Street clashes broke out between rioting youths and police in central Athens today as tens of thousands demonstrated during a nationwide strike against the cash-strapped government.
Hundreds of masked and hooded youths punched and kicked motorcycle police, knocking several off their bikes, as police responded with volleys of tear gas and stun grenades.
The violence spread after the end of the march to a nearby square, where police faced off with stone-throwing anarchists and suffocating clouds of tear gas sent patrons scurrying from open-air cafes.
Police say 16 suspected rioters were detained and two officers were injured.
Stand off: Greek police dodge petrol bombs hurled by rioters on the streets of Athens as protests against new measures to boost the economy turn violent
Up close: A flaming bottle flies towards a has-masked police officer who steps back to avoid being hit
Rioters used sledge hammers to smash the glass fronts of more than a dozen shops, banks, jewelers and a cinema.
Youths also set fire to rubbish bins and a car, smashed bus stops, and chopped blocks off marble balustrades and building facades to use as projectiles.
Organisers said some 60,000 people took part in the protest. But an unofficial police estimate set the crowd at around 20,000 - including those that took part in a separate, peaceful march earlier Thursday. Police do not issue official crowd estimates for demonstrations.
Thursday's strike - the second in a week - brought the country to a virtual standstill, grounding all flights and bringing public transport to a halt.
Chaos: A demonstrator kicks a tear gas canister as the 24 hour general strike turns ugly
Blockade: Strikers estimate up to 60,000 people had taken to the streets
State hospitals were left with emergency staff only and all news broadcasts were suspended as workers walked off the job for 24 hours to protest spending cuts and tax hikes designed to tackle the country's debt crisis.
Riot police made heavy use of tear gas during the start-and-stop clashes throughout the demonstration, including outside Parliament.
Strikers and protesters banged drums and chanted slogans such as 'no sacrifice for plutocracy,' and 'real jobs, higher pay.'
People draped banners from apartment buildings reading: 'No more sacrifices, war against war.
The demonstrators included hundreds of black-clad anarchists in crash helmets and ski masks, who repeatedly taunted and attacked riot police with stones and petrol bombs, at one point spraying officers with brown paint.
Extreme measures: Masked rioters set fire to a car during the demonstration
Force: Hundreds of police were deployed during the protests
Shopkeepers along the demonstration route hastily rolled down their shutters, while a few blocks away, people sat at outdoor restaurants, nonchalantly continuing their meals.
Tear gas wafted through the city center's streets, sending businessmen in suits scurrying for cover, their eyes streaming.
Minor clashes also broke out in the northern city of Thessaloniki, where about 14,000 people marched through the center.
Fears of a Greek default have undermined the euro for all 16 countries that share it, putting the Greek government under intense European Union pressure to quickly show fiscal improvement.
It has announced a raft of savings through public sector salary cuts, hiring and pension freezes and consumer tax hikes to deal with its ballooning deficit, but the measures have led to a new wave of labor discontent.
The cutbacks, added to a previous austerity plan, seek to reduce the country's budget deficit from 12.7 percent of annual output to 8.7 percent this year. The long-term target is to bring overspending below the EU ceiling of 3 percent of GDP in 2012.
The new plan sparked a wave of strikes and protests from labour unions whose reaction to the initial austerity measures had been muted.
Violence: Baton-wielding riot police clash with demonstrators in Athens
Target: A rioter sets fire to entrance of a hoteis
Thursday's strike shut down all public services and schools, leaving ferries tied up at port and suspending all news broadcasts for the day.
However, some private bank branches were open despite calls from the bank employees' union to participate in the strike.
While their colleagues clashed with groups of protesters, some police joined the demonstration.
About 200 uniformed police, coast guard and fire brigade officers, who cannot go on strike but can hold protests, gathered at a square in the center of the city shortly before the marches got under way.
'The police and other security forces have been particularly hard hit by the new measures because our salaries are very low,' said Yiannis Fanariotis, general secretary of one police association.
Joining the protest 'doesn't feel strange, because we are working people like everybody else and we are all shouting out for our rights,' he said.
The government says the tough cuts are its only way to dig Greece out of a crisis that has hammered the common European currency and alarmed international markets - inflating the loan-dependent country's borrowing costs.
But unions say ordinary Greeks are being called to pay a disproportionate price for past fiscal mismanagement.
'They are trying to make workers pay the price for this crisis,' said Yiannis Panagopoulos, leader of Greece's largest union, the GSEE.
'These measures will not be effective and will throw the economy into deep freeze.'
A general strike last Friday was marred by violence during a large protest march. Riot police used tear gas and baton charges against rock-throwing protesters, who smashed banks and storefronts, while left-wing protesters roughed up Panagopoulos as he was addressing a rally.
The labour unrest could spark fears that the government will have trouble in implementing its new measures.
Greece insists it doesn't need a bailout, and its European partners are reluctant to fund one.
But it has called for European and international support for its program, saying that unless it receives that support and the cost for it to borrow on the market falls, it might have to appeal to the International Monetary Fund for help.
On Wednesday night, Deputy Prime Minister Theodore Pangalos said Greece could bypass the costly process of borrowing from edgy markets by urging international institutions to buy its bonds at a set interest rate.
'We want, if there is an unjustified speculative attack against Greek bonds, to know that one of these institutions that have the substantial means to absorb such market products will come and say "look here, I am buying Greek bonds at this price, with this interest rate,"' Pangalos told private Mega TV.
He did not say which institutions he was referring to, or elaborate on the interest rate.
Markets think some kind of rescue would be organised if default looms. Speculation has focused on possible guarantees for Greek bonds or help from state-owned banks in other eurozone countries.
Illinois Governor Pat Quinn is the latest Democrat to demand a tax increase, this week proposing to raise the state's top marginal individual income tax rate to 4% from 3%. He'd better hope this works out better than it has for Maryland.
We reported in May that after passing a millionaire surtax nearly one-third of Maryland's millionaires had gone missing, thus contributing to a decline in state revenues. The politicians in Annapolis had said they'd collect $106 million by raising its income tax rate on millionaire households to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on income taxes, the top tax rate with the surcharge now reaches as high as 9.3%—fifth highest in the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn't fled the state.
Well, the state comptroller's office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million.
Yes, a big part of that decline results from the recession that eroded incomes, especially from capital gains. But there is also little doubt that some rich people moved out or filed their taxes in other states with lower burdens. One-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008. Some died, but the others presumably changed their state of residence. (Hint to the class warfare crowd: A lot of rich people have two homes.)
As William K. Black said a year ago, the government's entire strategy now - as in the S&L crisis - is to cover up how bad things are ("the entire strategy is to keep people from getting the facts").
Paul Krugman and others pointed out that Geithner has been trying to artificially prop up asset prices, but that such a strategy cannot succeed.
As I've pointed out numerous times, the stress tests were a total sham, with a pre-ordained passing grade for the banks.
As I've noted repeatedly over the last couple of years, the government has allowed the giant banks to hide their liabilities and maintain dizzying amounts of leverage by using off-balance-sheet gimmicks:
BIS slammed "the use of gimmicks and palliatives", and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts "will only make things worse".
This is, of course, what Marc Faber and many other economists have said for years.
But Bernanke and the other central bankers (as well as Treasury and the Council of Economic Advisors and Barney Frank and Chris Dodd and the others in control of American and British and French and Japanese and German and virtually every other country's economic policy) ignored BIS' advice in 2007 and 2008, and they are still ignoring it today.
Instead, they are doing everything they can to (2) prop up asset prices by trying to blow a new bubble by giving banks trillions, (2) re-write accounting and reporting rules to let the big banks and other giants keep bad debts on their books (or in sivs or other "second sets of books") and to hide the fact that they are bad debts, and (3) encourage consumers to spend spend spend!
Fraud at Lehman
Now, Geithner and Bernanke have been busted letting Lehman cook its books to try to hide its problems.
The examiner, Anton R. Valukas, also for the first time, laid out what the report characterized as “materially misleading” accounting gimmicks that Lehman used to mask the perilous state of its finances...
Lehman executives engaged in what the report characterized as “actionable balance sheet manipulation”....
A large portion of the [examiner's] nine-volume report centers on the accounting maneuvers, known inside Lehman as “Repo 105.”
First used in 2001, long before the crisis struck, Repo 105 involved transactions that secretly moved billions of dollars off Lehman’s books at a time when the bank was under heavy scrutiny.
The examiner ... said in a report publicly released Thursday that senior officials failed to disclose key practices, opening them up to legal claims ... the report concludes that the firm's auditor, Ernst & Young, failed to meet "professional standards."
The exhaustive report was unsealed today by Judge James M. Peck, who said the report reads "like a best-seller."
The examiner, Anton Valukas, also found that parties have claims to pursue against JPMorgan Chase and Citibank in connection with their behavior regarding the modification of agreements with Lehman and their increasing collateral demands in Lehman's final days. These demands had a "direct impact" on Lehman's diminishing liquidity -- its cash on hand -- which was a prime reason behind the firm's demise.
***
The examiner's report notes:
The business decisions that brought Lehman to its crisis of confidence may have been in error but were largely within the business judgment rule.
But the decision not to disclose the effects of those judgments does give rise to colorable claims [i.e. valid legal claims] against the senior officers who oversaw and certified misleading financial statements -- Lehman's CEO Richard S. Fuld, Jr., and its CFOs Christopher O'Meara, Erin M. Callan and Ian T. Lowitt.
There are colorable claims against Lehman's external auditor Ernst & Young for, among other things, its failure to question and challenge improper or inadequate disclosures in those financial statements.
***
The examiner notes that the issue giving rise to these potential claims was Lehman's creative use of repurchase agreements, otherwise known as repo. These are agreements between financial firms that essentially act as loans for cash -- one firm pledges collateral to another in exchange for cash with a promise that they'll buy back that collateral.
The examiner said the sole function of Lehman's use of repo was "balance sheet manipulation," according to the report:
Although Repo 105 transactions may not have been inherently improper, there is a colorable claim that their sole function as employed by Lehman was balance sheet manipulation. Lehman's own accounting personnel described Repo 105 transactions as an "accounting gimmick" and a "lazy way of managing the balance sheet as opposed to legitimately meeting balance sheet targets at quarter end." Lehman used Repo 105 "to reduce balance sheet at the quarter‐end."
The reason for that, the report notes, was to lower Lehman's leverage -- a critical component of the firm's credit rating.
In 2007‐08, Lehman knew that net leverage numbers were critical to the rating agencies and to counterparty confidence. Its ability to deleverage by selling assets was severely limited by the illiquidity and depressed prices of the assets it had accumulated.
Against this backdrop, Lehman turned to Repo 105 transactions to temporarily remove $50 billion of assets from its balance sheet at first and second quarter ends in 2008 so that it could report significantly lower net leverage numbers than reality.
Lehman did so despite its understanding that none of its peers used similar accounting at that time to arrive at their leverage numbers, to which Lehman would be compared...
Lehman's failure to disclose the use of an accounting device to significantly and temporarily lower leverage, at the same time that it affirmatively represented those "low" leverage numbers to investors as positive news, created a misleading portrayal of Lehman's true financial health.
Colorable claims exist against the senior officers who were responsible for balance sheet management and financial disclosure, who signed and certified Lehman's financial statements and who failed to disclose Lehman's use and extent of Repo 105 transactions to manage its balance sheet.
But Lehman wasn't alone in its gimmickry. The firm's auditor, Ernst & Young, one of the four biggest auditing firms in the world, failed in its oversight role:
In May 2008, a Lehman Senior Vice President, Matthew Lee, wrote a letter to management alleging accounting improprieties; in the course of investigating the allegations, Ernst & Young was advised by Lee on June 12, 2008 that Lehman used $50 billion of Repo 105 transactions to temporarily move assets off balance sheet and quarter end.
The next day ‐- on June 13, 2008 ‐- Ernst & Young met with the Lehman Board Audit Committee but did not advise it about Lee's assertions, despite an express direction from the Committee to advise on all allegations raised by Lee.
Ernst & Young took virtually no action to investigate the Repo 105 allegations. Ernst & Young took no steps to question or challenge the non‐disclosure by Lehman of its use of $50 billion of temporary, off‐balance sheet transactions.
Colorable claims exist that Ernst & Young did not meet professional standards, both in investigating Lee's allegations and in connection with its audit and review of Lehman's financial statements.
Tyler Durden slams the New York Fed, in a must-read essay:
There should be an immediate investigation into how many other banks are currently taking advantage of this artificial scheme to manipulate and misrepresent their cap ratio, and just why the New York Fed can claim it had no idea of this very critical component of the Shadow Economy.
Remember, The Feral Reserve is supposed to by the "uber-regulator" and the "safety and soundness" manager for the financial system.
They did a great job, right? Well...
For example, when
the Examiner questioned Lehman executives and other witnesses about Lehman’s financial health and reporting, a recurrent theme in their responses was that Lehman gave full and complete financial information to Government agencies, and that the Government never raised significant objections or directed that Lehman take any corrective action.
True? Let's see what the Examiner had to say:
Although various Government agencies had information that raised serious questions about Lehman’s reported liquidity and about the sufficiency of its capital and liquidity to withstand stress scenarios, the agencies generally limited their activities to collecting data and monitoring.
Oh. They looked but didn't act. I see.
Indeed, they looked pretty closely....
After March 2008 when the SEC and FRBNY began onsite daily monitoring of Lehman, the SEC deferred to the FRBNY to devise more rigorous stress-testing scenarios to test Lehman’s ability to withstand a run or potential run on the bank.5753 The FRBNY developed two new stress scenarios: “Bear Stearns” and “Bear Stearns Light.”5754 Lehman failed both tests.5755 The FRBNY then developed a new set of assumptions for an additional round of stress tests, which Lehman also failed.However, Lehman ran stress tests of its own, modeled on similar assumptions, and passed.5757It does not appear that any agency required any action of Lehman in response to the results of the stress testing.
So let's see what we got here. They ran two sets of stress tests and the firm failed both. Not satisfied with the results they then designed a third set, which the firm also failed (we can reasonably presume the third had less stringent requirements than the other two!)
Instead of applying any of these three, FRBNY, which was run by one MR. TIMOTHY GEITHNER, NOW OUR TREASURY SECRETARY WHO REPORTED TO ONE BEN BERNANKE, instead took Lehman's word that all was ok and did nothing.
Wait a minute. In the spring of 2009 we were told that all the big banks ran "Stress Tests" of Geithner's design. But Treasury didn't actually run them and didn't actually get and process the data - they told the banks to do so.
Uh, that's exactly what Lehman did, right? And Lehman passed its own "internally computed" stress test but failed all three of the externally-computed ones.
Do you still accept that all these other banks are solvent? What about the facts we do know - such as the inconvenient fact that between them the "big banks" have something like $150 billion of Home Equity lines behind an underwater and delinquent first mortgage, which is, by the way, worth zero yet being carried at or near full value......
Nor did it end there.
The SEC inspection revealed significant problems at Lehman. The SEC found that Lehman’s Price Valuation Group was understaffed; and it found that Lehman’s asset pricing function was overly “process driven.”5761 But the SEC did not release its findings or formally present them to Lehman prior to Lehman’s demise.
So The SEC knew, and they too did nothing.
It's worse. While Geithner is implicated as being "concerned" about Lehman in the paper, the most-troubling part the narrative is here:
The challenge for the Government, and for troubled firms like Lehman, was to reduce risk exposure, and the act of reducing risk by selling assets could result in “collateral damage” by demonstrating weakness and exposing “air” in the marks.5823
Air?
Uh, that's an apparent admission that FRBNY and Tim Geithner specifically knew that the marks that these banks were taking on their assets was materially and intentionally false.
Where have we seen this of late? Oh yeah - in all those banks that have failed of late, with 25-40% discounts to their claimed balance sheet values when the marks are actually reduced to losses to the deposit fund by the FDIC!
So let's see here. We now have:
Geithner, and presumably everyone under him, knew the marks on these assets were fictions months before Lehman failed, yet they intentionally concealed this fact from the market and took no action (nor did the SEC) to disclose this intentional misdirection.
The misdirection and false claims in this regard are almost certainly continuing today, as evidenced by the FDIC seizures literally on an every-week basis.
How about Bernanke? While he maintains (as did Geithner) that primary responsibility lay with the SEC, he also said:
Our concern was about the financial system, and we knew the implications for the greater financial system would be catastrophic, and it was.”
Now What?
Now what?
Well, as I've noted time and again, Geithner and Bernanke's strategies of covering up how bad things are, trying to paper over the severity of the problems of the financial giants by artificially inflating asset prices and allowing accounting tricks are doomed to failure.
Yves Smith points out that Geithner must be fired and that a full audit of the Fed - especially the New York Fed - must be conducted:
The key revelation is that Lehman as of late 2007 was routinely using repo transactions at the end of the quarter to mask how levered it truly was:
Lehman regularly increased its use of Repo 105 transactions in the days prior to reporting periods to reduce its publicly reported net leverage and balance sheet.2850 Lehman’s periodic reports did not disclose the cash borrowing from the Repo 105 transaction – i.e., although Lehman had in effect borrowed tens of billions of dollars in these transactions, Lehman did not disclose the known obligation to repay the debt.2851 Lehman used the cash from the Repo 105 transaction to pay down other liabilities, thereby reducing both the total liabilities and the total assets reported on its balance sheet and lowering its leverage ratios.
Yves here. The stunning bit is these “repos” were actually a conventional type of repo, despite the name, but Lehman was engaging in blatant misreporting, treating these “repos” (in which a bank still shows them on its balance sheet as sold with the obligation to repurchase) as sales. Note that at the time (as the report notes) analysts and others kept probing at the seeming miracle of Lehman’s deleveraging in a difficult market. This ruse may also square the circle on a Lehman leak we broke in 2007. A former Lehman MD had reported that most of the deleveraging that had occurred at the end of 2Q 2008 had resulted from the placement of $55 billion of assets with newly-formed entities in which Lehman retained a 45% ownership interest and were operated by former Lehman employees. To put it mildly, these were off balance sheet entities that strained the idea of independence. Bloomberg got hold of the story, and Lehman asserted that only $5 billion of assets had actually been transferred. I am now wondering whether the $55 billion were indeed transferred precisely as the source had said originally (he in turn had been told this by several people at Lehman) but that most of it was via this type of repo, and then re-materialized on Lehman’s balance sheet once the quarter end had passed (the Examiner’s report notes that the amount that Lehman moves off its balance sheet at the end of 2Q 2008 was $50.38 billion, which tallies with the difference between what the Lehman MD said had been moved off balance sheet versus what they fessed up to when asked by Bloomberg) .
Denninger raises one question: were other banks engaging in this type of accounting chicanery? But there is another question: did some of Lehman’s counterparties must have suspected what was going on, given that this took place on a large scale basis at the end of every quarter? How many had an idea that Lehman was engaging in massive window dressing and chose to play along?
But here is the part of the report that discussed how the Fed aided and abetted Lehman misconduct:
the Examiner questioned Lehman executives and other witnesses about Lehman’s financial health and reporting, a recurrent theme in their responses was that Lehman gave full and complete financial information to Government agencies, and that the Government never raised significant objections or directed that Lehman take any corrective action.
Yves here. So get this: even though Lehman dressed up its accounts for the great unwashed public, it did not try to fool the authorities. Its games playing was in full view to those charted with protecting investors and the financial system.
So what transpired? The SEC (which in all fairness, has never had much expertise in credit markets, this is a major regulatory problem) handed assessing Lehman over to the Fed, which bent over backwards to give it a clean bill of health:
After March 2008 when the SEC and FRBNY began onsite daily monitoring of Lehman, the SEC deferred to the FRBNY to devise more rigorous stress‐testing scenarios to test Lehman’s ability to withstand a run or potential run on the bank.5753 The FRBNY developed two new stress scenarios: “Bear Stearns” and “Bear Stearns Light.”5754 Lehman failed both tests.5755 The FRBNY then developed a new set of assumptions for an additional round of stress tests, which Lehman also failed.5756 However, Lehman ran stress tests of its own, modeled on similar assumptions, and passed.5757 It does not appear that any agency required any action of Lehman in response to the results of the stress testing.
Yves here. So get this: the stress tests were a sham. Only one outcome was permissible: that Lehman pass. So after the Fed was unable to come up with an objective-looking stress test that Lehman could satisfy, they permitted Lehman to devise a test with low enough standards to give itself a clean bill of health.
So why should we trust ANY government designed stress test, particularly when the same permissive grader, Timothy Geithner, was the moving force behind the ones dreamed up last year, which have been widely decried by banking experts, including Bill Black, Chris Whalen, and Josh Rosner? We linked to a simple analysis by Mike Konczal that demonstrates that for the biggest four banks alone, merely on their second mortgage portfolios, the stress tests of 2009 were too permissive to the tune of at least $150 billion.
Lehman type accounting, in other words, is being institutionalized, with the active support from senior government officials.
It is time for Geithner to go. He is not fit to serve as Treasury secretary.
And the time is overdue for a full audit of the Fed, and in particular the New York Fed, from the start of the Bear crisis through and including all the retrades of the AIG bailout.
This is the "last clear chance".
If Geithner is not replaced by someone who will actually try to fix things instead of just covering up for the big banks, and if the Fed is not audited so that the air can be cleared, it will almost certainly spell doom for America, and end up being worse than the Great Depression.
And so it begins. Big gun lawmakers are making the move toward principal writedowns as the last resort to save the housing market.
In a letter to the CEOs of Bank of America, Wells Fargo,JP Morgan Chase and Citigroup, House Financial Services Committee Chairman Barney Frank wrote, "To save homes on a large scale, we must move past temporary modifications in interest rates or terms and focus on permanent principal reductions that result in truly sustainable mortgages."
I agree and disagree with that statement: I agree that temporary modifications (even though the Treasury calls them permanent) are going to keep some borrowers in their homes for a while, but are really just prolonging the agony. I disagree that principal reductions will create truly sustainable mortgages.
The problem is prices. Home prices have fallen so far in the hardest hit areas, the areas where the bulk of the troubled loans are, that banks would have to write down principal 30 to 50 percent to put borrowers back in the green. Accounting rules require that banks write down the value of those loans on their books, and experts tell me that if banks really accounted for all the losses in the home loan market, they'd all be insolvent.
That's why the Obama Administration has created this kind of shell game in the first place.
I stole that shell game idea from housing consultant Howard Glaser: "We're spending tens of billions of dollars on a tax credit to get people to purchase homes, we're spending federal money to keep them in their homes through the modification program, and now we're going to pay them to move out of their homes. This is not a sustainable system for the housing market. It's a shell game. Bernie Madoff could have created this system," Glaser told me today.
Chairman Frank is focusing on second liens, blaiming them for holding up the first lien modification process. But the largest second lien holders are also the largest first lien holders. "Large numbers of second liens have no real economic value," writes Frank. He's right.
These lenders are getting pennies on the dollar even when they do get some kind of payoff, and they get nothing in a foreclosure. His theory is that if you get rid of the second lien then the first lien can be written down just fine and dandy. But the banks don't want to write down the first liens either. Why? Simple math.
The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.
About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can't obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.
As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.
The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of 2008 and fell steadily last year, according to a February investor report. But the bank expects repossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.
"Some of the positive housing data may not be signaling a true turning point, as many servicers are holding back on foreclosures and the related houses are not yet being offered for sale," said Diane Westerback, a managing director at Standard & Poor's. Westerback said it could take 33 months to clear the backlog.
Data released Thursday by RealtyTrac illustrate the dynamic. While banks repossessed fewer homes in February than a month earlier, borrowers continued to fall behind on their payments, adding to the inventory of properties headed toward foreclosure that have yet to be put on the market, said Daren Blomquist, RealtyTrac's spokesman.
"Just looking at the numbers, we would expect there to be a bigger percentage of properties" repossessed by banks by now, he said.
This "shadow market" reflects the increasing lag between defaults and foreclosures. Many lenders are struggling to keep up with the overwhelming number of borrowers who can't make their payments, and they're reluctant to rush repossessed homes onto the market when prices are depressed.
Delinquent borrowers
Today's delinquent borrowers, for the most part, differ in a key regard from those who were caught up in the surge of defaults in 2008. That earlier wave, which precipitated the financial crisis, consisted largely of subprime borrowers who defaulted when their risky loans became unaffordable.
The borrowers in trouble now are, for the most part, people who have better credit and safer loans and have become delinquent because they've lost their jobs or are dealing with other economic setbacks, economists said. More than 75 percent of the borrowers who are now seriously delinquent -- meaning they have missed at least three monthly payments -- have traditional prime loans, according to First American CoreLogic. Most of these borrowers have not made a mortgage payment in six months.
These borrowers are among the most difficult to help. Homeowners with economic troubles such as extended unemployment often cannot make even reduced mortgage payments. And the longer borrowers stay delinquent, the more difficult it is to fashion a mortgage relief plan for them.
Federal agents raided the downtown Hilo sanctuary of The Hawaii Cannabis Ministry Wednesday morning, assisted by local police.
Assistant U.S. Attorney Tom Muehleck said that no one had yet been arrested or charged in connection with the raid. Reached shortly before 3:30 p.m. Wednesday, he declined to provide other details and would not say whether THC Ministry director and founder Roger Christie had been detained.
"There's gonna be no comment from our office talking about anything that's occurred in Hilo or on the Island of Hawaii at this point," said Muehleck.
Local police had directed inquiries to the U.S. Attorney's office in Honolulu.
The door to the ministry's upstairs space at 94 Kamehameha Ave. was locked at 2:20 p.m. Wednesday. A sign next to the door said that the ministry is open from 2-5 p.m. weekdays.
Jared Fischer, 29, of Hilo, who was outside the ministry's entrance, said it was unusual for the door to be locked during posted business hours.
"I'm totally upset," said Fischer, who said he's a church member and uses cannabis as a sacrament. He said he tried calling the ministry's phone and was surprised that nobody answered.
He said he'd heard "the (Drug Enforcement Administration) busted Roger Christie." Fischer said that he was not at THC Ministry headquarters at the time, but heard "it happened sometime before noon." A call to THC Ministry's cell phone triggered a message that said that Christie's voice mail was full and could not take messages. Nor did Christie respond to a message left on a land line in time for this story.
"I guess that'll put an end to the dispensary," said the manager of a neighboring business, who asked not to be identified. "I'm all for live-and-let-live ... but I think that the presence of (THC Ministry) just as you enter downtown Hilo sends the wrong message to people who come here."
The businessman said he saw local police arrive at about 10 a.m. and federal authorities about an hour later.
He said there is usually a line "like clockwork" at 2 p.m. when the ministry's door opens.
The Web site imedicalcannabis.org lists THC Ministry as a "collective" or "cooperative" dispensary of medical marijuana. The Web site indicates that "flowers" -- another name for the bud of the female marijuana plant -- are offered, with on-site medicating available, and cash payment accepted.
While Hawaii has a law allowing the use of medical marijuana, the sale of marijuana is illegal under any circumstances and dispensaries are not allowed, although the state Senate has passed and sent to the House a bill to allow medical marijuana dispensaries. The measure was introduced by Sens. Will Espero, Robert Bunda, J. Kalani English, Brickwood Galuteria and Josh Green, all Democrats. Green is a physician from Kona.
The bill, if passed, would levy a $30 per ounce tax on medical marijuana, and would bring in an estimated $50 million yearly to depleted state coffers. It's scheduled for a hearing before the House Health and Public Safety committees at 10:45 a.m. today in House conference room 209 at the state Capitol Building in Honolulu.
THC Ministry's Web site makes no mention of its downtown Hilo sanctuary being a medical marijuana dispensary. The site proclaims: "Cultivation and enjoyment of Cannabis sacrament is a fundamental human right provided by God and protected by the First Amendment of the U.S. Constitution." The site further states: "We provide a legitimate religious 'defense to prosecution' for sincere practitioners over 21 years old."
The site lists the Hilo sanctuary as the "home ministry," with branches in Los Angeles, Bozeman, Mont., and Boulder, Colo.
The Associated Press reported Tuesday night that a Colorado man who claims membership in THC Ministry was convicted of misdemeanor possession of marijuana, plus possessing drug paraphernalia and driving an unregistered vehicle.
Trevor Douglas of Avon, Colo., argued that he shouldn't be convicted on drug charges because marijuana serves the same role in his religion as communion wine in Christianity. The judge didn't buy it, and he was fined $450 plus court costs and ordered to serve 15 hours of community service.
Clear Creek County Judge Rachel J. Olguin-Fresquez said that Douglas's beliefs don't rise to the level of religion.
Christie wrote a letter to Olguin-Fresquez, dated Monday, confirming that Douglas is "a member in good standing of the THC Ministry." Christie wrote that Douglas "is searching for higher meaning in his life and has deep questions about his place in the Universe and his quest for God. The plant Cannabis helps him further his knowledge and his quest for spiritual attainment."
It's not known if Douglas's conviction in Colorado is connected with the Hilo raid of THC Ministry headquarters.
Christie has also sponsored one-day seminars called "cannabis college" in a street level space in the Moses Building, most recently last Saturday. "Your $100 donation will include classes, great teachers and a catered hemp seed lunch," the ministry Web site said.
An announcement sent to the Tribune-Herald read, in part: "Some of the best cannabis growers on the Big Island will demonstrate their techniques for growing the highest quality medicine and sacrament. The classes will include lighting, cloning, fertilizing, harvesting, and curing."
Christie is a director of the Peaceful Sky Alliance, a marijuana advocacy group that wrote a ballot initiative passed into law by 53 percent of Big Island voters in November, making adult personal use of marijuana on private property the "lowest law-enforcement priority."
Saved permits can be used to meet future targets to cut emissions without reducing pollution
Companies involved in hoarding permits say banked credits will help them pay to develop new emission-cutting technology. Photograph: Joe Klamar/AFP/Getty Images
Companies across Europe are hoarding permits to produce greenhouse gas emissions worth hundreds of millions of pounds, the Guardian can reveal.
The surplus credits have been amassed from over-allocation of permits to pollute from the European emissions trading scheme, and by buying cheap credits from carbon-cutting projects in developing countries and holding on to their more expensive official EU allowances.
The saved permits can be used to meet future targets to cut the greenhouse gas emissions blamed for global warming and climate change without actually reducing pollution, or sold for a profit in the future.
Campaigners for tougher emissions reductions said the saved-up allowances discredited the argument of some industries that much deeper cuts in future would be "fatal" because they could no longer afford to compete against rivals outside the EU.
However, companies involved said the banked credits would help them pay to develop new emission-cutting technology, and to meet emissions targets until that became widely available.
Industry also warned it faced "death by a thousand cuts" as a result of the next phase of the scheme, from 2013 and 2020, and other costly environmental legislation planned by government. Business leaders accused the government of being prepared to sacrifice industry to enable other sectors such as aviation to keep polluting and meet the UK's carbon budgets.
One steelmaker told the Guardian: "Officials see us as acceptable collateral in the fight against climate change. If we don't make anything in this country any more, it means people could still fly to Tenerife once a year and the UK will keep within the carbon budget."
He said meeting targets would require vast amounts of steel to build windfarms, nuclear reactors and electric cars. This would have to be imported from more-polluting steelmakers outside Europe if the industry disappeared in the UK.
The Emissions Trading Scheme (ETS), the centrepiece of the EU's pledge to cut greenhouse gases, has already been criticised for giving many companies allowances to emit more emissions than they need, leaving little incentive to reduce pollution, and for lax regulation.
The latest concern about "banking" credits involves companies also buying cheap allowances from "offset" schemes which reduce emissions in other countries, often China and India, and using these to cover their emissions while keeping their official allowances – which are worth more because projects in other countries could in future be banned.
Analysis for the Guardian by campaign group Sandbag of the figures for 2008, the most recent available, looked at the extra allowances accrued by four big sectors: iron and steel, coke ovens, metal ore processing, and cement, which together have 800 installations covered by the trading scheme, and include big names like ArcelorMittal, Thyssenkrupp, Corus, Holcim and Cemex.
Sandbag calculated the four sectors received permits to emit 66m tonnes more carbon dioxide than they needed in 2008, partly because predicted growth did not happen and partly because of the recession towards the end of the year. In addition they bought cheap offsets for a further 18m tonnes plus, which would then free up more EU allowances. In total the surplus allowances would have been worth nearly €1.2bn (£1.1bn) in 2008, or just over €1.1bn at today's closing price of €12.99. Based on the forecast average price of €30 a tonne for the third phase of the ETS from 2013-2016 by analysts Point Carbon they would be worth more than double that in future.
If the companies stockpiled over-allocated surpluses for the whole of this phase of the ETS, from 2008-2012 they could be worth as much as €3.2bn at today's prices, said Sandbag. Any more credits released by buying offsets would be on top of that.
"If they [companies] want cashflow, which in the current climate they may, then they'll cash in the allowances," said Bryony Worthington, Sandbag's founder and director. "But if they are thinking long-term then they'll be thinking 'I should probably hold on to them and insulate myself for the future'."
ArcelorMittal, the world's biggest steel producer, has pledged to use profits to invest in future energy savings to reduce pollution, but there were no guarantees they or any other company would have to do this, said Worthington. "How do we police it, they could be using it for dividends or anything," she added.
Ian Rodgers, director of UK Steel, said: "The climate change agenda won't affect the amount of steel consumed, but it will determine where it's produced."
According to industry estimates, the third phase could cost heavy industry – including steelmakers such as Corus, the chemicals industry and the ceramics industry – €1bn a year.
Sandbag will tomorrow publish in-depth analysis for 2008, including the biggest buyers of offsets from developing countries, and a map linking every offset scheme with their European customers.
The FBI says that the anthrax case is closed, and that they have proved that Dr. Bruce Ivins did it.
But Congress is not convinced.
On March 3, 2010, Representative Holt called for a new investigation:
Last week, [Congressman Holt] succeeded in including language in the 2010 Intelligence Authorization Bill that would require the Inspector General of the Intelligence Community to examine the possibility of a foreign connection to the 2001 anthrax attacks.
“The American people need credible answers to all of these and many other questions. Only a comprehensive investigation—either by the Congress, or through the independent commission I’ve proposed in the Anthrax Attacks Investigation Act (H.R. 1248)—can give us those answers,” Holt said in a letter to the Chairmen of the House Committees on Homeland Security, Judiciary, Intelligence, and Oversight and Government Reform.
[Here's the letter.]
Dear Chairmen Thompson, Conyers, Reyes, and Towns,
I am writing to ask that your committees, either individually or jointly, conduct a probing investigation of our government’s handling of what has been known as the “Amerithrax” investigation.
As you are aware, last week the Federal Bureau of Investigation announced it was formally closing its investigation into the 2001 anthrax letter attacks, commonly known as the “Amerithrax” investigation. The Bureau has maintained since his suicide in 2008 that the late Dr. Bruce Ivins was their principal suspect in the attacks, a conclusion reaffirmed by the FBI when it closed the case last week—despite the fact that the FBI’s entire case against Ivins is circumstantial, and that the science used in the case is still being independently evaluated.
To date, there has been no comprehensive examination of the FBI’s conduct in this investigation, and a number of important questions remain unanswered. We don’t know why the FBI jumped so quickly to the conclusion that the source of the material used in the attacks could only have come from a domestic lab, in this case, Ft. Dietrick. We don’t know why they focused for so long, so intently, and so mistakenly on Dr. Hatfill. We don’t know whether the FBI’s assertions about Dr. Ivins’ activities and behavior are accurate. We don’t know if the FBI’s explanation for the presence of silica in the anthrax spores is truly scientifically valid. We don’t know whether scientists at other government and private labs who assisted the FBI in the investigation actually concur with the FBI’s investigative findings and conclusions. We don’t know whether the FBI, the Department of Homeland Security, the Department of Health and Human Services, and the U.S. Postal Service have learned the right lessons from these attacks and have implemented measures to prevent or mitigate future such bioterror attacks.
The American people need credible answers to all of these and many other questions. Only a comprehensive investigation—either by the Congress, or through the independent commission I’ve proposed in the Anthrax Attacks Investigation Act (H.R. 1248)—can give us those answers.
As you may know, my interest in this matter is both professional and personal. The attacks originated from a postal box in my Central New Jersey congressional district and they disrupted the lives and livelihood of my constituents. For months, Central New Jersey residents lived in fear of a future attack and the possibility of receiving cross-contaminated mail. Mail service was delayed and businesses in my district lost millions. Further, my own Congressional office in Washington, D.C. was shut down after it was found to be contaminated with anthrax.
Given its track record in this investigation, I believe it is essential that the Congress not simply accept the FBI’s assertions about Dr. Ivins alleged guilt. Accordingly, I ask that your committees investigate our government’s handling of the attacks, the subsequent investigation, and any lessons learned and changes in policies and procedures implemented in the wake of the attacks.
The next day, Representative Jerrold Nadler - Chair of the House Judiciary Subcommittee on the Constitution, Civil Rights and Civil Liberties - joined in Holt's call for a new investigation:
Despite the FBI’s assertion that the case of the anthrax attacks is closed, there are still many troubling questions. For example, in a 2008 Judiciary Committee hearing, I asked FBI Director Robert Mueller whether Bruce Ivins was capable of producing the weaponized anthrax that was used in the attacks. To this day, it is still far from clear that Mr. Ivins had either the know-how or access to the equipment needed to produce the material. Because the FBI has not sufficiently answered such questions, I join Congressman Holt in urging an independent investigation of the case.
Maryland Republican Congressman Roscoe Bartlett and other congressmen have also joined in the call for a new investigation.
The value of a new investigation, of course, entirely depends on whether or not those appointed are independent scientists. If they are instead employed by a facility such as Dugway Proving Grounds, then they may not be very neutral. Specifically, Dugway is where the anthrax originated, and Dugway has substantial experience working with weaponized anthrax (see this and this). Ivins did not.
Criticism of Israel and Zionism led to a rise of anti-Jewish sentiment around the world in 2009, the US said on Thursday in a report that denounced "new forms" of anti-Semitism
"Traditional and new forms of anti-Semitism continued to arise, and a spike in such activity followed the Gaza conflict in the winter of 2008-2009," the State Department said in an annual report.
"Often despite official efforts to combat the problem, societal anti-Semitism persisted across Europe, South America, and beyond and manifested itself in classic forms," it said.
Such incidents, it said, involved attacks on Jews or places of worship as well as desecration of cemeteries and accusations of undue Jewish influence on government policy and media.
"New forms of anti-Semitism took the form of criticism of Zionism or Israeli policy that crossed the line into demonising all Jews, and in some cases, translated into violence against Jewish individuals in general," it said.
It accused some governments - like those in Iran and Egypt - of fuelling anti-Semitism rather than combating the scourge.
TALLAHASSEE, Fla. -- More than 2.5 million Floridians are on food stamps, up from three years ago where 1.2 million residents received assistance.
That's according to records kept by the Department of Children and Families, which administers the program.
DCF Secretary George Sheldon told the South Florida Sun-Sentinel Tuesday that Florida's food stamp rolls grew the fastest in the nation since 2007. Florida's food stamp numbers hit a low in April 2007, when the state paid out $109.9 million to 1.2 million residents. Back then, 6.4 percent of the state population was on food stamps.
To qualify, Floridians must make 133 percent of the federal poverty level or less. For a family of four, that's just under $29,000 a year.
Maximum monthly benefits are $200 for one person and $668 for a four-member family.
This article has been generously contributed by Neithercorp Pressfor your reading pleasure.
By Giordano Bruno
Neithercorp Press - 03/10/2010
Herbert West: Re-Animator
Winter is slowly melting away here in the U.S., and Spring will soon be upon us. Wall Street is currently flush with delight at the year long run of the stock market (driven by fiat bailouts), which at first glance appears to be doing quite well, though international incidences such as those in Dubai and Greece have revealed how shaky the market actually is in the face of any unhealthy news. In the meantime, the dollar, recently on the edge of detrimental value loss, has made a semi-miraculous recovery in the span of a few months, especially as the Euro suffers. Official employment numbers, despite the continuous loss of jobs monthly, have somehow fallen and are for the moment stabilized. Is it time for America to dust off the old credit cards and return to the wild and rollicking carefree spending days of pre-2007? Perhaps not…
While the mainstream media puts on the recovery song and dance, the fundamental problems of the collapse remain the same, and in some cases are growing ever more precarious. Subsections of the public, unaware of the real issues at hand, are holding a misguided jubilee in the tranquil eye of a hurricane, wrongly assuming that the storm has passed.
The world is breathing a hasty sigh of relief at the beginning of 2010, but what are the facts behind the current “peaceful” economic moment? In this article, we will examine whether or not the good news is legitimate, or, if are we being lulled into a false sense of security…
Job Market Statistics Manipulated
At the beginning of the year, official unemployment stood at around 10%. This number of course does not include those people who are off unemployment benefits and still have not found jobs, or those people who are underemployed. The Labor Department then announced their intention to revise their “birth/death ratio” method of calculating job loss, which would supposedly add a whopping 800,000 lost jobs to their books that were hidden before:
Directly after this news was released, markets braced for a substantial increase in the unemployment percentage. Yet, by some act of magic, the unemployment percentage fell to 9.7%!
How is this possible? Well, those of us who were hoping for greater Labor Department transparency (including myself) should have known better. With the Labor Department, two-plus-two NEVER equals four…
As the EPI article above indicates, while the government has reportedly changed their dubious “birth/death ratio” method, they also at the same time changed their “home survey” method. This survey is meant to give the Labor Department an overall view of unemployment percentages, but now the government has sharply reduced the number of households they actually survey, making the results more volatile and easier to manipulate. This why even though nearly a million jobless people were added to the unemployment rolls, the government was still able to report a drop in unemployment percentages. Sound like a dirty trick? Yes, it is…
According to the EPI’s estimates, which are probably still conservative, over 11 million jobs would need to be created in order to bring employment rates to pre-2007 levels. This is called the “jobs gap.” To fill the jobs gap by 2013 (which is about the time frame that the government has suggested it would take for a full recovery) the U.S. would need to generate over 400,000 jobs a month for the next three years! As I think most of you can see, this is not going to happen. Last month according to official numbers the U.S. lost another 36,000 jobs. Jobs are not being created, and will not be created anywhere near the 400,000 a month mark required for a three year recovery.
Also not often reported is the span of weeks at which those who are unemployed have to wait until they find another job. This “lag time” in-between jobs has grown markedly higher in recent months as the chart below shows:
In January of this year alone, 6.3 million people (over half of those unemployed) had been without a job for more than 6 months. This is an astonishing number, and it shows just how out of touch MSM reports of recovery are. Anyone who has been unemployed for more than just one month knows how tense and uncertain such a situation makes life. Imagine the misery of a 6 month hiatus from steady work, not able to fully support ones self and not knowing when you’ll be able to again. The Labor Department, nor the media, seems to take the factor of ‘duration’ into account when considering whether employment is actually in recovery. Nor do they take into account the fact that most of the jobs lost over the past two years were high paying and specialized, while most of the scant few jobs created have been low paying service sector positions.
What is most frightening about this information is that it reveals deliberate mishandling of statistics. Instead of being more open about unemployment numbers, the government is moving to hide them further. But why would they escalate secrecy on the economy?
The Day The Dollar Died
Last week, Li Ruogu, chairman of Export-Import Bank of China, a lender tasked with supporting the country’s foreign investments, stated that China would continue to support the dollar and that reports of a break from U.S. treasuries were “absolute nonsense.” Investors in treasuries this week seemed to take the comment as a good sign that the dollar’s place as world reserve currency is assured. However, one might ask why it was suddenly so important for China to comfort treasury markets?
Interestingly, statements of China’s “affection” for the dollar have come right after their central bank decided to dump $34 billion in U.S. treasuries. Along with other nations, the U.S. suffered the worst one month treasury dump on record so far at $53 billion:
This follows a treasury dump last year by China of $25 billion, after which we predicted that such dumps would occur more frequently and in larger amounts. Apparently, we were right:
Initially, it was reported after their latest dumping of U.S. bonds that China had lost its position as the number one investor in U.S. debt, placing Japan in the top spot. Strangely, only days later this report was rescinded after the Treasury released a statement claiming that China did indeed dump $34 billion in bonds, but, they were still the number one investor in T-bills:
How is this possible? According to the Treasury, they “forgot” to include Chinese treasury holdings in third markets such as Hong Kong and Britain. This is very strange. Who holds these extra bonds and what are they doing sitting in foreign venues? Is it not convenient that these bonds appeared from thin air just as news of China’s treasury dump was hitting the bond market? And now we suddenly have a Chinese finance official attempting to reassure the world that China still wants T-bonds while at the same time they are trying to get rid of them? If this behavior seems confusing it is because this is what occurs when governments lie big; no matter how good they are at it, they can’t make the facts add up.
If one examines Treasury Auctions month-to-month, they would find that “Primary Buyers” of treasuries (who have to buy treasuries when no one else is buying) now dominate auction sales. Indirect buyers, who cannot be tracked, also make up a large portion of competitive bids on treasury bonds. It is suspected that most of these indirect buys are made by the Federal Reserve itself in order to prop up the dollar. The article below explains the process succinctly:
The bottom line is that foreign governments are NOT buying treasuries at volumes necessary to keep the U.S. afloat amidst its ever climbing national debt, and in some cases, they are now trying to quietly and gradually dump what they have so as to not arouse immediate suspicion from the markets. In fact, the Treasury and the Federal Reserve seem to be helping them do this!
The dollar is, in effect, dead, but disinformation and market manipulation, mainly by the private Federal Reserve, is being used to reanimate it for appearances. The result is the conjuring of a kind of “zombie currency,” a Weekend at Bernie’s currency that the Fed props up with strings and pulleys to fool everyone at the party.
The most obvious question here is, why go through so much trouble to keep the dollar around at all?
World Government And The SDR
Since the “Great Recession” began, economic forums and conferences such as the G20, and the annual World Economic Forum (WEF) in Davos, Switzerland have spoken of little else except the formation of a centralized world economy and the establishment of a legal body that has the power to run it. At the Davos “workshops,” economists and others present ideas for world governance as if they were the originators of the concept. It may not be surprising to most of us that there is rarely if ever anyone who participates in the WEF meetings that supports the restoration of national sovereignty. In fact, nearly all the participants seem to assume that a world government is the solution to all our ills. It is also important that like the G20, government officials from all over the world attend, including those from the U.S., and that very often the policies developed at these forums end up in legislation and mass media here at home. Meaning, the laws and propaganda supporting forced globalization and world government are fine tuned at the meetings and then brought to America for mass consumption. Below are a couple video examples of Davos workshops:
It is important to recognize what exactly is being presented in these two videos because they reveal much about our current economic circumstances. The goal of the G20 and the WEF, as they have stated on numerous occasions, is to dissolve national sovereignty. If they had their way, America as we know it would not exist, along with the Constitutional framework that is meant to protect our liberties. To achieve this end, a carefully engineered breakdown of the U.S. dollar is being enacted.
As we have shown, U.S. treasuries auctions have tanked and those long term treasuries already held by foreign nations are being slowly cast off. So far, the Federal Reserve has propped up the dollar by purchasing T-bonds in the place of foreign banks who no longer want them. By continually monetizing this debt, the Fed will inflate an incredible bubble in the treasury market. When will this bubble burst? The key lay in the rules governing Special Drawing Rights.
Special Drawing Rights (SDRs) are securities much like treasury bonds. Their value is determined by a basket of international currencies including the Dollar, the Euro, the Yen, and the Pound Sterling. The IMF claims that SDRs are not technically considered currency, but SDRs serve nearly all the functions of a currency except that they are not available to the general public (yet). It walks like a duck, and quacks like a duck, but the IMF would rather not call it a duck. In the end, the SDR is a world reserve currency, and its purpose is to topple the dollar.
Not long after the economic meltdown began, the IMF announced that they would begin the unlimited printing of SDRs. In 2009, within the span of a few months, SDR circulation went from $21 billion, to nearly $204 billion, and this is only the amount they have admitted to:
Governments across the world have purchased SDRs, while at the same time dropping U.S. treasuries. China in particular has shown sharp interest in the SDR as a replacement for the U.S. dollar:
It may be prudent to mention that China’s heightened dumping of U.S. treasuries began right around the time that the IMF began mass printing SDRs. And, even more disconcerting, the U.S. Treasury also quintupled its supply of SDRs in August of 2009:
Being that the U.S. dollar is supposedly the undisputed world reserve currency, why would the U.S. Treasury have any need to buy SDRs at all? Would this not be redundant? Unless, the Treasury knows that the dollar will not remain the world reserve currency for much longer….
Now we get to the tricky part…
The IMF has instituted new rules governing the SDR and those countries who trade it (called “member countries”). Drafting the “Fourth Amendment” governing SDR allocation, the IMF now requires member nations to retain a “special allocation” of the currency much higher than previous allocations. Countries who keep their SDR supply above the required level receive interest payment on their excess. Countries that fall below the required level have to PAY interest on the shortfall. That is to say, if the U.S. were to allow its SDR reserves to fall below the level demanded by the IMF, we would be punished monetarily. Also, under current rules, the interest rates of the currencies that make up the SDR help to determine the interest rates of the SDR.
The IMF claims it only acts as an “intermediary” between countries wishing to trade in SDRs, but since the IMF is the creator and printer of SDR’s, this would ultimately make them the controller of the SDR market, not some outside intermediary.
Participation in the SDR market for now is voluntary. However, what we are witnessing here is the subtle positioning of the SDR as the only alternative in the event that the U.S. dollar fails, and once again, China is the key.
China’s Slow Dollar Dive
The argument is constantly made by mainstream economists that China could never drop its large supply of U.S. T-bills because if they tried, the dollar would collapse, virtually erasing the value of their dollar holdings. The suggestion that “they are as dependent on us as we are on them” is rampant in the MSM, but, if we throw in the wild card factor of the SDR, this all changes.
If the Chinese central bank along with certain others amass enough SDRs over an extended period of time while gradually selling off their T-bonds, the SDR’s could act as a cushion to prevent foreign central banks from losing a large portion of their wealth while the dollar sinks. In fact, in the event that the Federal Reserve raises interest rates on the dollar (perhaps in response to the heightened risk of a mass treasury dump) those holding SDR’s actually benefit, because the interest they receive on their SDR reserves will also go up:
This would not absorb all of China’s losses in the event of a dollar collapse, but it would be a very effective stop gap, and ample incentive for them to continue dumping treasuries. I believe that this is the exact reason why the dollar and the Dow have been held up by the Federal Reserve for so long. They cannot allow a major dollar depreciation until the SDR is established on the world market as a ready substitute.
A good sign that this process might accelerate would be in the event that China de-pegs the Yuan from the Dollar and allows it to appreciate in value. This would signal that China is moving away from the traditional export arrangement with the U.S. Talks of a Yuan appreciation are already hitting the MSM:
Investors in the U.S. will foolishly cheer a rise in the value of the Yuan, thinking that this will increase American exports to China. In reality, China will be preparing to dump the last of its U.S. bonds, and begin exports and imports with the new ASEAN trading bloc:
This new bloc has the potential to surpass profit margins in U.S. markets, especially in the face of extremely weak consumer activity in America. As the U.S. falters under sovereign debt pressure, China will be in prime standing with a ready supply of SDRs and an organized trading bloc to take up the slack of falling exports to the West.
Shock And Awe
The illusion of U.S. recovery seems to be paramount in the plan for Globalist centralization. Every scam imaginable has been fashioned to lure the public into a sense of false comfort. In my original observations on the economic collapse, I believed that we would likely see a “trigger” event in 2010, which would set off a “rolling breakdown” that would not fully climax for a few years. Now, I am not so sure. After examining the facts behind the implementation of SDRs as well as the potentially explosive situation in the treasury market, I believe that a “shock and awe” scenario is becoming more probable. The behavior of the Fed, along with that of the IMF seems to suggest that they are preparing for a focused collapse, peaking within weeks or months instead of years, and the most certain fall of the dollar.
As I think of it now, the advantages of a sudden financial flash flood are numerous. In a drawn out collapse, the Liberty Movement is given a tremendous time advantage, allowing us to double and redouble our membership while the public opinion of the Federal Reserve and the government in general would deteriorate. In a sudden breakdown, our time will be cut short, and the public will be distracted and fearful, desperate for an organized authority to offer any semblance of “order.” A slow collapse allows for the Liberty Movement to work peacefully within the system to build a third party capable of dethroning the current two party farce. A sudden collapse erases all political activity and opens the door to martial law and illegitimate government. And finally, a fast moving meltdown leaves a much stronger psychological impression; a catastrophic waking nightmare, instead of a slow grinding depression. A world government could never be brought about due to the “monotony” of a long slow economic burnout. Too many factors could present themselves in such an extended period that might interfere with the desired end result. Too many variables to calculate. In an abrupt collapse, the Globalists would need only to gage and influence the amount of fear in the populace to a sufficient boiling point then leap in with their intended solution to the problem; centralized global governance.
I feel that in either method, the Central Bankers will fail to reach their ultimate goal, but the prospect of a direct monetary break with limited warning does make the atmosphere much heavier. One can only prepare as much as possible mentally and emotionally, and keep his eyes wide open.
This article has been generously contributed by Neithercorp Pressfor your reading pleasure.
Using the Tax Foundation's Microsimulation Model to analyze the deficits projected by the President's Budget, we can project how much revenue a broad-based increase in federal income tax rates would generate. As usual, the President's Budget forecasts lower deficits than any other reputable source, but we have used those optimistic deficit estimates to show that even the rosiest deficit scenario is far from rosy.
Assuming deductions, exemptions and credits were kept the same as they are now, Congress would have to raise each personal income tax rate by a factor of almost two and a half to erase the 2010 deficit. Even in later years when the President's Budget predicts that the deficit will be "only" in the $700-to-$800 billion range, the rates necessary to close the deficit are untenable.
Table 1 shows the effect on statutory rates of such a hypothetical tax hike in 2010. Instead of taxing couples with rates that range from 10 percent to 35 percent, tax rates would have to start at 24.3 percent and range up to 84.9 percent.Table 2 applies the same method as Table 1 but for the years 2011 through 2020. Two rate increases for this 10-year period are already counted in the deficit projections given by the President's Budget. The top two tax rates will increase on January 1, 2011. The 33% rate will rise to 36%, and the 35% rate will rise to 39.6%. Yet the additional tax rate hikes necessary beyond those, and for all the lower brackets, are still remarkably steep if the budget deficit is to be eliminated, especially at the end of the decade when, even with optimistic deficit projections, deficits are expected to rise quickly and hit $1 trillion.
Table 2 applies the same method as Table 1 but for the years 2011 through 2020. Two rate increases for this 10-year period are already counted in the deficit projections given by the President's Budget. The top two tax rates will increase on January 1, 2011. The 33% rate will rise to 36%, and the 35% rate will rise to 39.6%. Yet the additional tax rate hikes necessary beyond those, and for all the lower brackets, are still remarkably steep if the budget deficit is to be eliminated, especially at the end of the decade when, even with optimistic deficit projections, deficits are expected to rise quickly and hit $1 trillion.
Josh Gerstein over at Politico sent Threat Level his piece underscoring once again President Barack Obama is not the civil-liberties knight in shining armor many were expecting.
Gerstein posts a televised interview of Obama and John Walsh of America’s Most Wanted. The nation’s chief executive extols the virtues of mandatory DNA testing of Americans upon arrest, even absent charges or a conviction. Obama said, “It’s the right thing to do” to “tighten the grip around folks” who commit crime.
Now there’s DNA sampling. Obama told Walsh he supported the federal government, as well as the 18 states that have varying laws requiring compulsory DNA sampling of individuals upon an arrest for crimes ranging from misdemeanors to felonies. The data is lodged in state and federal databases, and has fostered as many as 200 arrests nationwide, Walsh said.
The American Civil Liberties Union claims DNA sampling is different from mandatory, upon-arrest fingerprinting that has been standard practice in the United States for decades.
A fingerprint, the group says, reveals nothing more than a person’s identity. But much can be learned from a DNA sample, which codes a person’s family ties, some health risks, and, according to some, can predict a propensity for violence.
The ACLU is suing California to block its voter-approved measure requiring saliva sampling of people picked up on felony charges. Authorities in the Golden State are allowed to conduct so-called “familial searching” — when a genetic sample does not directly match another, authorities start investigating people with closely matched DNA in hopes of finding leads to the perpetrator.
Do you wonder whether DNA sampling is legal?
The courts have already upheld DNA sampling of convicted felons, based on the theory that the convicted have fewer privacy rights. The U.S. Supreme Court has held that when conducting intrusions of the body during an investigation, the police need so-called “exigent circumstances” or a warrant. That alcohol evaporates in the blood stream is the exigent circumstance to draw blood from a suspected drunk driver without a warrant.
MOSCOW -- The current global financial and economic crisis once again confirms the fact that during economic upheavals the rich get richer and the poor become even more destitute.
On Thursday, Forbes Magazine carried an updated list of the world's wealthiest people.
As of late 2009, the number of billionaires soared from 793 to 1,011 and their total fortunes from $2.4 trillion to $3.6 trillion. The number of Russian billionaires almost doubled, from 32 to 62.
The list's authors believe that an increase in the number of wealthy people highlights the end of the recession, but it may also signal the appearance of new bubbles in the economy.
Mexican telecommunications king Carlos Slim Helu opens the list with $53.5 billion. He is followed by last year's leader, Microsoft founder Bill Gates with $53 billion and American investor, businessman, and philanthropist Warren Buffet with $47 billion.
However, this does not mean that Gates and Buffet now have less money than before. On the contrary, they have both increased their fortunes by $13 billion and $10 billion, respectively.
There have also been some tactical changes in the list of Russian billionaires. For instance, ONEXIM Group CEO Mikhail Prokhorov, who has expanded his fortune from $9.5 billion to $13.4 billion in one year, has ceded first place to Vladimir Lisin with $15.8 billion. Lisin, who is Chairman of the Board of Directors at Novolipetsk Steel (NLMK), came fifth in the rating only 12 months ago.
Despite the crisis, the list of billionaires has grown by 200 people and their aggregate capital has expanded by 50%. This may seem paradoxical but only at first glance. This result was predictable, if we recall how governments all over the world have dealt with the economic crisis.
Anti-crisis measures essentially implied massive infusion of money into the economy. The United States alone spent over $10 trillion. Against the backdrop of a global recession, the funding could only be put to good use on stock and raw materials markets, leading to the creation of new financial bubbles.
Consequently, oil prices which had hit an all-time low of $47 per barrel in December 2008, now stand at about $80. Global financial indices are also climbing steadily. The Russian stock market grew by over 100% over the course of 2009.
The lists of billionaires and their countries of residence have changed. China, which posted a 8.7% GDP growth last year despite the crisis, is now home to 64, rather than 62, billionaires, ousting Russia from second to third place. Although Russia has suffered a harsher blow from the crisis than most industrial and even developing countries, it now has 100% more billionaires than last year, regardless of the fact that the national GDP has plunged by 7.9% by late 2009.
The number of Russian billionaires correlates with raw materials prices, primarily oil and metals prices, Forbes Magazine Editor-in-Chief Steve Forbes told RIA Novosti. The 2009 price slump reduced the number of Russian billionaires by 50. And now they are back because of rising raw materials prices.
Although oil price hikes played an important role, other factors should also be considered. Igor Nikolayev, head of strategic analysis at FBK, one of the first private auditing firms in Russia, said this country used the same methods to fight the crisis as the others, but that it has achieved better results.
The volume of federal allocations injected by the Russian government into the economy was much higher than in Europe and the U.S. Forbes tactfully referred to this as the government's cooperation with big business, primarily raw materials companies.
However, even high-ranking Russian officials have repeatedly complained that anti-crisis allocations were either used for stock market operations or deposited in foreign bank accounts.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
Vlad Grinkevich is an economic commentator for RIA Novosti
