy to poorer nations.
In response, Burke said he agreed a fiscal union was vital to ensure a single market works, but warned that the bailouts imposed on peripheral EU states in recent years were ill-construed, unjust and “completely asymmetrical.”
“Banks who recklessly lent have been bailed out, while taxpayers in crisis countries have been loaded with even more debt,” he said.
Burke argued that the debt burdens of struggling EU states such as Greece and Ireland are unsustainable, and must be largely written off if real growth is to occur in these nations.
His comments follow the newly elected Greek government’s challenge to austerity diktats peddled by EU policymakers.
In the wake of leftist party Syriza’s election victory on Sunday, Greece’s new prime minister, Alexis Tsipras, appointed Marxist economist Yanis Varoufakis to the position of finance minister.
Central to Varoufakis’ pre-electoral mandate was a pledge to address Greece’s austerity-fueled human rights crisis, a vow to reduce the nations’ debt burden by a minimum of €320 billion, and a pledge to tackle corruption and the country’s oligarchic elites.
As Greece prepares to collide with Eurocrats over its plans to reverse draconian austerity policies and renegotiate the country’s debt burden, citizens in other heavily indebted states such as Ireland, Spain and Italy will be watching closely.

The changing face of Europe’s debt crisis

Earlier this month, IMF chief Christine Lagarde called the Irish people “heroes” during a visit to Dublin. Her assessment related to Ireland’s supposed economic recovery, following a grueling four-year IMF/EU bailout.
Her comment angered Irish MPs and anti-austerity campaigners alike, who argue Ireland remains deep in crisis. Colossal levels of socialized bank debt and relentless austerity have crippled the country’s economy and shredded its social fabric, they warn.
Since austerity was implemented in Ireland, the proportion of people in persistent poverty has soared by roughly 100 percent, according to Irish think tank Social Justice Ireland.
Burke, who backs UK campaign group the People’s Assembly Against Austerity, says austerity has also failed Britain.
He said Britain’s economic model has failed to create a stronger and more stable economy.
“In Britain and the US, austerity has been combined with policies to boost consumption,” he said.
“As output is stagnant and real incomes for most people are falling this has only been achieved by increased household borrowing.”
Burke concluded that British consumers are borrowing more than ever, the British government is “also borrowing more from abroad,” and that these inflated “bubbles of borrowing” are destined to burst.
He said Britain’s economic model should not be emulated by struggling Eurozone states.

Ford’s earnings for 2014 plunge 56 percent

(NEW YORK)  The Ford Motor Co. reported Thursday that net income for 2014 plunged 56 percent from the previous year as the automaker struggled with high product costs, lower volume and troubles in its international operations.
For the year, Ford said it earned $3.19 billion, down from $7.18 billion in net income during 2013, and its global revenue fell 2 percent from the year before.
Ford introduced two dozen new vehicles last year, including a revamped version of America’s top-selling vehicle, the F-series pickup, made at its Claycomo plant and a plant in Michigan. The introductions were expensive and cost Ford sales during the changeover. For 2014, the company said it sold 6.32 million vehicles, down from 6.33 million the year before.
Ford’s results translated into average profit-sharing checks of $6,900 for the company’s 50,000 union workers in the United States, a decrease from the $8,800 payments that members of the United Auto Workers union received last year, based on 2013 results.
Ford chief executive Mark Fields said that although the company faced difficulties last year, expenses for new vehicles and factories in markets such as China were necessary for longer-term success.
The year “was a solid yet challenging year for Ford, with our investments and a record number of new products launched around the world positioning us for strong growth this year and beyond,” Fields said.
The fourth quarter was particularly challenging for Ford, which is second to General Motors among U.S. auto companies. Ford’s net income was $52 million in the quarter, a huge decrease from the $3.07 billion it earned a year ago.
Despite cost pressure and lower sales, Ford’s operations in North America continued to be the bright spot. Pretax profit in North America was $1.55 billion in the fourth quarter, down from $1.8 billion a year earlier. For all of 2014, Ford posted pretax profit of $6.9 billion in the region, compared with $8.8 billion the previous year.
The company said that it expected stronger results overall this year and that pretax profit should return to 2013 levels or exceed them.

High End Retailer Kate Spade Closing Discount Stores, Starting China Venture

Kate Spade & Co., the handbag maker working to become a global lifestyle brand, will close stores devoted to its lower-priced and men’s lines while starting a new joint venture to speed its growth in China.
The 19 stores for the bargain Kate Spade Saturday line will shut in the first half of the year, as will the 12 Jack Spade men’s locations, the New York-based company said Thursday in a statement. The changes will result in cash charges of as much as $30 million and non-cash charges of as much as $9 million.
Chief Executive Officer Craig Leavitt has set a goal of almost quadrupling sales to $4 billion by expanding Kate Spade into fragrances, jewelry, watches and sunglasses in the mold of brands such as Ralph Lauren. Kate Spade said today in a preliminary earnings statement that sales last year were about $1.13 billion to $1.14 billion, topping analysts’ estimates.
Kate Spade also announced that it’s forming a 50-50 joint venture with the Lane Crawford Joyce Group’s Walton Brown unit to accelerate its growth in China. Kate Spade said it will buy out E-Land Fashion China Holdings Ltd.’s 60 percent stake in its current China venture.
The transactions include a $36 million payment to E-Land and the receipt of a $21 million payment from Walton Brown. Kate Spade also will have restructuring charges of about $5 million.
Kate Spade climbed 12 percent to $33.20 at 9:32 a.m. in New York. The shares were little changed last year after more than doubling 2013.

Syriza's Original 40 Point Manifesto

The daily bulletin of Italy’s Communist Refoundation Party published today the apparently official program of the Greek coalition of the left, Syriza. Here the 40 points of the Syriza program.

  1. Audit of the public debt and renegotiation of interest due and suspension of payments until the economy has revived and growth and employment return.
  2. Demand the European Union to change the role of the European Central Bank so that it finances States and programs of public investment.
  3. Raise income tax to 75% for all incomes over 500,000 euros.
  4. Change the election laws to a proportional system.
  5. Increase taxes on big companies to that of the European average.
  6. Adoption of a tax on financial transactions and a special tax on luxury goods.
  7. Prohibition of speculative financial derivatives.
  8. Abolition of financial privileges for the Church and shipbuilding industry.
  9. Combat the banks’ secret [measures] and the flight of capital abroad.
  10. Cut drastically military expenditures.
  11. Raise minimum salary to the pre-cut level, 750 euros per month.
  12. Use buildings of the government, banks and the Church for the homeless.
  13. Open dining rooms in public schools to offer free breakfast and lunch to children.
  14. Free health benefits to the unemployed, homeless and those with low salaries.
  15. Subvention up to 30% of mortgage payments for poor families who cannot meet payments.
  16. Increase of subsidies for the unemployed. Increase social protection for one-parent families, the aged, disabled, and families with no income.
  17. Fiscal reductions for goods of primary necessity.
  18. Nationalization of banks.
  19. Nationalization of ex-public (service & utilities) companies in strategic sectors for the growth of the country (railroads, airports, mail, water).
  20. Preference for renewable energy and defence of the environment.
  21. Equal salaries for men and women.
  22. Limitation of precarious hiring and support for contracts for indeterminate time.
  23. Extension of the protection of labor and salaries of part-time workers.
  24. Recovery of collective (labor) contracts.
  25. Increase inspections of labor and requirements for companies making bids for public contracts.
  26. Constitutional reforms to guarantee separation of Church and State and protection of the right to education, health care and the environment.
  27. Referendums on treaties and other accords with Europe.
  28. Abolition of privileges for parliamentary deputies. Removal of special juridical protection for ministers and permission for the courts to proceed against members of the government.
  29. Demilitarization of the Coast Guard and anti-insurrectional special troops. Prohibition for police to wear masks or use fire arms during demonstrations. Change training courses for police so as to underline social themes such as immigration, drugs and social factors.
  30. Guarantee human rights in immigrant detention centers.
  31. Facilitate the reunion of immigrant families.
  32. Depenalization of consumption of drugs in favor of battle against drug traffic. Increase funding for drug rehab centers.
  33. Regulate the right of conscientious objection in draft laws.
  34. Increase funding for public health up to the average European level.(The European average is 6% of GDP; in Greece 3%.)
  35. Elimination of payments by citizens for national health services.
  36. Nationalization of private hospitals. Elimination of private participation in the national health system.
  37. Withdrawal of Greek troops from Afghanistan and the Balkans. No Greek soldiers beyond our own borders.
  38. Abolition of military cooperation with Israel.  Support for creation of a Palestinian State within the 1967 borders.
  39. Negotiation of a stable accord with Turkey.
  40. Closure of all foreign bases in Greece and withdrawal from NATO.
That could stir things up a bit
Source: The Greanville Post

Air Asia Crash: Pilots Disabled Critical Computers Moments Before Crash

The pilots of AirAsia Bhd. Flight 8501 cut power to a critical computer system that normally prevents planes from going out of control shortly before it plunged into the Java Sea, two people with knowledge of the investigation said.
The action appears to have helped trigger the events of Dec. 28, when the Airbus Group NV A320 plane climbed so abruptly that it lost lift and it began falling with warnings blaring in the cockpit, the people said. All 162 aboard were killed.
The pilots had been attempting to deal with alerts about the flight augmentation computers, which control the A320’s rudder and also automatically prevent it from going too slow. After the initial attempts to address the alerts, the flight crew cut power to the entire system, which is comprised of two separate computers that serve as backups to each other, the people said.…

Jones New York to Close 127 Stores, End Wholesale Business

(AP)  Jones New York announced Thursday that it is closing stores, discontinuing its wholesale business and will look at strategic alternatives for its brand.
The privately held women’s clothing company says that it is making the move after a review of its recent performance and outlook.
Jones New York was acquired by private equity firm Sycamore Partners last year as part of a $1.2 billion deal, or $2.2 billion including debt. None of the other business units acquired as part of The Jones Group Inc. transaction are affected.
The company said that it will close 127 Jones New York Outlet stores and discontinue its wholesale business over the course of 2015. It also said it will pursue strategic alternatives for the brand, but did not say what was under consideration.

We Are The Generation That Gets To Witness The End Of The American Dream

By Michael Snyder
Abandoned Home We are the generation that gets to witness the end of the American Dream.  The numbers that you are about to see tell a story.  They tell a story of a once mighty economy that is dying.  For decades, the rest of the planet has regarded the United States as “the land of opportunity” where almost anyone can be successful if they are willing to work hard.  And when I was growing up, it seemed like almost everyone was living the American Dream.  I lived on a “middle class” street and I went to a school where it seemed like almost everyone was middle class.  When I was in high school, it was very rare to ever hear of a parent that was unemployed, and virtually every family that I knew had a comfortable home and more than one nice vehicle.  But now that has all changed.  The “American Dream” has been transformed into a very twisted game of musical chairs.  With each passing year, more people are falling out of the middle class, and most of the rest of us are scrambling really hard to keep our own places.  Something has gone horribly wrong, and yet Americans are very deeply divided when it comes to finding answers to our problems.  We love to point fingers and argue with one another, and meanwhile things just continue to get even worse.  The following are 22 numbers that are very strong evidence of the death of the American Dream…
#1 The Obama administration tells us that 8.69 million Americans are “officially unemployed” and that 92.90 million Americans are considered to be “not in the labor force”.  That means that more than 101 million U.S. adults do not have a job right now.
#2 One recent survey discovered that 55 percent of Americans believe that the American Dream either never existed or that it no longer exists.
#3 Considering the fact that Obama is in the White House, it is somewhat surprising that 55 percent of all Republicans still believe in the American Dream, but only 33 percent of all Democrats do.
#4 After adjusting for inflation, median household income has fallen by nearly $5,000 since 2007.
#5 After adjusting for inflation, “the median wealth figure for middle-income families” fell from $78,000 in 1983 to $63,800 in 2013.
#6 At this point, 59 percent of Americans believe that “the American dream has become impossible for most people to achieve”.
#7 In 1967, 53 percent of Americans were considered to be “middle income”.  But today, only 43 percent of Americans are.
#8 For each of the past six years, more businesses have closed in the United States than have opened.  Prior to 2008, this had never happened before in all of U.S. history.
#9 According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.
#10 According to one recent report, 43 million Americans currently have unpaid medical debt on their credit reports.
#11 Traditionally, owning a home has been one of the key indicators that you belong to the middle class.  Unfortunately, the rate of homeownership in the U.S. has now been falling for seven years in a row.
#12 According to a survey that was conducted last year, 52 percent of all Americans cannot even afford the house that they are living in right now.
#13 While Barack Obama has been in the White House, the number of Americans on food stamps has gone from 32 million to 46 million.
#14 The number of Americans on food stamps has now exceeded the 46 million mark for 38 months in a row.
#15 Right now, more than one out of every five children in the United States is on food stamps.
#16 According to a Washington Post article published just recently, more than 50 percent of the children in U.S. public schools now come from low income homes.  This is the first time that this has happened in at least 50 years.
#17 According to the Census Bureau, 65 percent of all children in the United States are living in a home that receives some form of aid from the federal government.
#18 In 2008, 53 percent of all Americans considered themselves to be “middle class”.  But by 2014, only 44 percent of all Americans still considered themselves to be “middle class”.
#19 In 2008, 25 percent of all Americans in the 18 to 29-year-old age bracket considered themselves to be “lower class”.  But in 2014, an astounding 49 percent of all Americans in that age range considered themselves to be “lower class”.
#20 It is hard to believe, but an astounding 53 percent of all American workers make less than $30,000 a year.
#21 According to one recent survey, 62 percent of all Americans are currently living paycheck to paycheck.
#22 According to CNN, the typical American family can only “replace 21 days of income with readily accessible funds”.
The key to the recovery of the middle class is jobs.
The truth is that without middle class jobs, it is impossible to have a middle class.
Unfortunately, more middle class jobs are being offshored, are being replaced by technology, or are being lost to a slowing economy every single day.  The competition for the jobs that remain is incredibly intense.  Just consider the following example
In 2012, Eric Auld, an unemployed 26-year-old with a master’s degree in English, decided to find out what was on the other side of the black hole. He created a fake job ad as an experiment:
Administrative Assistant needed for busy Midtown office. Hours are Monday through Friday, nine to five. Job duties include: filing, copying, answering phones, sending e-mails, greeting clients, scheduling appointments. Previous experience in an office setting preferred, but will train the right candidate. This is a full-time position with health benefits. Please e-mail résumé if interested. Compensation: $12-$13 per hour.
If you have ever applied for a job like that, I offer my condolences. You have better odds at the casino. Auld received 653 responses in 24 hours. 10% of the applicants had more than 10 years of experience, and 3% of them had master’s degrees. Presumably, one of them would get the job. But what does that mean? It means that all the other experienced applicants and master’s degree holders would remain unemployed. That is about 64 experienced workers and about 19 workers with master’s degrees.
So how can we get this turned around?
How can we start to increase the number of middle class jobs in America once again?
Please feel free to share your solution by posting a comment below…

Under a mattress, in the freezer: Why so many are hiding cash

(Kelli Grant)  Where to stash your cash? Some Americans are sleeping on it—literally.
While banks are still the go-to solution for most consumers, 29 percent say they’re keeping at least some savings in cash bills and coins, according to a new survey of 1,820 adults from American Express. Of those holding cash savings, 53 percent are hiding it in a secret location.
Millennials are even more apt than other generations to go the mattress or freezer route, with 67 percent of those saving cash saying that they hide it outside a bank account.
“We’ve long asked people about how they’ve planned to keep their savings, and for the past few years, we’ve seen an uptick in people saving cash,” said Kimberly Litt, public affairs manager at American Express. This is the first year the company has specifically asked Americans about tucking away cash.
The survey also found that about 1 in 4 consumers anticipates a financial emergency this year, and hiding cash at home could be one way people are preparing. “I’ve also heard of people using it as a budget technique, keeping cash in envelopes set aside,” said Litt.
AmEx didn’t ask where, exactly, that cash is stashed, but a 2012 Marist College survey of 1,080 adults found that the most popular place—with 27 percent of the vote—is the freezer. A little less than 20 percent of Americans hide cash in a sock drawer, while 11 percent put it under the mattress and 10 percent secure it in a cookie jar. Another 9 percent keep their cash somewhere else in the house.
“We saw a surge of this back in 2008, when the banking crisis was going on,” said security expert Todd Morris, founder and chief executive of BrickHouse Security, a company that sells security, technology and surveillance solutions. The trend has continued in recent years, he said, with more people installing floor and wall safes to store important documents and cash.
But keeping large amounts of cash in the house is something that makes personal finance experts cringe. “Can’t discourage it strongly enough,” said Greg McBride, chief financial analyst at “That’s a recipe for problems down the road.”
Primarily, that’s because the funds don’t have the same loss protections afforded to an FDIC-insured savings or checking account. “Keeping money stashed around the house leaves you at tremendous risk of theft or loss due to fire or some sort of unforeseen disaster,” he said.
There are plenty of horror stories, such as the Israeli woman who in 2009 replaced her mother’s old mattress, only to learn that it was where she’d hidden her life savings, an estimated $1 million. Or the man in Moline, Illinois, who accidentally donated a suit with $13,000 stashed in a pocket.
That said, it’s not a bad idea to have a little cash at home, for use in an emergency, said McBride. After a major storm, for example, ATM access may be limited or stores’ credit card processing systems may not be working. Keep on hand what you’d need to tide you over for a few days, with the exact amount depending on your family’s financial situation, he said.
But even then, come up with a decent hiding spot. Thieves know which spots are popular, Morris said. “Burglars definitely know certain places to look, like the bottom of your sock drawers, and underneath your drawers, where it’s easy to tape an envelope [of cash],” he said. “If you think about your house and you know where things are, you can think about some places where people wouldn’t look.” Maybe a tool box in the basement, for example, or a little-looked-at book on your shelf.
Pick just one place, Morris said. Divvying up cash among multiple spots increases the chance of you forgetting one of the hiding places or otherwise losing the cash (say, by adding the pair of boots where it’s stored to the yard sale pile, or throwing out that old hairbrush that’s actually a diversion safe). Be sure to tell at least one other person the location of your hiding place, he said. That reduces the chances of an accidental disposal, and also ensures your assets won’t be lost if you suddenly pass away.

WTF Chart Of The Day: Baltic Dry Index Crashes To Lowest In 29 Years

Quietly behind the scenes - and not at all reflective of a collapsing global economy (because that would break the narrative of over-supply and pent-up demand) - The Baltic Dry Index plunged over 5% today to 632... That is the lowest absolute level for the global shipping rates indicator since August 1986...


Gilts hit historic low as fall in oil price brings deflation closer to Britain

Downward move in gilt yields may have implications for the cost of servicing the government’s near-£100bn budget deficit
The yield on 10-year gilts touched 1.396%, partly due to the possibility of a rapid fall in oil prices bringing deflation to Britain within the next few months. Photograph: StatoilHydro / Oyvind Hagen /EPA
Falling inflation and the prospect of official interest rates being kept on hold for longer sent the government’s benchmark measure of borrowing costs tumbling to an all-time low on Thursday.
With the prospect of the rapid fall in oil prices bringing deflation to Britain within the next few months, the yield, or effective interest rate, on 10-year gilts touched 1.396% at one point during the day – lower than during the worst point of the eurozone crisis of 2012, and the first time in history it had been below 1.4%. They closed at 1.42%
If sustained, the downward move in gilt yields will have implications for the cost of servicing the government’s near-£100bn budget deficit and reduce the cost of long-term mortgages. Pensions, however, will suffer a drop in investment returns.
Financial markets have reassessed their view of the inflation outlook since the turn of the year, a period that has seen the cost of crude decline to below $50 a barrel, global growth forecasts downgraded by the International Monetary Fund, and a rejection of austerity by Greece.
German inflation figures released on Thursday showed prices were 0.5% lower in January than they were a year earlier – the first time the eurozone’s biggest economy has experienced deflation since 2009.
Signs from the US Federal Reserve and the Bank of England that they have no immediate intention of raising interest rates also helped to drive down interest rates on government bonds, including UK gilts.
Data from the Office for National Statistics (ONS) showing that UK growth in the fourth quarter of 2014 was slightly lower than expected at 0.5% also helped to bear down on government debt financing costs, with 20- and 30-year gilt yields hitting record lows of 1.921% and 2.102%.
The premium that the 10-year gilt offers over the equivalent German bund narrowed sharply – by about five basis points on the day to 106.5 basis points.
But even with UK government debt yields at such lows, they still offered a better return than bonds issued by other major countries in Europe, where the risk of damaging deflation and slow growth contrasts with Britain’s growing economy.
Jennifer McKeown, senior European economist at Capital Economics, said: “January’s drop in German inflation, well into negative territory, highlights the strength of deflationary pressures in even the eurozone’s strongest economies.
“While falls in prices should prove temporary in Germany, there are downside risks. And the threat of sustained deflation is clearly much greater elsewhere in the region.”
Citi strategist Jamie Searle said gilts would continue to attract strong demand from investors, especially in light of the European Central Bank’s announcement last week that it would be starting a €1.1tn (£830m) bond purchase programme, a move designed to push interest rates on eurozone bonds to even lower levels.
Long-term US bond yields slid on Wednesday as some investors focused on the Fed’s reference to international developments and weak inflation, which they judged might cause it to delay tightening policy.
Safe-haven German bunds rallied on Thursday as worries over Greece’s new anti-bailout government buoyed demand for top-rated assets.
“In the morning gilt prices caught up with the price action overnight with US Treasuries,” said RBC strategist Vatsala Datta.

The End of Currency 'Safe-Havens'

Swiss - Negative rates

In the past [even the recent past] investors have often 'parked' their funds in a 'safe-haven' currency, when fears about the dollar or other currencies rose. The leading candidates have always been the Swiss Franc and the Yen, with gold, in the last three years usually being excluded, because of its declining trend against the dollar and the limited amount of stock relative to the availability of these currencies. While gold's trend seems to have changed to the upside now, the developed world is still 'out of gold'.

But gold has never forfeited its role as a 'safe-haven' for long. It is distinguished by the fact that there is no lasting link between gold and national governments and their national currencies. What gold has always had is the respect and the belief that it is money 'in extremis'. For governments, through institutions to individuals, gold is always money, even between enemies.
In the last 40 years and more, the world led by the U.S., has sought to sideline gold as money, but inevitably it has proved its worth, most notably when currency crises appear. The success the dollar has had in these four decades has been largely due to two factors:
  1. It is riveted to oil as the only currency with which oil could be bought.
  2. It has the largest economy in the world, until now, as China appears to be moving into that place.
But as 2014 closed and a volatile, dramatic 2015 and 2016 entered our lives, this is changing. With oil at less than half its peak value today, only half the dollars that were used in the past for oil are being used now. Add to this that payments for oil in currencies other than the dollar, particularly by China, are being made. This is massively reducing the need for the dollar, globally. All theses excess dollars will become redundant, but the impact of this has yet to be seen or appreciated.

Euro Crisis masking the dangers

With the euro crises throwing a smokescreen over the dollar picture, as euros are exchanged for the U.S. dollar or through the 'carry trade' borrowed and sent into high yielding emerging market currencies, the dollar looks as though it is a strong currency.
Markets, market players and commentators tend to be myopic, focussed on short-term profits and only distracted when larger issues actually arrive. This is what's happening now.
We feel that what is happening now on foreign exchanges is an early signal of much bigger issues that will appear in the next couple of years.
Now we will look at the traditional 'safe-haven' currencies of the Swiss Franc and the Yen to see just why currencies could only act as 'safe-haven' for a short time, while the monetary system remained free of fundamental crises, such as the ones we see now and on the horizon:
The Yen - The Yen hit its peak when it stood at 76 to the U.S. dollar before the leading source of energy [nuclear] was discarded and replaced by imported fuel.
As Japan's population ages and spending habits become conservative, the real function of a currency has become apparent. It is used to allow the local economy to function smoothly as the only local means of exchange. Internationally, it is used as a basis for international trade and investment. As such, it functions well when the economy and Balance of Payments is healthy.
But when the Balance of Payments and the economy fail to function well, it hurts the international value of the currency as we have seen as Abenomics kicked in to lead Japan and the Yen into the future.
More importantly it now defines the trade competitiveness of the nation. Hence, the exchange rate itself, inevitably, is managed to the nation's benefit and not that of its citizens or its own integrity. Its integrity as a measure of value has been abandoned alongside its role as a 'safe haven'.
While the G-20 agreed that nations would not purposely weaken their exchange rates, the stark realities of today have overwhelmed these commitments and will continue to do so 'where deemed necessary'. Translated, that means it is now OK to weaken ones currency in the interests of the nation's export competitiveness. As most currencies follow this line and enter into the 'race to the bottom', any advantage to a nation becomes short-term as the one against whom the advantage was gained then does the same.
Today's exchange rate of the Yen is 118 to the dollar a 55% fall from its recent peak. This fall is far bigger than the fall in the Ruble, albeit the Yen fell over a longer period of time. The fact that it has taken longer is OK as it can be absorbed in trade over that time. This makes the policy more palatable? The consequences of such myopia will focus on confidence. Confidence is the only ingredient that makes a currency viable and a quality that if lost takes a currency with it.
Hence the Yen is no longer a currency 'safe-haven'.

The Swiss Franc

The Swiss franc has been a hallowed currency 'safe-haven' for generations, consistent with the earned image of Switzerland as a 'safe-haven' for foreigners assets and a nation that will fight to protect these investors. The events of the last three years have cost the Swiss dearly wiping out the confidence it had gained over the previous century. As of now, at least 10% of the Swiss economy depends upon the banking/asset management industry built up over this time.
But the rest of the economy doesn't rely on this image. As a world-respected manufacturer, Switzerland needs an exchange rate that supports its international trade competitiveness, most importantly against the euro, its main trading partner.
One would have thought that the two aspects of the Swiss economy could co-exist together easily. But when pressure on the global monetary system mounts, they can't.
The pressure on the Swiss Franc has been heavy in the last three years when the Swiss National Bank [SNB] took severe action to hold the 'Swissy' to euro at a ceiling of 1.20 to guard Switzerland's exchange rate against the euro without even contemplating the possibility that the world's second most important currency could weaken so dramatically and so quickly from its peak against the dollar.
The pressures proved too much last week and to the great surprise of the whole world the 'Swissy' was unpegged! As we look around at the damage the Swiss National Bank caused by 'unpegging' from the euro and now linking it to a 'trade weighted basket of currencies', including the U.S. dollar, we see once more, national interests elevated far above those of the people using the 'Swissy' both inside and out of Switzerland.
Perhaps you are thinking that the 'Swissy' can once more serve as a 'safe-haven' currency. A look at the intentions of the SNB in now linking the Swissy to the 'basket of currencies', is to keep the Swiss Franc down against them. This means that the SNB will continue to intervene in the foreign exchanges and hold it down against these other currencies.
So it will not return to 'safe haven' status, as we are now seeing in the market place as it slowly slips down against gold and other currencies. In addition, the Swiss National Bank has imposed an interest rate of -0.75% on sight deposit account balances at the SNB. In an effort to relieve the upward pressure on the Swiss franc, from 22 January the SNB will charge an interest rate of 0.75% on account balances above a certain threshold held with it by banks and other financial institutions. But will this work?
In what can only be described as a break in the integrity of the Swiss National Bank, a week before unpegging the Swiss Franc, the SNB reaffirmed its commitment to the minimum exchange rate of CHF-EUR1.20, and "will continue to enforce it with the utmost determination", they said. Further they said, "It remains the key instrument to avoid an undesirable tightening of monetary conditions resulting from a Swiss franc appreciation. Over the past few days, a number of factors have prompted increased demand for perceived 'safe-haven' investments. The SNB is prepared to purchase foreign currency in unlimited quantities and to take further measures, if required."
And now?

The end of Currency 'Safe-havens'

The very concept of a currency acting as a 'safe-haven' has now been destroyed by the actions of the currencies held up a one before. This reputation will not change because no country can afford to let it do so without mortally wounding its exports. It is hoped that the monetary system will survive a long time despite the undermining of the value of currencies. The loss of confidence in the currencies can go to the point of collapsing it because it is a currency managed by people who have differing agendas to the one that demands a solid value for their money. As examples of this in the past we look at how a currency is still used in a local economy while it is collapsing. Please note that governments impose it use on an unwilling public until it has collapsed.
We repeat, when a currency collapses internally, governments force its citizens to use it in day-to-day transactions until it becomes practically impossible to use it.
  • In the Weimar Republic after the first World War the German Mark fell from 4.63: $1 to 4.63 billion: $1.
    Germans were going around with wheelbarrows to transport the money needed for day to day transactions. Workers, when paid would rush to the gates of the factory and threw their money to wives who raced to the shops to buy whatever they could as prices rose.
    One story has it that a person left their money in a bag on a bicycles outside a shop and when they returned the bag and bicycle was gone and the money left on the pavement. Nevertheless it took the total collapse of the currency before the central bank changed the currency to the Rentenmark, a currency issued against property [that could not be printed]. By this time the middle and upper classes of Germany had been wiped out financially [in the nation's interests].
  • In Zimbabwe, After the Z$: $1 U.S. traded at 1:1 it took Z$70,000 just to catch a bus to work late in the collapse of that dollar in Harare. Now in Zimbabwe, the U.S. dollar is used, in a shattered economy with 95% unemployment. But again for the benefit of the government the Z$ was used right through until it was completely unacceptable as a currency [in the national interests] It even persisted with notes that had an expiry date.
  • In a tried and tested manner over the life of currencies, gold has always held international value. A Zimbabwean could go to Mongolia and get the world price for his gold. Not so with the Z$. The author has a Z$100,000,000,000,000 note in his desk that is worth less than a sheet of toilet paper.
Such is the history of fiat currencies and will be in the future when the games governments play reach their climax.
The U.S. $ is now in the position of being the retreat from other currencies, because the world's currencies are the branches off the tree-trunk of the dollar. But the dollar itself is under siege too. The Treasury department has made it clear that it does not want to see a strong dollar! It too must guard its international trade competitiveness by retraining a strong dollar. At the moment it is silent on this, but for how long?
Thus we have two opposing flows in the U.S. dollar:
  1. The inflow of dollars sold as they are excess to requirements and
  2. The newly bought flows of dollars back to the U.S. as other currencies fail to provide sufficient safety for investors.
The pressures on the dollar will take time to come to fruition and will be signaled by the failure of other currencies [such as the euro] and by the stumbling of the monetary system itself first.

Can the dollar collapse?

At the moment the dollar is the strongest of the world's currencies and is reflecting that in its exchange rates. But this is relative strength as the dollar will, if push comes to shove be the last currency standing, even if it is itself inherently weak. It will be used as there is no alternative to it in the Western world. [That's why China is trying to free itself from dependence on the dollar and be able to stand alone.]
If the dollar collapses it will be the last currency to collapse, after the breakdown of the monetary system itself. Even if the Yuan can stand alone, the developed world will not be permitted to exchange all other currencies for the Yuan. So no matter what the state of the dollar is, it will be used in the developed world.
Then, exchange rates will not be the measure of the dollar. When that happens, once more, the dollar, relative to other currencies will still look strong. The lack of confidence in currencies [and the dollar] will be reflected in volatility, instability and uncertainty, with many 'hallowed' currency standards being abandoned along the way. In turn, the Treasury and equity markets alongside institutions in the financial markets will stumble and fall. But everyone will be trying to turn to items that will be effective measures of value and means of exchange.
Among these internationally, precious metals will be at the head of the list. While individuals and institutions will turn to these markets, so will governments. As happened in 1933, governments will take such items to add credibility to their currencies and be able to say that the banking system will be 'lending against good assets'! At that time the price of gold will not be measured by the dollar, but gold will measure the dollar.
Until that day comes we can expect growing currency volatility and to the extent the precious metal markets allow, a turning to gold and then silver slowly but surely!
Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit

By Julian D. W. Phillips
Gold-Authentic Money
Copyright 2014 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.
What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.
Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.
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Ron Paul On Gold & The Fed’s Failed ‘Utopian Dream’

by Ron Paul via The Ron Paul Institute for Peace & Prosperity,
Over the last 100 years the Fed has had many mandates and policy changes in its pursuit of becoming the chief central economic planner for the United States. Not only has it pursued this utopian dream of planning the US economy and financing every boondoggle conceivable in the welfare/warfare state, it has become the manipulator of the premier world reserve currency.
As Fed Chairman Ben Bernanke explained to me, the once profoundly successful world currency – gold – was no longer money. This meant that he believed, and the world has accepted, the fiat dollar as the most important currency of the world, and the US has the privilege and responsibility for managing it. He might even believe, along with his Fed colleagues, both past and present, that the fiat dollar will replace gold for millennia to come. I remain unconvinced.
At its inception the Fed got its marching orders: to become the ultimate lender of last resort to banks and business interests. And to do that it needed an “elastic” currency.  The supporters of the new central bank in 1913 were well aware that commodity money did not “stretch” enough to satisfy the politician’s appetite for welfare and war spending. A printing press and computer, along with the removal of the gold standard, would eventually provide the tools for a worldwide fiat currency. We’ve been there since 1971 and the results are not good.
Many modifications of policy mandates occurred between 1913 and 1971, and the Fed continues today in a desperate effort to prevent the total unwinding and collapse of a monetary system built on sand. A storm is brewing and when it hits, it will reveal the fragility of the entire world financial system.
The Fed and its friends in the financial industry are frantically hoping their next mandate or strategy for managing the system will continue to bail them out of each new crisis.
The seeds were sown with the passage of the Federal Reserve Act in December 1913. The lender of last resort would target special beneficiaries with its ability to create unlimited credit. It was granted power to channel credit in a special way. Average citizens, struggling with a mortgage or a small business about to go under, were not the Fed’s concern. Commercial, agricultural, and industrial paper was to be bought when the Fed’s friends were in trouble and the economy needed to be propped up. At its inception the Fed was given no permission to buy speculative financial debt or U.S. Treasury debt.
It didn’t take long for Congress to amend the Federal Reserve Act to allow the purchase of US debt to finance World War I and subsequently all the many wars to follow. These changes eventually led to trillions of dollars being used in the current crisis to bail out banks and mortgage companies in over their heads with derivative speculations and worthless mortgage-backed securities.
It took a while to go from a gold standard in 1913 to the unbelievable paper bailouts that occurred during the crash of 2008 and 2009.
In 1979 the dual mandate was proposed by Congress to solve the problem of high inflation and high unemployment, which defied the conventional wisdom of the Phillips curve that supported the idea that inflation could be a trade-off for decreasing unemployment. The stagflation of the 1970s was an eye-opener for all the establishment and government economists. None of them had anticipated the serious financial and banking problems in the 1970s that concluded with very high interest rates.
That’s when the Congress instructed the Fed to follow a “dual mandate” to achieve, through monetary manipulation, a policy of “stable prices” and “maximum employment.” The goal was to have Congress wave a wand and presto the problem would be solved, without the Fed giving up power to create money out of thin air that allows it to guarantee a bailout for its Wall Street friends and the financial markets when needed.
The dual mandate was really a triple mandate. The Fed was also instructed to maintain “moderate long-term interest rates.” “Moderate” was not defined. I now have personally witnessed nominal interest rates as high as 21% and rates below 1%. Real interest rates today are actually below zero.
The dual, or the triple mandate, has only compounded the problems we face today. Temporary relief was achieved in the 1980s and confidence in the dollar was restored after Volcker raised interest rates up to 21%, but structural problems remained.
Nevertheless, the stock market crashed in 1987 and the Fed needed more help. President Reagan’s Executive Order 12631 created the President’s Working Group on Financial Markets, also known as the Plunge Protection Team. This Executive Order gave more power to the Federal Reserve, Treasury, Commodity Futures Trading Commission, and the Securities and Exchange Commission to come to the rescue of Wall Street if market declines got out of hand. Though their friends on Wall Street were bailed out in the 2000 and 2008 panics, this new power obviously did not create a sound economy. Secrecy was of the utmost importance to prevent the public from seeing just how this “mandate” operated and exactly who was benefiting.
Since 2008 real economic growth has not returned. From the viewpoint of the central economic planners, wages aren’t going up fast enough, which is like saying the currency is not being debased rapidly enough. That’s the same explanation they give for prices not rising fast enough as measured by the government-rigged Consumer Price Index. In essence it seems like they believe that making the cost of living go up for average people is a solution to the economic crisis. Rather bizarre!
The obsession now is to get price inflation up to at least a 2% level per year. The assumption is that if the Fed can get prices to rise, the economy will rebound. This too is monetary policy nonsense.
If the result of a congressional mandate placed on the Fed for moderate and stable interest rates results in interest rates ranging from 0% to 21%, then believing the Fed can achieve a healthy economy by getting consumer prices to increase by 2% per year is a pie-in-the-sky dream. Money managers CAN’T do it and if they could it would achieve nothing except compounding the errors that have been driving monetary policy for a hundred years.
A mandate for 2% price inflation is not only a goal for the central planners in the United States but for most central bankers worldwide.
It’s interesting to note that the idea of a 2% inflation rate was conceived 25 years ago in New Zealand to curtail double-digit price inflation. The claim was made that since conditions improved in New Zealand after they lowered their inflation rate to 2% that there was something magical about it. And from this they assumed that anything lower than 2% must be a detriment and the inflation rate must be raised. Of course, the only tool central bankers have to achieve this rate is to print money and hope it flows in the direction of raising the particular prices that the Fed wants to raise.
One problem is that although newly created money by central banks does inflate prices, the central planners can’t control which prices will increase or when it will happen. Instead of consumer prices rising, the price inflation may go into other areas, as determined by millions of individuals making their own choices. Today we can find very high prices for stocks, bonds, educational costs, medical care and food, yet the CPI stays under 2%.
The CPI, though the Fed currently wants it to be even higher, is misreported on the low side. The Fed’s real goal is to make sure there is no opposition to the money printing press they need to run at full speed to keep the financial markets afloat. This is for the purpose of propping up in particular stock prices, debt derivatives, and bonds in order to take care of their friends on Wall Street.
This “mandate” that the Fed follows, unlike others, is of their own creation. No questions are asked by the legislators, who are always in need of monetary inflation to paper over the debt run up by welfare/warfare spending. There will be a day when the obsession with the goal of zero interest rates and 2% price inflation will be laughed at by future economic historians. It will be seen as just as silly as John Law’s inflationary scheme in the 18th century for perpetual wealth for France by creating the Mississippi bubble – which ended in disaster. After a mere two years, 1719 to 1720, of runaway inflation Law was forced to leave France in disgrace. The current scenario will not be precisely the same as with this giant bubble but the consequences will very likely be much greater than that which occurred with the bursting of the Mississippi bubble.
The fiat dollar standard is worldwide and nothing similar to this has ever existed before. The Fed and all the world central banks now endorse the monetary principles that motivated John Law in his goal of a new paradigm for French prosperity. His thesis was simple: first increase paper notes in order to increase the money supply in circulation. This he claimed would revitalize the finances of the French government and the French economy. His theory was no more complicated than that.
This is exactly what the Federal Reserve has been attempting to do for the past six years. It has created $4 trillion of new money, and used it to buy government Treasury bills and $1.7 trillion of worthless home mortgages. Real growth and a high standard of living for a large majority of Americans have not occurred, whereas the Wall Street elite have done quite well. This has resulted in aggravating the persistent class warfare that has been going on for quite some time.
The Fed has failed at following its many mandates, whether legislatively directed or spontaneously decided upon by the Fed itself – like the 2% price inflation rate. But in addition, to compound the mischief caused by distorting the much-needed market rate of interest, the Fed is much more involved than just running the printing presses. It regulates and manages the inflation tax. The Fed was the chief architect of the bailouts in 2008. It facilitates the accumulation of government debt, whether it’s to finance wars or the welfare transfer programs directed at both rich and poor. The Fed provides a backstop for the speculative derivatives dealings of the banks considered too big to fail. Together with the FDIC’s insurance for bank accounts, these programs generate a huge moral hazard while the Fed obfuscates monetary and economic reality.
The Federal Reserve reports that it has over 300 PhD’s on its payroll. There are hundreds more in the Federal Reserve’s District Banks and many more associated scholars under contract at many universities. The exact cost to get all this wonderful advice is unknown. The Federal Reserve on its website assures the American public that these economists “represent an exceptional diverse range of interest in specific area of expertise.” Of course this is with the exception that gold is of no interest to them in their hundreds and thousands of papers written for the Fed.
This academic effort by subsidized learned professors ensures that our college graduates are well-indoctrinated in the ways of inflation and economic planning. As a consequence too, essentially all members of Congress have learned these same lessons.
Fed policy is a hodgepodge of monetary mismanagement and economic interference in the marketplace. Sadly, little effort is being made to seriously consider real monetary reform, which is what we need. That will only come after a major currency crisis.
I have quite frequently made the point about the error of central banks assuming that they know exactly what interest rates best serve the economy and at what rate price inflation should be. Currently the obsession with a 2% increase in the CPI per year and a zero rate of interest is rather silly.
In spite of all the mandates, flip-flopping on policy, and irrational regulatory exuberance, there’s an overwhelming fear that is shared by all central bankers, on which they dwell day and night. That is the dreaded possibility of DEFLATION.
A major problem is that of defining the terms commonly used. It’s hard to explain a policy dealing with deflation when Keynesians claim a falling average price level – something hard to measure – is deflation, when the Austrian free-market school describes deflation as a decrease in the money supply.
The hysterical fear of deflation is because deflation is equated with the 1930s Great Depression and all central banks now are doing everything conceivable to prevent that from happening again through massive monetary inflation. Though the money supply is rapidly rising and some prices like oil are falling, we are NOT experiencing deflation.
Under today’s conditions, fighting the deflation phantom only prevents the needed correction and liquidation from decades of an inflationary/mal-investment bubble economy.
It is true that even though there is lots of monetary inflation being generated, much of it is not going where the planners would like it to go. Economic growth is stagnant and lots of bubbles are being formed, like in stocks, student debt, oil drilling, and others. Our economic planners don’t realize it but they are having trouble with centrally controlling individual “human action.”
Real economic growth is being hindered by a rational and justified loss of confidence in planning business expansions. This is a consequence of the chaos caused by the Fed’s encouragement of over-taxation, excessive regulations, and diverting wealth away from domestic investments and instead using it in wealth-consuming and dangerous unnecessary wars overseas. Without the Fed monetizing debt, these excesses would not occur.
Lessons yet to be learned:
1. Increasing money and credit by the Fed is not the same as increasing wealth. It in fact does the opposite.

2. More government spending is not equivalent to increasing wealth.

3. Liquidation of debt and correction in wages, salaries, and consumer prices is not the monster that many fear.

4. Corrections, allowed to run their course, are beneficial and should not be prolonged by bailouts with massive monetary inflation.

5. The people spending their own money is far superior to the government spending it for them.

6. Propping up stock and bond prices, the current Fed goal, is not a road to economic recovery.

7. Though bailouts help the insiders and the elite 1%, they hinder the economic recovery.

8. Production and savings should be the source of capital needed for economic growth.

9. Monetary expansion can never substitute for savings but guarantees mal–investment.

10. Market rates of interest are required to provide for the economic calculation necessary for growth and reversing an economic downturn.

11. Wars provide no solution to a recession/depression. Wars only make a country poorer while war profiteers benefit.

12. Bits of paper with ink on them or computer entries are not money – gold is.

13. Higher consumer prices per se have nothing to do with a healthy economy.

14. Lower consumer prices should be expected in a healthy economy as we experienced with computers, TVs, and cell phones.
All this effort by thousands of planners in the Federal Reserve, Congress, and the bureaucracy to achieve a stable financial system and healthy economic growth has failed.
It must be the case that it has all been misdirected. And just maybe a free market and a limited government philosophy are the answers for sorting it all out without the economic planners setting interest and CPI rate increases.
A simpler solution to achieving a healthy economy would be to concentrate on providing a “SOUND DOLLAR” as the Founders of the country suggested. A gold dollar will always outperform a paper dollar in duration and economic performance while holding government growth in check. This is the only monetary system that protects liberty while enhancing the opportunity for peace and prosperity.

Soros as Kiev’s Central Banker and Ridiculous US Laws

If it comes to pass, and it cannot unfortunately be ruled out, recent media rumors say that naturalized US billionaire hedge fund speculator and philosopher, George Soros, a very weary-looking 84-year-old who continues to try to weaken the Russian economy as he did back in 1998, might become the head of the Ukrainian National Bank in Kiev. Soros as head of any central bank in my view is putting the old fox to guard the hen-house. That would complete a quartet of foreign technocrats that clearly would do no good to the shattered real economy of Ukraine nor to peace in the world.
So far it is a report carried only by APA, the Azeri press agency in Baku. They cite a report carried Ukraine’s Channel 112. That report cited sources in the Ukraine parliament, the Verkhovna Rada and people around Ukraine President Petro Poroshenko.
Billionaire speculator Soros is no stranger to Ukraine. In a personal interview with US TV propaganda channel CNN. Soros declared, “I set up a foundation in Ukraine before Ukraine became independent of Russia. And the foundation has been functioning ever since and played an important part in events now.” That interview was made after the US State Department February 21, 2014 coup d’Etat.
Soros, via his network of “tax free charitable” foundations has worked with US Government-funded NGOs such as USAID, the National Endowment for Democracy (now doing work formerly assigned to the CIA), the International Republican Institute, the National Democratic Institute for International Affairs, the Freedom House, and the Albert Einstein Institute for training in “nonviolence as a weapon of warfare.”
Whether the good Mr. Soros will bring his financial alchemy to Kiev and try to earn the new Finance Minister billions of euros for their strained budget is not at all clear. There is reportedly a list of five candidates including Soros. It reportedly includes former IMF head Dominique Straus-Kahn and at least one person from the US Federal Reserve.
Ukraine: Washington’s New Colony
The naming of Soros or another foreign banker to head the central bank of Ukraine at this point would fit nicely into what emerges as Washington’s strategy to simply run the country–into the ground at that—by proxies. Earlier this month, US State Department favorite Ukraine President Petr Poroschenko engaged in constitutionally dubious manipulations, holding a secret ceremony hours before a Ukraine Parliament vote, to make three now Kiev government ministers from foreign countries into Ukrainian citizens.
The three were Finance Minister Natalia A. Jaresko, a then-US citizen who worked for the US State Department in Ukraine and recently as investment banker for funds of USAID. As Economics Minister sits a Lithuanian investment banker who managed a Swedish investment fund for Ukraine, Aivras Abromavicius. And the new Health Minister is US-tied national of neighboring Georgia, Alexander Kvitashvili whose wife reportedly worked with the CIA.
And New US Sanctions…
The US President Obama just signed into law a new round of economic sanctions against Russia. The US President on December 18 signed into law HR 5859, euphemistically titled, Ukraine Freedom Support Act of 2014 113th Congress. A more honest title would be, An Act of 2014 to Provoke War with Russia.
The new law calls for “economic sanctions, diplomacy, assistance for the people of Ukraine, and the provision of military capabilities to the Government of Ukraine that will enhance the ability of that Government to defend itself and to restore its sovereignty and territorial integrity in the face of unlawful actions by the Government of the Russian Federation.”
The new US law gives the US President a dangerous new weapon. If he deems Gazprom, the Russian state gas giant that supplies much of the EU as well as Ukraine, is “withholding” significant natural gas from NATO countries, or from Ukraine, Georgia, or Moldova, he can order draconian new sanctions on Gazprom, something carefully avoided by Washington until now. That means all the CIA or neo-cons running US State Department Ukraine policy need do is convince Kiev to claim Russia is withholding gas or refuse to pay Gazprom, a sword of Damocles over the Russian gas supplier.
Then the new US law, HR 5859, SEC. 9. SUPPORT FOR RUSSIAN DEMOCRACY AND CIVIL SOCIETY ORGANIZATIONS, specifies that the Secretary of State shall, “directly or through non-governmental or international organizations, such as the Organization for Security and Co-operation in Europe, the National Endowment for Democracy, and related organizations–(1) improve democratic governance, transparency, accountability, rule of law, and anti-corruption efforts in the Russian Federation; strengthen democratic institutions and political and civil society organizations in the Russian Federation; (3) expand uncensored Internet access in the Russian Federation…”
This remarkable part of the new law gives open support to a new attempt at a CIA-State Department Color Revolution to topple Putin, using the US Congress and Soros Foundation-financed National Endowment for Democracy, the same cast of suspects who ran the Euro-Maidan Color Revolution a year ago in Kiev. If it reads like a brazen attempt to trample Russian sovereignty and impose a Washington version of “democracy” in another country, one might ask, what bloody right do Washington Congressmen and Presidents have to impose anything on anyone, let alone its own citizens?
To underscore the absurdity of Washington neo-cons and their moral arrogance in deciding where and how they can impose “democracy,” some in the Russian Duma, with characteristic Russian droll humor, apparently made a tit-for-tat mirror image of HR5859. Imagine, as a normal American citizen, how you would feel if the following were to become operational:
United States of America Freedom Support Act of 2014
Sixth Duma of the Russian Federation
An Act:
To provide assistance for the democratic development of the United States of America and for other purposes. Be it enacted by the Representatives of the State Duma and the Federation Council of the Russian Federation assembled in the Federation Assembly…
(a) In General.–The Minister of Foreign Affairs, directly or through nongovernmental or international organizations, such as the Organization of American States (OAS), the EURASIA HERITAGE FOUNDATION, and related organizations—
(1) improve democratic governance, transparency, accountability, rule of law, and anti-corruption efforts in the United States;
(2) strengthen democratic institutions and political and civil society organizations in the United States;
(3) expand free and unmonitored Internet access in the United States; and
(4) expand free and unfettered access to independent media of all kinds in the United States, including through increasing Russian Government-supported broadcasting activities.
The Russian spoof merely underscores how ridiculous US foreign policy has become. Little wonder that the USA today enjoys so little respect around the world. Its elected politicians are simply ridiculous.
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

Keystone filibuster fails, pipeline poised for approval

FILE-This Jan. 19, 2015 file photo crews work to contain an oil spill from Bridger Pipeline’s broken pipeline near Glendive, Mont., in this aerial view showing both sides of the river. Oil pipeline accidents have spiked in the U.S. as ... more >

The Keystone XL pipeline is closer than it’s ever been to approval after the Senate overcame a Democrat-led filibuster Thursday and was headed for a final passage vote later in the day — setting up an eventual showdown with President Obama, who has promised a veto.
Nine Democrats bucked Mr. Obama’s threat and voted with 53 Republicans to approve the pipeline, which has taken on a political significance far beyond the 830,000 barrels per day of tar sands oil that it is projected to carry if it ever gets built.

It marks the first major legislation to clear the Senate since the GOP took control earlier this month, and serves as a key test of how willing Democrats will be to challenge their lame-duck party leader, Mr. Obama.
“This took a bipartisan effort to get done. That’s what the people want,” said Sen. John Hoeven, the North Dakota Republican who sponsored the legislation.
The bill will still have to be married with a House version, which cleared that chamber earlier this year on a similar bipartisan vote — though in neither case was there enough support to overcome an expected veto.
The project is popular with voters and even has won support from some labor unions, who say it will produce jobs. But environmental groups have declared the project a key test of the U.S. commitment to combatting climate change, and have pressured Mr. Obama to fight the pipeline.

The 1,1790-mile pipeline would carry oil from Alberta, Canada, to Steele City in Nebraska, where other pipelines would farm it out for refinement.
Mr. Obama says he would veto the bill because he doesn’t want to change current law, which gives his administration the power to make a decision. He said the State Department, which has been considering the project for five years, should not be rushed.
The president had also said he wanted to wait until a Nebraska court ruled on a local challenge to the path of the pipeline, but that state’s Supreme Court threw the case out several weeks ago arguing the challengers didn’t have standing, so that objection fell.
Opponents of the pipeline say that while it will create thousands of short-term jobs building the pipeline, it will only produce a few dozen long-term jobs once it’s up and running. And they say the type of oil that would flow through it is considered among the dirtiest for carbon emissions.
They also said the oil will go to the Gulf of Mexico to be refined, where it’s likely to be shipped to other countries and won’t affect the price of gas at pumps in the U.S.
Supporters counter that the oil will be drilled in Canada no matter what, and if the U.S. doesn’t build the pipeline it will be shipped to China or elsewhere, meaning the carbon emissions will happen no matter what. They argue having more oil in North American is good for price stability and helps free the U.S. from dependence on Middle East fuels.
The nine Democrats who sides with Republican on the pipeline vote were: Sens. Michael Bennet of Colorado, Tom Carper of Delaware, Bob Casey of Pennsylvania, Heidi Heitkamp of North Dakota, Joe Manchin of West Virginia, Claire McCaskill of Missouri, Jon Tester of Montana and Mark Warner of Virginia.
Mr. Hoeven and Sen. Lisa Murkowski, an Alaska Republican who serves as chairwoman of the Senate Energy Committee, said if Mr. Obama does eventually veto the bill they’ll try to find ways to attach it to other energy legislation the president wants, hoping to get him to sign it through a compromise.

‘DO NOT DISCLOSE’: Obama Admin Tells Banks To Shut Up About Its Targeting of Consumers, Gun Dealers

(Patrick Howley)  The Obama administration’s Consumer Financial Protection Bureau is threatening banks to be silent about the administration’s new programs supervising and investigating private bank account holders.
A shocking bulletin that CFPB issued to banks, which was obtained by The Daily Caller, was sent around this week in the midst of controversy regarding the administration’s Operation Choke Point program, by which the administration pressures banks to cut off accounts for supposedly suspicious businesses, including gun dealers. Operation Choke Point’s anti-gun mission was recently confirmed in a series of audiotapes published by the US Consumer Coalition, in which a bank teller explained to a gun dealer why his account was being shut down.
“The Consumer Financial Protection Bureau [CFPB] issues this compliance bulletin as a reminder that, with limited exceptions, persons in possession of confidential information, including confidential supervisory information [CSI], may not disclose such information to third parties,” the bulletin states.
“‘Confidential information’ means ‘confidential consumer complaint information, confidential investigative information, and confidential supervisory information, as well as any other CFPB information that may be exempt from disclosure under the Freedom of Information Act pursuant,” according to the bulletin.
Even non-disclosure agreements are invalid according to the CFPB’s effort to suppress information.
CFPB states that “private confidentiality and non-disclosure agreements neither alter the legal restrictions on the disclosure of CSI nor impact the CFPB’s authority to obtain information from covered persons and service providers in the exercise of its supervisory authority.”
Good thing President Obama’s Dodd-Frank Act gave CFPB vast powers to enforce this kind of information-suppressing.
“Many supervised financial institutions became subject to federal supervision for the first time under the Dodd-Frank Wall Street Reform and Consumer Protection Act [Dodd-Frank Act]. Pursuant to authority granted under the Dodd-Frank Act, the CFPB has issued regulations that govern the use and disclosure of CSI. The CFPB expects all supervised financial institutions to know and comply with the regulations governing CSI.”

Bank of England governor attacks eurozone austerity

The Bank of England governor, Mark Carney, has launched a strong attack on austerity in the eurozone as he warned that he single-currency area was caught in a debt trap that could cost it a second lost decade.
Speaking in Dublin, Carney said the eurozone needed to ease its hardline budgetary policies and make rapid progress towards a fiscal union that would transfer resources from rich to poor countries.
“It is difficult to avoid the conclusion that, if the eurozone were a country, fiscal policy would be substantially more supportive,” the governor said. “However, it is tighter than in the UK, even though Europe still lacks other effective risk-sharing mechanisms and is relatively inflexible.”
Carney’s remarks come just three days after the election of the Syriza-led government in Greece presented a direct challenge to the austerity policies championed in the eurozone by Germany’s Angela Merkel.
While not mentioning any eurozone country by name, Carney made it clear that he thought the failure to complete the process of integration coupled with over-restrictive fiscal policies risked driving the 18-nation single currency area deeper into a debt trap.
“Since the financial crisis all major advanced economies have been in a debt trap where low growth deepens the burden of debt, prompting the private sector to cut spending further. Persistent economic weakness damages the extent to which economies can recover. Skills and capital atrophy. Workers become discouraged and leave the labour force. Prospects decline and the noose tightens.
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In a war u stock up on weapons, in a currency war u stock up on gold: Russia Increases Gold Reserves for 9th Month:

Kazakhstan’s Central Bank buying out all gold produced
For the recent two years Kazakhstan’s Central Bank has been buying all the fine gold produced in the country, reported, citing Albert Rau, Minister for Investments.
“Given the turbulent global economy condition, the National Bank has been buying out all the fine gold produced (…) annual production output stands at 22 tons a year”, Mr. Rau said, when presenting a draft law on precious metals and gems in the country’s Majilis (lower chamber).
“As a rule, prices for gold grow amidst growing demand (…) the latter is normally driven by volatility of major currencies. Currently, the keen interest to gold is assigned to the weakening Euro. Gold is seen as a stable harbor”, he elaborated.
Russia Increases Gold Reserves for Ninth Consecutive Month
Russia raised its gold reserves for a ninth straight month in December as the country continued to add to the fifth-biggest gold holdings in the world, data from the International Monetary Fund showed on Tuesday.
Russia increased its bullion holdings by 20.73 tons to 1,208.23 tons in December, the IMF data showed.