Thursday, April 9, 2009

Strange Days by Jim Kunstler

Strange Days

Even while a wave of reflex nausea washed over America last week, and the unemployment rolls swelled by much more than another half million, the greatest stock market suckers' rally in seventy years pulled in the last of the credulous. These are strange days. The earth is heaving and the buds swelling again -- at least north of the equator, where most of the action is -- and the global economy, which was supposed to be a permanent new add-on to the human condition, is sloughing away in big horrid gobs. But no one in charge of anything can believe it. The banking fiasco has introduced so much noise into the system that world leadership can't think straight.

What they're missing is real simple: peak oil means no more ability to service debt at all levels, personal, corporate, and government. End of story. All the other exertions being performed in opposition to this basic fact-of-life amount to a spastic soft-shoe performed before a smokescreen concealing a world of hurt. If the "quantitative easing" (money creation) and fiscal legerdemain (TARPs, TARFs, et cetera) happen to jack up the "velocity" of the new funny-money, and the world resumes its previous level of oil use, the price of oil would rise again -- this time astronomically because the previous crash of oil prices crushed the development of new oil projects to offset depletion -- and the global economy will crash again. Only the next phase of the disease is liable to move beyond the financial and into the social and political realms. Disorder of various kinds will rule -- toppled governments, civil unrest, international tension and conflict.

Continue Reading

William Black's interview

BILL MOYERS: When you wake in the middle of the night, thinking about your work, what do you make of that? What do you tell yourself?

WILLIAM K. BLACK: There's a saying that we took great comfort in. It's actually by the Dutch, who were fighting this impossible war for independence against what was then the most powerful nation in the world, Spain. And their motto was, "It is not necessary to hope in order to persevere."

Now, going forward, get rid of the people that have caused the problems. That's a pretty straightforward thing, as well. Why would we keep CEOs and CFOs and other senior officers, that caused the problems? That's facially nuts. That's our current system.

So stop that current system. We're hiding the losses, instead of trying to find out the real losses. Stop that, because you need good information to make good decisions, right? Follow what works instead of what's failed. Start appointing people who have records of success, instead of records of failure. That would be another nice place to start. There are lots of things we can do. Even today, as late as it is. Even though they've had a terrible start to the administration. They could change, and they could change within weeks. And by the way, the folks who are the better regulators, they paid their taxes. So, you can get them through the vetting process a lot quicker.


Complete Interview

Civilization at the Crossroads by John Meyer

OUR ENEMY THE CORPORATE STATE

In our last letter we stated that, "American capitalism ended in 1913 and remains "An Unknown Ideal." We also commented that, "A troubling question arises: Has the financial community hijacked government?"

We are going to discuss those issues in an historical and philosophical context. We all today live in a twilight zone where things seemingly are and yet aren't. We must travel down some roads, which are troubling and rather dark. But, it is necessary, because it is today's reality. We can say at the start that you will find the trip unbelievable - I know I did when I first stumbled down this path. Matter of fact, at first I totally dismissed it as absolute insanity and therefore not possible. For, it was inconceivable that the morality of man could descend to such naked malevolence.

To look more deeply into our history is necessary, because almost all that comes from our "intellectual" community, is propaganda and spin. Before we heap cures on a dying patient, first and always diagnose. Diagnosis is the art or act of identifying the disease. All the talk about free markets and capitalism having failed and always what we need is more regulation and intervention are deliberate obfuscations. Naturally, with this propaganda barrage, Socialism keeps "gaining" by default. You have to be on another planet to think that what we have had for the last century is capitalism or free markets.

So - every once in awhile it pays to stand back and locate one's position in reality. Events have gone well beyond the field of economics, finance and politics. Sub rosa forces seem to be spinning us deep into an Orwellian existence. The Founding Fathers created a Constitutional Republic. It was not a democracy. The Founding Fathers were quite outspoken on this. Madison in a passage in The Federalist wrote: "there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual. Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths."

The natural and inalienable rights of the individual trumped the majority vote of a mob. The State was to be the servant of the individual. The Declaration of Independence was the culmination of the Enlightenment and Classical Liberalism. The individual and the concept of property rights were elevated to be supreme. The individual was set free from the collective, king or god to pursue his own rational self interests. This noble experiment propelled the United States to a level of achievement, which has never been equaled. Productivity is the essential requirement of life. In fact, life demands it. It is metaphysical. That is, it is biocentric. Life is a constant process of self-sustaining and self generated action. The individual is the creator and to deny or impinge, in any way, on the products of his efforts leads society down the road to slavery. The right to life and by extension his property is the source of all rights.

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Friday, April 3, 2009

The Soft Panic of 2009 Has Just Begun

The Soft Panic of 2009 Has Just Begun

By Andrew Mickey, Q1 Publishing

Highlights:

New York is the “canary in the coal mine” when it comes to CRE. A year ago, vacancy rates in the Big Apple were between 7% and 8%. The rate climbed to 10.9% at the end of 2008. Now, just three months later, the vacancies are up to 12%. And they’re still going to go.

Climbing vacancy rates have pushed the cost of renting way down. The lease rate on a square foot of office space went from $74.49 to $65.18 in just the past three months. That’s a 12.5% decline in just three months. Keep in mind; this is in New York City where some of the world’s most valuable CRE is. We can only imagine what is going on across the country.

CRE has its own vicious cycle. Unemployment increases, demand for office space decreases, rents fall, and then commercial property prices fall. CRE prices have already fallen and the next leg down could make the subprime crisis look like a cakewalk.

In the end (yes the end is near – this was a bit long, but it’s not a simple topic and the risks posed warrant the time), the CRE debt issues are a ticking time bomb. With unemployment on the rise, vacancy rates rising, rents dropping, and CRE loans on the brink of default, this is shaping up to be a big problem.

The deal to unload the iconic Hancock Tower is just a sign of what’s to come. There are buyers now. But when liquidations increase, you’ll see prices fall much faster than the three year near-50% decline in the price of the Hancock Tower.


Read Article

Thursday, April 2, 2009

When Empires Fall - George Santayana

No one rings a bell when an empire falls. No one sends out an alert when an empire decays. Most of the people who live in such nations continue to live their normal lives. They think that life will go on as before. Two thousand years ago, Romans numbed their minds by watching circuses and gladiators. Today, Americans numb their minds by watching sports, "Dancing With The Stars," and "American Idol." Only the external appearances differ. The fundamentals are the same. Is America asleep? I fear it to be so.

In my newsletter, I have written extensively about the move toward dumping the dollar as the world's reserve currency. It might not happen this week (when the G-20 meeting takes place). However, it will happen. When an empire's currency falls, the empire falls. No exceptions.

On March 30, 2009, President Obama fired the CEO of General Motors, once the greatest of all American corporations. Think about it. The federal government now dictates who should, or should not, serve as the CEO of a PRIVATE CORPORATION. Representative Barney Frank has now proposed legislation which would allow the federal government to set ALL SALARIES OF ALL EMPLOYEES of companies which have accepted federal financial assistance. What do you think that Thomas Jefferson and James Madison would say about that? What would they do?

I have no sympathy for Mr. Wagoner, the CEO of GM. No one should excuse the stupidity of GM's management. They made just about every bad business decision which could have been made. However, bad business decisions do not go unpunished in free markets. The free market would have disposed of Mr. Wagoner and GM quite well. If we had free markets, GM would have gone bankrupt months ago. The "good" parts would have been bought, and the bad parts would have been liquidated. Instead, as a practical matter, the United States government will now run the company. Welcome to GM: Government Motors.

I fully realize that many Americans do not care any more, but there is no Constitutional authority for what Mr. Obama has done with GM. None. If you haven't read the Constitution lately, perhaps you might consider doing so now. Let me know if you see anything which would allow a federal politician to force a CEO of a private corporation to resign. If you do not think that the Constitution is important, perhaps you would prefer to live in a world in which politicians decide what is legal as the mood strikes them. After all, it's for the greater good.

Now that GM will be run by bureaucrats from Washington, it will be interesting to see what kinds of "free market" business decisions they will make. What will they do about all their labor union friends in the UAW? Will they mandate job cuts? That wouldn't be a big vote-getter, would it? Will they allow GM to manufacture the kinds of vehicles that the public wants, or will they dictate what kinds of vehicles must be made? I'm betting that the government will do the same stellar job with GM that it has done with AMTRAK. Bring back the Yugo!

I suspect that very few modern Americans have ever heard of the Roman Emperor Diocletian. Thank our public education system for that. In the early third century A.D., Diocletian had a currency crisis on his hands. The Roman coinage had been debased to such an extent that inflation was running rampant. Even though this had been caused by the government, Diocletian blamed "profiteers" and "speculators." In 301 A.D., he imposed The Edict on Maximum Prices. He forbade merchants from raising prices. He set wage controls. Those who refused to abide by the price controls were subject to the death penalty. At the same time, Diocletian continued his policy of minting large quantities of coins of low precious metals content, thus causing increasing monetary inflation.

What happened? Normal business activities ceased. A huge black market arose. A barter economy grew. The official Roman currency increasingly became worthless. The Roman economy did not stabilize until years later. Rome lasted a while longer. It wasn't sacked by the barbarians until about 100 years after Diocletian. However, under Diocletian, the empire had embarked upon the road to debasement. There is a lesson in all of this, although it is clear that our current leaders will not heed it. Humanity has been at this fork in the road in the past. The Romans took the wrong turn, and our current leaders seem likely to do the same.

Our current problems are not the result of too much free market capitalism. To the contrary, we have had too little free market capitalism. We live in a society in which the Fed, a central bank, sets certain important banking interest rates. An interest rate is the price of money. Setting interest rates by central planning committee is a form of imposing price controls. If we lived in a free market economy, ALL interest rates would be set by free market forces. Most of our current problems have happened because central planners artificially set low interest rates. This, in turn, sent a false message to borrowers about the price of money, and it ignited the biggest real estate bubble in world history. We are now paying the price.

When central government planners interfere with private businesses by hiring, firing, setting wages, and dictating industrial policies, they are attempting to do the same things which failed when Diocletian tried them more than 1,700 years ago. Our present leaders think that there is no aspect of the economy which government planners should not attempt to control. The only way one can entertain such a belief is to ignore the clear lessons of thousands of years of history.



"Those who cannot remember the past are condemned to repeat it."

Article by George Santayana

South Park version of economic mess - Hilarious

Friday, March 27, 2009

Nobody Is Smarter Than You Are - Terence McKenna

Terence McKenna: Culture is not your friend

"Official" Failed Bank List

FDIC Site - List of Failed Banks

So far 21 banks have failed since the start of this year. That is almost 2 banks folding every Friday. Intrestingly, i was listening to a show on radio where they described how FDIC is hiring almost 600 so called secret agents for one of their regional offices to assist in the process of taking over failed banks. In addition, FDIC decides who will take over the failed bank; whether selected new owner wants to participate or take over the failed bank is never considered.

I am wondering if FDIC's one regional office is ramping uP hiring of so called army of secret agents, what does it say about the banking industry? How many more banks will go under? Commrcial Real Estate have barely begun the process of deleveraging.

Speaking Truth to Power

Speaking Truth to Power
by J. R. Nyquist
Weekly Column Published: 03.27.2009

Diogenes the cynic was a Greek philosopher of the fourth century B.C. who walked the streets of Athens carrying a lamp in broad daylight. People asked what he was doing. He said, “I am just looking for a human being.” After Plato offered Socrates’ definition of humanity as “featherless bipeds,” Diogenes brought a plucked chicken to Plato’s Academy, saying, “Behold! I have brought you a human being.” When captured by pirates and sold into slavery his new master asked what his trade was. “Governing men,” he replied, adding that he wished to belong to someone who needed a master. One morning, when Diogenes was basking in the sun, Alexander the Great came to see him. Wishing to do the philosopher a kindness, Alexander asked if there was any favor he could bestow. “Yes,” replied Diogenes. “Stand out of my sunlight.”

The integrity of Diogenes has much to do with his independence. He was not interested in advancing his career, winning the favor of princes, or making money. He didn’t flatter his teachers or the public. When he spoke, there was no reason to distrust what he said. He had nothing to sell, so he had no motive to flatter or manipulate. In today’s world we have become very comfortable buying and selling things. It is also our habit to say what is pleasing to our superiors. More and more, our culture emphasizes the necessity of having a career, of promoting oneself, of making money and impressing other people.

To be wise, to love wisdom, requires a different emphasis than that of today’s culture. It requires an emphasis on truth and clarity. To be successful today, to advance your career, truth and clarity aren’t always appreciated. Perhaps you have heard that the customer is always right. And everyone with common sense knows that the boss is right – because he is the boss. Despite our egalitarian pretenses, rank is an inescapable reality of human existence. And when rank and privilege are abused, when truth is disregarded, what is the underling to do? Should he, like Socrates, drink the hemlock? Alexander the Great admired the nobility of Diogenes, because Diogenes revered his own clarity and the truth above all mortal masters. The Macedonian said, “If I were not Alexander, then I should wish to be Diogenes.”

Continue reading

Wednesday, March 25, 2009

Postal Service Asks Congress for Bailout

Postmaster General John Potter said Wednesday the financially strapped U.S. Postal Service will run out of money this year without help from Congress.

The only lingering question, Potter told a House subcommittee, is which bills will get paid and which will not. He did say ensuring the payment of workers' salaries comes first. But Potter also said other bills may have to wait.

Potter's appearance came as the agency, which has lived on a reputation of serving through wind, rain and all sorts of obstacles, seeks permission to reduce mail delivery to five days a week. It also wants to change the way retiree health benefits are amassed to save money.

"We are facing losses of historic proportion," he said. "Our situation is critical."

Read rest of the article.

Monday, March 23, 2009

How latest plan can and most likely will go wrong

Open letter to FDIC Ombudsman by Karl Denninger @ Market Ticker
Now that the Treasury Plan to "cleanse" the market of "toxic assets" has been put forward, I have noted that The FDIC is the entity that will both guarantee the debt issued and vet the bidder list.

I also note the following quote from The FDIC:

The FDIC will provide oversight for the formation, funding, and operation of new public-private investment funds (“PPIFs”) that will purchase loans and other assets from depository institutions. The Legacy Loans Program will attract private capital through an FDIC debt guarantee and Treasury equity co-investment. Private market equity investors (“Private Investors’) are expected to include but are not limited to financial institutions, individuals, insurance companies, mutual funds, publicly managed investment funds, pension funds, foreign investors with a headquarters in the United States, private equity funds, and hedge funds. The participation of mutual funds, pension plans, insurance companies, and other long term investors is particularly encouraged.

There is a potential problem here.

Let's say that I am a bank ("financial institution") with $100 billion in "toxic assets". I have them on my balance sheet at 80 cents on the dollar. The market has them marked at 30 cents. We do not know what the held-to-maturity performance will be, since that requires knowing the future, although for the moment let's assume that they are cash-flowing at the present time.

What I (the bank) do know, however, is that if I sell them at 30 cents I take a monstrous loss - perhaps enough to force me under Tier Capital limits and thus render me subject to an FDIC enforcement action. I therefore will not sell for 30 cents so long as I have any belief whatsoever that the cash flow - or any government subsidy - will exceed that value.

If I, as a "financial institution" can participate as a bidder in these auctions I can foist off my loss onto the taxpayer. Here is how I can rig the game so as to avoid an otherwise-inevitable loss:

•I become a "bidder" and "bid" on my own assets at 75 cents.
•I am providing 5 or 10% of the money. The rest is covered by Treasury, The Fed and the FDIC via guaranteed bond issuance.
•The loan, ex my contribution, is non-recourse. That is, I can lose 5 or 10% of the total portfolio purchased, but nothing more.
Now the "assets" (a passel of CDOs?) turn out to be worthless. I lose 5% of $75 billion, or $3.75 billion that I put up, plus the other nickel on the original mark, but that's all.

The taxpayer gets hosed for the remaining $71.25 billion dollars.

This can and will be done if the "sellers" of these assets are allowed to bid either directly or indirectly as it provides a means for banks to intentionally dump bad assets at a certain loss that is much smaller than their expected realized loss over time, shifting the rest of the loss to the taxpayer.

This program has the potential to shift literally $500 billion or more in losses onto the taxpayer, not through the operation of "bad luck" but rather through what amounts to a bid rigging operation.

Be aware that I, along with many others, have figured this out. Also be aware that as taxpayers and your ultimate boss, we do not intend to sit still and allow the public treasury to be looted in such a fashion.

The FDIC's job is to prevent that sort of looting operation by prohibiting the sellers of these assets from having any financial interest in the bidding side of the equation, directly or indirectly, and I along with many others intend to hold you to that obligation.

I like the outline of this program if and only if it cannot be gamed in this or similar fashion. Provided that does not occur, this program has the potential to provide great benefit to both the banking system and our economy.

If, however, the financial institutions that created this mess in the first place are allowed by the FDIC and Treasury to use it as a looting operation to intentionally shift their bad assets onto the Taxpayer you can expect that we the people will hold our government to account.

Transmitted by email to ombudsman@fdic.gov

Saturday, March 21, 2009

Thursday, March 19, 2009

Debt Monetization has consequences

Posted by Karl Denninger in Monetary at 15:31

Actions Have Consequences


So The Fed thinks it can print its way out of this eh?


MOSCOW, March 19 (Reuters) - China and other emerging nations back Russia's call for a discussion on how to replace the dollar as the world's primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar's status as world's sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decision-making globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

Oops.

By the way, if you want to see lots of "fun" in our currency markets along with a near-immediate bond dislocation, get the oil producers along with China and Russia to agree on a new reserve currency and......

That'd be "goodnight Uncle Sam."

Congress might want to rethink their concept of spending more than they make, thereby effectively calling for "Quantitative Easing" and similar shenanigans.

Yes, I know that contracting spending to tax revenues would be extraordinarily painful and end the stupidity of doing things like granting unlimited "free" medical care in hospitals to illegal aliens.


But if you think an announced change in Social Security, Medicare and similar programs would be bad, how bad do you think one would be that occurs as the consequence of forced action if our bond market was to implode?
Welcome to crazy-town Mr. Bernanke!

Monday, March 16, 2009

What is Bubba Effect?

Thursday, March 12, 2009

Wednesday, March 11, 2009

GRAND ILLUSION – THE FEDERAL RESERVE

GRAND ILLUSION – THE FEDERAL RESERVE
by James Quinn
March 11, 2009

So if you think your life is complete confusion
Because your neighbors got it made
Just remember that it's a Grand illusion
And deep inside we're all the same.
We're all the same...

America spells competition, join us in our blind ambition
Get yourself a brand new motor car
Someday soon we'll stop to ponder what on Earth's this spell we're under
We made the grade and still we wonder who the hell we are

Styx – Grand Illusion

The whole world is in a state of complete confusion. Americans are coming to the realization that their lives have been a grand illusion. You thought your neighbor had it made. They were driving a Mercedes, spent $40,000 on a new kitchen with granite countertops and stainless steel appliances, sent their kids to private school, had a second home at the shore, and took exotic vacations all over the world. Now their house is in foreclosure and you are paying to bail them out. The anger and outrage in the country is at the highest level since the Vietnam War. The American public is being misled by government officials, politicians, and the Federal Reserve regarding the causes of this crisis and the solutions needed to solve our economic tribulations.

The average American does not know much about the Federal Reserve. The government and the Federal Reserve prefer to operate in the shadows. If the American public understood what their policies have done to their lives, they would be rioting in the streets. Henry Ford had a similar opinion:

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Continue Reading

Anti-Democratic Nature of Bailouts

Noam Chomsky: Current crisis demonstrates anti-democratic nature of financial system

Benoit Mandelbrot thinks we're all screwed

Is it time to turn out the lights?

Martin Armstrong gives some interesting insight into where we may be headed.

Read here.

Sunday, March 8, 2009

George Orwell was right!!!

Following excerpt is taken from http://www.newspeak.com/Newspeak.htm

The purpose of Newspeak was to drastically reduce the number of words in the English language in order to eliminate ideas that were deemed dangerous and, most importantly, seditious to the totalitarian dictator, Big Brother and the Party. "Thoughtcrime," the mere act of thinking about ideas like Freedom or Revolution, was punishable by torture and brainwashing.

Newspeak was the sinister answer. A character in 1984 describes it succinctly: "Don't you see that the whole aim of Newspeak is to narrow the range of thought? In the end, we shall make thoughtcrime literally impossible because there will be no words in which to express it... The whole climate of thought will be different. In fact, there will be no thought as we understand it now."

Is our real world today, at the beginning of the new millennium, so very different on a fundamental level from what Orwell predicted? There have been countless refutations of the 1984 dystopia: Totalitarianism is on the wane, Communism is dead, there is more prosperity, more community, more freedom than ever before.

Arguably, on a geo-political level, the global information economy has promoted the causes of peace and freedom, preventing potentially worse atrocities and repression in hotspots such as China and the Balkans. The Internet is likely going to give more people more access to first hand information that has ever been available on the planet, and the means to spontaneously and instantaneously communicate their ideas and concerns to as many other people as they can cram into their contact management programs.

But who is really calling the shots? In Oceania, there was the Party and there were the Proles - the great unwashed proletariat, living in subhuman squalor. In our world, out of the now 6 billion souls living on this planet, who belongs to the Party? Well, let's just deal with it in Internet terms. How many Internet subscribers are there in the world - 505 million by most recent count (Source: Global Reach 12/01) - that's 8% of the population of 6.2 billion. OK, so Ingsoc had an Inner Party and an Outer Party. If 5% of the world is in the Inner Party (those who have access to more prosperity, education, can shape their own destiny more than most), then let's say that another 10% belongs to the Outer Party (those who still benefit from the spoils, but don't make the rules). In today's word, that's another 600 million people. Let's be generous and say that 900 million people (15%) or the population, in one way or another, benefit from the freedom and prosperity of the modern world, can get an education, medical care etc. What about the 85% - the "proles" of our world? They're living in a world where 30% of them do not live with drinkable water, where infant disease and mortality are still raging out of control, where there is minimal education, inadequate social services if any, and no prospects whatsoever.

Think about it:

You can shut off your TV, but do you really want to?
You live in a democratic society and have the right to vote, but only 5% of registered voters in the U.S. actually contribute money to political campaigns. And you wonder why it's so tough to pass campaign finance reform?
You are free to spend your money however you choose. But why do you feel compelled to spend it? Is advertising just the free market at work, or is it the ultimate form of brainwashing to part you from your hard-earned cash?
How come you're pre-approved for so many credit cards? Isn't debt just another form of indentured servitude?


The bottom line is:

you have no freedom, no power,
you feel no need or desire for freedom or power, and, what's worse
you don't even know that you don't have it.
George Orwell was right!


http://www.newspeak.com/Newspeak.htm

Moral Alchemy by Sheldon Richman

"The welfare state is based on “legal plunder.” Only an impossible moral alchemy could turn theft into beneficence."


Alexis de Tocqueville, in volume two of Democracy in America, wondered, “What Sort of Despotism Democratic Nations Have to Fear.” Anticipating that democratic despotism would come from government’s smothering the people with control-laden benefits, he wrote: “Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if, like that authority, its object was to prepare men for manhood; but it seeks, on the contrary, to keep them in perpetual childhood.”

From Short Article by Sheldon Richman - Link

Saturday, March 7, 2009

Economic Crisis - Manufactured (Surprised? i am not)

Excellent explanation of Illiquid assets and current economic crisis BY Karl Denninger. In shorts it is a manufactured problem. Yes thats right. This is a manufactured crisis.

"Illiquid Assets" are not an act of the markets, nor are they an accident. They are in fact created by GOVERNMENT INTERFERENCE in the marketplace.

In 10 minutes you'll "get it" - why the government - not the markets - has led to the credit freeze. Why the market cannot clear. And why it is in fact explicitly the things that the government has done and is doing that has led us to have a "credit crunch", where assets that normally would trade won't.


AIG Explained - Max Keiser

What's Dead (Short Answer: All Of It)


Thursday, March 5. 2009
Posted by Karl Denninger in Editorial at 09:57


What's Dead (Short Answer: All Of It)


Just so you have a short list of what's at stake if Washington DC doesn't change policy here and now (which means before the collapse in equities comes, which could start as soon as today, if the indicators I watch have any validity at all. For what its worth, those indicators are painting a picture of the Apocalypse that I simply can't believe, and they're showing it as an imminent event - like perhaps today imminent.)


All pension funds, private and public, are done. If you are receiving one, you won't be. If you think you will in the future, you won't be. PBGC will fail as well. Pension funds will be forced to start eating their "seed corn" within the next 12 months and once that begins there is no way to recover.


All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can't earn anything off investments, and if you have a claim in process at the time it happens, it won't get paid. The probability of you getting "boned" on any transaction with an insurance company is extremely high - I rate this risk in excess of 90%.


The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they're doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.


Government debt costs will ramp. This warning has already been issued and is being ignored by President Obama. When (not if) it happens debt-based Federal Funding will disappear. This leads to....


Tax receipts are cratering and will continue to. I expect total tax receipts to fall to under $1 trillion within the next 12 months. Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary. This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs. That will likely get close.


Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest). If you have a 401k, or what's left of it, or an IRA, consider it locked up in Treasuries; it's not yours any more. Count on this happening - it is essentially a certainty.
Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way.

Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop. This will in turn lead to....


The unemployed will have 5-10 million in direct layoffs added within the next 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.


Civil unrest will break out before the end of the year. The Military and Guard will be called up to try to stop it. They won't be able to. Big cities are at risk of becoming a free-fire death zone. If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go "feral"; witness New Orleans after Katrina for how fast, and how bad, it can get.


The good news is that this process will clear The Bezzle out of the system.
The bad news is that you won't have a job, pension, annuity, Social Security, Medicare, Medicaid and, quite possibly, your life.


It really is that bleak folks, and it all goes back to Washington DC being unwilling to lock up the crooks, putting the market in the role it has always played - that of truth-finder, no matter how destructive that process is.


Only immediate action from Washington DC, taking the market's place, can stop this, and as I get ready to hit "send" I see the market rolling over again, now down more than 3% and flashing "crash imminent" warnings. You may be reading this too late for it to matter.

Tuesday, March 3, 2009

When the World Went Bankrupt

by Butler Shaffer

To understand the machinations of a complex world, one must become sensitive to how apparently separate phenomena interconnect to produce unexpected consequences. Otherwise intelligent men and women struggle to make sense of the destructive turbulence that is fast becoming the norm in modern society. Wars that fail to satisfy even the most meager of excuses for their prosecution; rapidly-expanding police states rationalized as necessary for the ferreting out of "terrorist" bogeymen; state-sponsored torture conducted for no more apparent purpose than an end in itself; the wholesale looting engaged in – with bipartisan support – for the purpose of creating trillions of dollars of booty to subsidize the corporate owners of American society for losses sustained through incompetent management; these are the major examples of the failure to see interrelated causes of social disorder.

Continue Reading...

Saturday, February 28, 2009

How Money Controls You

Exponential Growth and Economy

Will blind pursuit of growth lead to end?



Now what you just saw. Watch following video in context of growth and how it can easily become exponential growth over a period of time. Why it is important to not blindly put our faith in techonology to deal with problems caused by blind pursuit of growth.



I doubt we even have any leader who actually understands the problems with growth over time...

Comrades Stimulus Must Pass (Pun Intended)

Wednesday, February 25, 2009

48 Laws of Power

The following are 48 Laws of Power. It is useful to understand how Power works.

The 48 Laws of Power is a 1998 book by Robert Greene. The book shares thematic elements with Niccolò Machiavelli's The Prince and has been compared to Sun-Tzu's classic treatise The Art of War.

PLANETARY BANKRUPTCY

Following is an excellen article reproduced here from site http://un-debt.net/

'If all the bank loans were paid up, no one would have a bank deposit, and there would not be a dollar of currency or coin in circulation. This is a staggering thought. We are completely dependent on the commercial banks for our money. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp upon the picture, the tragic absurdity of our hopeless position is almost incredible - but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and the defects remedied very soon.' - Robert H. Hemphill, Federal Reserve Bank of Atlanta.

In order to give a full meaning to the quote above, it is essential to mention that it applies to any 'fiat' currency, not just the US Dollar. Fiat money's value is backed by confidence in the economy and covered by the government which decrees it to have value - and more importantly (here comes the devious twist) is also backed by a promise to pay! So, let's stress it again: not only the banknotes remain in our wallets at the condition we pay them back but will retain their value as long as we are able to take on debts. How confident are you in 'a piece of paper' that is worth less that it's printed on, because it is the strict bottom line as Former Fed. Reserve Chairman Paul Volcker puts it in 'The Ascent of Money', a pbs.org video at 17:36 min. Such a concept is repellent to the mind because if we give it a thought, we begin to perceive the illusion we live in - to feel like our spiritual self and our hyper-materialistic driven environment are set for a inevitable collision course.

Since last September, world nations have grasped the importance to prop up the USD and that the failure to do so would have dire consequences. Confidence in the world currency reserve is eroding at a faster pace every day. These grave threats could all vanish overnight if people were able to make the link between the amount of taxes paid since they joined the workforce and the promises made to them during all this time - then asked themselves honestly: what did come true, was it all a dream? If they were doing just that, maybe they would demand the repudiation of their (illegal) *National Debt* to start with. Politicians who want to be elected use the old trick named 'the carrot and the stick'. Their promises will demand raising taxes. Governments have always overspent and it is precisely this pattern which corrupts minds across the board. Passing debt onto further generations is not really a concern because nearly everybody wants it N-O-W! More dramatically, the financial structure is built in a way to preserve itself, nobody wants to lose one's entitlements: so the cure is to inject more cash into failed programs and accept corruption as a fatality. Moral hazards do not go away, they merely become bigger threats as decades pass by. How many layers of fallacies are needed to realize that fiscal straitjacket on a government level is a myth?

Alas without the power to tax, the economic world cannot exist because money wouldn't have any value at all, this is a simple as that. The top 10% depends on this scheme to consolidate wealth. The most appalling is that even the architect of our current system once confessed the awful truth:

'Should government refrain from regulation (taxation), the worthlessness of the money becomes apparent and the fraud can no longer be concealed.' -- John Maynard Keynes, 'Consequences of Peace'

It is precisely taxpayers' money that first enabled the predatory behavior of lobbies and cartels feeding today off bailouts, which are nothing more than the bones of global debt carcass. We are just running on empty and it's only a matter of time before the music stops. This is a very last cancer stage: taxpayers have been unknowingly the engine of their own demise and now must endure a 'die or spend mode' as their insolvent central banks turned them into lenders of the last resort to rescue the ' Davos Golden Boys' way of life. Told that their house value was the safest piggy bank on earth, many worked hard and spent as if there was no tomorrows while not realizing that what was done to them was exactly the same as the economic Hitmen did to the third world countries.

Our World Managers Succumb To Monetary Dementia

Let's consider some eye-popping figures: if a big bank such as 'Bank of America' needed a $131bn bailout, CiTi finds itself on the brink of liquidation, Merrill Lynch clients pulled $10Bn in the fourth quarter, J.P. Morgan profit fell more than 75%, hedge funds lost $350Bn in 2008 and pension funds (worth $15Tn) threaten to implode... we are indeed walking on very thin ice. Interestingly, American taxpayers seem to keep their eyes on the ball better than their lawmakers. Has a stimulus ever been necessary at all? Anti-Bailout coalitions and advocacy groups have begun to mushroom nationwide. A recent poll revealed that 60% of Americans want the bailout of the financial sector to stop; yet the DC Geniuses (who still can't figure why printing our way out of debts will aggravate the liquidity crunch) plot the next step after aid to Citigroup and Bank of America. Unethical premises and remedies multiply moral hazards. One of the unintended consequences to finance those 'has-been businesses' is creating a new menace to the economy: 'Zombie' Debtors that will be feeding off the taxpayers and stockholders — as healthier rivals become increasingly threatened with 'organized competition' put in place by Lawmakers. The price of protection shows its true colors: it allows the government to decide who can live - or die: it is fascism in disguise. The ugly side of intervention is precisely its addictiveness. And that is why institutionalized debtism has a lethal track record.

An 'almost incomprehensible' amount of cash evaporated, this the Global crisis 'has destroyed 40pc of world wealth', Steve Schwarzman admitted. Indeed, where the heck did all the money go? When money is debt it is negative wealth... got it?

Two days before his inauguration, Obama urged to move swiftly to rescue the banks continuing to hemorrhage billions of dollars. As the situation worsens by the day Bernanke skipped Congressional Financial Hearings in favor of a secretive euro bankers confab. According to Ron Paul, the meetings took place in Basel and were chaired by ECB's Jean-Claude Trichet - not so surprisingly the mainstream outlets remained elusive about them. Just like a bad quality varnish peeling under the pressure of a nail, the magic really vanishes when one looks at Obama's billionaire pals' list and who is throwing money into the most lavish Inauguration in history. Guess what? The biggest part of the pie goes to the financial sector. Obama is no savior... and here is why:

The Government Accountability Office (GAO), Congress' investigative watchdog, has found that "a majority of America's largest publicly traded companies and the U.S. government's largest federal contractors use multiple subsidiaries in offshore tax havens to conduct business... The culprits include some corporate giants who are receiving countless millions in bailout money, Leonnig notes. ... (01/16/09) - more

As credit card spending in 'The Rich West' screeched to a halt, China Central Bank, which called Paulson a 'gangster', is trying to prevent a quagmire; and so far the only remedy is the Yuan devaluation. How smart is this really? Doing so is extremely tricky because competitive devaluation (race to the bottom) has limits. If things really go wrong, it may lead to a professional run on banks. So much for our fabulous globalization, heh?! But what if banks do not start lending again (what wouldn't fix the downhill trends if they did either)? Evans-Pritchard leans toward a collapse that could drag the entire planet into a remake of the Great Depression. SocGen warned too that the Chinese economy is imploding and speculates about the possibility of regime change. Flash back: that very dire outcome was forecast in 2004 by Krassimir Petrov. There is practically no doubt that the Chinese will overcome the shock a lot better since they are already accustomed to sweatshop wages. For us, it will be a rude awakening and we could see, in the so-called free world, a suicide epidemic as currently witnessed among young Chinese women.
In Russia, troubles are brewing too. Last November, its stock market is down 70 percent from late spring 2008 and since then anti-Western rhetoric abound. In December alone, the central bank spent $70BN to rescue its currency and avoid the panic of a currency collapse reminiscent of the 1998 crisis. As of January 13, the WSJ reported that the drastic measures didn't prevent the Ruble from nose-diving and massive lay-offs from bringing wages back to earth. The Jungle is surely fairer than our financial environment. Ireland is in the midst of a housing bust and real estate prices are predicted to fall by 80%. Icelanders have to go back fishing to survive the complete demise of their banking system - now seen as the worst economic crash of any country in peacetime, BBC reported. The Japan's jobless are encouraged to accept a government program that focuses on reviving the ageing countryside amid a worsening recession. All this is a mere glimpse of what is coming next: your government will soon turn out being the biggest employer, that's where minimum wage laws start fitting the big picture. How great is this? But wait, the avalanche of bad news isn't over just yet... 40% of Latin America’s financial wealth was wiped out in the first 11 months of 2008. On the old continent, the monetary union has left Eastern Europe trapped in depression. Um-um, wasn't that part of the world too in the midst of a b-o-o-m-i-n-g housing market until early 2008, setting off alarms bells at the IMF? Financial alchemists like Lorenzo Bini-Smaghi, a ECB board member, perfectly knew that the euro pegs would lead to boom and bust cycles. How bad could it really get? Just look at the Zimbabwean hyperinflation (hitting 231 million percent!) that has left the country with more than half the population starving and of course, the United Nations is begging for more aid. Once again, the UN is showing its uselessness!

So now, we can begin to see why Trichet said that 2009 will be ‘substantially’ worse than forecast. He blamed 'mispricing of risk' for the downturn and ended his statement by saying that 2010 will be the year of the recovery. On Jan 29, in France, one million protesters demanded Sarkozy to do better at protecting jobs and consumers during the crisis. When will the masses realize that 'managed economies' do not work but are implemented to protect those in power? Moreover, how smart is it to ask people who couldn't see the bust coming to find appropriate solutions? Our problems cannot be solved by the minds that created them in the first place. Sure, after the bust the economy always comes back, it is not a matter of 'if' but 'when'. Uncharted waters. Guru Trichet even made an esoteric statement in the Dow Jones News as of 01/29, and which amounts to 'another nuclear option':

ECB is already carrying out many 'non-standard' operations, like massive liquidity injections... We are in a non-standard world. So whether or not we will embark on other non-standard operations, I said already that I wasn't excluding that," he said. And it shouldn't be wise to bet on 2010 at all, as such a leverage needs a lot more than two years to be cleaned up. Think of ten years or more instead. The Euro could be toast for good. Meanwhile Germany forecasts the worst economic growth since WWII and riots spread throughout in Eastern Europe. An article in The Spiegel even describes Great Britain as a second Iceland and Italy as a second Argentina. The European Parliament lamenented that six to eight countries had to reduce their deficits but no receipe as how they might go about doing that. There is no solution other than debt liquidation. On the other side of the North Sea, in Ireland (whose economy will shrink 10% by 2010), a leading economist advised a withdrawal from the euro unless Ireland gets its part of the bailout pie.

(01/19/09) "If we have a single currency there are obligations and responsibilities on both sides. The idea that Germany and France can just hang us out to dry, as has been the talk in the last couple of days should not be taken lying down," he said.... By keeping with the current policy, the state is ensuring that Ireland turns itself into a large debt-repayment machine. Is this the sort of strategy to win wars?", he said. more

Speaking of bailouts, The European Commission approved a French plan to allocate firms affected by the crisis up to EUR500,000 in aid. In America, Bailout money used for lobbying and Obama promises that he will push bankers to lend more, he doesn't want them to sit on the money that they got from taxpayers. Paid by the taxpayers... then borrowed again by them with an interest... doesn't this make sense or perhaps is debt laundering legal? In England, dementia struck a step further as the BofE’ s multibillion-pound scheme will offer credit to new car buyers to rescue the moribund motor industry. And there is more, the government also contemplates an insurance crackdown targeting two million uninsured drivers who, as a result, could get their cars seized and crushed! There is even sillier: US Financial Services Committee Chairman, Barney Frank who declared that companies with corporate jets may forget about the bailout money. Nevertheless, a few days later the press reported that taxpayers were also funding Citibank's jet.

Black clouds are gathering above the horizon. Europeans are waking up to the abrupt demise of democracy as discovering the fine print in all the treaties. The IMF just announced that the world trade collapsed by staggering 45% in the last quarter of last year. Even the euphoria of Obama's inauguration didn't last long. The same day Dow closed below 8,000 as banking fears were gripping the European markets and bringing shockwaves from the United Kingdom too. British Banks got a £1TN injection which didn't prevent RBS shares to plunge 70%. London is faced with a bloodbath. Brown admitted there is not yet a limit on how much risk taxpayers must bear as a result of his rescue plan, but he even promised financial institutions that they will get more cash if they pass it on. Looks like the Brits are too being set up for the mother of all crashes. With the UK government debt alone and future liabilities not included, this means that every new baby is born with £17,000 debt. Checkmate! UK cannot take Iceland's soft option, Evans-Pritchard explains:

The parallels with Iceland are disturbing. The country was ruined by the antics of its three big banks. They built up foreign liabilities equal to 900pc of GDP. Operating as hedge funds, they borrowed in dollars, euros and pounds to speculate....If Britain walked away from UK banks' $4.4TN of foreign liabilities – worth eight times Lehman Brothers – it would destroy the credibility of the City and take the whole world into deeper depression... The sovereign debt of Russia, Ukraine, Greece, Italy, Belgium, Austria, The Netherlands, Ireland, Australia, New Zealand and Korea is all being tested by the markets. The core of countries deemed safe is shrinking by the day to a half dozen. Sadly, Britain is no longer one of them. (01/20/09)
Describing in length the fundamentals of the American economy at this stage is more or less a naughty intellectual exercise. As the bank bailout is expected to cost $4Tn, U.S. financial losses could reach $3.6TN and suggest that the banking system is 'effectively insolvent' contends Nouriel Roubini, New York University Professor and former financial Clinton's adviser. Back to spending orgy. The clock is really ticking; even the legendary investor Jim Rogers predicts a total decline in 2009. We can get a better sense of absolute gloom and doom if we take into account the Asset 3 Level also known as ‘mark to make believe,’ thus whose market prices are based on the banks' 'unobservable inputs' that 'reflect management’s own assumptions'. So now we have phantom asset values which remind of the CDOs' notional values, also called by Warren Buffett WMDs. The Titanic is about to hit the iceberg. Gerald Celente doesn't chew his words when commenting on the ongoing dreadful meltdown. The situation is so dire out there that global banks have joined the clamour for bailouts. Do our demented global elites deserve to be rescued - honestly?

The Demise of Mainstream Economics “All truth passes through 3 phases: First, it is ridiculed. Second, it is violently opposed, and Third, it is accepted as self-evident.” — Arthur Schopenhauer

Almost every teenager has been warned about the dangers of getting into debts, but they all grew up accepting that a government debt was acceptable and even honorable. As this editorial points out earlier, if the scheme is run by the top managers of a country, the amount of debts can only grow exponentially. One doesn't need to be a rocket scientist to figure what happens when the national debt exceeds the GDP. For the bankers it doesn't really matter, they operate for profits and when money is debt (does not exist) massive liquidations are ineluctable. The (bank) shareholders and the taxpayers are simply left holding the bag. As stipulated in 'Beyond The Age of Usury', today's events are far from being isolated. Luckily, such facts are everywhere on the Internet: we only have to keep an open mind and allow reality to reveal itself. They represent a recurrent pattern that is concealed to preserve a feudal hierarchy. The book titled The Bankers That Broke The World and written by Liaquat Ahamed - here reviewed by the New York Times - tells us about a macabre monetary story that looks much like today. The parallels are uncanny. That book should be on your must read list this year. If your budget is tight, there are plenty of free online books that will do the job and which you can find in the library of the site.... time is running out. As financial illiteracy and corruption are about to engulf the whole planet, some speculate more and more about the meanings of The Mayan 2012 prophecy. One thing is certain though: it is The End Of The World As We Know It - or TEOTWAWKI as an acronym frequently used by the doomsayers.

It is going to take the collapse of the dollar to have a mentality change and address central banking, Congressman Ron Paul conceded recently on MSNBC. Since we cannot escape what is coming toward us, a Biblical debt jubilee and the implementation of 'honest money' are the only long-term answers. The people have to free themselves because the 'powers that be' will never admit to being the rulers by deception. More positively, this battle cannot take place on the streets but in each of us individually; and it can only be won if waged peacefully and spiritually. There is no such a thing as a war to end all wars.

And ultimately, everything is bound to be overcome or disappear eventually. If 'We The People' were able to find our way back to prosperity, we'd no longer be living in a world where destruction is more profitable than peace and with the fear of technology. It would also enhance the smooth transition to the development of a resource based economy as advocated by Jacky Fresco who dedicated is entire life to The Venus Project... (to be continued)

Monday, February 23, 2009

AIG needs $60 billion more as of 2/23/2009

AIG in talks with U.S. government, sees $60 billion loss: source

American International Group Inc, rescued twice last year by the U.S. government, is asking for more aid and bracing for a fourth-quarter loss of roughly $60 billion, a source familiar with the matter said. It would be the biggest loss in a quarter in corporate history.

Red Alert: Major Meltdown Imminent!

Red Alert: Major Meltdown Imminent! - Link

Some Key Points from article:

Stock market crash: A swift plunge in stocks to about 5000 on the Dow, 500 on the S&P 500 and 900 on the Nasdaq … or lower. (For our reasons, see “Stocks to fall AT LEAST another
40%!“)

Corporate bankruptcies: A chain reaction of Chapter 11 filings or federal takeovers, including not only General Motors and Chrysler, but also Ann Taylor, Best Buy, Jet Blue, Macy’s, Saks Fifth Avenue, Sears, Toys “R” Us, U.S. Airways and even giants like Ford or General Electric.
Megabank failures: Bankruptcies or nationalization not only of Citigroup and Bank of America, but also JPMorgan Chase and HSBC. (See my January issue, “Megabanks Could Fail Despite Federal Aid.”)

Nationwide epidemic of small and medium-sized bank failures: Outright FDIC takeovers, with little prospect of nationalization. (I’ll give you a link to our free guide with a more extensive list
in a moment.)

Insurance failures: State takeovers of companies like Ambac Assurance, Bankers Life and Casualty, Conseco, FGIC, Medical Liability Mutual, Mortgage Guaranty Insurance, Nuclear Electric Insurance, PMI Mortgage, Standard Life of Indiana and many others. (Our free guide also contains a more extensive list of insurers.)

Cities and states: An epidemic of defaults by thousands of cities, states and other issuers of tax-exempt municipal bonds.

Stock market shutdowns: Trading halts on major, big-cap stocks … plus on-again, off-again exchange shutdowns, making it increasingly difficult for investors to liquidate their holdings at any price.

Credit market deep freeze: A virtual shutdown in all debt markets except U.S. Treasuries. An avalanche of selling — and virtually no buyers — for corporate bonds, commercial paper, asset-backed securities, municipal bonds and all forms of bank loans.

Government bond collapse: A steep decline in the price of medium-and long-term government securities, as the U.S. Treasury bids aggressively for scarce funds to finance a ballooning budget deficit.

Shocking? Perhaps. Avoidable? No.

AMEX paying some cardholders to cancel

AMEX paying some cardholders to cancel

American Express wants you to leave home without them.

In a marketing turnabout, the largest U.S. credit card company by purchases, is offering select members a $300 gift card to drop its card, according to a notice on its web site.

Globalist elite's view of the world

Sunday, February 22, 2009

We're in lot of trouble

Blue Pill or Red Pill?

Max Keiser ponders on the question - Will Dollar Survive?

March towards nationalization

The U.S. government may end up holding as much as 40 percent of Citigroup's common stock, the Wall Street Journal reported on its website, citing sources familiar with the plans.

U.S. seeking up to 40 percent stake in Citigroup: report

Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer

Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis that began with the poorest Americans has reached the wealthiest.

Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer

No market bottom in sight

Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros sees no bottom for world financial "collapse"

Five Stages of Collapse by Dmitry Orlov

Five Stages of Collapse by Dmitry Orlov

Stages of CollapseStage 1: Financial collapse. Faith in "business as usual" is lost. The future is no longer assumed resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings are wiped out, and access to capital is lost.

Stage 2: Commercial collapse. Faith that "the market shall provide" is lost. Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down, and widespread shortages of survival necessities become the norm.

Stage 3: Political collapse. Faith that "the government will take care of you" is lost. As official attempts to mitigate widespread loss of access to commercial sources of survival necessities fail to make a difference, the political establishment loses legitimacy and relevance.

Stage 4: Social collapse. Faith that "your people will take care of you" is lost, as local social institutions, be they charities or other groups that rush in to fill the power vacuum run out of resources or fail through internal conflict.

Stage 5: Cultural collapse. Faith in the goodness of humanity is lost. People lose their capacity for "kindness, generosity, consideration, affection, honesty, hospitality, compassion, charity" (Turnbull, The Mountain People). Families disband and compete as individuals for scarce resources. The new motto becomes "May you die today so that I die tomorrow" (Solzhenitsyn, The Gulag Archipelago). There may even be some cannibalism.

Link to the complete article

Coming Hyperinflation...

Here is an excerpt from the article which provides indepth analysis for coming hyperinflation.

Overview


The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.


The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.


What lies ahead will be extremely difficult and unhappy times for many. Ralph T. Foster, in his "Fiat Paper Money" (see recommended further reading at the end of this issue), closes his book’s preface with a particularly poignant quote from a 1993 interview of Friedrich Kessler, a law professor at Harvard and University of California Berkeley, who experienced the Weimar Republic hyperinflation:


"It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money."

Link to the Article - Shadowstats Website

Fiat Empire

Worst Economic Collapse Ever - Gerald Celente

Waking Life - Fear or Laziness

Waking Life - Evolution

Waking Life - Lack of voice

Waking Life - Dreams for free

Waking Life - Life is not a dream.

Atheists & Stock Markets

Great Depression + Hyperinflation

Something wicked comes this way...

Derivatives the new 'ticking bomb'Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen - Paul B. Farrell

Taken from article above:

=================================================================
Data on the five-fold growth of derivatives to $516 trillion in five years comes from the most recent survey by the Bank of International Settlements, the world's clearinghouse for central banks in Basel, Switzerland. The BIS is like the cashier's window at a racetrack or casino, where you'd place a bet or cash in chips, except on a massive scale: BIS is where the U.S. settles trade imbalances with Saudi Arabia for all that oil we guzzle and gives China IOUs for the tainted drugs and lead-based toys we buy.

To grasp how significant this five-fold bubble increase is, let's put that $516 trillion in the context of some other domestic and international monetary data:

U.S. annual gross domestic product is about $15 trillion
U.S. money supply is also about $15 trillion
Current proposed U.S. federal budget is $3 trillion
U.S. government's maximum legal debt is $9 trillion
U.S. mutual fund companies manage about $12 trillion
World's GDPs for all nations is approximately $50 trillion
Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
Total value of the world's real estate is estimated at about $75 trillion
Total value of world's stock and bond markets is more than $100 trillion
BIS valuation of world's derivatives back in 2002 was about $100 trillion
BIS 2007 valuation of the world's derivatives is now a whopping $516 trillion

===================================================================


Do you see something out of sync here? If not then better take some MATH 101 classes. What this tells me is that $2.5 trillions on bailout and stimulas spent so far is meager chump change compared to whats headed our way. It reminds me of this song...

Double, double toil and trouble;
Fire burn, and caldron bubble.
Double, double toil and trouble
Something wicked this way comes
Eye of newt, and toe of frog, Wool of bat,
and tongue of dog,
Adder's fork, and blind-worm's sting,
Lizard's leg, and owlet's wing,
Double, double toil and trouble;
Fire burn, and caldron bubble.
Double, double toil and trouble
Fire burn, and caldron bubble.
Something wicked this way comes!

They say nobody saw it coming...

This is for all those people who think that this economic downturn is due to something quiet mysterious. Specially for all those folks who keep believing that 'No one can predict where it is headed and worst of all is that nobody saw it coming'. What a load of bull. There were many who knew what they talk on bubblevision was a lie. A big fat lie. There were people yelling at top of their lungs trying to point out systemic risk facing our planet's economy before any of those so called thinking heads on bubblevision. But they were and still branded as Dr. Dooms on various bubblevision channels. Any reasonable and logical human being can understand that something rotten about this economic mess or should i call it a catastrophe is being covered up.

Wake up people. What they are hoping to do with this stimulus and bailout money is like trying to use deodorant while sitting on pile of horseshit, hoping no one will smell the horseshit.

Warren Buffett warned his shareholders about WMD called Derivetives back in 2002,
"The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

Excerpt from Warren Buffett's Warning to Shareholder in Annual Report 2002

Charles Hugh Smith made predictions about stock market falling by atleast 3000 points back in November 2007. Here are his predictions (Listed in his own words). I have posted link to his complete article if you are interested in reading his obituiry for entire economy.

"Here are a few predictions:
1. The Dow Jones Industrials will drop hundreds of points in a day, very soon, losing at least 3,000 points within the next few weeks.
2. The Shanghai stock market will lose half its value, dropping from 5,800 to under 3,000.
3. Major banks will be declared insolvent.
4. Major lay-offs will occur as U.S. retail, auto and house sales plummet.
5. The tech high-fliers (RIMM, GOOG and AAPL) fall will precipitously

As I have noted here last week, trading curbs (and the uptick rule on shorting) have both been abolished. There are no constraints on the market falling; a free-fall of several thousand points in a single day is now possible. I also ran a chart of the VIX volatility chart which suggested a breakout up (i.e. a sharply declining market) was probable. Maybe I'm off by a few weeks, but I think not.

The Empire of Debt is crashing, and it won't take months for the global financial markets to react. For alas, the money's already lost. Not that the mainstream media will be willing to state this inconvenient truth...."


Here is the link to his complete analysis and prediction..
Empire of Debt I: The Great Unraveling Begins


And then there are people like Peter Schiff, Nassim Nicholas Taleb, Gerald Celente, Jim Rogers and many more. These people may not be completely right in their predictions but from what i have read and heard from them over the past few years, they have been darn close to what has transpired over past 18 months. They saw it coming. And our leaders have audacity to come on bubblevision and tell people, this was 'some random collapse', 'some unknown phenomenon', and sickening lie that 'nobody saw it coming'...? WTF? you are telling me nobody saw this coming!!!!!

Bailout

The picture speaks for itself...

Journey Begins

Tik tok tik tok…as the time makes it’s eternal forward march, i am wondering what’s next? I feel the urge to do something and i feel compelled to do nothing. Conflicting feelings perplexes me. It feels as if this eternal march of time is pulling me, pushing me, coercing me towards future. Towards future that i am in no hurry to find out and yet anxious to discover. It is a paradox which teases me and plays with me yet i feel strangely peaceful.

You may discover as i have, once set free from the mysterious web we call system, the world around turns into an aura of strange properties. You are split in half. Your body performing actions and mind dwelling in void, the world unknown. Tik tok tik tok…at one moment, I am sitting at the window, sipping coffee, rain blurring the Michigan lake view in tiny infinite droplets. At another I am falling in void, never ending dark hole. I await my future, your future, our future with dispassion and interest. My mind is filled with conflicting thoughts as if right side of three pounder blended into the left. I think such transformation can happen when you are jolted out of your dream state and shown the reality. It feels like i have been hanging upside down for over so many aeons that time sieze to exist and all you know is void filled with never ending tik tok tik toks. You may wonder how I know its been enternity. I do know. There is a watch facing me, you, us. Laughing at me, you, us. Pointing its three fingers in various direction pointing out our helplessness and pathetic state we are in and worst we are headed towards. Time always finds state of helplessness as its biggest triumph. Pointing and accusing and fulfilling.

Its constant tik tok tik tok annoying me, filling me up by one tik one tok at a time, draining me by one tik one tok at a time. By now I cannot even remember how I landed up at this god forsaken place. My memory fails me. Am I going to die hanging upside down?Is this the end? I ask and a faint smile appears on my face. The idea of death, entering in a ghost world, sounds so inviting. I have never felt so confident about the end of any kind. I just wish for this insanity to end. See I was an ambitious, optimist, hard working fool with a various college degrees. I have a job which can be considered great compared to what people have these days. I was loking foward to next review and next bonus. But it was all before this hanging upside down business started making sense. I had seen the dots but picture only started emerging over past few weeks. Three months can undo two decades of doing. I feel i am enlightened.

The truth is nothing. We are nothing. Nothing matters. No reason matters. No effort matters. The grand design rules. We go around trying to plan what may appear as chaotic web called life. We plan for retirement, we plan for wedding, we plan for kids, we plan for better future, we plan for bad times and sadly some of us even plan for thier death. It is our frugal attempt to manage so called chaos. But only tiny problem is that universe has different plan. Yes, universe has its own plan. The plan of universe trumps every other plan. Universe is moving towards ultimate complexity at all times with increasing speed. Our plans dont matter. Our plans are almost always heading directly against the goal of ultimate complexity. We are bound to fail. Ultimate complexity must be achieved. Thats the grand design. Our plans, stimulus and bailouts will not succeed. Thats how simple it it.

You may say that I have lost my mind. I say try accepting that you are hanging upside down while hearing tik tok tik tok do its work. I await my fate. I await the end. I await the new beginning...

Ants?

"Hey. Could we do that again? I know we haven't met, but I don't want to be an ant. You know? I mean, it's like we go through life with our antennas bouncing off one another, continously on ant autopilot, with nothing really human required of us. Stop. Go. Walk here. Drive there. All action basically for survival. All communication simply to keep this ant colony buzzing along in an efficient, polite manner. "Here's your change." "Paper or plastic?' "Credit or debit?" "You want ketchup with that?" I don't want a straw. I want real human moments. I want to see you. I want you to see me. I don't want to give that up. I don't want to be ant, you know?" - Waking Life

So here it goes. I was watching Waking Life, the episode about opera woman talking with the protaganist about recognizing human beyond the facade of lables. Something about that episode struck a real chord with me. To allow our souls confront each other and communicate. Ane I cannot agree more with the opera woman about humans turning into ants. I dont want to feel like an ant. I dont want to be labled as home owner, consumer, employee, graduate, alien, or native. I just want to feel like a human. I want you to see me as human and understand me as a human. If even for a brief moment, i just want to feel like a human being and i want to see that in your eyes and i want you to see that in my eyes. Dont you?

Here is the link to Waking Life - Ants video.

http://www.youtube.com/watch?v=ly1jejsjOhw