Friday, January 21, 2011

China devalues US buying power by 30%, Protects US Treasury Holdings

The trade imbalance between the US and China, a hot button between the nations for the last decade or so, is finally going to start to stabilize in the summer of 2011. However, it is doing so with a de facto devaluation of the US dollar and its buying power. The average American will see a spike in the price of everything from their favorite jeans and T-shirts, to the cost of some electronics.

The Chinese have decided to devalue the US dollar’s buying power, without devaluing the US Treasury holdings they hold. It is an elegant solution to their issues. It will be interesting to see if they can pull it off, while they try to prop up the European Sovereign debt markets at the same time.

The Chinese are attempting, successfully so far, to introduce the Yuan as a global currency in which to settle international trade. China is pumping into its own internal currency markets so much liquidity, they need an export market to develop for the Yuan or their own internal markets will overheat.

So China is going to start offering Yuan based savings accounts, to westerners as a vehicle in which to park capital. While this is a test case only, one might expect Yuan based accounts to be offered around the world sooner rather than later.

If western investors take to Yuan based cash accounts as a way to try and gain an increase in value, the transition will drive the western banks to be more proactive in adding convertibility into their systems. To start, they are offering these Yuan accounts at three US based branches.

The US Dollar devaluation will come in the form of an increase in the prices of all products. In reality it will represent the uniform cost push effects of inflation. The US can expect it on all Chinese based products of one form or another. The timing of the change is set to arrive with the products on the US shores in the summer of 2011.

“They’re going to go home with 35 percent less product than for the same dollars as last year,” particularly for fur coats and cotton sportswear, said Bennett Model, chief executive of Cassin, a Manhattan-based line of designer clothing. “The consumer will definitely see the price rise.”

China has no choice at this stage, but to pass on the cost of raw inflation to its customers. The era of cheap Chinese imports is over. The real impacts of higher commodity costs are going to push into the economy at different levels.

The weather impact on Australia has not hit the Chinese manufacturing capacity yet, but you can expect that diesel will increase significantly in the coming weeks, as China draws upon the world’s spare capacity to fuel their economy this spring.

The US had warned China to adjust its currency peg with the US, or suffer the consequences. Those consequences are now being going to be return to the US shores as expensive imports of dubious quality.

However, not all nations or economist agree with the stance the US is taking. Robert Mundell, Nobel Prize winning economist, and the proverbial father of the Euro, feels that the US is pushing China too hard in this regard.

Robert Mundell, Professor of Economics, Columbia University, said: “It’s a mistake to have China change the exchange rate. This is a bad way of changing something.

“A big appreciation in China would create deflation, aggravate poverty in the western part of the country, in the rural areas. It would be something that would in the long run come back to haunt China.”

Channel News Asia

China has no choice but to push the cost of the rising raw commodity prices onto their end consumers. The dirty secret of the runaway commodity bull market that started in the summer of 2010 is how much real inflation is raging inside of the Chinese economy in 2011.

“Four percent, China can bear it — beyond 5 percent, people will complain a lot,” said Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation here.

The Chinese people are reported to be experiencing painful levels of internal inflation on food staples. The hard reality is that in the global trade in fresh produce, requires that energy inflation is quickly pushed through to food prices. The Chinese government has reacted to these increases by rolling out Nixon like price caps on staples.

“Given that food prices are spearheading immediate inflationary pressures, supply-side measures should be more effective than rate hikes,” Qu Hongbin, the co-head of Asian economics research at the international bank HSBC, “There’s no need to panic, as Beijing has more than enough effective policy options to combat inflation.”

The real mark up of inflation will be higher, and across the board for buyers of Chinese products in the spring 2011 for the next Christmas buying season. This is going to introduce expectations of inflation in the US by the spring of 2012.

Victor Fung, the group chairman of Li & Fung in Hong Kong, a 35,000-employee trading company that supplies most of the world’s big retailers with Asian goods, said that contracts signed late last year would produce a jump of 10 to 20 percent in the import prices of consumer goods arriving at American ports by the second quarter of this year.

“By the middle of this year, you’ll see considerable diversion of trade away from China,” which will start to bring down the United States trade deficit with China, Mr. Fung said in an interview.

New York Times

The Chinese – US bilateral trade will show signs of leveling at a new lower rate, just as the European mess grows worse. This is the Catch-22 China now finds itself in. Europe has grown into China’s most important export market, just as the economy of Europe shudders from the fiscal and monetary policies of the area. China can handle the market adjustment to one of its major export markets, but can it handle both?

The Chinese could find themselves in a situation in 2012 where their largest two export markets have radically changed on them. This leaves their government open to domestic issues concerning the support they are providing to bankrupt western nations.

The US purchasers for organizations like Wal-Mart are international mercenaries. They will look to relocate their international low margin purchases to nations like Vietnam, the Philippines, and Africa, and to the Mexicali factories, once again.

The Chinese are going to find themselves priced out of the low end of the cheap product market. While their factories are the largest in the world and they employ armies of workers, the scale of large numbers is starting to work against the Chinese as a whole.

The increase in prices from most if not all world sources, will drive new changes to the US business models in the near future. It will be interesting to see where China and its exports are in that make up.

Confessions of a Macro Contrarian

Insider Selling To Buying Ratio: DIV/0, As No Insiders Bought Any Stock In Prior Week

According to Bloomberg, in the week ended January 14 S&P 500 insiders sold $163 million worth of stock in 54 separate transactions. They bought exactly $0. That's right, in the last week, there was no insider purchasing. This is the first time in years (and possibly for ever) in which we have seen a week during which there was not one purchase by an insider. Surely, there is no need to comment on this result.

Source: Bloomberg

How the financial elite have dismantled the American middle class

top 1 percent share of wealth at levels not seen since the Great Depression. Goldman Sachs offering average bonuses of $430,000 while a record 43,200,000 Americans receive food stamps.

The U.S. economy is now operating like a finely tuned engine bent on dismantling the middle class and protecting the tiny elites in our nation that have learned to manipulate both political parties to their financial benefit. This did not occur over night but started in the 1970s when the U.S. government and investment banks juiced up the nation with deficit and debt spending. A single family cannot go into debt for a very long time without consequences but a rising housing market hid much of the inequality developing in our system for a very long time. It was an illusion of stability. The top 1 percent in our nation now control 43 percent of all financial wealth. These are levels not seen since the years before the Great Depression consumed the global economy. The fact of the matter is the top 1 percent has massively gained in real financial terms because of political maneuvering and selling out the middle class. Since these people protect their wealth through investment banks and tax breaks politicians have not dared touch these sacred cows or even asking banks to pay for their decades of personal irresponsible lending. In the end the elite have created a system where the working and middle class are paying for their own demise.

tent city

“(UK Guardian) A homeless encampment known as Tent City, in Sacramento, California, in 2009. Since the 1970s, real wages stopped growing and the gap between rich and poor expanded as the US economy slowed down after decades of growth. Photograph: Rich Pedroncelli/AP”

I find it disturbing that foreign news organizations are covering our financial reality better than local media outlets. This probably has to do with many large media outlets being controlled by the same Wall Street power brokers. This is no conspiracy story but a logical extension of money infiltrating and controlling politics, laws, and the trajectory of our economy moving forward. The above comes from the UK and shows a grim reality that many Americans do not want to face. Those that do face it are usually left voiceless (ironically the viral star Ted Williams was a homeless man with a golden voice). We have a very large problem with many people falling off of the economic radar. Tent cities are now a staple in many areas of the country and food banks are facing unprecedented demand for their services. Why is this occurring in the midst of a recovery? Well take a look at how many people now receive food assistance from the government:

food stamp participation chart

Source: SNAP

The latest uninviting data shows 43,200,000 Americans receiving some form assistance, an all-time record that seems to be broken each month. This number has been moving up steadily for the entire decade. Many of these people are families that have been thrown off of the middle class track. With 1 out of 3 families with no retirement savings many people are one paycheck away from being homeless or being evicted, a fact confirmed by the record number of foreclosures in 2010. What is disturbing however is how many people are anesthetized by the mainstream media and somehow blame each other for these problems. Have they not noticed the record profits at investment banks? Did they miss the memo that Goldman Sachs, a bank that would not even be around without taxpayer support, is now going to give out bonuses that average $430,000? Did people forget that it took Wall Street years to create these financially destructive products to gamble away the wealth of average Americans and distribute it amongst themselves? While most working and middle class Americans operate in the rugged individualistic capitalism world of Social Darwinism many of the elite operate in a plutocracy model where they win no matter what outcome hits in the market. If they make a failed bet they can extort politicians and force their hands for bailouts.

“US employers took advantage of the changed situation: they stopped raising wages. When basic labour scarcity became labour excess, not only real wages, but eventually benefits, too, would stop rising. Over the last 30 years, the vast majority of US workers have, in fact, gotten poorer, when you sum up flat real wages, reduced benefits (pensions, medical insurance, etc), reduced public services and raised tax burdens. In economic terms, American “exceptionalism” began to die in the 1970s.”

income inequality

The disparity is obvious by examining the above chart. Income is now flowing to the top 10 percent in a way that it has not since the 1920s all the while middle class American have been increasing productivity and have actually added more family members to the workforce merely to stay afloat. Half of all American workers make $25,000 a year or less. Wages have been stuck for over a decade and have gone virtually nowhere for a few decades in real terms. Yet these gains in productivity and favorable political climate have flowed one way:

“The rich, however, have got much richer since the 1970s, as every measure of US income and wealth inequality attests. The explanation is simple: while workers’ average real wages stayed flat, their productivity rose (the goods and services that an average hour’s labour provided to employers). More and better machines (including computers), better education, and harder and faster labour effort raised productivity since the 1970s. While workers delivered more and more value to employers, those employers paid workers no more. The employers reaped all the benefits of rising productivity: rising profits, rising salaries and bonuses to managers, rising dividends to shareholders, and rising payments to the professionals who serve employers (lawyers, architects, consultants, etc).”

incomedistribution (1)

So even with the top 10 percent we see the inequality spike as we move up the chain. The narrative coming out of Wall Street is all of this was inevitable. That somehow the middle class disappearing is just the market working itself out. That is a blatant lie. If that were to be the case all big investment banks on Wall Street would be in the ash heap of history. That would be the market working things out. Instead, we have subsidized cronyism for the top 1 percent all at the expense of the working and middle class:

“Since the 1970s, most US workers postponed facing up to what capitalism had come to mean for them. They sent more family members to do more hours of paid labour, and they borrowed huge amounts. By exhausting themselves, stressing family life to the breaking point in many households, and by taking on unsustainable levels of debt, the US working class delayed the end of American exceptionalism – until the global crisis hit in 2007. By then, their buying power could no longer grow: rising unemployment kept wages flat, no more hours of work, nor more borrowing, were possible. Reckoning time had arrived. A US capitalism built on expanding mass consumption lost its foundation.”

Average Americans need to wake up and get a handle on the situation. College tuition now is even outpacing inflation compared to other sectors so it is likely that fewer Americans will gain the knowledge base needed to combat these entrenched interests without going into massive debt at these institutions. Many would rather be fixated on a homeless man with a golden voice instead of looking at where all the real gold is in our economy.

The Baltic Dry Index is Shouting "Danger, Will Robinson!" But Are Investors Listening?

[Editor's Note: The Baltic Dry Index (BDI) flashed serious warning signals ahead of the 2008 financial crisis. After dropping for its 35th-straight day yesterday (Thursday), what is this thinly followed index telling us now?]

Back in May 2008, when global investors still expected economic growth to continue, a thinly followed index began to broadcast a "red-alert" warning to those few who were watching.

The index proceeded to drop by more than 90% in the next six months.

Had you been watching - and heeded its warning - this index would have saved you from the fallout of the biggest financial crisis since the Great Depression.

And here's the thing. This index is updated five days a week and is readily available to anyone who wants to track it.

The index in question is called the "Baltic Dry Index," or BDI, and it once again merits a closer look: After peaking in May, the BDI has fallen for 35 straight days.

Is this another economic red alert, or merely a statistical red herring, like so many of the other economic reports that have appeared during the often-contradictory, whipsaw markets we've seen of late?

Let's take a closer look...

A Look Back at the Last Warning

The Baltic Dry Index is a number issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index tracks worldwide international shipping prices of various dry bulk cargoes.

The index provides investors and others with an idea of how much it will cost to move major raw materials by sea (in bulk, hence the name). Taking in 26 shipping routes measured on a time-charter and voyage basis, the BDI covers Handymax, Panamax, and Capesize dry bulk carriers shipping a plethora of commodities - including coal, iron ore, and grain.

If we look back at the BDI plunge that presaged the "Great Recession," we can see that outside events coincided with the index decline.

Crude oil peaked at an all-time high in a speculative frenzy in July 2008, and then reversed course. In September and October we witnessed the "big unwind," as Lehman Bros. Holdings Inc. (OTC: LEHMQ) collapsed, American International Group Inc. (NYSE: AIG) was torpedoed by its credit-default-swap (CDS) business, and mortgage giants Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FNM) imploded.

The index kept dropping as shipping companies parked their fleets. It let anyone who was following it know - in advance - that things were continuing to get worse.

When the index finally bottomed in December 2008, it established a bottom so low that it represented the ability to rent a 1,000-foot ore-class ship for less than the cost of the fuel it would burn if left to idle for a day. Ships that chartered for $48,000 back in May can now be had for $18,000 a day, a Lombard Street Research analyst told The Economist.

To the investors who watched this index, all of this was pretty obvious. Unfortunately, not many investors were watching.

And now the BDI is flashing "Red Alert" once again.

The Return-Trip Ticket

As important as it is to understand that a crash is imminent, I believe it's just as crucial to be ahead of the game by understanding when a rebound is at hand.

The Baltic Dry Index performs that early warning system function just as well. It had fully bottomed three months before U.S. stocks ended their sell-off. By January 2009, in fact, the BDI had signaled to "informed investors" that it was time to start nibbling again.

As a fund manager working to navigate the crash, I made sure that my shop relied on this index: Along with some other tools, the BDI provided us with insights about how the U.S. and global economies were behaving. It provided us with a panoramic view of what global manufacturers were doing with their raw ore reserves.

That brings us back to the present.

Back on the Tarmac

The BDI most recently topped out in May. As of yesterday (Thursday), it has already dropped 35 days in a row.

That's significant.

This string of "down days" is the longest in at least nine years, The Economist reported this week. During the crash of 2008, the index never fell 35 days in a row.

Today, the BDI is again flashing serious warning signs that not everything is as it appears. It may be warning us about the start of a "double-dip" recession, or it may be telling us that something even worse is at hand.

Historically, the Baltic Dry Index has shown itself to be the EKG of future industrial demand. And, right now, the BDI is screaming "Danger, Will Robinson!" to any investor who will read it and heed it as a true leading indicator.

If the price of refined copper is called "Dr. Copper," for its ability to ascertain the health of the demand for growth in an economy, the BDI is the daily heartbeat for near-term future industrial demand.

Combined, those two indicators can provide investors with a view of whether the world economy is growing or shrinking, based on the big picture of world demand for growth. Currently, the BDI is flashing serious warning signs to anyone who is looking at it.

The drop in the BDI index in 2008 was one of the most obvious signs of the real impact that the so-called "Great Recession" would have. From May 20, 2008 to Dec. 3, 2008, the BDI fell from its high of 11,793 to its low of 663 - a near-freefall of 94%.

Moves to Consider Now

Given the signals we're getting from the Baltic Dry Index, the question to ask is clear: Are you preparing your portfolio so it includes protection against a possible additional leg down in the market?

It may help to understand the specific moves you'd want to consider.

Remember, back in 2008 the BDI had dropped for nearly two months before crude oil hit that July record peak and then started to unwind.

We will want to keep an eye on other raw commodity prices for similar "topping" actions, as we watch for confirmation of weakness in our favorite natural resources.

When demand is dropping for raw bulk materials, and the inventory of refined products like copper is growing, we will know it is time to consider putting in a "short" play on some of our commodity futures via long-dated put options.

Action to Take: The odds of a double-dip recession escalate even as volume dries up during summer trading. Put tight stops on any speculative position that you would be uncomfortable holding through a "2008-like" financial event that could strike this fall. You want to have enough liquidity to be able to buy when the next "March-2009-like" market bottom occurs. It won't play out just like the last one, but there will be similarities. You will need the financial firepower - cash - to take advantage of such a great possible entry point. Be prepared.

[Editor's Note: Jack Barnes started his career at Franklin Templeton in 1997, working with the company's portfolio team in its fund-information department - just as the Asian contagion infected the Asian tiger countries. He launched his own RIA shop in 2003 just as the second Gulf War was breaking out. In early 2006, after logging a one-year return of nearly 83%, Forbes named Barnes the top stock picker in its "Armchair Investors Who Beat the Pros" competition. His two audited hedge funds generated double-digit returns in 2008. Last summer, Barnes retired to the beach - which is where he writes from now.]

What the US can learn from China

Click this link ......

Goldman Sachs Vs. J.P. Morgan: Which Insolvent Bank Is A Better Investment - Chris Whalen With Larry Kudlow - Video

CNBC Video - Jan. 19, 2011

Discussing earnings results for Goldman & JP Morgan, with Charles Bobrinskoy, Ariel Investments, and Christopher Whalen, Institutional Risk Analytics.


Solvency is not even a question...

The 4 largest banks are insolvent many times over. Their puny and massively over-leveraged capital bases would not just be wiped out, they would be turned into negative multiples of the original equity.

Then take the next step and understand that these same criminally fraudulent and insolvent institutions, are paying their executives $144 billion in bonuses this year, based on false accounting that was endorsed by Congress and jammed down the throats of FASB in June of 2009.

I wrote about the criminal insolvency of banks here.

And here:

* VIDEO: 120 Seconds Of Gerald Celente Kicking Wall Street's Ass - "$144B Bonus Is 49th Largest GDP In World!"

* What If The Bankers Gorged On A Record $144 Billion In Bonuses And No One Noticed


Bill Black has made the case recently here...

* William Black Calls On FDIC To Seize Bank Of America

* William Black With Dylan Ratigan: "There Is Bank Fraud Everywhere And BERNANKE Is Leading The Cover-Up," PLUS Part 2 Of 'Seize Bank OfAmerica'


12 Economic Collapse Scenarios That We Could Potentially See In 2011

What could cause an economic collapse in 2011? Well, unfortunately there are quite a few "nightmare scenarios" that could plunge the entire globe into another massive financial crisis. The United States, Japan and most of the nations in Europe are absolutely drowning in debt. The Federal Reserve continues to play reckless games with the U.S. dollar. The price of oil is skyrocketing and the global price of food just hit a new record high. Food riots are already breaking out all over the world. Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time. Most Americans have no idea that a horrific economic collapse could happen at literally any time. There is no way that all of this debt and all of this financial corruption is sustainable. At some point we are going to reach a moment of "total system failure".

So will it be soon? Let's hope not. Let's certainly hope that it does not happen in 2011. Many of us need more time to prepare. Most of our families and friends need more time to prepare. Once this thing implodes there isn't going to be an opportunity to have a "do over". We simply will not be able to put the toothpaste back into the tube again.

So we had all better be getting prepared for hard times. The following are 12 economic collapse scenarios that we could potentially see in 2011....

#1 U.S. debt could become a massive crisis at any moment. China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated. Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates. If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial system.

#2 Speaking of threats to the global financial system, it turns out that "quantitative easing 2" has had the exact opposite effect that Ben Bernanke planned for it to have. Bernanke insisted that the main goal of QE2 was to lower interest rates, but instead all it has done is cause interest rates to go up substantially. If Bernanke this incompetent or is he trying to mess everything up on purpose?

#3 The debt bubble that the entire global economy is based on could burst at any time and throw the whole planet into chaos. According to a new report from the World Economic Forum, the total amount of credit in the world increased from $57 trillion in 2000 to $109 trillion in 2009. The WEF says that now the world is going to need another $100 trillion in credit to support projected "economic growth" over the next decade. So is this how the new "global economy" works? We just keep doubling the total amount of debt every decade?

#4 As the U.S. government and the Federal Reserve continue to pump massive amounts of new dollars into the system, the floor could fall out from underneath the U.S. dollar at any time. The truth is that we are already starting to see inflation really accelerate and everyone pretty much acknowledges that official U.S. governments figures for inflation are an absolute joke. According to one new study, the cost of college tuition has risen 286% over the last 20 years, and the cost of "hospital, nursing-home and adult-day-care services" rose 269% during those same two decades. All of this happened during a period of supposedly "low" inflation. So what are price increases going to look like when we actually have "high" inflation?

#5 One of the primary drivers of global inflation during 2011 could be the price of oil. A large number of economists are now projecting that the price of oil could surge well past $100 dollars a barrel in 2011. If that happens, it is going to put significant pressure on the price of almost everything else in the entire global economy. In fact, as I have explained previously, the higher the price of oil goes, the faster the U.S. economy will decline.

#6 Food inflation is already so bad in some areas of the globe that it is setting off massive food riots in nations such as Tunisia and Algeria. In fact, there have been reports of people setting themselves on fire all over the Middle East as a way to draw attention to how desperate they are. So what is going to happen if global food prices go up another 10 or 20 percent and food riots spread literally all over the globe during 2011?

#7 There are persistent rumors that simply will not go away of massive physical gold and silver shortages. Demand for precious metals has never been higher. So what is going to happen when many investors begin to absolutely insist on physical delivery of their precious metals? What is going to happen when the fact that far, far, far more "paper gold" and "paper silver" has been sold than has ever actually physically existed in the history of the planet starts to come out? What would that do to the price of gold and silver?

#8 The U.S. housing industry could plunge the U.S. economy into another recession at any time. The real estate market is absolutely flooded with homes and virtually nobody is buying. This massive oversupply of homes means that the construction of new homes has fallen off a cliff. In 2010, only 703,000 single family, multi-family and manufactured homes were completed. This was a new record low, and it was down 17% from the previous all-time record which had just been set in 2009.

#9 A combination of extreme weather and disease could make this an absolutely brutal year for U.S. farmers. This winter we have already seen thousands of new cold weather and snowfall records set across the United States. Now there is some very disturbing news emerging out of Florida of an "incurable bacteria" that is ravaging citrus crops all over Florida. Is there a reason why so many bad things are happening all of a sudden?

#10 The municipal bond crisis could go "supernova" at any time. Already, investors are bailing out of bonds at a frightening pace. State and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP. According to Meredith Whitney, the municipal bond crisis that we are facing is a gigantic threat to our financial system....

"It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the U.S. economy."

Former Los Angeles mayor Richard Riordan is convinced that things are so bad that literally 90% of our states and cities could go bankrupt over the next five years....

#11 Of course on top of everything else, the quadrillion dollar derivatives bubble could burst at any time. Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn't stop. Today, most money on Wall Street is not made by investing in good business ideas. Rather, most money on Wall Street is now made by making the best bets. Unfortunately, at some point the casino is going to come crashing down and the game will be over.

#12 The biggest wildcard of all is war. The Korean peninsula came closer to war in 2010 than it had in decades. The Middle East could literally explode at any time. We live in a world where a single weapon can take out an entire city in an instant. All it would take is a mid-size war or a couple of weapons of mass destruction to throw the entire global economy into absolute turmoil.

Once again, let us hope that none of these economic collapse scenarios happens in 2011.

However, we have got to realize that we can't keep dodging these bullets forever.

As bad as 2010 was, the truth is that it went about as good as any of us could have hoped. Things are still pretty stable and times are still pretty good right now.

But instead of using these times to "party", we should be using them to prepare.

A really, really vicious economic storm is coming and it is going to be a complete and total nightmare. Get ready, hold on tight, and say your prayers.

Josh Rosner: 'Landmark Foreclosure Ruling' In Massachusetts Ibanez Case - Bloomberg Video

New clip from Rosner - not posted before.

Video - Jan. 10 (Bloomberg) -- Joshua Rosner, an analyst at Graham Fisher & Co., talks about the implications of a court ruling against U.S. Bancorp and Wells Fargo & Co. in a Massachusetts foreclosure case.

The state Supreme Judicial Court upheld a judge's decision saying two foreclosures were invalid because the banks didn't prove they owned the mortgages, which he said were transferred into two mortgage-backed trusts without the recipients' being named.

If this clip gets pulled, watch it here on Bloomberg's Youtube channel...


Here's a related Bloomberg story from earlier this Summer involving Rosner...

Fannie subpoenas to show $30 billion in bad mortgages

Fannie Mae and Freddie Mac’s regulator may identify as much as $30 billion of debt included in mortgage bonds that the companies can force sellers to repurchase, according to Joshua Rosner, an analyst who in 2007 predicted the collapse in the market for the securities.

The Federal Housing Finance Agency this month said it issued 64 subpoenas seeking loan files and other documents related to so-called non-agency mortgage securities bought by the two government-supported companies. The U.S. is trying to determine whether misrepresentations might require issuers to repurchase debt, producing funds from firms that may include Wall Street’s largest banks to help repay taxpayer money.

Rosner’s estimate of the amount of bad loans the FHFA might find doesn’t equal how much Fannie Mae and Freddie Mac may recover because banks can argue some misstatements weren’t “material,” the New York-based analyst at independent research firm Graham Fisher & Co. said in a telephone interview. At the same time, the move bolsters other investors’ efforts, he said.

“The most important thing is probably that the subpoenaed documents will support other private actions and other government-agency actions,” said Rosner, co-author of a May 2007 paper that said the failure of mortgage bonds would roil housing and financial markets. “It will cause a lot of unhappiness on Wall Street.”

Corinne Russell, an FHFA spokeswoman, declined to comment.


Will China's Yuan overtake US Dollar?

Not Made In China: US Bullshit Manufacturing

Your host didn’t quite know what to say after viewing the meeting of the President and the Hu fellow from China yesterday. A perfectly honest man might have created a stink and told the truth:

We’ve spent a lot of time digging our own holes and now you’re a part of that, an enabler. And since we’re not going to agree on anything, get out. But before everyone leaves I’d like to show some handy charts I’ve had prepared by government employees, people who still have jobs. Which is what this is all about.

From the Department of Commerce, a pie chart of worldwide steel production as of November 2010:

The Commerce department on steel production is full of graphical data. All of it a horror show in terms of showing how the United States has disintegrated.

From 2009, another appalling graph — produced from data taken by the US Census, part of Commerce, on military production in the US versus everything else (and originally shown in the NY Times):

This continues on the blog riff that the US produces nothing but weapons. At the expense of everything else.

And that while what production of durable goods in the US that remains is charted, it — along with the fortunes of the middle class and the new mass of unemployed — cratered in 2009. However, military production did not.

It went through a minor dip and then soared.

This is immoral. It destroys any argument on fairness and shared burden and consequences being a part of US society. It broadly and mercilessly insults the intelligence of all those who must listen to, see or read about the Department of Defense making nibbles around the edges to trim its budget in the coming time of austerity.

The post a few days ago asked the rhetorical questions: What manner of leading western country has one company, General Atomics, devoted to only making killer drones for assassinating people elsewhere that’s half the size of the Food and Drug Administration? Or where the budget for killer drones is the same as the one to ““Transform Food Safety System, Invest in Medical Product Safety, [and provide] Regulatory Science”?

In light of this, I had an idea for what would have been an appropriate response to the Obama/Hu joint appearance. People armed with creme pies, enough for those onstage and in the polite audience.

Today’s news, from AP, delivers this classic piece of instantly generated convenient American bullshit, the usual lame attempt to polish a really big turd:

[President Obama] said the newly announced business deals worth $45 billion — which include a highly sought-after $19 billion deal for 200 Boeing airplanes — would help create 235,000 U.S. jobs, in addition to the half-million U.S. jobs already generated by the United States’ annual $100 billion in exports to China.

Boeing, the big arms manufacturer.

Perhaps one of the problems rests in the idea that the people who lead this country, and those who follow them around reporting on their insubstantial statements, don’t really grasp how many things in the US are made in China.

It’s not just a lot. It’s virtually everything I come into contact during my daily travels, except cars and food. There’s no getting away from it. There are no alternatives.

Perhaps the people in power never look hard at the astonishing data revealing profound failure, all carefully produced by government agency. It’s too ugly and impeaching. It reveals economic treason on a grand scale.

Here’s a quaint poster, one sold to the upper middle class, a decorative thing that shows a government chart of US steel production from 1895. Now it’s sold as a gift, presumably made in China, for hanging on the wall where perhaps someone fancy and fine will momentarily wonder what happened to all that and how the word growth was redefined as looting.

An alert and courteous reader passed on a related piece, from someone’s column on innovation, or the lack of it in the US. It was discussing how that word has been redefined also — downward into the nothing of going nuts for iPhones and apps:

As for the rest of the crowd, it was disturbing to observe what appeared to be a total lack of awareness of the bigger picture. The preoccupation, bordering on obsession, with what they define as “technology” really costs all of us. In the minds of the svelte and young, it seems technology is only information technology: iPods, iPads, laptops, displays, and cell phones ad nauseam.

The concept of technology that you and I might define as the real iron that once drove this country — motors, valves, machinery, presses — that stuff that required the skills of engineers and craftspeople in this country to design and build, never seemed to cross the minds of the beautiful.

I suppose that is the root of the problem. The technology being discussed, software and cell phones and the like, is engineered and built overseas. The software is outsourced to India and the electronics built in China.

Video: Hu Rocks Washington, Takes Over White House & Donates To Beggar Bernanke (Instant Classic)

Do not skip this one. I still can't stop laughing. Brilliant work.

Text from Youtube page

Chinese President Hu Jintao is visiting Washington D.C. this week to meet with Barack Obama and talk about trade deficits, the yuan and North Korea. Watch as Hu flies in on China's new stealth jet and literally raises hell.


Here's another one from the same creators...


Check out the Bilderberg 2010 Conference slideshow...

Bilderberg Conference 2010 - Ultimate Viewers Guide

Everything you ever wanted to know about the Bilderberg group and related conspiracy theories. History, videos, links, snide remarks, photos, lists, it's all there.

Saving a Doomed Dollar: Plans B, C, D, and E

Mac Slavo

Reuters’ Emily Flitter asks in a recent column What is Plan B if China dumps its U.S. debt?
It is worth asking about U.S. officials’ Plan B just in case one day relations take a surprise turn for the worse and Beijing dumps its holdings of U.S. treasuries.
China is officially the United States’ biggest foreign creditor, with roughly $900 billion in Treasury holdings — or over $1 trillion with Hong Kong’s holdings included.
That means it could do severe damage to U.S. debt markets if it suddenly started selling large amounts.
This is not a “just in case” scenario. China has already been taking steps to curb their US Treasury purchases, lowering their U.S. debt holdings from $929 billion to $896 billion between November of 2009 and 2010 (Hong Kong’s year over year holdings are down as well). Chinese President Hu Jintao made it clear where the Chinese stand with regards to the US dollar of the future calling the current dollar-led global monetary system a “product of the past.” While this may not necessarily mean the Chinese will one day, all of a sudden, halt all purchases of US debt, it is certainly reason for concern to those hoping to maintain a strong and stable U.S. currency. Our major foreign creditor is reducing their exposure - that means something, or at least it should. The US dollar, as it has for the last 100 years, will continue to weaken over time compared to other major currencies, and our dollars will buy fewer and fewer goods as a result. The nation’s fiscal problems will see to it that the depreciation of the dollar accelerates over time.

The slow collapse of the dollar, in our view, would be the best-case scenario, but there is still the very real possibility that China completely pulls the plug and kills the patient. Ms. Flitter writes:
To be sure, the idea that China would suddenly sell its U.S. debt holdings is almost unimaginable to some.
After all, any weakening in the U.S. debt markets and the resulting global markets turmoil, including likely weakness in the dollar, would bounce back on China and could hurt its economy badly, especially as the United States is such a huge Chinese export market.

It is only unimaginable to some because they don’t believe it can happen here. But it can happen here - it must. The lead stories during this economic recession/depression have been about real estate, jobs, and GDP. The real story is none of those. Although it has yet to become the mainstream talking point , the real crisis facing America is a sovereign debt crisis. We have too much debt, and that’s going to get cleared out of the system one way or the other.

Any number of reasons, some of which Ms. Flitter mentions in her article, could be used as justification by China to stop the purchase of U.S. debt. Trade and resource disputes, Taiwan, or the final push to bring America to it’s knees. Sure, the Chinese economy and its people will hurt for a few years, but it would be a small price to pay by a communist Chinese government to see the world’s major super power be marginalized or perhaps even completely obliterated.

Make no mistake. The Chinese are at war. These events are not simple one or two dimensional short-term manipulations. The playing field is a grand chessboard and the Chinese have been positioning their pieces for decades. An attack on the King is imminent.

Ms. Flitter suggests several plans (packaging them into what she refers to as ‘Plan B’) to deal with the attack once it begins and be assured it will. You can be certain of it.

In an earlier report we detailed that the Pentagon and Military are Actively War Gaming ‘Large Scale Economic Breakdown’ and ‘Civil Unrest’ scenarios, going so far as to send military specialists to the floors of our stock exchanges to learn more about how a financial attack on our system would occur and to develop response plans if and when it does.

Plan B
Banks could be called on to increase their holdings of treasuries, and as a last resort, the Federal Reserve could also be called on to fill the gap, though this could risk turning any dollar weakness into a slump.
Plan B is already in effect, as evidenced by the monetization of US debt by the Federal Reserve. It started in 2008 and continues to this day, with the most recent round being some $600 billion dollars (officially). In case you haven’t heard, the privately held (by major banking institutions) Federal Reserve is the largest buyer of US debt, having surpassed China as of November 2010.

Given that we have been engaging in Quantitative Easing for quite some time, and the US dollar continues to lose strength and status, we suggest that Plan B has already failed.

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Obama Budget Cuts Visualization

MUST SEE VIDEO: David Rockefeller gets annihilated by onlooker at Chilean Airport during vacation

This gets a bit crazy for a minute. The protester is relentless.

Video - Rockefeller gets confronted - Jan. 17, 2011

Text from Youtube page -- Together with his good-old friend Agustin Edwards Eastman, Mr. Rockefeller takes a quick vacation almost every year in the south of Chile. Both are well known for working with the CIA during the 1973 coup against Salvador Allende and manipulating public opinion through a newspaper called El Mercurio, leading to the rise of Pinochet.

Edwards is also known for being a descendant of (chilean elitist) Agustín Edwards McClure, who served as President of the League of Nations from 1922-23.


Check out the Bilderberg 2010 slideshow...

Bilderberg Conference 2010 - Ultimate Viewers Guide

Everything you ever wanted to know about the Bilderberg group and related conspiracy theories. History, videos, links, snide remarks, photos, lists, it's all there.

The 'Volcker Rule' Is Now A 'Suggestion': Bank CEOs May Be Required To Sign Off On Speculative Trades

WASHINGTON (Marketwatch) — Federal regulators on Tuesday suggested that bank chief executives be forced to attest in writing that the lenders they run adhere to new rules limiting speculative trading.

The regulators released a study on the Volcker Rule, named after its author, former Federal Reserve Chairman Paul Volcker. The rule is intended to limit big insured banks’ speculative investments in the wake of a financial crisis that took the economy to the brink.

At a meeting on Tuesday, the newly formed Financial Stability Oversight Council, which comprises banking and securities regulators including the Federal Reserve, approved the release of the study. They will consider the study as they write rules, which are due in nine months.

Big banks will be permitted to take proprietary positions as long as in the “near term” they believe they can sell them to clients or counterparties. This provision opens up a number of questions that bank regulators will need to answer, such as how near-term the sale must be and whether institutions will have to have clients for these investments.

A requirement by bank regulators that a counterparty buy a stake within 30 days, for example, could make it very difficult for big banks to continue their investment approach. If a longer period is permitted, it could open up the door to more controversial proprietary trading.

Continue reading at Marketwatch...


The Volcker Rule is now the Volcker Suggestion...

Video: Dylan Ratigan with Jonathon Alter & Eliot Spitzer -- May 28, 2010

It's a beautiful thing. Larry Summers and Tim Geithner get pretty much all the blame. And the Volcker rule ain't happening:

  • "The current provision is more like the Volcker weak suggestion than the Volcker Rule."
  • "Will we see President Obama stand up against bank lobbyists or will he ultimately hide behind the political expediency and convenience of perpetuating this infinitely leveraged, non-transparent system because he's afraid to take the risk of actually fixing it?"


Volcker on Charlie Rose...

Video - September 30, 2009


Check out the Bilderberg 2010 Conference slideshow...

Bilderberg Conference 2010 - Ultimate Viewers Guide


'US wars to continue until its economy busts'

American wars will continue until the country's giant corporations, which pay the politicians in Washington's corridors of power, become financially unsustainable, says senior fellow at the Nation Institute, Chris Hedges.

Hedges told Press TV's U.S. Desk in a Wednesday interview that the economy will fail "because we're paying for it through debt, through borrowing."


"Well the fact is like that ... like most wars this is the business. Unlike previous wars we have privatized many of the functions that the traditional military used to do and whether the wars go badly, we're certainly losing the war in Afghanistan," he pointed out.

"And I think it ultimately has been covered in the New York Times that [the Afghan] war is also unwinnable. It doesn't really matter. There are huge corporations whose profits [have] swollen four by four," Hedges said.

"The continuation of these conflicts is good for their bottom-line. That's why we're seeing very little reticence on the part of the government which knows how drastic the situation is in Afghanistan to pull back because the people who hold the ultimate power in the United States, which are corporations want these wars to continue," he went on to say.

Hedges named a number of corporations including Halliburton and Blackwater/Xe and argued that the big firms have obtained substantial profits, saying, "These corporations are doing very, very well. All you have to do is look at the difference in their stock price before 1991 and now."

He said that U.S. President Barack Obama spoke tactically during his presidential campaign "when he said he would withdraw the combat troops from Iraq."

"Even during the campaign if you look at the fine print, Obama wasn't promising" what many expected, he noted.

"There was an acknowledgment that occupation troops would remain in Iraq for many, many years," Hedges concluded.


Roughly 48,000 American troops are still based in Iraq seven years after the start of the war, according to the Washington Post.

Since the U.S.-led invasion of Iraq in 2003, 4,435 U.S. troops have been killed and more than 31,827 wounded in Iraq, according to the media.

The total cost of the Iraq war has been estimated to be over $3 trillion, according to

Since 2003, more than 1,300,000 Iraqi civilians are estimated to have been killed.

An estimated 4.7 million Iraqis have been displaced as a result of the war, according to

In October 2001 when U.S. forces attacked Afghanistan they had no authorization from the United Nations Security Council. It was only later on, in December, that the UNSC authorized the forces to be present in that country. As such, the Afghanistan war was not authorized by the United Nations Security Council from the start and many experts call it illegal under international law.

There are about 97,000 U.S. troops in Afghanistan who, under Washington's plan, were supposed to start withdrawing in July ahead of the scheduled transfer of responsibility for security to Afghan forces in 2014. WSJ

Since the 2001 U.S.-led invasion of Afghanistan, more than 34,000 Afghan civilians have been killed in the country as a result of the war.

By the end of 2010, the war had resulted in 2,281 coalition casualties, including 1,445 American deaths. U.S. fatalities in 2010 (711) accounted for nearly half of all U.S. deaths since the war began over nine years ago. iCasualties


Zillow: Home price declines now exceed the Great Depression, prices fall for 53rd straight month

Source - Reuters

(Reuters) - Home prices fell for the 53rd consecutive month in November (the latest data available), taking the decline past that of the Great Depression for the first time in the prolonged housing slump, according to Zillow.

Home prices have fallen 26 percent since their peak in 2006, exceeding the 25.9 percent drop registered in the five years between 1928 and 1933, the housing data company said in a report on Monday. Prices fell 0.8 percent over the month.

It is a dubious milestone for the U.S. housing market which has failed to gain much traction despite a host of government programs to reduce delinquencies and encourage demand with temporary tax credits and lower interest rates. Many economists expect further price drops, even if there are some anecdotal signs of growing demand, such as in pending home sales data.

"For the next six to nine months, the larger factors affecting the housing market that will produce more home price declines will be the excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated employment, Stan Humphries, Zillow's chief economist, said in a blog post.

Declines are accelerating, and it will take a while before falling unemployment and other signs of economic improvement support the market, Zillow said.

Home prices fell at a 0.78 percent pace in November, the fastest since February 2009, the company said.


Dr. Robert Shiller - Eventually the bailout bill will be $1 trillion for Fannie & Freddie due to continued declines in housing in 2011...

Video: Steve Liesman with Yale Professor Robert Shiller

For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg. According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, some experts caution, the cost to the taxpayer could hit as much as $1 trillion.


3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation—25 Times More Than 1995 Estimate—

Reston, VA - North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation.

A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil.

Technically recoverable oil resources are those producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.

New geologic models applied to the Bakken Formation, advances in drilling and production technologies, and recent oil discoveries have resulted in these substantially larger technically recoverable oil volumes. About 105 million barrels of oil were produced from the Bakken Formation by the end of 2007.

The USGS Bakken study was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol as required by the Energy Policy and Conservation Act of 2000.

The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest "continuous" oil accumulation ever assessed by the USGS. A "continuous" oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. The next largest "continuous" oil accumulation in the U.S. is in the Austin Chalk of Texas and Louisiana, with an undiscovered estimate of 1.0 billions of barrels of technically recoverable oil.

"It is clear that the Bakken formation contains a significant amount of oil - the question is how much of that oil is recoverable using today's technology?" said Senator Byron Dorgan, of North Dakota. "To get an answer to this important question, I requested that the U.S. Geological Survey complete this study, which will provide an up-to-date estimate on the amount of technically recoverable oil resources in the Bakken Shale formation."

The USGS estimate of 3.0 to 4.3 billion barrels of technically recoverable oil has a mean value of 3.65 billion barrels. Scientists conducted detailed studies in stratigraphy and structural geology and the modeling of petroleum geochemistry. They also combined their findings with historical exploration and production analyses to determine the undiscovered, technically recoverable oil estimates.

USGS worked with the North Dakota Geological Survey, a number of petroleum industry companies and independents, universities and other experts to develop a geological understanding of the Bakken Formation. These groups provided critical information and feedback on geological and engineering concepts important to building the geologic and production models used in the assessment.

Five continuous assessment units (AU) were identified and assessed in the Bakken Formation of North Dakota and Montana - the Elm Coulee-Billings Nose AU, the Central Basin-Poplar Dome AU, the Nesson-Little Knife Structural AU, the Eastern Expulsion Threshold AU, and the Northwest Expulsion Threshold AU.

At the time of the assessment, a limited number of wells have produced oil from three of the assessments units in Central Basin-Poplar Dome, Eastern Expulsion Threshold, and Northwest Expulsion Threshold.
The Elm Coulee oil field in Montana, discovered in 2000, has produced about 65 million barrels of the 105 million barrels of oil recovered from the Bakken Formation.

Results of the assessment can be found at

For a podcast interview with scientists about the Bakken Formation, listen to episode 38 of CoreCast at

Banks drop foreclosures in Southwest Florida

1:10 A.M. — Banks in recent weeks have been dropping hundreds of their Southwest Florida foreclosure lawsuits instead of facing defendants at trial, according to local attorneys and court records.

Opinions varied sharply on whether that means banks are just taking a breather before refiling with stronger evidence - or giving up for good on hopelessly flawed cases.

Some foreclosures at large law firms were never actually read by the attorneys who filed them here and elsewhere, and some of the mortgages that ended up in mortgage-backed securities sold to investors were never legally transferred by the banks, defense attorneys have alleged.

"We think they're going to come back and refile," Lee County Clerk of Court Charlie Green said.

That's an expensive proposition, he said, noting foreclosure suits carry a hefty filing fee: about $1,900 for a $250,000 house, for example.

What happens is lawyers for the banks are asking judges to dismiss their cases, which is "very much out of the ordinary," Green said. "You don't see cases dismissed without prejudice that often."

Foreclosures were rare in Southwest Florida until the housing market crashed at the end of 2005, bringing on waves of mortgage defaults by investors and homeowners.

Green said he hasn't calculated exactly how many foreclosures are being dismissed.

But eight voluntary dismissals were filed Tuesday alone by seven different banks including Bank of America, one of the largest filers of foreclosures in this area. Bank of America did not reply to a request for comment Tuesday.

At one court hearing alone, attorney Kevin Jursinski said, one of his associates watched as "50 in a row" were withdrawn.

"Can they re-litigate?" Fort Myers-based attorney Carmen Dellutri asked. "I don't think so."

Most of the mortgages in dispute were sold to Wall Street and sold in bundles to investors as mortgage-backed securities, he said. But so many mistakes were made in the process it's unlikely the banks can win those cases.

Some mortgages still held by the bank that made the loan might be defensible but those are in the minority, Dellutri said.

He said he's seeing cases withdrawn in large numbers in Lee, Collier and Charlotte counties, and he heard from an attorney in Jacksonville the situation is the same there.

April Charney, a Jacksonville-area legal aid attorney who's an expert on foreclosure issues, said for the most part banks have no way to prosecute their cases because the mortgages in mortgage-backed securities were never actually legally transferred to the trusts.

She said much of the recent wave of voluntary dismissals may be a result of a Massachusetts Supreme Court ruling Jan. 7 upholding a judge's decision two foreclosures were invalid because the banks didn't prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts.

Now, she said, many mortgages simply aren't fixable. "You can't go back and securitize. You run a red light, you can't go back and unrun it."

Your Private Wealth Is Threatened By Government Revenue Needs and Treasury Debt

Ron Holland
Freedom Matters

This is Part 2, of Ron Holland's speech Down Argentine Way presented on the recent FreedomFest Untitled 1 financial cruise down in South America during November. Here at the Foundation we hope to report more information and editorial comment about what is happening in South America. ...

There is nothing very complicated or prophetic about forecasting how Washington plans to steal much of the remaining private wealth of most American citizens over the next decade or so. This is the norm in history and politics throughout world history and this has always been the major function of governments. While the Anglo-American establishment has whitewashed this part of history, politics and information over the last 150 years, today with the internet, the truth of our history is apparent to anyone willing to do the research.

Just as the citizens of America and Great Britain have in the past financially benefited from living under the Anglo-American Axis in many ways, today in these twilight latter-days of the empire so we will suffer under the wealth confiscation and likely retribution from the rest of the world due to the accident of our birthplace and citizenship.

As the American national debt grows larger, here are 15-plus probable attacks on your wealth over the coming ten years.

Your assets, benefits and future prosperity will be forfiet to Washington's elites as they try to buy time to right a sinking ship - and to no avail. The impact on our wealth and future prosperity will likely dwarf what has happened before in Argentina, during the Russian collapse and in Germany with the post First World War Weimer republic.

This essay will discuss the threats and possible new taxes, penalties and controls designed to transfer wealth from the private sector to the federal government.

Social Security Theft - As we see today in France, Social Security retirement ages will be further extended into the future. Wealthy Americans will be "means tested" and entirely forfeit their benefits and Washington will eventually end cost-of-living adjustments for all but the poorest Social Security recipients.

Manipulate Cost of Living Adjustments & Statistics To Steal Your Wealth - Even those receiving existing benefits will find their cost-of-living adjustments dramatically reduced over time with false inflation statistics just as we see today.

The End of Capital Gains - The severe depth of the recession has bought US investors a couple of years extension of capital gains but this will not be a permanent benefit regardless of the party in power. First favorable capital gains treatment will likely be ended for all privately owned investments except for US domestic stock and bond investments. Foreign stocks and bonds will be taxed at regular income tax levels while domestic securities other than (non-productive assets) including mining and natural resource companies will still be provided favorable capital gains treatment. If they are able to manipulate the stock market to new highs then expect an eventual end to capital gains for US equities.

The Probable Imposition of a Non-Productive Asset Gain Tax - Americans with highly appreciated precious metals investments (including numismatics and collectibles) will find a substantial amount of their gains charged with an emergency non-productive asset gain tax. Not only will you lose capital gains treatment but expect an additional high penalty tax on gains as the last thing the establishment wants is hard money investors benefiting while the rest of population find their investments collapsing in value.

This Tax Will Likely Be Extended to Mining and Natural Resource Stocks - Another reason to take your profits sooner rather than later in a crisis situation where the public with conventional investments will clamor for this type of retroactive tax.

A Two-Tier Gold Price Structure - At the very least there may well be a government enforced set or internal price for precious metals sales that operates outside the free-market pricing outside the jurisdiction of the United States. This could be handled by the non-productive asset tax mentioned about or used during a time of government gold confiscation to pay lower prices to American investors than the price outside of America. This is what happened during Roosevelt's earlier gold confiscation and don't expect Congress to help you.

The Risk of Private Gold Confiscation Will Continue To Increase - When the dollar and Treasury market crashes, Washington will enact legislation or use Presidential Executive Orders against gold investors to curtail your profits, add a confiscatory non-productive asset tax or confiscate your gold with some type of fiat currency exchange. In any case, they plan to end up with your gold as this will be the basis of a fake gold standard which may be used as the pretense to confiscate your gold. This will take place during the coming bond and dollar crisis by Presidential Executive Order. (Next month's letter will have a discussion on Presidential Executive Orders past and future.)

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