Saturday, February 5, 2011

Jim Rogers: "I expect more currency turmoil, more social unrest, more governments collapsing" (CNBC)

Video - Jimmy Rogers - Aired earlier today

  • "I don't own many equities, because I don't know what's going to happen in the world economy. I expect more currency turmoil, more social unrest, more governments collapsing. So I am investing in currencies and commodities rather than stocks."
  • "I have been explaining to everybody on CNBC for two years now that food prices are going to go through the roof, they're going to explode. We have serious shortage of everything developing, including shortages of farmers."

Meet The Fed’s QE2 Traders, Buying Bonds By The Billions

That's it. That's the room where Bernanke's magic happens. Incredibly underwhelming for money printing ground zero. Maybe next year, the Helicopter will drop some cash for new computers. Reminded me of this story...

There are quotes from the Fed's head trader Brian Sack, though there is no mention or explanation of his meetings with Goldman Sachs FX Committee, as Zero Hedge detailed recently.

Full profile from the NYT inside, and more - video, links, QE2 infographic.


Meet the Fed's QE2 Traders

Source - NYT

In a spare, government-issue office in Lower Manhattan, behind a bank of cubicles and a scruffy copy machine, Josh Frost and a band of market specialists are making the Fed’s ultimate Wall Street trade. They are buying hundreds of billions of dollars of United States Treasury securities on the open market in a controversial attempt to keep interest rates low and, in the process, revive the economy.

To critics, it is a Hail Mary play — an admission that the economy’s persistent weakness has all but exhausted the central bank’s powers and tested the limits of its policy making. Around the world, some warn the unusual strategy will weaken the dollar and lead to crippling inflation.

But inside the Operations Room, on the ninth floor of the New York Fed’s fortresslike headquarters, there is no time for second-guessing. Here the second round of what is known as quantitative easing — QE2, as it is called on Wall Street — is being put into practice almost daily by the central bank’s powerful New York arm.

Each morning Mr. Frost and his team face a formidable task: they must try to buy Treasuries at the best possible price from the savviest bond traders in the business.

The smallest miscalculation, a few one-hundredths of a percentage point here or there, could unsettle the markets and cost taxpayers dearly. It could also embolden critics at home and abroad who say QE2 represents a dangerous expansion of the Fed’s role in the markets.

“We are looking to get the best price we can for the taxpayer,” said Mr. Frost, a buttoned-down 34-year-old in a striped suit and rimless glasses.

Whether Mr. Frost will reach that goal is uncertain. What is sure is that market interest rates have risen, rather than fallen, since the Fed embarked on the program in November. That is the opposite of what was supposed to happen, although rates might have been even higher without the Fed program.

Mr. Frost’s task is to avoid paying top dollar for bonds that could be worth less when the Fed tries to sell them one day.

Louis V. Crandall, the chief economist at the research firm Wrightson ICAP, said Wall Street bond traders were driving hard bargains. The Fed has tipped its hand by laying out which Treasuries it intends to buy and when, giving the bond houses an edge.

“A buyer of $100 billion a month is always going to be paying top prices,” Mr. Crandall said of the Fed. “You can’t be a known buyer of $100 billion a month and get a good price.”

Nevertheless, Mr. Frost and his team have been praised on Wall Street for creating a simple, transparent program. Neither the Fed nor Wall Street wants any surprises. The central bank is even disclosing the prices at which it buys.

Mr. Frost and his team work out of a small, beige corner office with arched windows that used to be a library. There, at about 10:15 most workday mornings, one of them pushes a button on a computer. Across Wall Street, three musical notes — an F, an E and a D — sound on trading terminals, alerting traders that the Fed is in the market.

On one recent Tuesday morning, what Mr. Frost and his five young colleagues did over a 45-minute period might have unsettled even a seasoned Wall Street hand: they bought $7.8 billion of Treasuries.

Mr. Frost and his team drew up the daily schedule for what the Fed calls its Large-Scale Asset Purchase program. And that program is, by any measure, large scale: through next June, these traders will buy roughly $75 billion of Treasuries a month — on top of another $30 billion it is reinvesting in Treasuries from its mortgage-related holdings.

Continue reading at the NYT...



QE2 for Dummies...

More detail on this clip is here:




By Gordon Duff STAFF WRITER/Senior Editor

Right off the bat, I want to make myself clear, this is about American military veterans, the “heroes” that got all that “flag waving” when they were marched off to Afghanistan and Iraq, and 25 other countries we don’t admit to, for the past decade.

Americans, after the last election, found their “conservative” center again, part “Tea Party” and part Zionist/Neocon humbug. The victims, as always, are America’s veterans, no longer heroes but, as we are now being told by our new Republican legislature, through its filth spewing cabal of neocon/nutcase “think tanks,” in this case, the Heritage Foundation and the American Enterprise Institute, that America’s veterans are a pack of “losers, whiners and welfare cheats.”

Helping our “right thinking” members of congress every step of the way are the major service organizations , organizations now screaming that they have been betrayed by the chiseling psychopaths that they put into office. You know who you are, the American Legion, the VFW and, worst of all, the National Rifle Association, not a veterans group but a group of carnival clowns who “shill” for Wall Street by subjecting dull witted gun owners to childish scare tactics. Shame on all of you!

Americas debt stands at 15 trillion dollars, all but less than one trillion run up during the “Reaganomic” years of tax cuts to the rich, giveaways to the bankers and America’s decline into third world debtor status, a petty police state with phony elections, a controlled press and a military of economic hostages fighting wars for Israel while doped up on anti-depressants and mood stabilizers. Why mince words. This is the simple truth, deal with it.

We couldn’t pour trillions of our counterfeit Federal Reserve dollars into the hands of this pack of thieves quickly enough and we aren’t done, not by a long shot. They get billions more each day.

To pay for it, our good friends, our super-patriotic good friends, advised by their “right thinking” experts and backed by Israel’s control of our media, is planning to cut and eventually eliminate entirely all services to the 25 million families in the United States that make up our veterans community.

It is bad enough that they, and there really is a “they,” have bankrupted America and killed thousands here, 9/11 our butchered troops, the millions around the world starved, displaced or “Playstationed” to death, now, as we predicted before the election, it is time to turn on America’s veterans.

“They” have shifted in high gear and have the full and total support of, of all things, many of the new “tame” veterans who have been elected to office. We warned you about that too. We told you most of them were spineless opportunists who sold out for a quick buck.

I don’t enjoy being right, not when it means there is going to be so much suffering. Being right is worthless, at least in America it is.


When President Obama was elected, by a large enough margin that the Supreme Court couldn’t step in and overthrow the election, though they have discussed it many times, political opponents declared his election “illegitimate.”

Wild stories spread by conspiracy theorists working for the media, OK, we can really call it Zionist controlled and accept a truth that is inexorable, we are talking Fox, Murdoch, Hannity and the gang, pushed an agenda to convince our military to rebel against the government.

Some tried, claiming they didn’t have to serve because “TV commentators” told them the President was an illegal alien. Does this sound like sedition or maybe treason? Funny how patriots can change hats when orders from above arrive.

Now America is in the process of breaking every promise it has ever made to those who have, maybe not always defended America, not a country whose government is a slave to special interest, organized crime and “other” foreign loyalties, but have given and sacrificed more than anyone can imagine. We have allowed another generation of Americans to be destroyed and now, now that they are down, we are going to help the rich and powerful kick them to death because a few “right thinking” TV commentators were ordered to tell us…tell us to COMPLY.

Our new crop of Americans seems to love to “comply” when it involves hating and blaming, especially if the victims are veterans. Americans love to blame vets, “baby killers, rapists and torturers.” Been watching the news?

When Congressman Ron Paul, a little over a week ago, gave evidence into the Congressional Record proving, finally and for all, that the Gulf War, yes, that first Gulf War, the “clean war,” was a scam…

…a scam…now supported by real proof that Bush authorized Saddam to invade Kuwait, one of the few decent pieces of information confirmed by a leaked cable from Mr. Julian Assange, all moral authority America has to send men and women to their deaths came into doubt. (link to testimony and secret State Department cable)


This has nothing to do with liberal and conservative. It certainly has nothing to do with the ‘Tea Party.” It dissolved the second it reached Washington and committee assignments and payoffs were negotiated. “Keep your mouth shut, do what you are told, and “corporate payoffs,” in reality, laundered drug money from Afghanistan, will keep you and your family safe and warm for a lifetime.

“Welcome to the family.”

The first move, put into play by Michelle Bachmann, a notorious flake and “know nothing,” partner to Sarah Palin, her virtual shadow without the “attack dog” jaws, is to gut payments to America’s disabled veterans.

When President Obama came into office, there were 1 million veterans whose disability applications were in processing, many, not some, but many for as long as 25 years.

Think “kafka.”

Send mail to the Department of Veterans Affairs and they shred it, burn it or hide it and then blame you for not having responded. If you complain enough, they investigate you. Complaining too loudly has sent many veterans to prison on trumped up charges.

Most veterans who file for disability have never been able to survive processing. They died first. With medical appointments for serious illnesses taking between 1 and 3 years, claims processing, all initial denials and a hopeless appeals procedure, usually took over 5 years.

Few disabled veterans could handle the stress of the claims process and most simply gave up. Veterans are easy targets, like shooting fish in a barrel.

Medical care in many facilities goes the same way. Taking into account the wonderful employees at the VA, something I actually believe and am not just saying to sound like I am being “fair,” there are many, very many, a proud “many,” who are clearly tasked with, not only denying care but abusing veterans and convincing them to avoid all medical care entirely.

The number of veterans who have left VA medical facilities because of unpleasant treatment by VA employees is incalculable.

Incidents of abuse of veterans at government facilities run by the Department of Veterans Affairs run into the millions. Good employees are terrorized and forced to work in an environment often akin to a concentration camp.

Bad as things are, and despite some improvements under Secretary Shinseki, congress is now planning to gut funding for medical care, gut payments for disability compensation for the few who survived the process and throw the savings into a fund for wild parties, drugs and prostitutes.

OK, was this last statement a bit too far? Haven’t you been reading the papers for the past decade? This is exactly where the money is going, why not tell the truth for a change.

Snow Chaos Just One More Sign of Crumbling US Infrastructure

Washington - The monster snow storm hitting the United States this week may be a random act of nature, but the resulting gridlock will likely unleash a more predictable stream of criticism over downed power lines, airport closures and a lack of snow ploughs.

States, cities and private power companies have already come under intense public pressure since December for their handling of a series of major winter storms that have struck north-eastern regions.

'If only we could fashion a large wall or blade and attach it to a big truck and somehow push the snow away,' The New Yorker Magazine quipped this month, mocking New York's lack of snow ploughs during its last major storm in December.

The United States is far from alone in struggling with winter madness. But the snow chaos is just one small aspect of a wider crisis of crumbling infrastructure across the United States - a problem that is more uniquely American.

From the breached levies in New Orleans after 2005's Hurricane Katrina, to a major bridge collapse in Minneapolis, Minnesota in 2007, there have been signs for years that much of the country's infrastructure is in urgent need of repair.

'Our infrastructure used to be the best, but our lead has slipped,' President Barack Obama said last week in his annual State of the Union speech to Congress.

Obama pointed to higher spending in Europe, Russia and China to repair roads, bridges, rail and even extend high-speed internet access. He cited the American Society of Civil Engineers, which gave US infrastructure a 'D' grade - one letter above failing - in 2009.

Europe on average spends about 5 per cent of its economic output on improving infrastructure. China spends about 9 per cent, while the United States spends only 2 per cent, according to a report by the US Treasury Department last October.

Tackling crumbling infrastructure is one of the few areas where Obama might find common ground with conservative Republicans, who took control of the House of Representatives this year after Obama's self-described 'shellacking' in November's congressional elections.

Infrastructure is the backbone of any economy, and its decline has alarmed businesses and public officials alike. That sparked a rare coalition between the country's top labour unions and business associations in the aftermath of Obama's speech on January 26.

Private-sector jobs 'grow where infrastructure is strong. Countries that aspire to compete with the United States know that,' said Janet Kavinoky of the US Chamber of Commerce. 'It's why they are building transportation, energy, telecommunications and water infrastructure systems to support their economies.'

The funding gap is massive. A study in October by two former transportation secretaries, Norman Mineta and Samuel Skinner, estimated the shortfall for transportation alone at anywhere from 134 billion dollars to 194 billion dollars per year.

That is simply to keep transportation infrastructure at its current level. Any improvements - such as high-speed rail lines that are commonplace in much of Europe and Asia - are estimated to cost in the range of 189 billion dollars to 262 billion dollars.

'It all comes down to ... how is the new infrastructure investment going to be funded? How do you pay for it?' asked Rick Geddes, a former economic advisor to president George W Bush and now with the American Enterprise Institute, a conservative think-tank.

Obama already sought to fill some of the gap, using more than 100 billion dollars in the 814-billion-dollar 2009 stimulus package that was designed to kick-start an economy in recession. It marked the largest single infrastructure investment since former president Dwight Eisenhower launched a massive national highway system in the 1950s.

Obama has proposed another 50 billion dollars as part of a six- year plan that would also tap into private funds and be paid for by ending subsidies for oil and natural gas. There is also a running debate over raising petrol taxes - low by European standards - though politicians from both parties have rejected the idea in public.

But most conservative lawmakers balk at the prospect of any more government spending, instead demanding massive cuts to bring down a federal budget deficit that has remained above 10 per cent of gross domestic product since 2009.

Many US states and local governments are also suffering chronic budget shortfalls in the aftermath of the 2008-09 recession and ongoing weak economy, a key problem that has made the infrastructure question much more urgent in the past two years.

Congressman John Mica, a Republican who chairs the House committee on transportation and will play a key role in crafting any new legislation on the topic, suggested there was an opening to work with the Obama administration - but only a small one.

'Just another proposal to spend more of the taxpayers money ... will never get our economic car out of the ditch,' Mica said last week. 'We've got to do more with less to improve our infrastructure in a fiscally responsible manner.'

That leaves only one option, said Geddes: More private investment. He advocates public-private partnerships for transportation that would involve an overhaul of how consumers currently pay for their road privileges, such as more tolls, or paying per kilometre driven.

'The old funding approach will simply not work any longer,' said Geddes. 'They're going to have to consider alternative ways of financing infrastructure.'

Understanding the Unemployment Deception

Mac Slavo

Yahoo! reports, and the mainstream media parrots, that the “unemployment rate is sinking at the fastest pace in half a century because a surprisingly large number of people say they’re finding work.”
The unemployment rate dropped sharply last month to 9 percent [down from 9.4%], based on a government survey that found that more than a half-million people found work.
...The unemployment rate has fallen by eight-tenths of a percentage point in the past two months. That’s the steepest two-month drop in nearly 53 years.
Buried within the report, outside of the view of home page lead headlines, is this important item of interest:
But part of that drop has occurred as many of those out of work gave up on their job searches. When unemployed people stop looking for jobs, the government no longer counts them as unemployed.
The number of people who have given up looking rose to 2.8 million last month, from 2.6 million in December.
We can expect to see leg tingling excitement amongst mainstream pundits struggling to hold on to the Bernanke-Geithner-Obama narrative of recovery, as they grasp for any semblance of statistical evidence to show they’ve been right all along and that you should be heading to Disney World with the kids the minute weather conditions improve. Never ones to delve into the possibility that the algorithmic analysis and surveys used by the Bureau of Labor and Statistics and our government might not tell the whole story, 9.0% will be blindly touted by the best and brightest as evidence of success for the estimated $23 Trillion in stimulus, bailouts and monetary expansion which have prevented another catastrophic financial and economic collapse.

The reality, however, is starkly different from the perceptions being created by the power elite who are attempting to prevent Egyptian style political uprising and civil unrest in the U.S.

While the majority of Americans will take this latest report as a sign that things really are getting better, even if the data are skewed and manipulated, we subscribe to the musings of Horace (65 BC - 8 BC), who said naturam expellas furca, tamen usque recurret - You can drive Nature out with a pitchfork, but she’ll always come back.

Karl Denninger points out just some of the machinations in the latest government (un)employment situation:
There’s no love in here. Worse, the benchmark revisions are out, and they show about 300,000 supposedly-reported jobs that didn’t really happen. No, really? How come that number seems to always be in this direction? That is, why is it that the BLS always seems to over-report reality in the establishment survey?
That inconvenient truth, incidentally, is why I always use the household numbers. They’re at least a real survey without BS “adjustments” applied and while they’re subject to sampling error at least they’re not intentionally distorted.
...This officially sucks.
On a month-by-month basis the number of actual employed people dropped by more than 1.5 million! That’s a huge decrease and what’s worse, the trend is awful, being unbroken now since the first of last year.
It looks like someone in the administration needed to show some positive numbers, truth be damned. Someone, for some reason, decided to throw in a few hundred thousand extra jobs. We’ve seen this before, and eventually those numbers will come out in the open. One example of this was an official adjustment of the 2009 unemployment numbers, which indicated that the BLS overstated the amount of people employed that year by some 675,000.

The manipulations are nothing new. The powers that be can continue to play with the numbers, and assuredly, they will. But in the end, nature will take hold and reality will hit us like a sledgehammer.

Mainstream information outlets prefer to avoid looking at the real story - perhaps it’s too complex for the average prole - but for inquiring minds willing to do some basic arithmetic, the reality is readily available. The Yahoo report above says that we are having a record breaking employment growth cycle, as job losses decrease at a rapid pace. The record they didn’t talk about is the one that really matters:
Probably the last chart to bury any doubt about just how truly horrible today’s employment data was, comes from a little observed data metric: that showing the number of people who are not in the labor force, but who want a job now. The number just hit 6,643K, a jump of 431K from December, and the highest number in history. These are people that would send the unemployment rate to about 12.8% if they were in the labor force (and, as indicated, looking for a job). Nothing else needs to be said.
Source: Zero Hedge
Now you see how it’s done.

The official rate should be at least 12.8%. The 9.0% unemployment rate does not include those people who are now considered to be “out of the labor force” because they have stopped looking for work.

Maybe, just maybe, they’ve stopped looking for work because there are no meaningful jobs left in America. Maybe it makes economic sense for them to stay home and collect the unemployment insurance benefits to which they have contributed their entire working lives. For someone that had a job paying $100,000 year before the economic crisis, doesn’t it make sense, financially, to collect as many benefits as possible rather than losing those benefits by taking a minimum wage job working a cash register at a Chinese product distribution warehouse? Many of those on unemployment are making the right financial decision by collecting more than a paycheck would provide, not only via a weekly insurance distribution, but by accessing other benefits that include state funded health care, food benefits and support with utilities.

Not many media pundits will talk about that as the reason why people have stopped looking for work. Nor will they discuss the many millions of people who, once their benefits expire after 99 weeks, will no longer be counted as looking for work. They just kind of disappear into a singularity - one in which they are not counted as employed or unemployed. They, for all intents and purposes, don’t exist anymore.

Using this type of mathematical approach, the government could potentially see continued drops in unemployment indefinitely. Potentially, we could have more employment than we have people if they work the math right! As a couple hundred thousand jobs are added each month, a half a million people drop out of being counted as their benefits expire or for other reasons, the official rate is reported as going down.

In reality, however, there are more and more people entering the workforce each month, and the numbers of jobs being created simply isn’t enough to offset the losses, which means there are actually many more people out of work than there are with work.

If we used this simple calculation (with work vs. without work) for determining the unemployment rate, the number would be closer to 45% of people without full time employment in America:
But the by far largest category “missing” from both the Employed and Unemployed statistics is the “Not In Labor Force”: 85.2 Million people.
The BLS definition states: “Not in the labor force (NILF). A person who did not work last week, was not temporarily absent from a job, did not actively look for work in the previous 4 weeks, or looked but was unavailable for work during the reference week; in other words, a person who was neither employed nor unemployed.” (Clearly, this does include lot of unemployed people).
To summarize: 108.616 million people in America are either unemployed, underemployed or “Not in the labor force”. This represents 45.5% of working age Americans.
Believe what you will about the official unemployment figures in America. But understand that no amount of manipulation will change what’s really happening. Just because someone in the news media suggests that only 9% of people are unemployed doesn’t change the fact that 43.6 million (and counting) broke and hungry people depend on food stamps to feed their families, home prices continue to decline, foreclosures are at record levels and climbing, and the cost of essential goods is inflating in response to monetary inflation.

Federal Reserve Chairman Ben Bernanke, in prepared comments to the National Press Club, said on February 3, 2011:
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”
Based on how the government is officially calculating our unemployment rate, recovery should be in full swing by summertime.

For those who look at the underlying fundamentals of our unemployment picture, however, it’s clear that the rate of unemployment, as estimated by Shadow Stats, is roughly 22% with no end in sight to the job losses.

If sustained growth in employment will lead to economic recovery, then astute readers can probably guess what the alternate scenario may bring.

Author Mac Slavo writes and edits the website:

Walter Williams: Taxation is Theft

Click this link .....

The Egyptian Tinderbox: How Banks And Investors Are Starving The Third World

The Egyptian Tinderbox: How Banks And Investors Are Starving The Third World

Ellen Brown
Web Of Debt
February 2nd, 2011

“What for a poor man is a crust, for a rich man is a securitized asset class.”
–Futures trader Ann Berg, quoted in the UK Guardian

Underlying the sudden, volatile uprising in Egypt and Tunisia is a growing global crisis sparked by soaring food prices and unemployment. The Associated Press reports that roughly 40 percent of Egyptians struggle along at the World Bank-set poverty level of under $2 per day. Analysts estimate that food price inflation in Egypt is currently at an unsustainable 17 percent yearly. In poorer countries, as much as 60 to 80 percent of people’s incomes go for food, compared to just 10 to 20 percent in industrial countries. An increase of a dollar or so in the cost of a gallon of milk or a loaf of bread for Americans can mean starvation for people in Egypt and other poor countries.

Follow the Money
The cause of the recent jump in global food prices remains a matter of debate. Some analysts blame the Federal Reserve’s “quantitative easing” program (increasing the money supply with credit created with accounting entries), which they warn is sparking hyperinflation. Too much money chasing too few goods is the classic explanation for rising prices.

The problem with that theory is that the global money supply has actually shrunk since 2006, when food prices began their dramatic rise. Virtually all money today is created on the books of banks as “credit” or “debt,” and overall lending has shrunk. This has occurred in an accelerating process of deleveraging (paying down or writing off loans and not making new ones), as the subprime housing market has collapsed and bank capital requirements have been raised. Although it seems counterintuitive, the more debt there is, the more money there is in the system. As debt shrinks, the money supply shrinks in tandem.

That is why government debt today is not actually the bugaboo it is being made out to be by the deficit terrorists. The flipside of debt is credit, and businesses run on it. When credit collapses, trade collapses. When private debt shrinks, public debt must therefore step in to replace it. The “good” credit or debt is the kind used for building infrastructure and other productive capacity, increasing the Gross Domestic Product and wages; and this is the kind governments are in a position to employ. The parasitic forms of credit or debt are the gamblers’ money-making-money schemes, which add nothing to GDP.

Prices have been driven up by too much money chasing too few goods, but the money is chasing only certain selected goods. Food and fuel prices are up, but housing prices are down. The net result is that overall price inflation remains low.

While quantitative easing may not be the culprit, Fed action has driven the rush into commodities. In response to the banking crisis of 2008, the Federal Reserve dropped the Fed funds rate (the rate at which banks borrow from each other) nearly to zero. This has allowed banks and their customers to borrow in the U.S. at very low rates and invest abroad for higher returns, creating a dollar “carry trade.”

Meanwhile, interest rates on federal securities were also driven to very low levels, leaving investors without that safe, stable option for funding their retirements. “Hot money” – investment seeking higher returns – fled from the collapsed housing market into anything but the dollar, which generally meant fleeing into commodities.

New Meaning to the Old Adage “Don’t Play with Your Food”
At one time food was considered a poor speculative investment, because it was too perishable to be stored until market conditions were right for resale. But that changed with the development of ETFs (exchange-traded funds) and other financial innovations.

As first devised, speculation in food futures was fairly innocuous, since when the contract expired, somebody actually had to buy the product at the “spot” or cash price. This forced the fanciful futures price and the more realistic spot price into alignment. But that changed in 1991. In a revealing July 2010 report in Harper’s Magazine titled “The Food Bubble: How Wall Street Starved Millions and Got Away with It,” Frederick Kaufman wrote:

The history of food took an ominous turn in 1991, at a time when no one was paying much attention. That was the year Goldman Sachs decided our daily bread might make an excellent investment. . . .

Robber barons, gold bugs, and financiers of every stripe had long dreamed of controlling all of something everybody needed or desired, then holding back the supply as demand drove up prices.

As Kaufman explained this financial innovation in a July 16 interview on Democracy Now:

Goldman . . . came up with this idea of the commodity index fund, which really was a way for them to accumulate huge piles of cash for themselves. . . . Instead of a buy-and-sell order, like everybody does in these markets, they just started buying. It’s called “going long.” They started going long on wheat futures. . . . And every time one of these contracts came due, they would do something called “rolling it over” into the next contract. . . . And they kept on buying and buying and buying and buying and accumulating this historically unprecedented pile of long-only wheat futures. And this accumulation created a very odd phenomenon in the market. It’s called a “demand shock.” Usually prices go up because supply is low . . . . In this case, Goldman and the other banks had introduced this completely unnatural and artificial demand to buy wheat, and that then set the price up. . . . [H]ard red wheat generally trades between $3 and $6 per sixty-pound bushel. It went up to $12, then $15, then $18. Then it broke $20. And on February 25th, 2008, hard red spring futures settled at $25 per bushel. . . . [T]he irony here is that in 2008, it was the greatest wheat-producing year in world history.

. . . [T]he other outrage . . . is that at the time that Goldman and these other banks are completely messing up the structure of this market, they’ve protected themselves outside the market, through this really almost diabolical idea called “replication” . . . . Let’s say, . . . you want me to invest for you in the wheat market. You give me a hundred bucks . . . . [W]hat I should be doing is putting a hundred bucks in the wheat markets. But I don’t have to do that. All I have to do is put $5 in. . . . And with that $5, I can hold your hundred-dollar position. Well, now I’ve got ninety-five of your dollars. . . . [W]hat Goldman did with hundreds of billions of dollars, and what all these banks did with hundreds of billions of dollars, is they put them in the most conservative investments conceivable. They put it in T-bills. . . . [N]ow that you have hundreds of billions of dollars in T-bills, you can leverage that into trillions of dollars. . . . And then they take that trillion dollars, they give it to their day traders, and they say, “Go at it, guys. Do whatever is most lucrative today.” And so, as billions of people starve, they use that money to make billions of dollars for themselves.

Other researchers have concurred in this explanation of the food crisis. In a July 2010 article called “How Goldman Sachs Gambled on Starving the World’s Poor – And Won,” journalist Johann Hari observed:

Beginning in late 2006, world food prices began rising. A year later, wheat price had gone up 80 percent, maize by 90 percent and rice by 320 percent. Food riots broke out in more than 30 countries, and 200 million people faced malnutrition and starvation. Suddenly, in the spring of 2008, food prices fell to previous levels, as if by magic. Jean Ziegler, the UN Special Rapporteur on the Right to Food, has called this “a silent mass murder”, entirely due to “man-made actions.”

Some economists said the hikes were caused by increased demand by Chinese and Indian middle class population booms and the growing use of corn for ethanol. But according to Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi, demand from those countries actually fell by 3 percent over the period; and the International Grain Council stated that global production of wheat had increased during the price spike.

According to a study by the now-defunct Lehman Brothers, index fund speculation jumped from $13 billion to $260 billion from 2003 to 2008. Not surprisingly, food prices rose in tandem, beginning in 2003. Hedge fund manager Michael Masters estimated that on the regulated exchanges in the U.S., 64 percent of all wheat contracts were held by speculators with no interest whatever in real wheat. They owned it solely in anticipation of price inflation and resale. George Soros said it was “just like secretly hoarding food during a hunger crisis in order to make profits from increasing prices.”

An August 2009 paper by Jayati Ghosh, professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University in New Dehli, compared food staples traded on futures markets with staples that were not. She found that the price of food staples not traded on futures markets, such as millet, cassava and potatoes, rose only a fraction as much as staples subject to speculation, such as wheat.

Nomi Prins, writing in Mother Jones in 2008, also blamed the price hikes on speculation. She observed that agricultural futures and energy futures were being packaged and sold just like CDOs (collateralized debt obligations), but in this case they were called CCOs (collateralized commodity obligations). The higher the price of food, the more CCO investors profited. She warned:

[W]ithout strong regulation of electronic exchanges and the derivatives products that enable speculators to move huge proportions of the futures markets underlying commodities, putting a bit of regulation into the London-based exchanges will not alleviate anything. Unless that’s addressed, this bubble is going to take more than homes with it. It’s going to take lives.

What Can Be Done?
According to Kaufman, the food bubble has now increased the ranks of the world’s hungry by 250 million. On July 21, 2010, President Obama signed a Wall Street reform bill that would close many of the regulatory loopholes allowing big financial institutions to play in agriculture commodity futures markets, but Kaufman says the bill’s solutions are not likely to work. Wall Street innovators can devise new ways to speculate that easily dance around cumbersome, slow-to-pass legislation. Attempts to ban all food speculation are also unlikely to work, he says, since firms can pick up the phone and do their trades through London, or arrange over-the-counter (private) swaps.

As an alternative, Kaufman suggests a worldwide or national grain reserve, so that regulators can bring wheat into the market when needed to stabilize prices. He notes that we actually kept a large grain reserve in the Clinton era, before the mania for deregulation. President Franklin Roosevelt pledged to maintain a large grain reserve in his second Agricultural Adjustment Act in 1938.

Chris Cook, former director of a global energy exchange, maintains:

The only long term solution is to completely re-architect markets. Firstly, cutting out middlemen — which is a process already under way. Secondly, a new settlement between producer and consumer nations — a Bretton Woods II.

Speculative markets today are driven more by fear, says Cook, than by greed. Investors are looking for something safe that will give them an adequate return, which means something they can live on in retirement. They need these investments because their employers and the government do not provide an adequate safety net.

At one time, federal securities were a safe and adequate investment for retirees. Then federal interest rates plunged, and investors moved into municipal bonds. Now that market too is collapsing, due to threats of bankruptcy among bond issuers. Cities, counties and states floundering from the credit crisis have been denied access to the quantitative easing tools used to bail out the banks — although it was the banks, not local governments, that caused the crisis. See “The Fed Has Spoken: No Bailout for Main Street.”

Meanwhile, pensions are being slashed and social security is under attack. Arguably, along with the grain reserves institutionalized under Franklin Roosevelt, we need an Economic Bill of Rights of the sort he envisioned, one that would guarantee citizens at least a bare minimum standard of living. This could be done through job guarantees when people were able to work and social security when they were not. The program could be funded with government-created credit or government-bank-created credit, and this could be done without causing hyperinflation. To support that contention would take more space than is left here, but the subject has been tackled in my book Web of Debt. In the meantime, the credit needed to get local economies up and running again can be furnished through publicly-owned banks. For more on that possibility, see

Niko Kyriakou contributed to this article.

Record January snow adds to cloudy US jobs market

Economic gridlock
© AFP/Getty Images/File Scott Olson
AFP/Activist Post

WASHINGTON (AFP) - US job creation slowed to a halt in January as winter storms gripped broad swaths of the country, according to official data published Friday.

The economy added a meager 36,000 jobs, the Labor Department said, an increase that was much smaller than the 148,000 expected.

But bad weather along with statistical adjustments clouded the data, offering Americans a contradictory snapshot of the still-weak jobs market.

A separate survey showed a sharp 0.4 percentage point drop in the unemployment, which fell to a 22-month low of 9.0 percent.

Economists said that was at least partly because hundreds of thousands of people disappeared from the statistics thanks to an annual population revision.

But according to Nigel Gault of IHS Global Insight, Friday's news is positive, if a little opaque.

"The payroll details and the drop in unemployment signal that there is an underlying improvement in the labor market buried under the snow and ice," he said.

The decline in the jobless rate "reflected more people finding jobs, not more people giving up and leaving the labor force," he said.

But as job creation remained far below the 200,000-a-month level which experts say is needed to get employment back to where it was before the recession, the White House sounded a cautious tone.

President Barack Obama's administration said unemployment was still painfully high as it vowed to put the government-supported recovery on a sustainable track.

"The 0.8 percentage point decline in the unemployment rate over the past two months is a welcome development; however, the rate remains unacceptably high," White House chief economist Austan Goolsbee said in an official blog.

"The overall trend of economic data in recent months has been encouraging, as initiatives put in place by this administration are taking hold, but there is still considerable work to do."

Since a low in February 2010, employment has increased by an average of 93,000 a month, leaving policymakers hesitant to let the economy stand on its own.

Federal Reserve chairman Ben Bernanke warned Wednesday the economy was still in "a deep hole" more than a year and a half after the Great Recession ended.

"Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established," the central bank chief said at a rare news conference.

Details of Friday's data appeared to show the jobs market was heading in the right direction, but at the wrong velocity.

The private sector added 50,000 jobs, offsetting the loss of 14,000 payrolls in the federal and state governments.

Jobs were added in manufacturing, a key engine of the recovery from recession, up 49,000, and in retail trade.

Sectors typically affected by inclement weather such as construction, shed 32,000 jobs.

Most other major industries saw little change in employment over the month, the Labor Department said.

WSJ: What Could Bernanke & The NY Fed Be Hiding?

Fed Chairman Bernanke

Ben Bernanke

Why were bank bondholders made whole, while taxpayers got shafted? Bernanke has never answered publicly. Any doubts about fair play on Fed transparency will evaporate as you read the following.

Editor's Note - We are republishing this WSJ story from last Fall in light of Bernanke's comments - lies, actually - during Thursday's speech.


Two exceptional editorials from the WSJ. Reprinted with permission.

On the key facts behind the bailouts of 2008, regulators have stonewalled the public, the press and even the inspector general of the Troubled Asset Relief Program. On Wednesday, we'll find out if they can also stonewall the Financial Crisis Inquiry Commission.

Chairman Phil Angelides and his panel will begin two days of hearings on the subject of "Too Big to Fail," featuring testimony from Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corporation Chairman Sheila Bair. Across bailouts from Bear Stearns to AIG, the government has refused to release its analysis of the "systemic risks" that compelled it to mount unprecedented interventions into the financial system with taxpayer money. Two years after the crisis, Mr. Angelides and his colleagues should finally let the sun shine on this critical period of our economic history.

A year ago we told you about former FDIC official Vern McKinley, who has made a series of Freedom of Information Act requests. He wanted to know what Fed governors meant when they said a Bear Stearns failure would cause a "contagion." This term was used in the minutes of the Fed meeting at which the central bank discussed plans by the Federal Reserve Bank of New York to finance Bear's sale to J.P. Morgan Chase. The minutes contained no detail on how exactly the fall of Bear would destroy America.

He also requested minutes of the FDIC board meeting at which regulators approved financing for a Citigroup takeover of Wachovia. To provide this assistance, the board had to invoke the "systemic risk" exception in the Federal Deposit Insurance Act, and it therefore had to assert that such assistance was necessary for the health of the financial system. Yet days later, Wachovia cut a better deal to sell itself to Wells Fargo, instead of Citi. So how necessary was the assistance?

The regulators have been giving Mr. McKinley the Heisman, but two weeks ago federal Judge Ellen Segal Huvelle made the FDIC show her the Wachovia documents. She is still considering the McKinley suit, but the crisis commission doesn't need to wait for her decision. It should let all Americans read them now.

Then there's AIG. Who decided that firm was too big to fail, and on what basis? Last winter, Senator Jim Bunning went on CNBC and said that Mr. Bernanke's staff did not think AIG was too big to fail. "His staff didn't agree with him. . . . I'm talking about an email that he sent his staff after his staff recommended that the Federal Reserve not touch AIG," said Mr. Bunning.

In February, we sent a FOIA request to the Fed for an internal memo entitled "Issues Related to Possible IPC Lending to American International Group" and an email from Chairman Bernanke that included a draft of the proposal that he would soon present to the Fed Board of Governors to approve lending to AIG. Yesterday a Fed spokeswoman told us it is still reviewing the request.

You could argue that the Fed has been a model of good government in handling our request compared to the way it has responded to TARP inspector general Neil Barofsky. Documents he's asked for were not produced and in some cases the New York Fed has told Mr. Barofsky that documents did not exist when in fact they did. Along with investigating the management of the crisis, the former prosecutor is also now investigating the withholding of information about the crisis.

What could the New York Fed be hiding? For one thing, a clear explanation of why it felt it had to bail out AIG. The story from regulators during the crisis was that credit-default swap counterparties had to be paid lest the financial system collapse. The public became incensed about 100-cents on the dollar pay-outs to big banks. Then last winter, Treasury Secretary Timothy Geithner, who ran the New York Fed in 2008, said the real problem had been AIG's insurance business, threatening average consumers.

Writing in our pages in February, former New York Insurance Superintendent Eric Dinallo said that "policyholders would have been protected" in the event of an AIG bankruptcy. That seemed clear enough, but then Mr. Dinallo immediately added that an AIG bankruptcy "would have been bad for those same policyholders." So which was it? State insurance regulators and industry analysts have since told us that Mr. Dinallo was wrong when he suggested that policyholders would have suffered.

Two years after the bailouts and more than a month after President Obama signed into law new authority for the government to prevent "systemic risk," Washington still won't tell us what this term means. Releasing the history of 2008 would at least allow us to know what regulators thought it meant at the time, with lessons for the future. Is there any other reason for this inquiry commission to exist?


After two more days of hearings this week about the 2008 credit meltdown, the lid on Federal Reserve Chairman Ben Bernanke's black box remains shut and locked. Testifying Thursday before the Financial Crisis Inquiry Commission, Mr. Bernanke made clearer than ever that financial "systemic risk" is whatever he and his fellow regulators decide it is. Read on and weep at how little has changed despite financial "reform."

The danger of a systemic financial failure was the government's catch-all justification for its unprecedented market interventions beginning with Bear Stearns in March 2008. Asked by commissioner Keith Hennessey this week to define "systemic risk," Mr. Bernanke said that many academics are currently trying to do just that, but there remains a debate about how to measure it. Taxpayers might hope that Mr. Bernanke would demand a clear definition before he commits the next trillion dollars, but that's probably not the way to bet. The Fed Chairman confidently predicted that determining the level of such risk will largely "remain subjective."

As bad as this news is for taxpayers, the potentially worse news came when Mr. Hennessey asked if, in times of crisis, the government could still assist a particular company now that Dodd-Frank reform is the law of the land. Mr. Bernanke quickly put the matter to rest by noting that a too-big-to-fail company undergoing the government's new resolution process could still receive money from the Treasury. Uh, oh.

As for what particular risk at AIG inspired Mr. Bernanke to authorize a taxpayer bailout that grew to $182 billion, Mr. Bernanke's answer was vague, but it differed from the explanation offered by Treasury Secretary Timothy Geithner.

Mr. Geithner has testified that an AIG bankruptcy would have threatened the insurance subsidiaries on which consumers rely. Mr. Bernanke apparently knew better than to try that one on commissioner Brooksley Born, whose mission in life is to blame the crisis on over-the-counter derivatives, especially credit-default swaps. Ms. Born asked if AIG was considered a systemic risk "in part because many of the world's largest and most important financial firms were AIG's counterparties on these credit default swaps, and thus could have been impacted with AIG's failure."

Mr. Bernanke danced around the question. After all, who wants to argue that we had to use tax dollars to bail out French banks and Goldman Sachs? The Fed chairman artfully suggested that while the AIG counterparties didn't all necessarily need the help, the risk would be triggered by the "uncertainty" among investors wondering which ones needed help and which ones didn't. Mr. Bernanke added that at the time of the rescue in September 2008 and even now, two years later, he never learned the net exposure of the giant banks to AIG.

More plausibly, he described the potential downside for creditors with "commercial paper, corporate bonds and other vehicles" that "would have triggered an intensification of the general run on international banking institutions." Mr. Bernanke made no mention of the AIG insurance businesses.

So it appears the Geithner explanation for the AIG bailout is no longer operable, and Mr. Bernanke has now confirmed that his own decision was based on intuition, not a study of credit exposures. We imagine Johnny Carson holding an envelope to his head as Carnac the Magnificent, as Ed McMahon (Hank Paulson) intones, "you, in your divine and mystical way, will ascertain the answers having never before seen the questions."

But did Mr. Bernanke's staff perform such a risk study, which he ignored? On Thursday the Fed told us it is still reviewing our Freedom of Information Act request for a staff recommendation to Mr. Bernanke. Senator Jim Bunning has said he's seen evidence showing that the Fed staff opposed the bailout. The crisis commission should release this document, along with Mr. Bernanke's subsequent email with the draft proposal to the Fed Board of Governors to approve lending to AIG.

This week the commission did at least release the minutes of the September 2008 meeting at which the FDIC board approved a "systemic risk" exception to allow the government to finance the sale of Wachovia Bank to Citigroup. Wells Fargo later topped Citi's bid in a private transaction, showing that federal assistance wasn't necessary.

The minutes reveal that while the staff did see a systemic risk, the FDIC was under intense pressure from the Fed and Treasury to approve the deal. FDIC Chairman Sheila Bair noted that she only acquiesced after Treasury agreed to cover any FDIC losses as they occurred, without waiting, as is customary, for the Federal Deposit Insurance Fund to be depleted before providing assistance.


Which brings us to the most troubling part of Mr. Bernanke's testimony. While reciting a litany of mistakes by private firms and various harms allegedly caused by a lack of regulation, the Fed chief once again dismissed the notion that loose Fed monetary policy contributed to the credit bubble.

So there you have it: The chairman takes no responsibility for the monetary roots of the credit mania but wants virtually unbridled authority to intervene in the markets based on a hip-pocket judgment about "systemic risks" that not even he can define. Taxpayers will just have to take his word for it.


Further reading...

Mexican Government successfully sheds the US Dollar from its economy

Von Helman

Mexico has always considered the US dollar almost a secondary currency to their Peso as the fact that billions of US dollars spent their way through the Mexican economy in 2009 and 2010 which speaks for itself, but sometimes even the best of friendships come to an end.

The Mexican government in September 2010 enacted a new law which basically restricts the use of US Dollars for almost all purchases inside of Mexico.

In early 2010 travelers and visitors could shop at many of the large US corporations inside of Mexico such as Wal-Mart, Home Depot or even one of the hundreds of American food establishments such as McDonalds or Dominoes Pizza and pay for their meal using US Dollars but under the new law using US Dollars is no longer an option.

Just image the surprise of many Americans being told by Wal-Mart that US Dollars are no longer accepted at their store especially since Wal-Mart is one of the most iconic “American” businesses in the world with such buying power that they set the prices which manufactures must sell them their items for.

Wal-Mart´s buying power is so well known in fact that most people would normally be able to safely assume that with such buying power that Wal-Mart could also force almost any country into allowing them to accept the US Dollar to further their in store sales, but apparently not even Wal-Mart is that powerful.

Therefore it was no surprise that when this story broke in late September of 2010 that Mexico was no longer accepting US Dollars the internet was abuzz with conspiracy theories claiming a banking holiday was in short order or the crash of the US dollar was intimate while others were raising the “BS” flag and claiming Mexico would never stop accepting US Dollars because those dollars were its economic life support but as the year closed out and those “end of the world” predictions didn’t come to pass and the fact Mexico did stop accepting the dollar, well that only left many people wondering what really was going on south of the border.

The Mexican government had made it clear that they will no longer allow ANY businesses to accept US dollars including American companies regardless of the operation or who is paying in American dollars. That’s right, this means if you’re a US citizen and fly into Mexico for vacation or business your hotel is no longer allowed to exchange cash dollars into pesos at the front desk which was customary up until 2011.

Also in Mexico if you travel to a local bank regardless of the bank name or national origin including HSBC from China which is the fastest growing bank in Mexico you are no longer able to exchange US Dollars for pesos. Only account holders at banks have the option of depositing US Dollars into their bank accounts but this is for deposits only and not exchange and then you have to have a special type of account set up that is more costly. Of course even if you do have a special account that allows you to deposit US dollars your bank will charge you a service free for depositing foreign currency into your account and then probably another service fee for a withdrawal but that’s another issue all together.

Ok so many readers are probably asking if the banks no longer exchange money or business are no longer allowed to accept US Dollars then what is a person who has US dollars suppose to do.

For those who have traveled to Mexico there is a good chance you are familiar with Casa de Cambios which are small exchange centers for US dollars and often littered on every corner of any large tourist city or the closer to the border you are, however these Casa de Cambios themselves have come under strict new regulation as well as have been greatly reduced in numbers as more are closing every day faster than “one hour” Kodak film processing centers or Blockbuster video locations.

Part of the new regulations is that anyone exchanging money for any reason must now present a valid government ID which is copied and placed on file with a copy of the transaction and amount of money being exchanged. This additional paperwork and hassles now mean higher operational costs for these businesses which in turn mean those costs will be passed onto the consumers who are often the one that end up paying for everything anyway.

Another drawback is that since there are now fewer Casa de Cambios this means less competition and so the exchange rate doesn’t have to be as competitive or even what the banks posted exchange rate is, after all you really have no other option in exchanging your US dollars. Gone are the days of such advantageous exchange rates that allowed anyone exchanging US Dollars into Pesos additional purchasing power by walking away with more for your money south of the border.

The Mexican government wants everyone to believe that these new laws were enacted because the war on drugs and the inability to track all these US Dollars floating around their economy which they claim the drug cartels are using in a black market way but a closer look indicates something completely different.

As the dollar continues to lose purchasing power so does the ever enjoyed exchange rate the US Dollar held for so long. This is a way to actually help devalue the US Dollar while protecting the Mexican economy from going down with the US financial Titanic that has been taking on way too much water in the form of overspending and red ink.

With the value of the dollar sliding lower each day there are some experts who are predicting the US Dollar to reach a point that it will either collapse or need to be reevaluated but either way the Peso is expected to be worth more than the US Dollar and this looks like it will happen sometime very soon at the rate of how things are changing for the Dollar around the world.

This is why it looks as if the Mexican government is doing everything it can to remove as many US Dollars from their economy so there are fewer US Dollars in circulation inside of Mexico so that when the US Dollar does finally go by the wayside there will be less of a direct affect on the Mexican Economy as a whole.

It has now been almost 5 full months since this law took effect and Mexico has been successful in eliminating millions of US fiat Dollars out of its economy and taking steps to vamp up the removal of all remaining dollars by recently instigating even stricter rules at the Casa de Cambios preventing them from exchanging more than $300.00 dollars per transactions. This means it will be much more difficult for Mexicans to send US Dollars home to their families without enriching the pockets of the bankers and the money transfer companies. These caps on exchanging Dollars will also cause the people to want to get away from the dollar faster as it’s more difficult and costly to do business with dollars.

On a side note it´s also important to note that the Mexican economy grew at a rate of just over 5% in 2010 and by the year’s end many large companies in Mexico were reporting stronger than ever revenue and sales at rates not seen in many years. Many large companies are actually in hiring frenzies and some companies are desperate to fill slots with qualified workers.

Now while some will argue that any cash regardless if it is drug money or laundered is actually good for an economy but most people can also understand it’s not good if that cash you have is losing its value so fast that it isn’t going to be worth the paper it’s printed on so it´s best to get rid of that money as fast as you can.

There has been a rush to sell off US Dollars inside Mexico because the people are sensing a coming financial storm with the US Dollar and they too don’t want to be stuck with worthless paper or allowing that worthless paper to drag down their economy especially while their overall economy is going through a growth trend but until that time does come you will still be able to use your credit and debit cards as those funds are simply automatically converted at the time of a transaction but are not physically in the economic system as fiat paper money but rather electronic funds.

A good conspiracy theorist will argue the point that the removal of paper money and forcing people into electronic transactions and requiring those who do use cash to provide ID to be Orwellian and that the bankers come out winning might have a point to some degree but in Mexico the fiat currency in the form of Peso bills can still be used for most transactions. The irony is that many Americans for so long often use to complain about how so many Mexicans living in the United States were sending US Dollars back to Mexico and how it hurt the US economy. The irony is now those Americans are getting their wish that little if any US dollars are being sent to Mexico and in turn this is actually greatly helping the Mexican economy while drastically hurting and aiding in the devaluation of the US dollar.

SO for those planning to travel to Mexico be sure to take your Kevlar and your American Express card (don’t leave home without it) and remember Visa is everywhere you want it to be, even in Mexico where the Dollar is no longer accepted.


10 Things That The Egypt Riots Can Teach Us About What Happens When Society Breaks Down

The rioting in Egypt is perhaps the biggest single news story so far in 2011. The pace at which Egyptian society has been transformed over the past week has been absolutely breathtaking. A few months ago, nobody would have ever dreamed that there would be huge riots in the streets of major Egyptian cities calling for the resignation of Hosni Mubarak. But it has happened, and now Egypt will never be the same again. So what does the future hold for Egypt? Well, many are hopeful that this revolution will bring about a better government in Egypt and a better way of life for average Egyptians. Personally, I am not nearly so optimistic. In fact, I believe that there is a great danger that an even more repressive government could take the place of the current regime. But in any event, there are important lessons that the Egypt riots can teach all of us about what happens when society breaks down. Societal collapse is often a very messy, very violent affair. Someday if the global economy completely implodes, we may see economic riots erupt all over the world (including inside the United States) and we all need to get prepared for that.

So far more than 100 people have died during the rioting that has rocked Egypt over the past week. Other reports put the true number of dead much higher. Scores of shops and businesses have been looted. There have been dozens of rapes. Groups of citizens have formed vigilante groups to protect their own homes. These are the kinds of things that happen when society breaks down.

But could such a thing happen in the United States? Of course it could. Just remember what happened in the aftermath of Hurricane Katrina. Imagine what would happen in this country if a disaster on an even larger scale happened. What any of us be truly safe?

In a previous article, I detailed some of the things that all of us can do to get prepared for the collapse of society. Unfortunately many Americans will never start to prepare until it is far too late.

But for the rest of us that are willing to learn, there are some things that have happened during these Egypt riots that are important lessons for all of us....

#1 When society breaks down, people look for whatever weapons they can find. Over this past week, abandoned police stations throughout Egypt have been stripped of their arsenals by looters.

#2 When society breaks down, nobody is safe. Average Egyptians "armed with sticks and razors" have formed vigilante groups to protect their homes from the crazed looters that have emerged during the rioting.

#3 When society breaks down, you better protect your women and children. At least 60 rapes have been officially reported since the rioting began. The unofficial number is surely far higher than that.

#4 When society breaks down, criminals do not fear the law. There are reports that at least 4 prisons have been attacked and that thousands of convicts have escaped into the streets.

#5 When society breaks down, authoritarian governments begin hoarding food. The Telegraph is reporting that governments throughout the Middle East and North Africa have started stockpiling huge amounts of food in response to all the rioting that has been going on.

#6 When society breaks down, food shortages can happen shockingly fast. As commerce has been brought to a standstill in Egypt, serious shortages of some of the most important basic food staples are starting to be reported. Many families in Egypt only have enough food to be able to survive for a couple more days.

#7 When society breaks down, respect for personal property goes out the window. All over Egypt shops and businesses are being broken into and totally looted.

#8 When society breaks down, mobs will start doing some of the most stupid things imaginable. According to Egypt's top archaeologist, Zahi Hawass, looters broke into the Egyptian Museum during the rioting "and destroyed two pharaonic mummies".

#9 When society breaks down, it always creates a "power void". The Obama administration is calling for an "orderly transition of power" in Egypt, but there is absolutely no guarantee that is going to happen - especially in a nation that has no history of legitimate democracy.

#10 When society breaks down, often outside influences are involved. The individual being touted as the new "leader" of the protest movement in Egypt is Mohamed ElBaradei.

So exactly who is Mohamed ElBaradei?

Well, Paul Joseph Watson of describes him this way....

ElBaradei serves on the Board of Trustees of the International Crisis Group, who today issued a press release protesting the decision on behalf of Egyptian authorities to place ElBaradei under house arrest.

International Crisis Group is a shadowy NGO (non-governmental organization) that enjoys an annual budget of over $15 million and is bankrolled by the likes of Carnegie, the Ford Foundation, the Bill & Melinda Gates Foundation, as well as George Soros’ Open Society Institute. Soros himself serves as a member of the organization’s Executive Committee. In other words, this is a major geopolitical steering group for the global elite.

Well isn't that convenient?

Let us hope that the protests in Egypt result in some positive changes being made for the Egyptian people. But let us also understand that those with their hands on the levers of global power are going to try to direct events in a way that benefits them.

In any event, one of the main things that the rioting in Egypt has taught us is just how rapidly society can change. Will someday we end up seeing scenes in the United States similar to the ones that we have witnessed in Egypt over the past week?....

California cities top most miserable list

(Reuters Life!) - If the saying "as goes California, so goes the nation" still rings true, then Americans are facing a depressing future, according to a list of the country's most miserable cities.

Ravaged by falling house prices, high unemployment, a massive budget deficit, rampant crime and high state taxes, California filled four of the top five spots in the Forbes list of unhappy urban areas.

Stockton, in the state's Central Valley, topped the list, followed by Miami, in Florida, Merced, Modesto and Sacramento -- all in California.

"California was hit by the bursting of the housing bubble about as hard as can be imagined," said Kurt Badenhausen, Forbes senior editor.

"Both California and Florida have a history of boom and bust economies. People flooded to these states because of the weather during the boom years but that helped inflate the massive bubble in housing."

Forbes analyzed the 200 largest U.S. cities and ranked them on 10 factors including unemployment, the weather, taxes, commuting times, violent crime and even how its sports teams have performed in recent years.

California and Florida both have plenty of sunshine, but for the first time Forbes also looked at housing as a factor following the real estate crash. Changes in median home prices over three years and foreclosure rates in 2010 were included in the survey.

In Stockton, home prices have crashed by 58 percent over the last three years and unemployment has averaged 14.3 percent. Unemployment is projected to rise to 18.1 percent in 2011, after averaging 17.2 percent in 2010, according to economists at Moody's Analytics.

"Stockton has issues that it needs to address, but an article like this is the equivalent of bayoneting the wounded," Bob Deis, Stockton city manager, told the magazine.

"I find it unfair, and it does everybody a disservice. The people of Stockton are warm. The sense of community is fantastic. You have to come here and talk to leaders. The data is the data, but there is a richer story here."

Miami was the only city not from the Golden State to crack the top five. Its sunshine and lower state taxes saved Florida's second most populous city from taking first place.

Florida and California are home to 16 of the top 20 cities in terms of home foreclosure rates in 2010, with Miami topping the list with 171,704 last year.

Ron Pollina, president of site selection firm Pollina Corporate Real Estate, told the outlook for California's corporate real estate market isn't much brighter.

"If I even mention California, they throw me out of the office," Pollina said. "Every company hates California."

Chicago and Washington D.C. were two of the 10 largest cities to make the list, hurt by long commute times, taxes, weather and falling home prices. Detroit, which topped the list the first time it was run in 2008, was in 15th place this time, helped by the inclusion of housing.

Not One Step Back: Cairo's Tahrir Square demands 'Mubarak leave today'

Another Economic 'Martial Law in the Streets' Moment Approaches

In the fall of 2008, during the lead up to the TARP bailout of the financial industry, Treasury Secretary Henry Paulson warned members of Congress that there will be Martial Law in America should they fail to pass the multi-trillion dollar looting of the taxpayer.

Well, despite the American public being overwhelmingly against the bailout, the blackmail worked and the banks got their money. If it worked once, why not try it again?

With the economy no better off for having borrowed trillions to "stabilize" criminal financial institutions, the national debt ceiling is rapidly approaching. As some Republicans begin to float the notion of blocking this extension of credit, the Treasury Department, Democrats in Congress, and Ben Bernanke issued apocalyptic warnings clearly showing how pathetically fragile the U.S. economy is.

These threats, reminiscent of Paulson's 2008 ransom demands, once again appear to be offering two black-and-white choices: Armageddon or more debt. The coordinated pitch for higher debt levels is echoing the same urgency as the TARP looting, as Treasury Secretary Geithner said the government is insolvent and will run out of money in about two months' time unless Congress votes to raise the federal debt ceiling.

The AFP reported Thursday that Senate Democrats warned that the government would "shut down" if the debt ceiling was not raised. Chuck Schumer (D-NY) explained what that would mean if a shutdown were to occur: "citizens couldn't get their checks, veterans couldn't get their benefits, military payments would stop."

Ben Bernanke doubled down on the debt-fear campaign in a rare press conference where he said, "Beyond a certain point . . . the United States would be forced into a position of defaulting on its debt. And the implications of that on our financial system, our fiscal policy and our economy would be catastrophic."

Fiscal conservatives who oppose raising the debt ceiling say it is just delaying necessary belt-tightening and massive spending cuts, and say that raising the debt ceiling further only forestalls needed austerity moves to avoid a more catastrophic collapse in the future. House Republicans presented a plan to cut $32 billion from the budget, which is laughable given the impossible-to-pay-off debt levels.

The U.S. national debt is approaching the ceiling of $14.29 trillion; unfunded liabilities like Social Security and Medicare are estimated to be around $100 trillion; and the total cost of stabilizing the financial industry is reportedly upwards of $23.7 trillion. And these numbers say nothing of the fraudulent $600-trillion derivatives scam. No amount of tax increases, spending cuts, or economic growth will be sufficient to satisfy this equation.

The notion that America can somehow pull itself out of this mess if average citizens, who had no part in creating the national debt, would only "tighten their belts," seems preposterous.

None of the options are exactly attractive to the already over-burdened taxpayer. Indeed, the people are being given a lose-lose-lose scenario: 1) the status quo of slow economic demolition through raising the debt ceiling; 2) crippling austerity cuts and public asset looting; or, 3) catastrophic collapse.

Although the banks and their pocket-change politicians describe market conditions that would result in a collapse should the ceiling not be raised, it seems obvious that the only power capable of drastically changing economic conditions are the banks themselves. Therefore, market conditions appear to be an increasingly insignificant part of a bigger illusion.

As if the sun would not rise if a piece of legislation was not passed, the gun-to-the-head urgency will likely result in raising the debt ceiling. If the level of resistance comes close to the near unanimous public disgust over the TARP bill, you can bet we'll hear new warnings of "martial law in the streets" in order to keep the illusion in tact. If for some reason collapse is unavoidable, the U.S. military is actively war gaming "large scale economic breakdown" and "civil unrest" should they choose otherwise.