Thursday, February 16, 2012

China Reduces Holdings of U.S. Treasuries to Lowest Level Since June 2010

China, the largest foreign lender to the U.S., reduced its holdings of Treasuries in December to the least since June 2010 amid efforts to assist Europe in addressing its debt crisis.
The world’s second-largest economy decreased its U.S. debt securities by $31.9 billion from November, or 2.8 percent, to $1.11 trillion, according to Treasury Department data released yesterday. Its position in longer-term notes and bonds also fell $32.5 billion, or 2.8 percent, to $1.1 trillion, the least since June 2010. Japan, the second biggest buyer, increased its holding by $3.5 billion to $1.04 trillion.
“We continue to see Chinese Treasury holdings trending lower as they are acting on their desire for diversification and as they may get more involved in the situation in Europe,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut.
China’s policy makers have advocated diversification of the nation’s foreign exchange reserves away from U.S. assets. China may support Europe through channels such as the International Monetary Fund, the European Financial Stability Facility and the European Stability Mechanism, said People’s Bank of China Governor Zhou Xiaochuan.

European Assets

“China will always adhere to the principle of holding assets of EU sovereign debt,” Zhou said in Beijing yesterday. “We would participate in resolving the euro debt crisis,” he said.
Chinese Officials, including central bank adviser Li Daokui, have urged diversification of the nation’s foreign exchange reserves. The Asian nation will “seek diversification in the management of reserve assets, strengthen risk management, and minimize the negative impacts of the fluctuations in the international financial market on the Chinese economy,” Zhou said in August.
Foreign investors held 47.6 percent of outstanding public Treasury debt as of December, the smallest proportion since October 2006, Treasury data show.
Net buying of long-term equities, notes and bonds totaled $17.9 billion during the month compared with net purchases of $61.3 billion the previous month, the Treasury Department said. Including short-term securities such as stock swaps, foreigners bought a net $87.1 billion in December compared with net buying of $42.9 billion the previous month.
China increased its position in shorter-term bills by $600 million to $2.9 billion. The U.S. updated data on Feb. 28, 2011 to show China’s Treasury investments in October 2010 were a record $1.18 trillion, 30 percent more than the initial estimate of $906.8 billion.
“Overall flows were weak for the U.S. and the Chinese tactical selling reflected that as Treasuries were giving back very little,” said Aaron Kohli, an interest-rate strategist BNP Paribas SA in New York, one of 21 primary dealers that trade directly with the Federal Reserve. “As yields rise, look for China to buy Treasuries again.”
Treasuries have lost 0.1 percent this year after returning 9.8 percent last year, according to a Bank of America Merrill Lynch index.

Oh No! Car Dealers Might Have To Deal With Informed Customers! That Must Be Illegal!

A few folks sent over this recent NY Times article about how the traditional auto sales world was apparently up in arms about a company called TrueCar that seeks to make the process of buying cars easier by providing more info to buyers about what cars are actually selling for, what the dealers' true prices are, and also offering guaranteed "haggle free" prices from certain dealers. To be honest, this really doesn't sound all that different from a few other services online. The last two times I've bought cars, I've been able to get good deals using online services like this and just emailing directly to dealers (and for anyone buying a car, I can't recommend enough, even with its 90's era web design -- that site has saved me a ton).

However, what's really incredible is how the industry has reacted to this site -- basically freaking out and whining about how consumers actually being informed might put them all out of business. The excuses are typical of what you'll find with an industry that works on a collusion or gatekeeper system when it's finally faced with real competition. They start talking about how real competition is evil and how it will lead to a worse situation with more scams. In fact, TrueCar got hit with claims that what it was doing, in providing consumers with more info, was illegal. They've even had to change their practices in some states -- which really only goes to show just how much car dealers have influenced various state laws in their favor to protect against true competition and an informed consumer.
Others, including Honda, have argued that TrueCar could open the door to unscrupulous dealers trying to sell a more expensive car or more options once they get the customers in the door — which Honda said reflected poorly on the brand. Honda also threatened to cut off marketing dollars to dealers who promoted its cars on the site below the invoice price, a price that is supposed to represent something close to the dealer’s cost (though dealers usually make more money on other manufacturer incentives and programs).
Think of just how convoluted and insane this argument is. Honda doesn't want informed consumers because (wait for it...) informed consumers might lead dealers to try to trick buyers. Seriously. Okay, time to cross Honda off any future potential car list.

Spain as Western China

Marshall Plan - labeling used on aid packages
Marshall Plan - labeling used on aid packages | Would it be modified and reused?

1 Yuan Note - 1996
1 Yuan Note - 1996
Following the ongoing European monetary crisis, European Union leaders visited Beijing this week seeking Chinese money to help bolster a planned fund of about 500bn euros ($665bn). The new fund would provide bailout financial guarantees to loans given by European national banks in the hope of kick-starting European economy. Yesterday, February 14, 2012, Premier Wen Jiabao offered co-operation to help stabilize debt-ridden EU nations, but made no specific promise to invest in the proposed European bailout fund.

The visit was urgent, since credit-rating agency Moody’s again downgraded Spain, Italy and Portugal. It also downgraded the credit outlook for France, the UK and Austria. Greece passed a new package of severe cuts late on Sunday, and that resulted in ongoing riots in Athens. The USA is in deep financial problems itself, and thus in no position to help the EU. Last year, the European Union was the largest trading partner of China, with a trade worth 560bn euros. Hence, China became the best chance for the EU to get financial help; especially since China enjoys a surplus economy as the map below shows. Without the new fund, the weakest European economies would fail to inspire enough credibility to be able to sell their bonds. That means, some of them could collapse.
The EU delegation failed to get the solid commitment they wanted from China. Probably the European leaders were the only ones surprised by that. After all, in the last 500 years Europe has behaved like an elephant in a china store. Spain is one of the dark stars in the ongoing crisis; thus, it is enlightening to remember key statements and events related to this economy. Choosing them carefully allows elucidating the current Chinese position, and offers a look into what we should expect in the near future.
During the first week of 2011, Li Keqiang, China’s Vice Premier visited Spain and was welcomed by then Spanish Prime Minister Jose Luis Rodriguez Zapatero. The visitor announced that his country would buy $7.9 billion in Spanish bonds, when China already owned 10% of Spain’s foreign debt. China bought debt also from other troubled countries of the EU. Chinese attention to these quasi-junk bonds is beyond the premium interest paid by them. El País newspaper dubbed Li Keqiang the new "Mr. Marshall," in a reference to America's post-World War II Marshall Plan.
My choosing a second-line European country may be misleading. Spain is important in the current crisis because it is not like Greece, Portugal, Ireland or Italy. Spain played by the EU rules, and yet it is collapsing. When it joined the euro in 1999, Spain broke the EU debt rule, with a debt/GDP ratio of 62.3%. However, the Spanish government run a balanced budget on average—that means its borrowing was zero—every year until the 2008 financial crisis. Yet, it is failing. If Spain fails, it may mean the euro is not viable, and that Germany and France may also collapse.

Country Foreign Exchange Reserves Minus External Debt
Country Foreign Exchange Reserves Minus External Debt | China Green; Europe and the USA Red


China buys not only national debt in Europe and the Americas (it practically owns Venezuela); China buys also commercial companies. Sometimes this is done through cross-holding deals, as it happens with the Spanish Telefónica.
The strength of monopolies is often ignored, mainly because they are strong enough to suppress criticism. Created in 1924, as Compañía Telefónica Nacional de España (CTNE), Telefónica was the monopolist telephone operator in Spain until 1997. After its privatization, it still holds around three quarters of the market. In the past, the company used its monopoly strength to penetrate the markets of Spain’s former colonies. Eventually, it also entered the US market, through Telefónica USA, which provides services to US based multinational companies that have operations in Latin America and Europe. Surprisingly, this is the third largest phone provider in the world.
In 2009, China Unicom signed a $1Bn cross-holding with Telefonica. In January 2011, the two partners agreed to a further $500M tie-up in each other, which following completion in late 2011, Telefonica will hold a 9.7% stake in China Unicom, while China Unicom will own 1.4% of the Spanish firm. In such a way, China is getting access—slowly but surely—to the international communications system. A new version of CAZAB is being created, this time in the open, and trading in international stock exchanges. Overall, China owns a significant part of the Spanish foreign debt and has at least a significant position in one major Spanish corporation. In shape, this resembles very much the actions of colonial companies set up by the Brits and Dutch, namely The English East India Company and The Dutch East India Company, which were described in Western Blueprint.
Are we witnessing an economic colonization of Europe by China? If so, why did China refuse—by ignoring—helping the new bailout fund? After all it would have substantially strengthened its hold in its would-be-colonies.

West’s End

Certain issues are so indefensible, that elected governments prefer to delegate them to unelected institutions rather than confront voters in a fair process. Before leaving office—he decided not to run again for office—Spanish Prime Minister Zapatero took advantage of his position to sign a deal with the USA; I described it in detail in NATO’s Missile Defense Backfires. On October 5, 2011, Zapatero and US Defense Secretary Leon Panetta announced at Brussels’ NATO headquarters that Spain will provide a base for US ships in support of NATO’s missile defense system. Prime Minister Zapatero cheated the Spanish people by deciding to allow four additional American ships and another 1200 American soldiers to be stationed at Naval Station Rota, a naval base located halfway between Gibraltar and Portugal. Just imagine President Obama allowing Bolivian troops to be stationed in California on his own, without consulting the Congress or the Senate! That’s what Zapatero did.
He also overlooked another key player. He forgot to ask China—the owner of much of his country—if it agrees to the reinforced American presence in Europe, China’s largest trade partner. One year later, the Chinese quite ignored Europe’s plea for financial help. “Sign another deal with the USA Navy,” was China silent message. However, there are not enough American ships to help Europe out of the actual disaster.
China is not the West; it won’t engage in savage worldwide attacks in order to impose its position in world politics and economy. Instead, it is doing so by slow and legal actions. One day in the not so far future, Spain—and its colonialist neighbors—would be nothing more than Western China; small vassal nations returning to their innate place in history. Just look at the map.

We can avoid a Dollar collapse

Lloyd Blankfein's the Wrong Spokesman for Gay Rights

Courtesy of good friend David Sirota, who has also written on the subject, I heard today that the Human Rights Campaign, the organization that advocates for equal rights for gay, lesbian, and transgender people, has named Goldman Sachs CEO Lloyd Blankfein its “national corporate spokesman for same-sex marriage.”
This is an extremely unfortunate error by the HRC, which in making Blankfein a spokesman for this important political campaign has allowed one of the most relentless enemies of the poor and the disadvantaged to use the gay and lesbian community to buy moral credibility.
What’s most distressing about this decision is that the HRC has decided to honor and celebrate the CEO of a company with an extensive record of promoting inequality and preying upon ordinary working people.
How would the members of the HRC board feel if a group of labor unions got together and decided to nominate an antigay bigot like Rick Santorum, Gary Bauer or James Dobson to head a national campaign for workers’ rights?
Well, state workers in Mississippi might very well ask a version of that question about the HRC, now that the HRC has made a spokesman out of a man whose company, Goldman, Sachs, reportedly bilked the Public Employees’ Retirement Fund of Mississippi out of nearly $700 million, by selling those pensioners the toxic mortgages issued by corrupt lender New Century.
So maybe the HRC will avoid doing work in Mississippi, then – no big deal. Of course, there’s also Arkansas, where Goldman is being sued by the Arkansas Teachers’ Retirement System for fraud involving the notorious Abacus deals… and Virginia, where the Plumbers and Pipefitters National Pension Group is bringing suit… and there’s also Illinois, where the Central Laborer’s Pension Fund, a major holder of Goldman stock, is suing Goldman (and Blankfein personally) for devoting too much money to compensation and not leaving enough for shareholders (there are a bunch of those suits out there). The Teamsters, the SEIU, Workers United – they’ve all targeted Goldman for one ugly reason or another.
In fact, in most every state in America, some major institutional investor, union, pension fund, or shareholder is either suing Goldman, Sachs or Blankfein for unethical business practices, or actively protesting the bank’s extreme greed and seeming disregard for the well-being of ordinary people.
How about overseas? Well, the HRC might want to avoid agitating in Holland, where the Dutch pension fund ABP is suing Goldman for more mortgage ripoffs. It might want to avoid Australia, where Goldman helped sink a hedge fund called Basis Capital by putting it into $100 million worth of a toxic deal called Timberwolf (that’s the one where Blankfein’s subordinates were celebrating after they found such a dumb customer, with one Goldman bragging he’d found a “white elephant, flying pig and unicorn all at once”).
The HRC should probably also stay out of South Korea, where Goldman settled with the Heungkuk Life Insurance company, which also was suckered into the deadly Timberwolf deal to the tune of tens of millions. And those disturbances in Greece you’re watching on TV this week? You might want to look into Goldman’s history of larding up that country with deadly swap deals, and then helping create an index for speculators to bet against Greek debt. Then there are the Dutch and German banks who collectively lost over a billion dollars though Goldman's Abacus scam...
All over the world, Goldman is famous for lying and cheating people out of their money, profiting from the misfortunes of others, and saving its own neck through political influence and bailouts. This is who HRC wants representing the gay and lesbian community?
As for Blankfein personally, he’s only a guy whom a U.S. Senate subcommittee recommended for perjury charges, who told a British newspaper he was doing “God’s work,” and who took home $53 million in compensation in 2007, the worst year of a national financial crisis he had a big hand in creating. So it’s not like he’s personally a dick in addition to running one of the most corrupt and predatory firms in the history of international capitalism.
There is a long tradition of Wall Street predators mesmerizing the liberal press through their advocacy – often sincere advocacy – of socially liberal causes. Traditionally a homogenous bastion of rightist politics, Wall Street’s end-of-last-century shift toward an embrace of social issues dear to progressives and Democrats was a key to the finance community’s success in finally seducing both major parties.
Crossover types like Bob Rubin, another former Goldman head who made it fashionable for a depraved finance pirate to vote Democratic, paved the way for the modern phenomenon of corrupt financiers escaping media scrutiny through the careful nurturing of good-guy images through advocacy on issues like environmentalism and gay rights.
The good p.r. these guys buy with this activity is, quite literally, the least they can do. What I mean by that is that coming out for gay rights or green energy is utterly inexpensive, from either a dollar standpoint or an ideological standpoint, for the Blankfeins of the world – it costs them nothing, but there’s a gain there. Sirota put it eloquently:
Not surprisingly, the particular progressive causes they choose tend to be those that do not impact their businesses or personal economic situations. In some cases, in fact, these thugs seem as if they are leveraging their stands on such progressive issues as a quid pro quo bargaining chip for their personal financial interests. As just one example of where that kind of dynamic may have played out, recall that almost immediately after Wall Streeters underwrote Democratic Gov. Andrew Cuomo’s campaign to legalize gay marriage, Cuomo launched a public (though ultimately unsuccessful) campaign to halt the extension of a so-called millionaires tax on those same Wall Streeters.
The fight for gay and lesbian rights is ongoing and important, and same-sex marriage is an important battle in that war. I’m glad Blankfein is on the right side of it – he ought to be, everybody ought to be. But the HRC stepped in it on this one. I hope they rethink their decision.
p.s. Maybe I'm misreading something, but if I'm going to let Lloyd Blankfein run around town dressed in my own personal cloak of liberal do-gooderism, I want him paying top dollar for the privilege. So how is Goldman only listed as a Bronze Partner in the HRC list of corporate partners, when companies like American Airlines and Citi are Platinum Partners? Hell, HRC should've come away from this transaction owning all of Greece's debt and that entire Maiden Lane bond portfolio Goldman just bought from the Fed. Sigh... on the other hand, no one ever accused Lloyd of being a bad negotiator.

War is over but Pentagon wants billions for Iraq

Impeach Them All

By Monty Pelerin

The US Government continues actions that will result in its own demise. That might seem fitting, except that its failure will seriously harm the citizenry.

Government decisions and actions have assured an economic collapse that will result in another depression. Federal debts and promises are too large to be honored, a conclusion based not on economics but on simple arithmetic.

The government collapse will likely trigger the economic collapse, although the order could be reversed. Arguably, we are already in a depression which has been disguised by juicing GDP via excessive government spending. This spending has been  funded increased government debt in magnitudes never seen before. To put matters into perspective, by the end of President Obama's first four years, he will have added more to the federal debt than all 43 Presidents who preceded him.

The economic collapse, as a result of this borrowing and stimulus, will be terrifying and worse than it needed be. Whether it is preceded by hyperinflation or goes directly into a deflationary collapse is moot and immaterial regarding an ultimate depression. Resulting conditions will be worse than those experienced during the Great Depression of the 1930s.

As frightening as the economic event will be, it will be superseded by the political damage. Given the state of our economy and the state of our government, there is a high probability that we lose our form of government. The confluence of the horrific economic events coupled with what H. L. Mencken foresaw long ago brings the very survival of freedom and liberty into question:

    As democracy is perfected, the office of President represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart's desire at last, and the White House will be occupied by a downright moron.

Mencken's "great and glorious day" is upon us. We have found our "moron," not that he is the first or only one. His intent "to transform America" suggests that his actions will not be limited to methods considered appropriate by his predecessors.

In a recent article on American Thinker Steve McCann expressed his concerns that Obama is following in the footsteps of Twentieth Century despots:

    ... Barack Obama is the most corrupt, dictatorial, and ideologically driven president in American history?  That his entire being and psyche are devoted to transforming the country not only into a socialist utopia, but into a nation permanently governed by a radical oligarchy?

Other observers share McCann's opinion, and many do so in less complimentary terms.

What Made This Country Great?

America became great not because it consisted of great men (even though there were many).  Our system of governance encouraged laissez-faire capitalism and the freedom and opportunity that allowed ordinary men to do great things. Greatness did not come from electing great leaders. They may have helped, but they were neither necessary nor sufficient for the country to succeed.

The Founding Fathers provide a framework and an "operating system" which allowed the country to prosper. These hearty men were wise, courageous and noble. They understood the nature of man and the danger of power. They established a system designed to protect people from both. They designed a form of governance to accommodate imperfect and less than honorable men. Their primary focus was on limiting the role and power of the federal government.

Under such an arrangement the energy and creativity of people pursuing their own self-interests quickly transformed America into a dynamo unlike anything seen before.  In less than a century, the US grew from a backwoods society to one of the most powerful, prosperous nations in the world. Along the way the country elected its share of idiots and morons, perhaps not in a clinical sense but in terms of the gap between their abilities and the abilities required for their offices. The limited role of government restricted the damage that could be imposed on the citizenry. Imperfect men were constrained by a nearly perfect Constitution.

What Happened?

Sadly, the citizenry is no longer protected by the institutional constraints established by the Founders. Over time, continued attacks on the Constitution by the power hungry elite weakened the document. Today, it is more an interesting historical artifact than the basis of law and government limitations for which it was created. That is the problem, not the current occupant of the White House. The deterioration in government constraints enabled fools, hucksters and charlatans to exploit the country. The decline of the Constitution led to the decline of America.

Where We Are Now?

The government has now grown to Leviathan proportions. It is into everything from light bulbs to toilets and every other aspect of our lives. No business is immune from inane and arbitrary bureaucratic regulations, most of which make no economic, environmental or occupational sense. Faceless bureaucrats now run your life and your business, believing they are more knowledgeable and trustworthy than you. Via force they have slowly crippled the productivity of American workers and companies. In doing so, they raise the cost of living for all citizens. Their hubris and ideology supersedes any need for cost-benefit analyses. When they "know" something is "right," they will make you conform.

This country is approaching the fascist state which ran the economy of Nazi Germany. Government has removed decisions from the board room and delegated them to the mindless bureaucracy. As a result, productivity has declined and uncertainty has increased. Investment has declined and much of it has been driven to more welcoming places overseas. Human capital is fleeing and the rate of outflow will likely accelerate if conditions continue to be unfavorable. Jobs are scarce and educational results are disgraceful. Everything the government has run is either bankrupt or soon to be. In short, we are in one big economic mess, all of which can be traced back to the relaxation/elimination of constitutional constraints.  When government broke its chains, we began our descent into toward the dustbin of history.

Much of the emasculation of the Constitution happened surreptitiously and slowly over many years. No amendments were added or overruled. An implicit agreement among the political class seems to have been struck. Both parties apparently considered their work too important to be constrained by some old document. Court decisions soon reflected this political attitude. The judiciary, while a separate branch of the government by law, has always been de facto cognizant of and bent with the political winds. The notion that justice is blind or even consistent is questionable when judges are appointed based on political and legal ideology. Republican law says the Constitution is fixed and to be interpreted by original intent. Democrat law says the Constitution is a living document, subject to change to meet the needs of a changing society.

Blame for the destruction of much of the Constitutional constraints is bi-partisan. Both political parties had incentives to increase their power, only achievable by relaxing the legal limitations on government. Both chose to ignore or violate the Constitution when it served their purposes. After a century of this behavior, the Constitution is a shell of its original self. Unfortunately, that thin piece of parchment is all that stands between us and tyranny. It has been the difference between the development of the United States and the rest of the world. Now it is gone.

What Can Be Done?

Let us return to the beginning, or at least the McCann quote:

    ... Barack Obama is the most corrupt, dictatorial, and ideologically driven president in American history?  That his entire being and psyche are devoted to transforming the country not only into a socialist utopia, but into a nation permanently governed by a radical oligarchy?

Read that quote again, slowly. Now read the second half of it again. I am not offended by the characterization of Obama or even its accuracy. What galls me is the presumption that one man, Democrat or Republican, believes he has the authority to change the governance model of this country. That notion is antithetical to everything this country was based upon and everything that enabled it to become so prosperous. It conflicts with all of our traditions, customs and laws. The mere thought implies that we are no longer a country subject to the Rule of Law but subject to the whims of whoever the current ruler might be. This is the governing principle of countries like North Korea, Cuba, Venezuela and the old Soviet Union. If this is acceptable, then we are truly doomed as a country.

Do the masses believe that a president has such power? Have they become so dumbed-down that they don't understand the consequences? Has our country fallen this far so fast?  If so, totalitarianism is just a matter of time. If Obama doesn't achieve his objectives, then some successor will. America is over if mob rule (democracy) has replaced the Constitution and the Rule of Law.

Democrats in favor of what is happening should realize the implications. Just because your man is assuming these extra Constitutional powers today doesn't mean the next in that office will be so pleasing. Remember how you felt about George Bush when you saw some of his actions as unconstitutional? How would you feel if he came back to office with expanded power?  Or, how about a reincarnation of Richard Nixon? How would you feel about Dick Cheney, Don Rumsfeld, Sarah Palin, Rush Limbaugh or whomever your worst nightmare might be in office with virtually unlimited power? Hopefully, you understand the danger. It is not the man, it is the power. No man can be trusted with excessive power!

I see no reason for optimism regarding any solution to this problem. We no longer have politicians with conscience or integrity. Why have Democrats and Republicans not stepped forward to admonish Obama for his extra-Constitutional acts? Why has someone not issued a cease and desist order backed up by the threat of impeachment hearings? Why do these elected fools stand by and watch the destruction of their country? Does no one have courage? Do principles not matter?

Sadly, I think the answers to most of these questions are obvious. Both political parties participated in the destruction of the Constitution because they believed it to be in their personal self-interest. Strengthening government strengthens themselves. If both parties didn't willingly participate in this destruction, we could never have moved so far off course.

Now we are close to going over a cliff from which there is no return. That would result in a substantial loss of our remaining freedoms, our prosperity and our country. The siren song of our Socialist in Chief does not explain this problem. We know how socialism works -- it doesn't! It steals freedom, impoverishes people (except the ruling elite) and ultimately results in the collapse of governments, economies and civilizations. The data on these claims are irrefutable. Socialism, even in theory, does not work. In practice it is worse; it is death, destruction and suffering.

The Outrage

I do not blame Obama for seeking to increase his power, control or even the pursuit of a dictatorship.  Blaming him is like blaming a shark because it preys on other creatures. It is in the nature of sharks and politicians. That is what they do.

What I am outraged over is that he can so blatantly commit transgressions without a meaningful peep from either political party. That is clear indication of how corrupt our political system is. The 500 plus elected peacocks that strut around looking for TV cameras to impress us with how smart, important and necessary they are, are the problem. Republicans and Democrats alike ignore this blatant violation of the law and the anger of the public.

Obama is a problem on many levels. But he is merely a product of the corrupt system. Both parties have lost their will to do what is right and what they are legally obligated to do. They are different wings of the same predatory bird. Their behavior is indistinguishable from that two organized crime syndicates who have cut a deal. Rather than act on principles, they agreed not to fight other than at the ballot box. So long as neither party exposes the other, the plunder and pillage of the population can continue. The two mob bosses apparently have seen cooperation as a better solution than fighting. Some years the Bloods will be in charge and other years the Crips. No matter who is in charge, there is plenty of loot to divvy up. Better to share the scam than to jeopardize its continuance.

Congress is clearly in violation of their oath of office to defend and uphold the Constitution. Impeachment proceedings should be brought against this president. They will not be and our country will be lost. The selfishness and greed of the political class is best served in such a fashion.

Unless meaning is put back into the Constitution, it will not matter who wins or loses the next election. Elections no longer matter! We think we are voting for change and can achieve such by changing horses. That is exactly what they want you to believe. If you were to recognize that you no longer have any control over what is happening, then the myth of government has been exploded.

I have no solution to this problem other than to Impeach Them All. That is the correct solution, but not a practical one.

Thus we are left waiting for the collapse. Perhaps in rebuilding from the ashes a Constitutional Republic that worked and we wasted, can be re-instituted. But a collapse of the economy, the government and much of society is very dangerous and opens the door for a demagogue to assume power. That was the recipe used by Hitler.

Athens Is Burning and Angela Merkel Holds the Spent Match

Athens is besieged by riots, because ordinary Greeks understand what their leaders won’t admit. The reforms imposed by Angela Merkel and Greek creditors will delay but not avoid a sovereign default. Those won’t solve the nation’s chronic economic problems, and ultimately will cause the ruin of Europe’s most ancient civilization.

At issue are the conditions imposed by Germany and other rich European nations, the IMF and European Central Bank, and private creditors in exchange for an aid package and deal to cut Greek government debt in half and avert a sovereign default in March. These draconian budget cuts, including some 150,000 government jobs, a 22 percent cut in the private sector minimum wage, and other reforms are intended to make the Greek economy more competitive, attractive to investment and ultimately capable of repaying its remaining debt.

In addition to ascent from the sitting Parliament, Germany and others are demanding that opposition political leaders pledge not to seek to renegotiate these terms if Greeks vote for a change in government. Essentially, led by German Chancellor Angela Merkel, Greece’s creditors are demanding that Greece become a German protectorate, deprived of democracy, or it will be let to default, treated as a pariah by the EU, and impoverished.

That might be acceptable, if the reforms would fix the Greek economy and permit sustained growth, but Greeks rioting in Athens and elsewhere have figured out what their leaders won’t admit—the package can’t work.

Like other southern Eurozone nations, the euro is overvalued for Greece’s economy—it makes Greek exports too expensive and imports from places like Germany too cheap. Consequently, all the Mediterranean nations have been running large and growing trade deficits with Germany and other northern economies, and borrowing to pay their bills—that’s the origin of all that sovereign debt in Portugal, Italy, Greece, and Spain, and why each of them is in need of some kind of bailout.

Higher taxes, spending and wage cuts, and labor market reforms will only permit these nations to attract investment, grow and earn euro to pay what they still owe, if those policies cause their economies to accomplish sustained trade surpluses with Germany and other northern European economies. Simply, that is not going to happen.

In addition to these Mediterranean states, France and other nations further north are also cutting government spending. This is thrusting Europe into recession in 2012 and will compel rather slow growth or continued recession for the next several years. In that environment, hardly any new industrial facilities will be built in Greece or anyplace else in Europe.

Germany’s whole economic policy is premised on a euro that is overvalued for the Mediterranean states but undervalued for Germany, Holland and a few others—those run persistent trade surpluses with Mediterranean nations and the United States. It is doubtful that Germany would permit, during a period of slow European growth, its large industrial enterprises to move substantial employment to Greece and other southern locations.

More simply, Greek economic reforms cannot succeed without more exports and that would require Germany to give up jobs and industry. Phrased in those terms, it is doubtful Angela Merkel could make a decent case for the regime she so stridently is imposing on her Hellenic neighbors.

The stakes are enormous—unemployment could easily rocket above 30 percent in Greece for years. With the government having with no real means to ease the pain, revolutionary conditions will prevail. Even now Greece is little more than a barn full of straw in the middle of a summer drought.

Yet, in a fit of Teutonic arrogance, Merkel is demanding, even if the aid package and reforms fail, no negotiations with a future Greek government—no turning back even if Greece risks sinking into state entropy and chaos.

In the street of Athens and other cities, citizens are rioting because they understand the folly and injustice of this deal.

The Federal Reserve’s Explicit Goal: Devalue The Dollar 33%

The Daily Reckoning
Business Insider

The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.
An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.
But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.
The Fed’s zero interest rate policy accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits. In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of Americans’ hard earned savings over the next 4 years.
Why target an annual 2 percent decline in the dollar’s value instead of price stability? Here is the Fed’s answer:
“The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve’s mandate for price stability and maximum employment. Over time, a higher inflation rate would reduce the public’s ability to make accurate longer-term economic and financial decisions. On the other hand, a lower inflation rate would be associated with an elevated probability of falling into deflation, which means prices and perhaps wages, on average, are falling — a phenomenon associated with very weak economic conditions. Having at least a small level of inflation makes it less likely that the economy will experience harmful deflation if economic conditions weaken. The FOMC implements monetary policy to help maintain an inflation rate of 2 percent over the medium term.”
In other words, a gradual destruction of the dollar’s value is the best the FOMC can do.

Here’s why: First, the Fed believes that manipulation of interest rates and the value of the dollar can reduce unemployment rates.
The results of the past 40 years say the opposite.
The Fed’s finger prints in the form of monetary manipulation are all over the dozen financial crises and spikes in unemployment we have experienced since abandoning the gold standard in 1971. The financial crisis of 2008, caused in no small part by the Fed’s efforts to stimulate the economy by keeping interest rates too low for, as it turned out, way too long is but the latest example of the Fed failing to fulfill its mandate to achieve either price stability or full employment.
The Fed’s most recent experience with Quantitative Easing also belies the entire notion that monetary manipulation can spur the economy. Between November 2010 and June 2011, the Fed tried to spur economic growth by purchasing $600 billion in Treasury securities, flooding the banking system with reserves and keeping interest rates low. In response the economy, which had been growing at a 3.4% annual rate, slowed to a 1% annual rate in the first half of 2011. Once the Fed stopped supplying all of that liquidity, economic growth in the second half of the year accelerated to a 2.3% annual rate.
Second, the Fed does not use real time indicators of the price level. Instead, it views inflation through the rear view mirror of the trailing increases in the PCE. And, even when it had evidence of rising inflation — as it did in the first quarter of last year — it chose to temporize, betting that the spike in inflation would prove temporary.
This spike in inflation did prove temporary, as Fed Chairman Bernanke predicted at the time, but not for the reasons — a slack economy — that he cited. Instead, the growing debt crisis in Europe led to a massive shift in deposits out of the euro and into the dollar — an event totally out of the Fed’s control. Yet, this increase in the demand for dollars was far more important than any action taken by the Fed because it increased the value of the dollar and produced a slowdown in the inflation rate.
What we are left with is a trial and error monetary system that depends on the best judgment of 19 men and women who meet every six weeks around a big table at the Federal Reserve in Washington. At the end of a day and a half of discussions, 11 of them vote on what to do next. The error the members of the FOMC fear most when they vote is deflation. So, they have built in a 2% margin of error.
Given the crudeness of the tools the FOMC uses to set monetary policy, allowing for such a margin of error is no doubt prudent. For example, when the economy slowed in the first half of last year, inflation picked up, accelerating to a 6.1% annual rate during the second quarter. And, when the economic growth accelerated in the second half, inflation slowed. These results are the precise opposite of what the Fed’s playbook says are supposed to happen.
The best the Fed can do — an average debauch in the dollar’s value of 2% a year while producing recurring financial crises and a more cyclical economy — is demonstrably inferior to the results produced by the classical gold standard. Here’s just one example. The largest gold discovery of modern times set off the 1849 California gold rush and increased the supply of gold in the world faster than the increase in the output of goods and services. The price level in the US did increase by12.4 percent over the next 8 years. That translates into an average of just 1.5% a year. The gold standard at its worst was better than the best the Fed now promises to do with the paper dollar.
The Fed’s best is hardly good enough. The time has arrived for the American people to demand something far better — a dollar as good as gold.
Charles Kadlec,
for The Daily Reckoning

Nigel Farage: "Greece is Being Driven Into the Ground!"

Italy and Netherlands slide into recession

Holland and Italy, two of the Eurozone’s largest economies, have gone into recession, new figures show.
The economies of both countries suffered a second successive quarter of shrinkage, each contracting by 0.7 per cent during the last three months of 2011.
Germany’s economy also contracted in the fourth quarter, down 0.2 per cent from the previous quarter. This was the country’s first shrinkage since 2009.
Together, all 17 nations making up the Eurozone witnessed a 0.3 per cent contraction in the fourth quarter, but have managed to avoid a collective recession with growth of 0.1 per cent in the third quarter.
However, Dr Howard Archer, chief UK and European Economist at IHS Global Insight, said he doubts that the Eurozone will be able to avoid further contraction in the face of tighter credit conditions, a further tightening in fiscal policy in many countries, the ongoing pressures facing consumers and limited global growth.
“We expect the Eurozone to start growing gradually again during the second half of 2012, assuming some easing in sovereign debt tensions, reduced inflation boosting consumer spending power, and a pick-up in global growth,” he said.
“Even so, we still see Eurozone GDP contracting by 0.6 per cent overall in 2012, held back significantly by extended contraction in Italy and Spain.”

Meanwhile, debt-stricken Greece suffered a seven per cent year-on-year contraction in its economy for the fourth quarter.
Public order minister Christos Papoutsis said today that the Greek people have been pushed to the limit by austerity measures.
The country had been ordered to make swingeing cuts in return for a €130 billion bailout.
But Eurozone ministers have demanded a further €325 million of cuts before the package will be considered.

A Warning Sign For The World

A Warning Sign For The World

Any financial system that is based on debt is doomed to fail. Today, we are living in the greatest debt bubble that the world has ever seen, and if all of a sudden people could not use credit to buy things our economy would immediately ground to a halt. Unfortunately, no debt bubble can last forever. When this current debt bubble finally bursts, faith in the financial system is going to disappear, credit is going to freeze up and there is going to be a massive wave of bank failures. Right now, Greece is a warning sign for the world. Nobody wants to lend money to Greece, the Greek banking system is dying, one out of every four businesses has already shut down, unemployment is soaring and the Greek economy has now been in recession for five years in a row. Sadly, the economic implosion in Greece is rapidly accelerating. The Greek economy shrunk at a 7 percent annual rate during the 4th quarter of 2011. That wasn't supposed to happen. Things were supposed to be getting better in Greece by now. But instead the Greek depression is getting even worse, and very soon the rest of the world is going to be going through what Greece is currently experiencing.

Unfortunately, most in the mainstream media are treating what is happening in Greece as an "isolated incident" rather than as a very serious warning sign for the world.

Thankfully, there are at least a few reporters out there that are realizing the gravity of the situation. The following is how one reporter from the New York Times recently described what life is like in Greece now....

By many indicators, Greece is devolving into something unprecedented in modern Western experience. A quarter of all Greek companies have gone out of business since 2009, and half of all small businesses in the country say they are unable to meet payroll. The suicide rate increased by 40 percent in the first half of 2011. A barter economy has sprung up, as people try to work around a broken financial system. Nearly half the population under 25 is unemployed. Last September, organizers of a government-sponsored seminar on emigrating to Australia, an event that drew 42 people a year earlier, were overwhelmed when 12,000 people signed up. Greek bankers told me that people had taken about one-third of their money out of their accounts; many, it seems, were keeping what savings they had under their beds or buried in their backyards. One banker, part of whose job these days is persuading people to keep their money in the bank, said to me, “Who would trust a Greek bank?”

Can you imagine?

Greece is experiencing a full-blown economic collapse and nobody can see a light at the end of the tunnel at this point.

As I have written about previously, the overall rate of unemployment in Greece has now risen above 20 percent and the youth unemployment rate in Greece has soared to an astounding 48 percent.

Deleveraging can be an extremely painful process. Greece has been forced to try to reduce the size of its budget deficit, but every time it cuts government spending that causes economic activity (and thus government revenues) to slow down as well.

Now the EU and the IMF are demanding that even more very painful austerity measures be implemented in Greece even though Greece is already experiencing a full-blown depression.

The EU and the IMF are demanding that Greece fire 15,000 more government workers immediately and a total of 150,000 government workers by 2015.

The EU and the IMF are demanding that wages for government workers be cut by another 20 percent.

The EU and the IMF are demanding that the minimum wage be slashed by more than 20 percent.

The EU and the IMF are also demanding significant reductions in unemployment benefits and pension benefits.

Of course all of those cuts are going to make the short-term economic conditions in Greece even worse.

The rioting, looting and burning of buildings that we are witnessing right now in Greece is likely to continue for quite some time as exasperated citizens attempt to express their frustrations to politicians that simply do not seem to care.

According to the National Confederation of Greek Commerce, recent rioting resulted in damage to 153 businesses in Athens. 45 of those businesses were totally destroyed.

You can view some stunning footage of the current rioting in Greece right here.

Despite all of the austerity measures that have already been implemented, the truth is that Greece is very likely to default soon anyway.

There is a very good chance that the new austerity agreement that the Greek parliament just approved will never be implemented. There are new elections scheduled for April and the current party in power is polling in the single digits.

The new Greek government is likely to look much different from the current one, and nobody knows for sure if the new government will follow through on any of the promises being made by the current government.

In addition, the German parliament must approve this new deal with Greece, and the German parliament is not scheduled to vote on it until February 27th. Considering the mood in Germany right now, approval is not guaranteed.

So there are all kinds of things that could go wrong with the "deals" that are currently being discussed. The truth is that a Greek default in the coming months seems to become more likely by the day.

Some in the financial world almost seem eager for a Greek default. The following is what Jon Moulton, the chairman of Better Capital, recently told CNBC....

"If I was Greek, I wouldn’t be going for these measures, I’d be going for default and getting it over with. Would you like two to three years of pain or 20?"

But a disorderly Greek default would not be a pleasant thing for the global economy at all. A recent article in the Guardian detailed what some of the consequences of a Greek default and exit from the eurozone might be....

But default and "re-drachmatisation" would be a costly and chaotic process. In the long term the euro might be strengthened if some of its weaker members headed for the door. But in the short term banks across the eurozone might have to be closed to prevent a run on the single currency as investors speculated about which country might be next. A new wave of bank nationalisations would be likely to follow as lenders counted their losses on now worthless Greek debt.

Capital controls would have to be imposed and borders shut to stop money flooding out of Greece. Portugal, Italy and Spain would come under intense pressure from investors wary about the risk of another victim. Banks everywhere, already reluctant to lend, would cut back hard, nervous about their exposure to the bonds of all Europe's crisis-hit states.

And the financial crisis in Europe is going to continue to spread well beyond Greece. Moody's Investors Service just downgraded the credit ratings of six European nations. The following is how Bloomberg described the downgrades....

Spain was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2 with a negative outlook, Moody’s said. It also reduced the ratings of Slovakia, Slovenia and Malta.

Countries such as Italy, Spain, Portugal, Ireland and Hungary are heading down the exact same road that Greece has gone. Greece was the first one to experience a full-blown depression, but soon Greece will have a lot of company.

Greece is most definitely a warning sign for the world. If you keep recklessly piling up debt, eventually a day of reckoning comes. It is inevitable.

But Barack Obama does not seem to understand this. He continues to pile another 150 million dollars on to our national debt every single hour. He knows that cutting spending significantly right now would hurt the economy and that would significantly hurt his chances for another term.

Needless to say, Barack Obama is not likely to do anything that is going to significantly hurt his chances for another four years in the White House.

So we continue to roll on toward disaster.

The U.S. financial system is like a car with no brakes that is heading straight toward a 5,000 foot drop at 100 miles an hour.

It is all going to seem like fun and games to some people until we hit the canyon floor.

Once that happens, nobody will be laughing.