Saturday, November 27, 2010

CHINA TELLS AMERICA: Turn Around The USS George Washington


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China has warned against military activity near its coastline ahead of U.S.-Korea naval exercises, according to Reuters.

China's Foreign Ministry said in an online posting that naval exercises risks starting a war: "We oppose any military act by any party conducted in China's exclusive economic zone without approval."

North Korea has also threatened to respond to military gestures with more attacks: "The situation on the Korean peninsula is inching closer to the brink of war due to the reckless plan of those trigger-happy elements to stage again war exercises targeted against the (North)."

If this sounds familiar, it's because the same thing happened after the Cheonan shipwreck. America sent some warships to join in naval exercises, China was outraged, and America yielded and moved the exercises primarily to a more distant location.

China wants peace. The only problem with Pax China is that it includes little protection for South Korea against the next surprise attack from Pyongyang.

« Currency Wars - How Bernanke, Geithner & QE2 Are Hyperventilating The Globe »

Three monks were walking back from a Dharma teaching with their Master. As they arrived back at their village they noticed a flag on a post, fluttering in the wind. The first student looks up says, "I see a flag flapping." The next student looks up and, trying to out-do the first, says, "No, I see the wind flapping." The third student even more sure of his superior understanding, glances up and says, "I see the mind flapping."

Then their Master looks up and says, "And I see mouths flapping!"


The opening paragraph of...


Putin ditches dollar, backs Euro on trip to Germany

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BBC: Irish economy, the bailout and the Euro - "All Goverments Solves The Crisis With Inflation"

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A Hedge Fund Republic?

Earlier this month, I offended a number of readers with a column suggesting that if you want to see rapacious income inequality, you no longer need to visit a banana republic. You can just look around.

My point was that the wealthiest plutocrats now actually control a greater share of the pie in the United States than in historically unstable countries like Nicaragua, Venezuela and Guyana. But readers protested that this was glib and unfair, and after reviewing the evidence I regretfully confess that they have a point.

That’s right: I may have wronged the banana republics.

You see, some Latin Americans were indignant at what they saw as an invidious and hurtful comparison. The truth is that Latin America has matured and become more equal in recent decades, even as the distribution in the United States has become steadily more unequal.

The best data series I could find is for Argentina. In the 1940s, the top 1 percent there controlled more than 20 percent of incomes. That was roughly double the share at that time in the United States.

Since then, we’ve reversed places. The share controlled by the top 1 percent in Argentina has fallen to a bit more than 15 percent. Meanwhile, inequality in the United States has soared to levels comparable to those in Argentina six decades ago — with 1 percent controlling 24 percent of American income in 2007.

At a time of such stunning inequality, should Congress put priority on spending $700 billion on extending the Bush tax cuts to those with incomes above $250,000 a year? Or should it extend unemployment benefits for Americans who otherwise will lose them beginning next month?

One way to examine that decision is to put aside all ethical considerations and simply look at where tax dollars will do more to stimulate the economy. There the conclusion is clear: You get much more bang for the buck putting money in the hands of unemployed people because they will promptly spend it.

In contrast, tax cuts for the wealthy are partly saved — that’s both basic economic theory and recent history — so they are much less effective in creating jobs. For example, Republicans would give the richest 0.1 percent of Americans an average tax cut of $370,000. Does anybody really think that those taxpayers are going to rush out and buy Porsches and yachts, start new businesses, and hire more groundskeepers and chauffeurs?

In contrast, a study commissioned by the Labor Department during the Bush administration makes clear the job-creation power of unemployment benefits because that money is immediately spent. The study suggested that the current recession would have been 18 percent worse without unemployment insurance and that this spending preserved 1.6 million jobs in each quarter.

But there is also a larger question: What kind of a country do we aspire to be? Would we really want to be the kind of plutocracy where the richest 1 percent possesses more net worth than the bottom 90 percent?

Oops! That’s already us. The top 1 percent of Americans owns 34 percent of America’s private net worth, according to figures compiled by the Economic Policy Institute in Washington. The bottom 90 percent owns just 29 percent.

That also means that the top 10 percent controls more than 70 percent of Americans’ total net worth.

Emmanuel Saez, an economist at the University of California at Berkeley who is one of the world’s leading experts on inequality, notes that for most of American history, income distribution was significantly more equal than today. And other capitalist countries do not suffer disparities as great as ours.

“There has been an increase in inequality in most industrialized countries, but not as extreme as in the U.S.,” Professor Saez said.

One of America’s greatest features has been its economic mobility, in contrast to Europe’s class system. This mobility may explain why many working-class Americans oppose inheritance taxes and high marginal tax rates. But researchers find that today this rags-to-riches intergenerational mobility is no more common in America than in Europe — and possibly less common.

I’m appalled by our growing wealth gaps because in my travels I see what happens in dysfunctional countries where the rich just don’t care about those below the decks. The result is nations without a social fabric or sense of national unity. Huge concentrations of wealth corrode the soul of any nation.

And then I see members of Congress in my own country who argue that it would be financially reckless to extend unemployment benefits during a terrible recession, yet they insist on granting $370,000 tax breaks to the richest Americans. I don’t know if that makes us a banana republic or a hedge fund republic, but it’s not healthy in any republic.

I invite you to visit my blog, On the Ground. Please also join me on Facebook, watch my YouTube videos and follow me on Twitter.

Woman survives jump from I-95 overpass

— A woman was taken by ambulance to Delray Medical Center after jumping from an overpass onto I-95 in Boca Raton, according to the Florida Highway Patrol.

"She's talking and conscious, but has some fractures," said FHP spokesman Lt. Tim Frith.

Officer Sandra Boonenberg, spokeswoman for the Boca Raton Police Department, said the woman is expected to survive. Boonenberg declined to give the woman's name but said she has been detained for mental evaluation under the state's Baker Act.

Around 7:40 a.m., the woman was on the Spanish River Boulevard overpass of I-95 when commuters saw her jump onto "a car that was almost stopped" in the northbound lanes of the busy highway, Frith said.

The accident temporarily closed some of the I-95 northbound lanes near Glades Road, according to the highway patrol.

Staff Writer Julius Whigham II contributed to this report.

Is America on the path to 'permanent war'?

CNN -- When the president decided to send more troops to a distant country during an unpopular war, one powerful senator had enough.

He warned that the U.S. military could not create stability in a country "where there is chaos ... democracy where there is no tradition of it, and honest government where corruption is almost a way of life."

"It's unnatural and unhealthy for a nation to be engaged in global crusades for some principle or idea while neglecting the needs of its own people," said Sen. J. William Fulbright, then chairman of the Senate Foreign Relations Committee, in 1966 as the Vietnam War escalated.

Fulbright's warning is being applied by some to Afghanistan today. The U.S. is still fighting dubious wars abroad while ignoring needs at home, says Andrew J. Bacevich, who tells Fulbright's story in his new book, "Washington Rules: America's Path To Permanent War."

As the Afghanistan war enters its ninth year, Bacevich and other commentators are asking: When does it end? They say the nation's national security leaders have put the U.S. on an unsustainable path to perpetual war and that President Obama is doing little to stop them.

No one wants a permanent war ... but the people we're fighting against have already declared permanent war against us.
--Thomas Cushman, scholar and author

Bacevich has become a leading voice among anti-war critics. He is a retired colonel in the U.S. Army, a former West Point instructor and a member of the Council on Foreign Relations.

He's also a Boston University international relations professor who offers a historical perspective with his criticism. He says Obama has been ensnared by the "Washington Rules," a set of assumptions that have guided presidents since Harry Truman.

The rules say that the U.S. should act as a global policeman. "Fixing Iraq or Afghanistan ends up taking precedence over fixing Cleveland or Detroit," Bacevich writes.

His solution: The U.S. should stop deploying a "global occupation force" and focus on nation-building at home.

"The job is too big," he says of the U.S. global military presence. "We don't have enough money. We don't have enough troops. There's a growing recognition that the amount of red ink we're spilling is unsustainable."

Thomas Cushman, author of "A Matter of Principle: Humanitarian Argument for War in Iraq," says Bacevich is mimicking isolationists who argued before World War II that the U.S. couldn't afford to get involved in other country's affairs.

"No one wants a permanent war, and nobody would argue that our resources could be better spent at home," Cushman says. "But the people we're fighting against have already declared permanent war against us."

Does Obama buy into the "Washington Rules"?

The questions about the Afghanistan War come at a pivotal moment. The Obama administration plans to review its Afghanistan strategy next month.

The president had pledged to start withdrawing some U.S. troops next July. Obama and NATO allies in Afghanistan recently announced that combat operations will now last until 2014.

Those dates matter little to Bacevich.

"Obama will not make a dent in the American penchant for permanent war," he says. "After he made the 2009 decision to escalate and prolong the war, it indicated quite clearly that he was either unwilling or unable to attempt a large-scale change."

Bacevich says the notion that the U.S. military has to stay in Afghanistan to deny al Qaeda a sanctuary doesn't "pass the laugh test."

"If you could assure me that staying in Afghanistan as long as it takes will deny al Qaeda a sanctuary anywhere in the world, then it might be worth our interests," he says. "Pakistan can provide a sanctuary. Yemen can provide a sanctuary. Hamburg [Germany] can provide a sanctuary. ''

John Cioffi, a political science professor at University of California, Riverside, says the nation's "increasingly unhinged ideological politics" makes it difficult for the country to extract itself from battles in Afghanistan, Iraq and Central Asia.

"The U.S. is not on the path to permanent war; it is in the midst of a permanent war," Cioffi says.

Permanent war is made possible by massive defense spending that has been viewed as untouchable. But that may change with the recent financial crisis and the decline of the nation's industry, Cioffi says.

More ordinary Americans might conclude that they can't have a vibrant domestic economy and unquestioned military spending, Cioffi says.

"All this points to a time in the future when the government will no longer have the resources or popular support to maintain what amounts to an imperial military presence around the world," he says.

Yet leaders in the nation's largest political parties may still ignore popular will, says Michael Boyle, a political science professor at La Salle University in Pennsylvania.

"While the public tends to be much more concerned with domestic issues, both the Democratic and Republican foreign policy establishments tend to be more internationalist and outward-looking," Boyle says. "This makes them far more willing to conclude that nation-building missions in Afghanistan are essential to national security."

Birth of the 'Washington Rules'

The debate over permanent war may sound academic, but it's also personal for Bacevich.

His son, a U.S. Army officer, was killed in Iraq, a war he opposes. And Bacevich has written several other books on the limits of American military power, including "The Limits of Power: The End of American Exceptionalism."

Bacevich says the Washington Rules emerged when America was exceptional -- right after World War II when a newly empowered U.S. deployed a global military presence to contain communism and spread democracy.

Communism's threat has disappeared, but U.S. leaders continue to identify existential threats to justify the nation's global military empire, Bacevich says.

The cost of that military empire is immense: The U.S. now spends $700 billion annually on its military, as much money as the defense budgets of rest of the world combined, he says.

Bacevich says the Founding Fathers would be aghast. They thought that "self-mastery should take precedence over mastering others."

"It's not that the Founding Fathers were isolationists or oblivious to the world beyond our shores," Bacevich says. "Their reading of history led them to believe that empire was incompatible with republican forms of government and a large standing army posed a threat to liberty."

What Bacevich's critics say

William C. Martel, author of "Victory in War," says the U.S. didn't build a global military presence after World War II out of hubris but because of necessity. Much of the world had been destroyed in 1945.

"We had no option but to be engaged as a global leader," he says. "If we did not stand up to totalitarianism, the world would have been a much worse place."

Martel, an associate professor of international security studies at The Fletcher School at Tufts University in Massachusetts, says the U.S. must have a global military presence to confront radical groups that seek weapons of mass destruction.

The U.S. military may fight in Afghanistan "for years." But it's also been in Germany and Japan for decades, Martel says.

"We have a $14 trillion a year economy," Martel says. "We're spending roughly 4 percent of our GDP on defense. That's historically where we've been for decades. I don't see that as unaffordable."

Permanent war can, perversely, boost the nation's economy, says Jerald Podair, a history professor at Lawrence University in Wisconsin.

After World War II, most observers predicted a return to the Depression, Podair says. But Cold War military spending drove the nation's economy to its longest period of sustained economic expansion in history.

Transferring military money to domestic needs will not stimulate the American economy the same way war spending will, Podair says.

"It is sad to say that 'war is the health of the state,' but during the last 70 years, that has generally proved to be true," Podair says. "Unfortunately, the United States may have to 'fight' its way out of recession, just as it did during World War II and the Cold War."

Obama, though, might fight his way to a presidential defeat in the 2012 election if he doesn't find a way to pull the U.S. off the path to permanent war, Bacevich says.

If Obama is still waging war in Afghanistan in 2012, he'll be in trouble, he says.

"That's going to pose difficulty for him in running for re-election because many of the people who voted for him in 2008 did so because they were convinced that he was going to bring about change in Washington," Bacevich says. "But the perpetuation of war wouldn't amount to change."

German Source: The Karlsruhe Court Decision Is a Ticking Time Bomb

A well-informed and reliable source told EIR yesterday, that the European Financial Stabilization Facility (EFSF) in Luxembourg is presently working intensely to raise funds on the financial markets using the state guarantee, which according to him is legally questionable. The head of the EFSF, Klaus Regling, also is using the interest differential among countries, which would be cynical, to say the least.

Otherwise, the German government would work on a new insolvency law, and a new insolvency fund is supposed to replace the EFSF, which would be just a false labelling. This was discussed between German Chancellor Angela Merkel and French President Nicolas Sarkozy. This, however, requires a change in the Lisbon Treaty, which, given the Lisbon ruling of the Karlsruhe constitutional court, requires a Volksabstimmung, a popular referendum in Germany. If this happens, the market reaction would be massive.

The Karlsruhe court is expected to hold a hearing on the case of the five professors still this year, and alone that fact will have a huge effect on the markets. The case challenges the EU bailout scheme as a violation of the Lisbon Treaty. Also the fact, that the Rachman article in yesterday's Financial Times, "How Germany Could Kill the Euro," mentioned several times, that the position taken by the German government is actually driven by the fear that Karlsruhe will rule their policy to be unconstitutional, means that this is a ticking time bomb. The other time bomb actually is the possibility that the Irish budget, which Prime Minister Brian Cowen was to introduce into the parliament today, doesn't go through.

The source also expressed the view that, indeed, the inflation risk in the U.S. today approaches levels comparable to Germany in the early 1920s.

Iceland elects ordinary folk to draft constitution

In this image made available by the Icelandic government, Icelanders submit their views on what should be in the nation's new constitution, in Reykjavik, on Saturday Nov. 6, 2010. Citizens of the sparsely-populated volcanic island are holding an unusual election Saturday Nov. 27, 2010, to select up to 31 people who will cobble together a new charter, an exercise in direct democracy born out of the outrage and soul-searching that followed the economic meltdown, with hundreds of people are vying for the chance to take part in the Constitutional Assembly that will convene early next year. In this image made available by the Icelandic government, Icelanders submit their views on what should be in the nation's new constitution, in Reykjavik, on Saturday Nov. 6, 2010. Citizens of the sparsely-populated volcanic island are holding an unusual election Saturday Nov. 27, 2010, to select up to 31 people who will cobble together a new charter, an exercise in direct democracy born out of the outrage and soul-searching that followed the economic meltdown, with hundreds of people are vying for the chance to take part in the Constitutional Assembly that will convene early next year. (AP Photo/Jon Svavarsson, ho)

Iceland's getting a new constitution -- and it's really going to be the voice of the people.

The sparsely-populated volcanic island is holding an unusual election Saturday to select ordinary citizens to cobble together a new charter, an exercise in direct democracy born out of the outrage and soul-searching that followed the nation's economic meltdown.

Hundreds of people are vying for the chance to be among up to 31 people who will form the Constitutional Assembly slated to convene early next year -- a source of huge pride for Icelanders who have seen their egos take a beating in recent years.

"This is the first time in the history of the world that a nation's constitution is reviewed in such a way, by direct democratic process," says Berghildur Erla Bergthorsdottir, spokeswoman for the committee entrusted with organizing the Constitutional Assembly.

Iceland has never written its own constitution. After gaining independence from Denmark in 1944, it took the Danish constitution, amended a few clauses to state that it was now an independent republic, and substituted the word 'president' for 'king.' A comprehensive review of the constitution has been on the agenda ever since.

Pressure mounted for action after the nation's economic collapse in 2008, an event punctuated by ordinary citizens gathering outside the Althingi, the parliament, banging pots, pans and barrels -- a loud, clanging expression of fury. The meltdown was seen not only as a failure of the economy but of the system of government and regulatory agencies. Many came to believe a tighter constitutional framework -- including a clearer division of powers -- might have been able to minimize that damage, or even prevent it.

"It is very important for ordinary citizens, who have no direct interest in maintaining the status quo, to take part in a constitutional review," said Prime Minister Johanna Sigurdardottir. "We are hoping this new constitution will be a new social covenant leading to reconstruction and reconciliation, and for that to happen, the entire nation needs to be involved."

The election marks yet another twist in the fortunes of this Nordic nation of just 320,000 that went from economic marvel to fiscal basket-case almost overnight. The rugged island settled by Vikings was transformed from a country of fisherman to hub of international finance with dizzying speed. Icelandic investors -- dubbed 'Viking raiders' -- snapped up assets around the world for a decade, mostly on borrowed funds.

The global financial crisis wreaked political and economic havoc in Iceland. Banks collapsed in October 2008, and with them the Icelandic currency, the krona. Unemployment soared, as did the cost of living. Loans issued in foreign currencies during the boom suddenly doubled, tripled or even quadrupled, all due to the collapse of the krona.Continued...

Icelanders debated their values and turned to questioning the foundations of their society, including those that had facilitated the boom. Anger grew as more instances of misdeeds and incompetence in the private and public sector were exposed. Icelanders woke up to the harsh fact that their country, which had consistently been at or near the top of the Transparency International anti-corruption index, was, in fact, steeped in corruption.

That was ultimately confirmed in a 2,000-page report following a special parliamentary investigation. That report showed that the foundations of Icelandic society were decayed and that a sweeping revision of the social framework was needed.

Sigurdardottir says a new social covenant can at least assist in "restoring the public's faith in the government."

The constitutional assembly will be made up of 25 to 31 delegates, the final number to be determined by a gender and equality ratio. It will be made up of regular citizens elected by direct personal voting. Anyone is eligible to stand for election, with the exceptions of the president, lawmakers and the committee appointed to organize the assembly.

The assembly will draft a proposed new constitution next year. They will use material from another extraordinary project earlier this year in which 1,000 randomly chosen Icelanders -- aged 18-89 -- offered their views on what should be in the constitution.

Now the race is on to be among the charter's authors, with 523 people in the running. Truck drivers, university professors, lawyers, journalists and computer geeks are all among the candidates. All have been given equal air time on Icelandic radio to make their platforms known.

Those elected will receive a salary equal to that of Iceland's lawmakers while the constitutional review takes place, and Icelandic employers are legally obliged to grant leave to any employees elected to the assembly.

One candidate, Thorvaldur Gylfason, a professor of economics at the University of Iceland, drew parallels between Iceland and South Africa, saying that a country that has experienced shock needs a fresh start.

"A country that has suffered a complete economic and moral collapse needs to start with a clean slate," he said. "We need to ensure that the sort of malpractice and negligence that, among other things, led to the collapse of the Icelandic economy two years ago, cannot happen again."

Not everyone is convinced that the constitution should be amended, and some view the process as a frivolous populist exercise. They cite the high cost of the assembly and the difficulty of adequately presenting all the candidates.

Thorsteinn Arnalds, an engineer, is running in hopes of keeping the existing constitution intact, arguing that change in a time of crisis is preposterous.

"The constitution had nothing to do with the bank collapse, and it is not standing in the way of rebuilding," he said. "Right now we need the basic social structures in place, not for them to be torn down."

Others, like Berglind Steinsdottir, a proofreader and student, are more enthusiastic.

"I am incredibly optimistic and excited about seeing what comes out of this," Steinsdottir said.

If Bribery Is Illegal Everywhere...

...why aren't Goldman and the other major banks involved under indictment?

by Karl Denninger
MUMBAI: Institutional investors who subscribed to the qualified institutional placement (QIP) of Money Matters Financial Services are unlikely to recover their investment in the debt syndication company anytime soon, say investment bankers .

Rajesh Sharma, CMD of Money Matters, was arrested by the CBI on Wednesday for allegedly bribing bank officials to get loans sanctioned for some developers. E-mail queries to Fidelity, GMO, Goldman Sachs did not elicit any response, while Morgan Stanley said it “did not comment on market transactions”. Investors also vented their fury on shares of IIFL, the broking firm which had arranged the QIP. The IIFL stock crashed 14% to close at .Rs 92.55.

Let me guess? "Unexpected" and "we didn't know"?

Uh huh.

Again, if you're engaged in some sort of organized felonious conduct in concert with other people, the common word for that is "Racketeering."

For how much longer will not only we but other nations allow these international banks to participate in these schemes, make god-awful amounts of money, and yet not suffer the consequences?

Oh sure, they bust a few people involved. But the institutions make billions from these schemes and they keep the money that these "few people" siphoned off!

Remember that this crap is largely responsible for the India property bubble-pricing nonsense - just like it was over here in America, in Ireland, and everywhere else! The banks may have put together different sorts of schemes in different places but the central point of the scheme doesn't change - it's all about finding some way - any way - to create a false belief of value in real estate, which then drives leverage and profits - right up until the falsehood (and fraud) is exposed, at which point it crashes and the suckers (ordinary people) lose everything while the banksters run off with the loot.

This has to stop - and India needs to, in this case, level an indictment at these "funding banks" that bought "investments" and both seize executives and charge them or better, bar these institutions from doing business in their nation and seize every asset of theirs they can find.

Global poverty doubled since 1970s: UN

Editor's Note: Or code for the implementation of Agenda 21?

AFP image

GENEVA — The number of very poor countries has doubled in the last 30 to 40 years, while the number of people living in extreme poverty has also grown two-fold, a UN think-tank warned Thursday.

In its annual report on the 49 least developed countries (LDCs) in the world, the UN Conference on Trade and Development (UNCTAD) said that the model of development that has prevailed to date for these countries has failed and should be re-assessed.

"The traditional models that have been applied to LDCs that tend to move the LDCs in the direction of trade-related growth seem not to have done very well," said Supachai Panitchpakdi, secretary general of UNCTAD.

"What happened is that in the past 30-40 years, the number of LDCs have doubled so it has actually deteriorated, the number of people living under the poverty line has doubled from the 1980s."
The report indicated that the situation has sharply deteriorated in the past few years.

Read Full Article

Euro slides as Portugal bailout pressure builds

Portugal is under pressure to accept an EU bailout in order to stop the eurozone debt contagion spreading to Spain, according to German press reports that pushed the euro to a two-month low.

Portugal General Strike - AFP image
Bruno Waterfield

The European Central Bank is pushing Portugal to become the third eurozone country to accept an EU-IMF “rescue” because of concerns that a Portuguese debt crisis will sink its Iberian neighbour Spain.

The EU and eurozone fears that Spain, Europe’s fifth largest economy, is too big to bailout and that a Spanish crisis would tear down the European single currency.

Major European stock markets fell sharply, unsettled by the news and talk of the EU bailout fund being doubled. Spain's Ibex led the way losing 2.3pc, while bourses in London, Paris and Frankfurt were down between 1.3pc and 1.7pc. The euro hit $1.3204, its lowest since late September.

Borrowings cost in Portugal and Spain climbed, with yields on the countries' 10-year bonds near record highs.

“If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal,” unnamed sources told the Financial Times Deutschland.

The rumours mirror similar leaks and briefings three weeks that Ireland was seeking an EU bailout and despite denials from all parties the reports were later confirmed.

Portugal, like Ireland before it, has denied it is being pressured by euro zone countries and the ECB. “This news article is completely false, it has no foundation,” said a government spokesman.

But Fernando Teixeira dos Santos, Portugal’s finance minister, has hinted euro zone are pushing Portugal to accept a bailout and the loss of sovereignty that allows the EU and IMF to take over a country’s fiscal policy.

Read Full Article

Angela Merkel in eurozone permanent bail-out vow

Germany's Chancellor Angela Merkel has vowed to implement a permanent bail-out facility amid speculation over a break up of the 16-nation eurozone.

A joint statement with French President Nicolas Sarkozy said the two would propose replacing the existing fund that expires in 2013.

Meanwhile the head of Germany's central bank said the existing fund could be increased if needed.

And the fund's head has dismissed the risk of a eurozone break-up.

Klaus Regling of the European Financial Stability Facility (EFSF) said it was "inconceivable that the euro fails".

There has been speculation that some countries may be forced to give up the euro in light of the Irish debt crisis.

Fund upsize

In their joint statement, the French and German leaders said that they were working "under high pressure on a joint proposal for a crisis mechanism that is to replace the current one beyond 2013".

The EFSF was set up over the summer as a general rescue fund for eurozone governments, in a failed attempt to prevent the Greek debt crisis spreading to other countries.

The two leaders also said they wanted a bail-out of the Irish Republic by the EU and IMF to be finalised as soon as possible.

Bundesbank governor Axel Weber Mr Weber said the rescue fund could be increased

The negotiators plan to conclude talks on Sunday, according to news agency Agence France Presse, citing an anonymous source in Brussels.

Much of the money for the Irish bail-out will come from the EFSF.

In separate comments, Axel Weber - head of Germany's central bank - said that the EFSF could be increased in size by a further 100bn ($134bn, £85bn) euros if need be.

It comes after the German finance ministry was forced to deny a story in German newspaper die Welt that the 440bn euros fund would be doubled in size.

Moves are also under way to carry out a new and tougher round of stress tests on Europe's biggest banks next year, after a run on the government-guaranteed Irish banks forced Dublin to seek its rescue from the EU and IMF.

Market doubts

Worries about the finances of other eurozone governments - in particular Portugal and increasingly Spain - are putting pressure on the euro and government bonds.

Euro v US Dollar

Last Updated at 26 Nov 2010, 23:50 GMT EUR:USD one month chart
€1 buys change %
1.3242 +

The currency has fallen by more than three cents against the dollar this week because of events in the Irish Republic.

The single currency rallied back slightly in Thursday afternoon trading to $1.3375, but has still lost 3.4 cents or 2.5% of its value against the dollar since the beginning of the week.

The euro has fallen 1.2% since Monday against the pound.

The bond yields of debt-troubled eurozone governments have continued to rise, suggesting that markets are becoming ever less comfortable about lending them money.

The 10-year Irish bond yield rose to 9.08% - above the highs seen prior to the start of the bailout talks. Spanish bonds also fell in value, raising the 10-year yield to 5.2%.

In or out?

Meanwhile, Mr Regling - the EFSF's head - told Germany's Bild newspaper there was "zero chance" that the euro would collapse.

Start Quote

Would Ireland be better off if it left the euro and revived the Punt? Would the Greek economy recover more quickly with a new Drachma?”

End Quote

"No country will voluntarily give up the euro - for weaker countries that would be economic suicide, likewise for stronger countries," he said.

Germany's Chancellor, Angela Merkel, also chimed in, saying that she was "more confident than this spring that the European Union will emerge strengthened from the current challenges".

It follows more negative comments she made earlier in the week, when she described the euro's plight as "exceptionally serious".

Questions have been raised about the cost to the EU, and the International Monetary Fund, of bailing out eurozone members - over the summer, Greece was bailed out to the tune of 110bn euros ($147bn; £93bn), while the Irish Republic is currently negotiating what is expected to be an 85bn-euro rescue package.

Many commentators have also pointed out that eurozone countries are unable to devalue their own currency - one of the key methods many governments use to trade their way out of recessions, as a weaker currency makes exports cheaper.

As a result, some have suggested that countries like the Irish Republic and Greece would be better off outside the zone.

Bank tests

Meanwhile, the EU intends to hold a new round of stress tests next year, to check the robustness of Europe's banks.

European officials claim that the new tests will be much more stringent than a previous set of tests carried out over the summer.

"We can expect truly demanding tests over the course of 2011," said Jonathan Faull, head of the internal market unit of the European Commission.

The European Central Bank is said to want to include an additional test of whether banks have enough cash in reserve in case they suffer the kind of deposit flight that afflicted those from Ireland.

The results of the first stress tests were published in July in a bid to reassure markets during an earlier chapter of the sovereign debt crisis.

Of the 91 major European banks scrutinised, only seven - in Greece and Spain - failed.

All of the major Irish banks passed. However, now the Irish government is set to almost completely nationalise Allied Irish Banks and Bank of Ireland.

Government deficits as proportion of GDP

BP oil spill incident commander dies in small plane crash in FL

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European Soviet Union - UKIP Godrey Bloom MEP evicted ! ! - November 2010

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Webster Tarpley: Manufactured Terrorism & The N-S Korea Staged Crisis

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Currency Crisis! So What Happens If The Dollar And The Euro Both Collapse?

Some analysts are warning that the U.S. dollar is in danger of collapse because of the exploding U.S. government debt, the horrific U.S. trade deficit and the new round of quantitative easing recently announced by the Federal Reserve. Other analysts are warning the the euro is in danger of collapse because of the very serious sovereign debt crisis that is affecting nations such as Greece, Portugal, Ireland, Italy, Belgium and Spain. So what happens if the dollar and the euro both collapse? Well, it would certainly throw the current world financial order into a state of chaos, but what would emerge from the ashes? Would the nations of the world go back to using dozens of different national currencies or would we see a truly global currency emerge for the very first time?

Up until recently, the idea of a world currency was absolutely unthinkable for most people. In fact, the notion that all of the major nations around the globe would agree to a single currency still seems far-fetched to most analysts. However, if enough "chaos" is produced by a concurrent collapse of the U.S. dollar and the euro, would that be enough to get the major powers around the world to agree to a new financial world order?

Let's hope not, but it is getting hard to deny that we are heading for a major currency crisis, and if the U.S. dollar and/or the euro collapse, the world will certainly never be the same afterwards.

In case you missed it, China and Russia made a very big announcement the other day.

They told the world that instead of using the U.S. dollar to trade with each other, they will now be using their own national currencies.

Most Americans don't realize it, but that is a very, very big deal.

The fact that the U.S. dollar has been the primary reserve currency of the world for decades has given the United States a tremendous amount of economic power.

But now nations are beginning to lose confidence in the U.S. dollar and they are slowly starting to move away from it.

When the Federal Reserve announced a new round of quantitative easing in early November, it created a huge backlash from other nations. For decades, many other countries have been heavily investing in dollar-denominated assets, and now they are quite upset that those assets are going to be devalued.

Chinese Finance Vice Minister Zhu Guangyao used very strong language in denouncing the Fed's new quantitative easing scheme earlier this month....

"As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets."

German Finance Minister Wolfgang Schäuble was even more blunt. He has called current Federal Reserve policy "clueless", and he says that he is absolutely disgusted with the Federal Reserve at this point....

"They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous."

So where is all of this going?

If the Federal Reserve keeps flooding the system with new dollars, the rest of the world could eventually totally reject the U.S. dollar and U.S. Treasuries.

If that day ever arrives, the results would be beyond catastrophic as the following short video from the National Inflation Association demonstrates....

But it is not just the U.S. dollar that is in trouble.

The euro is in danger as well.

Just consider the financial problems that some major European nations are experiencing right now....

*Standard & Poor's has slashed Ireland's credit rating two notches to "A", and is warning that there could be further downgrades. The Irish budget deficit is projected to reach 32 percent of national output this year. Ireland's finances are being called "just one big pyramid scheme", and they recently accepted a huge European bailout. Unfortunately for Ireland, this bailout comes with strings. The Irish government is now being forced to implement an austerity program that is being referred to as "draconian".

*Analysts are projecting that Portugal is going to need a bailout of at least 50 billion euros. The government of Portugal has implemented some harsh austerity measures in an attempt to get the red ink under control, and the people are not pleased. On Wednesday, a massive national strike shut down travel and basic services across the country.

*Things are so bleak in Portugal right now that Foreign Affairs Minister Luis Amado recently stated that his nation "faces a scenario of exit from the euro zone" if a solution is not found for this financial crisis.

*Greece was the first nation to need a European bailout, and now there are rumors that they may need even more assistance. The statistics agency for the EU, Eurostat, recently revealed that Greece's budget deficit for 2009 was actually 15.4% of GDP rather than 13.6% of GDP as originally thought. The Greek national debt is now well over 120 percent of GDP. The financial problems in Greece never seem to stop.

*Belgium's debt has reached 100 percent of annual national income, and the cost of insuring that country's debt has now hit record levels.

*Even Spain is in trouble. Rates on Spanish 10-year government bonds have risen to frightening heights in recent days, and the official unemployment rate in Spain is hovering around 20 percent.

*In a recent article entitled "A Spanish Bailout Would Test Europe’s Strained Finances", the New York Times quoted Jordi Galí, the director of the Center for Research in International Economics at Barcelona’s Pompeu Fabra University as saying that rumors that Spain is in financial trouble could end up making it a self-fulfilling prophecy....

"If investors expect Spain to have trouble refinancing its debt, now or somewhere down the road, then Spain will have trouble,” he added. “This is only aggravated by the fact that the reluctance of investors to purchase the country’s public debt leads to an increase in the interest rate it has to pay and thus in the budget deficit and the amount of debt it has to issue."

So could this sovereign debt crisis actually cause the euro to collapse?

Well, it depends who you ask.

European Financial Stability Fund chief Klaus Regling says that there is "zero" chance that the euro will collapse....

"There is zero danger. It's inconceivable that the euro would collapse."

Other European leaders are not so sure about that.

EU President Herman Van Rompuy recently warned that if some of the weaker countries in Europe are forced to abandon the euro it will likely cause a total meltdown of the European Union....

"We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union."

German Chancellor Angela Merkel is also warning that a failure of the euro could bring down the entire European Union....

"If the euro fails, then Europe fails."

But is this likely to happen any time soon?

No, probably not, but in 2010 top European officials are actually acknowledging the possibility, and that shows just how serious things have gotten.

So if the U.S. dollar and the euro do collapse, what would happen?

Well, already many world leaders are openly speaking of the need for a true global currency.

After all, they argue, there won't be any "currency wars" if we are all using the same currency.

In fact, the Institute of International Finance, an organization that represents 420 of the biggest banks and financial institutions on the globe, recently declared that the time has come to adopt a one world currency.

In fact, as I wrote in an article entitled "Bancor: The Name Of The Global Currency That A Shocking IMF Report Is Proposing", a recent IMF policy paper actually proposed a name for the "global currency" that they believe could be coming....

A paper entitled "Reserve Accumulation and International Monetary Stability" by the Strategy, Policy and Review Department of the IMF recommends that the world adopt a global currency called the "Bancor" and that a global central bank be established to administer that currency. The report is dated April 13, 2010 and a full copy can be read here. Unfortunately this is not hype and it is not a rumor. This is a very serious proposal in an official document from one of the mega-powerful institutions that is actually running the world economy. Anyone who follows the IMF knows that what the IMF wants, the IMF usually gets. So could a global currency known as the "Bancor" be on the horizon? That is now a legitimate question.

So will any of this ever come to fruition?

Well, it would likely take one whale of a crisis to get the countries of the world to agree to such a thing.

However, we do live at a time when the world financial system seems to be perpetually on the edge of chaos. If at some point the U.S. dollar and the euro totally fall apart perhaps we will see a "new order" arise out of all of that chaos.

But let's hope not. Once we give any organization the power to issue a global currency the odds of us ever getting our economic sovereignty back will be greatly reduced. The internationalists are going to use any crisis as an opportunity to argue for greater centralization of the world financial system, and it will be very important for the American people not to fall for those arguments.

Hopefully the U.S. dollar and the euro can remain stable currencies for at least a little while longer. Because once they collapse things will never, ever be the same again.

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