Wednesday, October 7, 2009

Gold Jumps to Record as Inflation Outlook Fuels Investor Demand

Oct. 6 (Bloomberg) -- Gold rose to a record on speculation that currencies will depreciate, spurring inflation and boosting the appeal of the precious metal for investors seeking to preserve their wealth.

Gold futures climbed as high as $1,045 an ounce in New York, topping the previous record of $1,033.90 in March 2008. The spot price is headed for a ninth straight annual gain, the longest rally since at least 1948. The dollar fell as much as 0.7 percent against a basket of six major currencies.

“Gold is acting like the ultimate currency,” said Chip Hanlon, the president of Delta Global Advisors Inc. in Huntington Beach, California. “Central banks are following the same monetary course and trying to stimulate and inflate their way back to growth. Everyone’s concerned about the dollar, but it’s not like you can hate the dollar and fall in love with the euro or the yen.”

President Barack Obama has increased the U.S. marketable debt to an unprecedented $6.94 trillion as he borrows to spur the world’s largest economy. Goldman Sachs Group Inc. predicts the country will sell about $2.9 trillion of debt in the two years ending next September.

Gold futures for December delivery climbed $21.90, or 2.2 percent, to $1,039.70 on the Comex division of the New York Mercantile Exchange. Prices may reach $1,400 within six months, Hanlon said. Gold for immediate delivery gained as much as 2.6 percent to a record $1,043.78. The metal has climbed 18 percent this year.

‘Just Begun’

“Gold has just begun its ascent,” said John Brynjolfsson, the chief investment officer of Armored Wolf LLC, a hedge fund in Aliso Viejo, California. “As central banks print more and more money, the private demand for gold as an investment and inflation hedge is destined to grow. It’s pretty clear that gold will be at $2,000 by 2012, and it could happen a lot faster.”

Expectations of higher consumer prices are building. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, which reflects the outlook among traders for inflation, widened to 1.84 percentage points from almost zero at the end of 2008. It averaged 2.2 percentage points in the past five years.

Soaring Crude Oil

Crude-oil futures, used by some investors to forecast inflation, have soared 59 percent this year.

“Even though the current inflation rate is low, the risk of a blowup in inflation in the future is becoming higher all the time,” said Adam Farthing, Deutsche Bank AG’s head of metals trading in Asia. “Gold is pricing that in.”

Farthing projected the metal will reach $1,150 by the end of the year.

Gold priced in other currencies will also rise, said Dan Greenhaus, the chief economic strategist at Miller Tabak & Co. in New York.

“Gold is not just seen as an inflation hedge here in the U.S. but is rather acting as a hedge against all currencies,” Greenhaus said. “As your currency depreciates in value, the consumer has less purchasing power and therefore it costs more to buy the same number of goods. Gold in inflation-adjusted terms is well below its highs.”

The slumping dollar helped propel gold above the previous record. The greenback fell after Australia unexpectedly raised borrowing costs. The Federal Reserve has kept its benchmark interest rate between zero and 0.25 percent since December.

Interest Rate Differentials

“Interest-rate differentials will begin to work increasingly against the dollar,” Greenhaus said.

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, recommended that investors buy gold in other currencies.

“By owning gold in foreign-currency terms, we’ve been able to hedge away our U.S. dollar exposure,” Gartman said.

Gold held in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, reached an all-time high of 1,134 metric tons on June 1 and was at 1,098.07 tons yesterday. The fund has passed Switzerland as the world’s sixth-largest gold holding.

Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said gold will climb further.

“Gold is not going up parabolic,” McGhee said. “You’ll have some technical selling here against the old highs, but it’s put some time in around $1,000 so the next first real stop will be around $1,200.”

Silver futures for December delivery advanced 76 cents, or 4.6 percent, to $17.295 an ounce on the Comex. The metal climbed to a 13-month high of $17.69 on Sept. 17 and is up 53 percent this year.

By Pham-Duy Nguyen, Nicholas Larkin and Kim Kyoungwha

Markey Pushes New Net Neutrality Regulations

Read HR 3458 "The Internet Freedom Preservation Act of 2009" here

Markey's campaign contributions on OpenSecrets here and here.

From Campaign For Liberty: Net Neutrality Regulation vs. Internet Freedom

From Tech Liberation: It’s no coincidence that the Internet, a sanctuary of governmental restraint, has spawned such unparalleled innovation. In the relentlessly fast-moving digital age, regulatory intervention is a recipe for entrenching the status-quo.

From Digital Society: The US leads the world in innovation on the Internet and all of its related technologies and continues to do so under the current regulatory regime. Yet in the absence of market failure or any materialization of dire predictions from Net Neutrality regulation advocates 3 years ago, why is now a good time to pass radical new changes to the regulatory landscape to enforce an experimental version of the Internet that has never been tried? Why destroy existing business models that have flourished on the Internet today in favor of hypothetical businesses that may never materialize?

IBM to buy Bank of America mortgage servicing unit

IBM has signed a deal to buy the core operating assets of Bank of America's mortgage servicing unit Wilshire Credit Corporation. Financial terms of the deal were not disclosed.

Under the deal, Big Blue will add Wilshire's mortgage servicing platform and 900 employees to its Lender Business Process Services unit. Wilshire will work with its clients, IBM and BofA to move its mortgage servicing rights and related assets to the bank.

Eric Ray, general manager, financial services sector, IBM Global Technology Services, says: "The acquisition of Wilshire's assets further demonstrates IBM's commitment to delivering robust and innovative mortgage solutions during a difficult time for the mortgage industry."

Max Wolff - Obama, beware another economic tsunami

Check this link .......

Peter Schiff On Fast Money - Oct 5, 2009

Check this link ........

Marc Faber – U S Dollars Will Be Worthless (THE TRUTH ABOUT THE ECONOMY)

No Gravatar

Top ten list of Americans for monetary reform: the most important economic policy in US history

The financial crisis in America today could be over almost instantaneously through monetary reform. Monetary reform is a fundamental shift in how America creates money. The shift is from a Robber Baron-era design of banks creating credit to lend to us at interest and ever-increasing debt, to our community (government) creating it for the direct payment of public goods and services. The benefits of monetary reform are conservatively $1 TRILLION every year, the end of the national debt, and full employment.

Please review the links above to fully understand this idea.
The power of monetary reform is evident in history. Napoleonic France quickly became the world’s leading economy and Paris its most beautiful city after ten years of violent revolution that killed or drove-off their economic leadership. Nazi Germany overcame tragic-comic hyperinflation to become the model economy during the Great Depression. These nations were in worse economic conditions than America today (economic power needs to be invested in the public good, not for empire).
This top 10 list of Americans who understood monetary reform deserve your attention. Given our economic condition, you literally have nothing more valuable for your attention. Each of the ten gives unique and added perspective for your learning of this multi-trillion dollar topic.
As always, please share this article with all who say they want to be a competent citizen. If you appreciate my work, please subscribe by clicking under the article title (it’s free). Feel free to peruse my other articles here. Following the list of our top 10 is two short video-clips of Dennis Kucinich and Ron Paul discussing monetary reform in the present.
  1. Thomas Edison (1847-1931) held over 1,000 US patents for his inventions and is considered among the most brilliant minds in American history. Edison understood the engineering of our monetary system and actively spoke for monetary reform. The following seven paragraphs are from an interview with the New York Times in 1921 from a publicity tour Edison took with his friend and fellow inventor Henry Ford to discuss monetary reform at a potential site for a hydroelectric dam at Muscle Shoals, Alabama. He discusses with the reporter how the US government should directly create the money for this public good.
  1. Thomas Jefferson (1743-1826) was the primary author of the Declaration of Independence, a foundation of American ideals. He was a scholar of the Enlightenment, including religious tolerance and freedom. Jefferson’s written work is extensive. He communicates strong understanding of banks creating credit that cause inflation to devalue everyone’s currency, the gambling of created credit such as we see today in credit default swaps and exotic derivative trading, and states, “Bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs.” My personal analysis is that Mr. Jefferson did not fully understand the power of creating money directly for the public good. However, he was quite eloquent to the dangers of the banking system creating and gambling with credit, the monetary and financial system we still have today.
  1. Andrew Jackson (1767-1845) is the last US President to pay-off the national debt. He did so only after ending the Federal Reserve of his day, the privately-owned Second Bank of the United States. The story is told in the 10-minute video below from the Money Masters. As did Thomas Jefferson, Jackson understood the subversive act and perpetual national debt with banks creating money to lend to the government. He did not understand the positive policy response of the government creating money directly for the payment of public goods and services.
  2. Peter Cooper (1791-1883) was one of America’s leading inventors and businessmen. He designed and built the first US locomotive in 1830, the “Tom Thumb.” Cooper was the first to introduce anthracite coal into iron production in 1845, resulting in the US’ first wrought iron beams for construction. In 1854, Cooper was a founder in the telegraph company that created the first trans-Atlantic cable. He patented Jell-O. In 1859, he founded The Cooper Union for the Advancement of Science and Art, a university in New York City that grants full scholarships to the nation’s brightest students with express admittance to all regardless of race, religion or sex. Peter Cooper was the newly-formed National Greenback Party candidate for President in 1876. Cooper learned about monetary policy from Albert Gallatin, US Secretary of the Treasury from 1801-1814.
  1. John F. Hylan (1868-1936) was Mayor of New York City from 1918 to 1925. New York has long been the US banking and financial headquarters, with the mayor’s office about a half-mile from the New York Stock Exchange. Hylan has two revealing communications in strong argument for monetary reform. The first is four paragraphs from a speech he made in Chicago on March 26, 1922 and reported in the New York Times the following day in the article titled, “HYLAN TAKES STAND ON NATIONAL ISSUES" (and here with immaterial other commentary). The next are 12 extensive paragraphs reported by the New York Times on Dec. 10, 1922 in the article titled, “HYLAN ADDS PINCHOT TO PRESIDENCY LIST; FORESEES A REVOLT.”
  1. These revealing comments come from two Chairpersons of the House Banking Committee, totaling 24 years of service in that position of comprehensive insight into American banking. Louis McFadden (1876-1936) was Chair from 1919-1931, and Wright Patman (1893-1976) was Chair from 1963-1975. After the two gentlemen’s remarks is a new 10-minute video from “The Secrets of Oz,” the sequel of the acclaimed “Money Masters” documentary.
  1. Benjamin Franklin (1706-1790) was a Founding Father of the United States and one of the most accomplished inventors and brilliant minds in human history. Among his achievements was the discovery of how to fund a government without taxes. Ok, Ben didn't invent this, but he was bright enough to recognize its power, write for it, and act for it's permanency in policy. This article will concisely summarize the method, document its veracity in conservative history, allow Mr. Franklin to explain it to you directly, and finish with a scenic 7-minute video describing Mr. Franklin’s contributions.
  1. William Jennings Bryan (1860-1925) was an attorney, one of the nation’s most popular public speakers, and the Democratic Party’s choice for President in three elections: 1896, 1900, and 1908. Bryan’s political populism centered on American monetary policy. He supported an expansion of the money supply in response to a national depression in the 1890’s by rejecting the gold standard, a limitation on currency based on a fractional reserve of gold holdings. His powerful stand for monetary reform is clearly expressed in his “Cross of Gold” speech in accepting the Democratic Party nomination for President in 1896, quoted below (click here to listen to Bryan’s reading of the speech 25 years later).
  1. Charles Lindbergh Sr. (1859-1924) was a member of the House of Representatives from 1907-1917 (R-MN). Lindbergh became disgusted with the leadership of both Republicans and Democrats, and ran as an unsuccessful third-party candidate for the Senate, Congress, and Governor from 1916 until his death. Lindbergh was among the leading spokespersons against the Federal Reserve and against US involvement in World War 1. Lindbergh’s powerful Congressional speech from his 1917 book Why is Your Country at War?, page 156, that alleges the Money Trust created the privately-owned Federal Reserve banking system to maximize their own profits. This speech is as strong and accurate a message that can be communicated. It is fully worth your investment of under 5 minutes' attention.
  1. The Great Depression in the US (1929-1941) motivated professional economists to comprehensively and creatively address its causes. Upon consideration of previous US economic depressions in 1837, 1873, and 1893, prominent economists led by Henry Simons at the University of Chicago proposed monetary reform as the nation’s most effective and practical policy response, known as the Chicago Plan (and here). This proposal was endorsed by Simons’ colleague, Paul Douglas, Frank Graham and Charles Whittlesley of Princeton, Irving Fisher of Yale, Earl Hamilton of Duke, Willford King of NYU, and sent to a thousand academic economists for their input. Three hundred twenty responded to the mailed proposal and survey (an impressively high number for a cold-call proposal and survey) from 157 universities, with 73% in full agreement with the proposal, 12.5% in approval with various considerations in its implementation, and only 14% in disagreement.

Dollar Living on Its Reputation and Borrowed Time

Stocks and commodities are on the rise today as the dollar falls. It's nothing new or surprising.

What is newsworthy is a report from the British newspaper The Independent claiming the dollar's days might be numbered in the oil trading pits.

The story says "secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars." The details on how and what would replace the dollar, according to the report, are still in the works.

Sources aren't named and Saudi officials, among others, are quickly denied the veracity of the report. However, it appears some investors are buying the story based on today's move in gold prices.

As Henry and Aaron discuss in this clip, questioning the U.S. dollar as the global reserve currency makes sense. How long can we print money and increase our debt before other global markets take action? And, how will the Fed manage its exit strategy without causing hyper-inflation?

BBC Attack Piece Promotes Cottage Industry Of Debunkers

The BBC cannot resist attacking anyone who questions the establishment line and counters mainstream accounts of events, especially if they make up part of the new and exciting alternative media that is contributing to the corporation’s ongoing fossilization.

That is why in a feature article today, the corporation is promoting a group of “scientists and skeptics” whose declared mission is to vigorously debunk those who are questioning the “accepted versions” of events.

“While many people find them harmless fun, others believe there is a darker truth – that conspiracy theories are rewriting history, warping the present and altering the future. Enough is enough they say – it’s time to fight back.” the report reads.

The article centres around the “non profit” James Randi Educational Foundation (JREF), which charges £175 a ticket to its conferences, events that equate to little more than rabid debunking fests on everything from 9/11 truth to research claiming mercury containing vaccinations are harmful.

In a deliberate Orwellian warping of language, JREF attendees are described as “skeptics” who are promoting critical thinking”:

“…scientists, writers and comedians target conspiracy theories – and their close cousins pseudoscience and medical quackery – in front of an audience loosely allied by their desire for more rational, critical thinking.” the report states.

“…some delegates prefer to call themselves rationalists, free thinkers or Brights. Out there in the audience is the next generation of bloggers and media professionals,” [JREF president Dr Phil] Plait says.

In what plain of reality is it considered “free thinking” to debunk and shut down alternative theories and questions in favour of a recieved reality?

Luminaries and speakers at the recent conference in London, titled The Amazing Meeting (TAM), included Glenn Hill, the son of someone who claimed to have taken pictures of fairies at the bottom of their garden, but later admitted it was a hoax.

The BBC report on JREF brazenly lumps in questions over the 9/11 attacks with moon landing conspiracies and individuals who claim to have paranormal spoon-bending powers.

It highlights the fact that those who have questioned and challenged the findings of the 9/11 commission have had a “massive impact”, however, the tone of the piece suggests this is thoroughly negative and even dangerous.

Presumably the 9/11 commissioners themselves should be a target for the JREF debunkers, given that six of the ten have openly questioned the Commission’s findings and described the whole thing as a whitewash.

Perhaps the same goes for the majority of the 9/11 victims’ family members, who also have unanswered questions regarding the attacks, according to the head of the biggest 9/11 families group.

JREF was officially established in 1996 to “help debunk paranormal and pseudoscientific claims”. How ironic it is then that the foundation seemingly supports the pseudoscientific claim that jet fuel, and office fires in the case of of World Trade Center 7, can burn at temperatures hot enough to cause multi-story steel framed structures to collapse and disintegrate at free fall rate.

JREF has comedians and a man who pretended to have a picture of fairies at its conferences, the 9/11 truth movement has heard from hundreds of architects, engineers and physics professors. How telling it is that the BBC paints up JREF as the credible organisation, while the 9/11 truth movement is reduced to the level of racist internet-dwelling freaks.

The ever present anti-semite smear against the 9/11 truth movement is present, tick that prerequisite off the list. Apparently British investigative journalist Jon Ronson (he who lied in his own book in claiming he entered the elite Bohemian Grove gathering with Alex Jones) posted a comment on a 9/11 truth forum and was, according to the BBC, “abused and ridiculed because he is Jewish”.

Demonization of the internet is there too, with the following lazy smear:

“Conspiracy theorists have used the internet to co-ordinate increasingly slick attacks on the accepted versions of events… Conspiracy theories predate the internet but the web has provided a fast, accessible platform for groups to unite, gather research and disseminate information without even meeting or leaving their houses.”

Check off another cliched attack.

The piece also intimates that a belief in a conspiracy regarding the assassination of JFK is something to be classed as kooky or revisionist. A reader comment nails the ridiculousness of such a claim:

So I guess you’re also including the “House Select Committee on Assassinations” who in 1970 concluded that “The committee believes, on the basis of the evidence available to it, that President John F. Kennedy was probably assassinated as a result of a conspiracy. The committee was unable to identify the other gunmen or the extent of the conspiracy.” This was a three-year investigation carried out carried out by the US Government. Those loony conspiracy nuts.

If the BBC and JREF are trying to convince the general public to believe something different, they have a great deal of work to do, given that some forty years later 7 in 10 stark raving mad kooks believe the assassination was the result of a nefarious plot, not the act of a lone killer.

Another reader comment on the BBC piece injects some common sense into an otherwise blithering mess of an article:

Some conspiracy theorists are plain nuts, but the ability and right to question what is commonly taught is extremely important. To assert that all conspiracy theories are bunk is the same as saying “believe what you are told”. Surely this is dangerous thinking?

BBC Attack Piece Promotes Cottage Industry Of Debunkers 260909banner

The BBC has routinely attacked the 9/11 truth movement and over the past few years has produced no less than four television hit pieces laden with bias and emotional manipulation in an attempt to debunk legitimate questions that remain unanswered.

The corporation has also hacked its way through research into the 7/7 London bombings that has raised concerning questions in the vacuum that exists due to the lack of any real investigation into the attacks.

In addition the BBC has taken to debunking any deviations from the official version of events surrounding Lockerbie, The Oklahoma City Bombing, and the deaths of Dr David Kelly and Princess Diana.

All of these shows have been backdropped with so called “experts”, including the director of The X-Files, forcing ludicrous, cringe-worthy and cliched psychobabble down the throats of viewers to the effect of “the conspiracy theorists just want to believe that there is a big evil force, that they have no power to resist, manipulating and controlling everything.”

We have attempted to engage the makers of these programs directly. Alex Jones himself has appeared in many of them and has had their producers and creators on his show as guests. Each time they have had very little to contribute and have actively shown themselves to be completely uninformed on the subjects they have supposedly spent months researching.

Trust in the BBC went down the toilet bowl a long time ago. The corporation was effectively castrated by the government following its role in the Iraqi Weapons of Mass Destruction debacle that preceded the invasion of Iraq in 2003.

After the Blair government appointee Lord Hutton astonishingly exonerated the government of any wrong doing over the affair, the Director General of the BBC, Greg Dyke, was forced to quit. The corporation was also made to issue a groveling apology for daring to act like an independent journalistic source when it ran a story claiming that the government had “sexed up” its Iraq weapons dossier with unreliable intelligence.

Greg Dyke has since spoken of a “Westminster conspiracy”, on the part of the elite political class and the BBC, that is actively breaking down democracy in Britain. But then again I guess he is just one of the loony internet-dwelling spoon-bending conspiracy theorists that the BBC is proud to announce should be countered by the “critical thinkers” of the James Randi Educational Foundation.

I guess we should simply trust a giant media corporation that is directly subsidized by the government and feeds off enforced tax payer license fees to deliver our “critical thinking” for us.

UN calls for new reserve currency

The United Nations called on Tuesday for a new global reserve currency to end dollar supremacy which has allowed the United States the "privilege" of building a huge trade deficit.

"Important progress in managing imbalances can be made by reducing the reserve currency country?s 'privilege' to run external deficits in order to provide international liquidity," UN undersecretary-general for economic and social affairs, Sha Zukang, said.

Speaking at the annual meetings of the International Monetary Fund and World Bank in Istanbul, he said: "It is timely to emphasise that such a system also creates a more equitable method of sharing the seigniorage derived from providing global liquidity."

He said: "Greater use of a truly global reserve currency, such as the IMF?s special drawing rights (SDRs), enables the seigniorage gained to be deployed for development purposes," he said.

The SDRs are the asset used in IMF transactions and are based on a basket of four currencies -- the dollar, euro, yen and pound -- which is calculated daily.

China had called in March for a new dominant world reserve currency instead of the dollar, in a system within the framework of the Washington-based IMF.

Copyright AFP 2008, AFP stories and photos shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium

US Cedes Economic Independence To IMF

Check this link ........

Dow Will Fall to 6,300 by Year End: Portfolio Manager

With the prospect of higher unemployment hanging over the markets, some experts expect a correction. So are they right? Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds, and John Lekas, CEO and portfolio manager at Leader Capital, shared their insights. (See their recommendations, below.)

“I think we go below the double dip,” Lekas told CNBC. “By year-end, we drop below 6,300 on the Dow and by 2011, we’re at 4,200.”

Lekas said although Monday's ISM services index was “neutral,” the unemployment number was at 785,000 last month and that number is expected to worsen.

“So 26 to 27 million people who are out of work isn’t going to help the economy,” he said. “And until that number gets better, we will not see a recovery.”

Lekas told investors to sell equities, buy short-term fixed income, stay with high quality names and stay safe.

CNBC Data Pages:

In the meantime, Cuggino said although there are risk factors and uncertainty in the markets, earnings are going to continue to improve.

“There’s also a tremendous amount of liquidity out there that will be used to prime economic growth going forward,” he said.

Cuggino recommended sticking with equities—“especially U.S. multinationals who take advantage of worldwide growth.” He also likes the financial services, biotechnology, pharmaceuticals and technology sectors.

More Market Intelligence:





















國)出版業受經濟不景衝擊,高檔生活雜誌出版社康迪納斯特(Conde Nast),宣佈一口氣結束旗下4本虧本的雜誌,包括美國歷史最悠久的飲食雜誌《Gourmet》、婚事雜誌《Modern Bride》和《Elegant Bride》,以及親子雜誌《Cookie》,180名員工被裁。






Treasury Secretary Forced Banks to Surrender Ownership Interest to Government

( – In a new report, Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), reveals that then-Treasury Secretary Henry Paulson and key federal regulators forced the nation’s nine largest financial institutions to take billions in taxpayer bailout dollars in October 2008, threatening that if the banks refused, the government would take their stock shares anyway.

Barofsky’s report, released Monday, examines the circumstances under which the government selected the initial nine participants of its Capital Purchase Program (CPP) bailout. The report found that the government picked the banks because of their size and involvement in the U.S. financial system, not because they needed the money or not.

The inspector general’s report also found that federal officials, including then-Secretary Paulson, Federal Reserve Chairman Ben Bernanke, and current-Treasury Secretary Timothy Geithner all viewed the plan as an offer the banks could not refuse.

“Officials at Treasury, the Federal Reserve, and other federal regulators felt strongly that the nine institutions should not be permitted to reject the government’s capital infusions,” the report says.

The report also confirms and cites a set of “CEO Talking Points” provided for Paulson that indicate that the government did not consider its plan optional.

“Taken together, your nine firms represent a significant part of our financial system – therefore – in our view you must be central to any solution,” the talking points state.

“We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed,” the talking points continue. “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”

The SIGTARP report cites Paulson’s talking points, confirming them with the former secretary, who told the IG that, if necessary, he would tell the banks’ CEOs that they had no choice but to sell shares of their companies to the government.

“Furthermore, former Secretary Paulson told SIGTARP that, if necessary, the government would make clear to the nine executives that they had no choice but to take the money,” the IG report documents.

This May 2009 photo depicts the headquarters of JPMorgan Chase & Co., which announced Wednesday, June 17, that it repaid in full the $25 billion preferred stock investment it accepted through the Troubled Asset Relief Program (TARP). (AP Photo/Mark Lennihan)
“Indeed, one bank executive told SIGTARP that the impression he received from Secretary Paulson and other regulators was that the executives did not have a choice in the matter,” states the report.

Interviews with six of those bank executives by SIGTARP reveal that the government intended that all nine banks take the funds, regardless of whether the money was needed, in order to hide the fact that some of them were in grave danger.

“These six executives also told SIGTARP that government officials strongly urged them to accept the capital injections as a group,” says the report, “irrespective of whether they believed that their institutions required such substantial assistance.”

“Federal Reserve officials later explained that acting as a group would help avoid any stigma that might have been associated with accepting capital from the government,” reads the report. “If some of the institutions had accepted and others had not, the markets might have viewed the decision to accept capital as a sign that the institution was experiencing financial problems.”

These problems, which some of the firms were in fact experiencing, might have led investors to withdraw their money because they were afraid that the banks might fail and their investments would be worthless – which some of the banks did, sending their stock values plummeting.

In fact, the report reveals that the health of the individual banks was not much of a concern for the government, which chose the banks because of their size and involvement in the U.S. financial system and not because they needed the money.

“According to government officials interviewed by SIGTARP, the relative health of the first nine institutions selected to receive CPP funds was not a primary factor in the institutions’ selection,” the report finds.

Despite statements by both Paulson and Bernanke that all nine institutions were “healthy,” government officials had concerns that some institutions needed the money while others were in relatively good shape. This fact was confirmed to SIGTARP by both Bernanke and Geithner.

“Chairman Bernanke told SIGTARP that there were differences in the nine banks in terms of strength and weakness, but that the selection was generalized in order to avoid stigmatizing any one bank as being a weak bank and creating a panic,” reads the report.

“He recounted, for example, that a few of the banks were under stress, but that they were included because they were key players in the financial markets,” the report reads.

It continues: “Secretary Geithner, who was then President of the FRBNY [Federal Reserve Bank of New York] told SIGTARP that, in selecting the first nine institutions, size and importance were the key characteristics that guided the process, and that no judgments were made as to their strength or weakness.”

Bush administration blocked efforts to prevent housing crisis

Federal regulators in the Bush administration blocked attempts by state governments to prevent predatory lending practices that resulted in the financial crisis now stalking the American economy, a new study from the University of North Carolina says.

In 2004, the Office of the Currency Comptroller, an obscure regulatory agency tasked with ensuring the fiscal soundness of America's banks, invoked an 1863 law to give itself the power to override state laws against predatory lending. The OCC told states they could not enforce predatory-lending laws, and all banks would be subject only to less-strict federal laws.

Now, a research paper (PDF) from UNC-Chapel Hill's Center for Community Capital shows that those anti-predatory lending laws had actually worked. States that had stricter regulations on issuing mortgages were found to have fewer foreclosures.

"We believe that these findings are remarkable, since they suggest an important and yet unexplored link between [anti-predatory lending laws] and foreclosures," the study's authors state.

The study may be the first scientific evidence to back up claims made by many critics that the Bush administration and earlier administrations allowed last year's financial crisis to happen by not enforcing common-sense regulations on lenders

Last year, seven months before the collapse of Lehman Brothers and the ensuing government banking bailout, then-New York Governor Eliot Spitzer wrote a Washington Post column in which he described how the Bush administration blocked states' efforts to prevent a crisis in the mortgage industry.

Spitzer wrote:

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Spitzer's Post column ran a month before the New York Times reported that federal authorities were investigating Spitzer as a patron of high-end hookers, ending his political career and long-running crusade against corporate malfeasance. Some observers, including investigative reporter Greg Palast, say this was not a coincidence.

The UNC study "is a perfect reminder, as Congress and the administration tackle financial regulatory reform, that not all regulations are onerous, anti-business, and aimed at choking off financial innovation," writes Mary Kane at the Washington Independent. "And it’s more evidence that borrowers buying beyond their means weren’t the only only players in the sub-prime mess."

What Henry Kissenger and the FBI knew about Cubana Flight 455 Bombing


33 years after the terror bombing of a Cuban airliner, the United States continues to protect the guilty

On October 6, 1976, anti-Castro terrorists murdered seventy-three people on Cubana Flight 455 off Barbados.

Declassified letters and reports (like below from FBI Director Clarence M. Kelley to Henry Kissenger) show that the United States Government knew of the plot beforehand and not only that: they knew exactly who was involved almost four months before the bombing.

For over three decades the US government has protected the terrorists. This outrage continues under the Obama Administration and undermines whatever moral authority the United States retains in the persecution of its war in Iraq – a “part-time hobby” war with no end in sight.

Further Reading

The National Security Archive (See declassified FBI & CIA documents)

Bombing of Cuban Jetliner, 30 years later

Luis Posada Carriles – The Declassified Record

Wikipedia: Cubana Flight 455

Barbados Free Press: Cubana Flight 455 Bombing – 30 Years Later USA Still Harbours A Terrorist

Cubana bomb Kissinger

Commercial Real Estate: The Shoe Dropped In California

More proof that the commercial real estate crash is coming: hotel foreclosures in California have more than tripled in the first nine months of this year, according to Bloomberg.

Foreclosures in Dana Point climbed to 47 in January through September from 15 a year earlier, and properties in default more than quadrupled to 259.

Loans secured by more than 1,500 hotels with a total outstanding balance of $24.5 billion are in danger of default.

And, as with the housing market, it was really the late stages of the housing bubble that did so much of the damage: 70% of its troubled hotel loans originated between 2005 and 2007. Sadly, offering free tats, tequila and BMWs for stays probably won't help.

China calls time on dollar hegemony

You can date the end of dollar hegemony from China's decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.

The Chinese yuan: friends take a photo in front of a sculpture of a one-hundred yuan banknote in Beijing
The Chinese yuan: friends take a photo in front of a sculpture of a one-hundred yuan banknote in Beijing

Beijing does not need to raise money abroad since it has $2 trillion (£1.26 trillion) in reserves. The sole purpose is to prepare the way for the emergence of the yuan as a full-fledged global currency.

"It's the tolling of the bell," said Michael Power from Investec Asset Management. "We are only beginning to grasp the enormity and historical significance of what has happened."

It is this shift in China and other parts of rising Asia and Latin America that threatens dollar domination, not the pricing of oil contracts. The markets were rattled yesterday by reports – since denied – that China, France, Japan, Russia, and Gulf states were plotting to replace the Greenback as the currency for commodity sales, but it makes little difference whether crude is sold in dollars, euros, or Venetian Ducats.

What matters is where OPEC oil producers and rising export powers choose to invest their surpluses. If they cease to rotate this wealth into US Treasuries, mortgage bonds, and other US assets, the dollar must weaken over time.

"Everybody in the world is massively overweight the US dollar," said David Bloom, currency chief at HSBC. "As they invest a little here and little there in other currencies, or gold, it slowly erodes the dollar. It is like sterling after World War One. Everybody can see it's happening."

"In the US they have near zero rates, external deficits, and public debt sky-rocketing to 100pc of GDP, and on top of that they are printing money. It is the perfect storm for the dollar," he said.

"The dollar rallied last year because we had a global liquidity crisis, but we think the rules have changed and that it will be very different this time [if there is another market sell-off]" he said.

The self-correcting mechanism in the global currency system has been jammed until now because China and other Asian powers have been holding down their currencies to promote exports. The Gulf oil states are mostly pegged to the dollar, for different reasons.

This strategy has become untenable. It is causing them to import a US monetary policy that is too loose for their economies and likely to fuel unstable bubbles as the global economy recovers.

Lorenzo Bini Smaghi, a board member of the European Central Bank, said China for one needs to bite bullet. "I think the best way is that China starts adopting its own monetary policy and detach itself from the Fed's policy."

Beijing has been schizophrenic, grumbling about the eroding value of its estimated $1.6 trillion of reserves held in dollar assets while at the same time perpetuating the structure that causes them to accumulate US assets in the first place – that is to say, by refusing to let the yuan rise at any more than a glacial pace.

For all its talk, China bought a further $25bn of US Treasuries in June and $25bn in July. The weak yuan has helped to keep China's factories open – and to preserve social order – during the economic crisis, though exports were still down 23pc in August. But this policy is on borrowed time. Reformers in Beijing are already orchestrating a profound shift in China's economy from export reliance (38pc of GDP) to domestic demand, and they know that keeping the dollar peg too long will ultimately cause them to lose export edge anyway – via the more damaging route of inflation.

For the time being, Europe is bearing the full brunt of Asia's currency policy. The dollar peg has caused the yuan to slide against the euro, even as China's trade surplus with the EU grows. It reached €169bn (£156bn) last year. This is starting to provoke protectionist rumblings in Europe, where unemployment is nearing double digits.

ECB governor Guy Quaden said patience is running thin. "The problem is not the exchange rate of the dollar against the euro, but rather the relationship between the dollar and certain Asian currencies, to mention one, the Chinese Yuan. I say no more."

France's finance minister Christine Lagarde said at the G7 meeting that the euro had been pushed too high. "We need a rebalancing so that one currency doesn't take the flak for the others."

Clearly this is more than a dollar problem. It is a mismatch between the old guard – US, Europe, Japan – and the new powers that require stronger currencies to reflect their dynamism and growing wealth. The longer this goes on, the more havoc it will cause to the global economy.

The new order may look like the 1920s, with four or five global currencies as regional anchors – the yuan, rupee, euro, real – and the dollar first among equals but not hegemon. The US will be better for it.