Happy New Year – Eternal Anarchist

My Fellow Americans !

We are Dooooooom ! We will never make it ! Apart from that, what’s not to be happy about? The Dumb Twits : Federal (My Ass) Reserve and US Government are gonna kill us all !

Apart from that I say : Why worry about tomorrow when we may not survive today. Happy New Year Y’all . May we be bless with all the USD B52 Ben is going to shower upon us.

What’s not to be happy about?
Happy and Blessed New Year Y’all !

Optimistically yours,

Eternal Anarchist
Chief Pessimist

Dr Doom and Mr Rogers – Short Treasuries!

• The last big bubble is the US Treasury bubble (Bond market). The flood of money from deleveraging, the sell down of the stock market and the commodities market has benefited Treasuries massively.
   
• Yields on 3 month are now close to zero (0.10%), 10 yr at 2.05% and 30 yr at 2.56% . These are ridiculously low rates. With the 2.56% of the 30yr long bond, the market is basically saying there will not be any inflation problem for the foreseeable 30 years. What do you think? It is plain insanity.
   
• All these buyers of treasuries are deluding themselves into thinking US Treasuries are safe. This is simply herd instinct and behavior based on past programming. Bonds are safe because US government will not default right ?
   
• US government is insolvent ! Uncle Sam will default on some of its debts soon. The only way out is to print more money and buy their own bonds ! This is total INSANITY ! But it is what the FedRes said it is going to do soon.
   
• Why bother to issue bonds when you can print money electronically and spend them?  Why not just print trillions of dollars and bailout everybody, I mean everybody ! Announce a debt amnesty for everyone: Fellow Americans your debts have been totally written off ! Start borrowing and spend more money to boost the economy!
   
• The result is Zimbabwe : United States of ZimbAmerica ! The USD will tank ! We can now use our USD as fuel for the wood stove to keep warm. Much like the Germans did in the Weimar Republic in the 1920s.
   
   
  (Much cheaper than buying firewood and lasts longer !)
   
• Let us see what Dr Doom, Marc Faber has to say. He sees the money that has been locked up in Treasuries starting to rush out during the coming year :
   
  I think the big trade in 2009 will be to go short Treasurys massively — I really mean massively 
     
• Jim Rogers is of the same opinion :  Jim Rogers Plans to Short U.S. Long-Term Bonds, Buy Yen .
   
• And why wouldn’t anyone want to buy bonds? Actually why would anyone want to invest in something that returns 2.05% (10yr bond) or 2.56% (30yr bond) ?? What kind of return is this? Do we still expect the bond market to rally?? And yield on 10yr, 30yr to go to ?? 1% ?? 1.5% ?? Why not just keep your money elsewhere?
   
• This is where Dr Doom thinks you should put your money in :
   
  … the best place for investments these days is in hard assets, but he has some suggestions for stock-market investors, too.
   
  “You want to be in gold, silver, platinum, and also oil,” Marc Faber told CNBC.  “If you believe in a recovery of asset prices as a result of money printing, you should be in hard assets, particularly precious metals.”   … If you want to own shares, I would own some resource companies
   
   
  Disclaimer – I am not a financial advisor. This is not an advice to buy, sell or hold any stocks or bonds or any precious metals.
  
  end

Peter Schiff – US Dollar is on the Verge of Collapse!

This is what the new $5 Billion note looks like : United States of ZimbAmerica Note

• Peter Schiff  C.E.O. and Chief Global Strategist of Euro Pacific Capital Inc. has been right countless times for the past few years. Unfortunately, the MSM has brushed him off more often than not. Haha the jokes on them! The credibility of the MSM and a lot of these so called analysts (propagandist) are down the gutter.
   
• Hats off to the Man : Peter Schiff . For the right calls, for honesty, sound analysis, economics and simply telling it like it is. If only the world had listened to him instead of the load of BS propaganda that the MSM is trying to pass off as economics and sound government.
   
• This is what he said during the 17 Dec 2008 interview :
   
  I am a 100% convinced that anybody who has their wealth in US Dollars will be just as broke as the people who had their money with Madoff.
   
• US Dollar Index has lost 10% for the past few weeks. Will it plunge soon ?? Will US enter a period of hyperinflation Zimbabwe style? Listen to Peter yourself : 
   
  
   

Part     2     ,   Part    3     ,    Part   4     ,    Part 5    ,   Part   6  

end

Russia Economic Crisis – Rouble Devaluation

• The current commodity market correction has hit Russia hard as they are still primarily a raw material economy. IHT :
   
  Russia has also had to tackle the effects of a “sharp decline” in prices for metals and raw materials, its main exports, Putin said. Urals crude, Russia’s main export blend, has tumbled more than 70 percent from its July high, while the nickel price has fallen more than 60 percent.
   
• The collapse of oil price from US$147 in July to under US$40/barrel has put the Russian economy under pressure in just a matter of 3-4 months.
   
• Russia’s main export is oil. It is the 2nd largest exporter of oil behind Saudi Arabia. It relies on oil revenue for a significant amount of its government expenditures. It needs a price of about US$70/barrel to balance its budget. Bloomberg reports, Ruble Falls to Record Low Versus Euro as Russia Weakens Defense :
    
  Russia is expecting to run its first budget deficit since 1999 next year, of as much as 2 trillion rubles ($69 billion), because of lower-than-expected oil prices, Finance Minister Alexei Kudrin said on Dec. 27. The price of Urals crude, the country’s main export blend of oil and its biggest export earner, has fallen 78 percent to about $32 a barrel since reaching a record high July 3. That’s less than half of the $70 Russia needs to balance its budget in 2009.The economy, which has averaged 7 percent growth since the 1998 debt default ruble devaluation of more than 70 percent against the dollar, may slip into a recession in the first half of 2009…      

• As a result, the Russian Rouble has been under pressure and has been gradually allowed to depreciate against a basket of currencies. Reuters, Rouble devalued further :
   
  Russia’s central bank began a gradual depreciation of the rouble in November in response to slumping oil prices, a worsening economy and investors’ flight from emerging markets.
   
  The rouble weakened to 35.08 to a euro-dollar basket in the first minutes of trade on Monday before stabilizing around 34.80, according to Reuters data, down around 1.5 percent or 50 kopecks from its close on Friday. The previous support level was about 34.30.
   
  After Monday’s fall — the ninth time the central bank allowed the rouble to weaken this month — the rouble/dollar rate hit its weakest level since 2004 while the rouble hit a new all-time low against the euro.
   
• Unlike the 1998 debt default rouble devaluation (70%), Russia is in a much stronger position economically. The past 10 years of prudent government spending and reserves building has seen Russia regained much of its confidence lost during the Perestroika era. Russia has built up the 3rd largest forex reserves estimated at US$ 600B in August before the Georgian crisis began. Since then it has been reduced to about US$450B (Dec 19) defending the rouble.
   
• Economists think that the rouble should be devalued another 5-20% from its current level to be competitive. Some argue against the gradual devaluation policy adopted by Putin at the moment. The rouble has been allowed to fall in steps of 1-2 percent and at the moment it is 19% lower compared to a basket of currencies.
   
• I cannot say I disagree with the gradual managed depreciation of the rouble. The volatility of the past few months in the forex market has made it incredibly risky and difficult for most companies to do business. Stability is needed. Reuters reports :
   
  ..the exchange rate policy was guided primarily by ordinary Russians’ interests. “Unlike during the past crises we do not shoot from the hip … like they are forced to do now in some other countries. We consciously use our reserves to enable an ordinary person to calmly take his own decision,” Putin said.
   
  Unlike a decade ago, when Russia had little choice but to allow a currency collapse, this time it has the world’s third biggest reserves. 
  …..
  The central bank says it will not alter its policy and allow a sharp one-off move. On Monday, it extended into next year its foreign currency asset limitations on commercial banks, in a bid to deter speculators.
   
• Unemployment will rise next year. 
   
  Health and Social Development Minister Tatyana Golikova said on Monday the number of Russians officially registered as unemployed could reach 2.1 to 2.2 million people next year. That represents a 69 percent increase from the 1.30 million officially registered as unemployed in November. The actual jobless figure, including those not claiming benefits, was 5.0 million in November, the state statistics agency reported.      

• Compared to 1998, Russia is better prepared to face this crisis. The political team of Putin and Medvedev is stable and rational. Putin has managed to stabilize the Russian government and Russian society as a whole compared to the Yeltsin mess.
   
• Allowing the rouble to depreciate 19% in a few months is sound economic policy. It will help boost their economy and export competitiveness. Their export revenue in rouble will rise accordingly.
   

end

Consumer Spending Collapse and Retail Bankruptcies

• Consumers are already maxed out when it comes to borrowing. People who are hoping that consumers will continue to borrow and spend to sustain consumer spending will be bitterly disappointed. Take a look at the chart for USA Household Debt Burden below :
   

• Outstanding Debt as a Percent of Disposal Income is above 100%. It is at a very high level compared to the past 12 years. The up move trend clearly started in 2001. Remember Greenspan’s aggressive interest rate reduction to 1% after 9/11/2001?
   
• With the economy in bad shape, unemployment rising and expected to rise even further, no amount of loose money/credit policy will persuade consumers to borrow and spend more.
   
• America is too reliant on consumer spending for economic growth. Unlike countries like Japan or China which has a high savings rate, US cannot rely on investment for economic growth. Savings rate was close to zero for this past 7 years. Where do companies and Uncle Sam get money to invest and sustain wars? The only way out was/is to borrow a lot of money from foreigners for government spending and go on a debt binge.
   
• President elect Obama has come out in favour of infrastructure spending as his preferred stimulus method and I applaud him for it. It is sound. By many accounts America need to spend between US$2-3 Trillions on infrastructure repair and building. But, how is America going to pay for this?
   
• This will perhaps be the darkest Christmas for consumer spending in living memory. Bloomberg is reporting, Post-Christmas Sales May Not Help Retailers Salvage Holidays :
   
  Retailers counting on post-Christmas sales to spruce up the sluggish holiday season may be disappointed as tapped-out shoppers turn their noses up at discounts of 70 percent or more. “This week isn’t going to do it,” Burt Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said in a Bloomberg Television interview. “Consumers are more cash- and credit-constrained than ever before. After a 25-year spending tsunami, they’ve shifted from spending to savings.” 
   …..
  Deepened retail discounts failed to prevent a spending drop of as much as 4 percent during the last two months of 2008, according to data from SpendingPulse, owned by MasterCard Advisors. Including fuel, sales tumbled as much as 8 percent. 
    
• This is terrible especially coming after an earlier report on Pre Christmas sales, Visits to U.S. Retailers Fell 24% on Weekend Before Christmas  :
   
  Dec. 25 (Bloomberg) — Customer visits to U.S. retailers fell 24 percent last weekend compared with a year earlier, the biggest drop on record, as deepened discounts failed to attract consumers.
   
  Retail sales declined 5.3 percent Dec. 19-21 because of inclement weather and a slowing U.S. economy, Chicago-based research firm ShopperTrak RCT Corp. said yesterday in a statement.  U.S. consumers were working with smaller budgets for holiday gifts this year because of rising unemployment and declining home values.
   
  Traffic decreased 6.5 percent for the week through Dec. 20 from a year earlier, ShopperTrak said. The pre-Christmas weekend drop was the biggest since at least 2003. 
   
  Consumer spending, which accounts for two-thirds of the U.S. economy, dropped at a 3.8 percent annual pace in the third quarter, the biggest plunge since 1980, according to the Commerce Department.
   
• Clearly the retail business is in for major problems in the coming months. In fact it has already started since Q3 of this year. More than a dozen retailers including electronics giant Circuit City have sought bankruptcy protection. And it is going to get worse, the Wall Street Journal, Retailers Brace for Major Change :
   
  Analysts estimate that from about 10% to 26% of all retailers are in financial distress and in danger of filing for Chapter 11. AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010. In the previous two years, the firm had estimated 4% to 7% of retailers then tracked were at a high risk for filing.
   
• 1 in 4 retailers are at risk of going bust. This is a realistic figure. My feeling is that this will be revised upwards to 1 in 3 early next year.
   
• This is not just happening in America, many companies will go bust worldwide next year. 1 in 4 companies will not be an unrealistic figure for any industry not just retail. See New Report: Worldwide Bankruptcy Wave About to Hit  :
   
  The situation is just as bad in Europe. Euler expects the number of insolvencies in Western Europe to rise from 169,000 this year to 197,000 next year, an increase of 16.7 percent. U.K. firms will account for a large portion of that bankruptcy surge, with the burst of the real estate bubble and worsening finance and banking crisis creating havoc for British companies. Spain is also expected to be particularly hard hit from the collapse of the construction and real estate market.Euler believes that German companies will continue to suffer from bad debt risk, while The Netherlands, which underwent only a 10 percent increase in bankruptcies this year, will see its insolvency numbers jump nearly 40 percent in 2009. In Eastern Europe, the Czech Republic and Hungary will see bankruptcies increase by 15 and 20 percent, respectively.
   
• The figures above still seem optimistic to me. Back to retail, consumer spending worldwide is collapsing. Retailers in UK are just as badly hit :
   
  Analysts say 15 retailers face collapse within month
  Warning of 2009 wave of retail bankruptcies
   
• Quote : 
   
  Hundreds of high street retailers will collapse next year despite a last-minute Christmas spending rush, a retail insolvency expert predicted last night.
   
  The wave of bankruptcies caused by the recession will leave “big holes on the high street”, and the failures are expected to include some of the most well-known names.
   
  Nick Hood, a partner at insolvency specialists Begbies Traynor, warned: “There will be hundreds of smaller retailers going bust and up to 15 national and regional chains, including one or two that will really make your eyes water.
   …
  Some of the biggest retailers are understood to have seen their sales crash by up to 30% and several have described the current trading conditions as the worst in memory. The warning from Begbies Traynor – which says it is aware of 200 retailers with critical financial problems
   
• In China which still projects growth for next year of about 5-7%, the government is taking steps to boost consumer spending. Factories in China produces mainly consumer goods so no surprise here. The factories are facing the brunt of the collapse in consumer spending in Western Europe. It is estimated that more than half of the toy factories in Southern China has closed, retrenching millions of factory workers. Bloomberg reports : China Needs Policies to Spur Consumption, Zhou Says
    
  China needs to devise more policies to boost consumption among the nation’s 1.3 billion people to counter the impact of falling exports on economic growth, central bank Governor Zhou Xiaochuan said. 
  ….. 
  household consumption’s share of China’s gross domestic product slumped to slightly more than 35 percent last year from 45 percent a decade ago, according to Chinese government data. China’s households have 20 trillion yuan of savings held in the nation’s banks yet have only borrowed 3.7 trillion yuan, Yi Gang, vice governor of the People’s Bank of China told the same conference today. “This shows there is huge potential to boost consumer credit and encourage people to buy homes and cars,” Yi said. 
      
• For the West the only way of boosting economic growth is via fiscal stimulus by governments. Consumer spending and private business investments and expenditures are not going to bail the economy out. The world has to rely increasingly on the public sector for new jobs creation as the private sector goes into tail spin.

end

Imminent War Between India and Pakistan?

• The war drums have been ratcheted up quite a bit in the past few days. Major deployment of forces along the Pakistan-India border are being carried out. No one doubts that it can lead to a major conflict. It will be the 4th war between the 2 countries if started. The hatred between the 2 countries is intense. Pakistan being practically all Muslim and India primarily Hindu. However, this conflagration is not about religion. Who wants to start a war between these 2 nuclear armed enemies? Who stands to benefit?
   
• Some reports are saying that India has given Pakistan a 26 Dec dateline for a crackdown on people involved in Mumbai terror attacks. Some puts the date as 28 Dec. After which India will take drastic actions.
   
• The Daily Times Pakistan reports: Pakistan troops move to Indian borders, 
   
  ISLAMABAD: Pakistan troops were deployed on Thursday to protect vital points along the Line of Control in Kashmir and the international border with India, defence sources told Daily Times. Reports in Indian media said Pakistan moved its 10th Brigade to Lahore and ordered the 3rd Armoured Brigade to march towards Jhelum, following a heavy concentration of Indian troops on the borders. Pakistan’s 10th and 11th divisions have been put on high alert, Indian media said, and troops had been stationed in Rajouri and Poonch sectors of Kashmir. Sources in the Defence Department declined to give details of any fresh movement but did not deny reports that Pakistan was moving certain brigades towards Lahore. Indian TV channels also reported that Pakistan Air Force continued its state of high alert and started aerial surveillance of the Chashma power plant and other sensitive sites on Thursday amid fears of a ‘surgical strike’ by India. sajjad malik
   
• Pakistan has made it very clear that it will not tolerate any attempt at surgical strikes by India into Pakistani territory. Logically who would? Agreeing to this will be like committing suicide. Who can guarantee that ‘surgical strikes’ will only be aim at territories held by terrorists?  The idea that any country will accept such ‘surgical strikes’ is absurd. The idea that any country will allow an open breach to their territorial sovereignty is equally absurd. Press Trust of India reports :
   
  Islamabad, Dec 25 (PTI) India should not make the “mistake” of carrying out surgical strikes against Pakistan as such an action would provoke a strong response, Foreign Minister Shah Mahmood Qureshi said today. Pakistan did not want war but is ready to defend its frontiers, Qureshi told reporters in his hometown of Multan. If India made the “mistake of carrying out a surgical strike”, Pakistan will deal sternly with such an eventuality, he said. “We will be compelled to respond if it happens,” he said. Asked if the possibility of war could be ruled out amidst escalating tensions in the wake of the Mumbai terror attacks, Qureshi said: “If you are asking me, I am not ruling out anything. But if war is imposed, we will respond to it like a brave and self-respecting nation.” 
   
• ZeeNews reports, Pakistan warns of stern response, boosts troop movement :
   
  “A lot of military movement is being noticed in districts just across the international border for the last few days, which is not normal,” said RC Dhyani, DIG of Rajasthan frontier BSF.The deployment is an indication of the level of apprehension on the Pakistani side on an Indian attack. It should be noted that the last time Pakistan Rangers were replaced by Army during the Kargil war. 
  …
  Meanwhile, after reports of a possible Indian attack on Pakistan, the Pakistan Air Force continued its state of high alert and started aerial surveillance of the Chashma power plant and other sensitive sites.There were reports of the fighter jets continuing aerial surveillance over the Chashma nuclear power plant and other sensitive sites.Pakistan had put its airbases on high alert amidst fears of Indian ‘surgical strikes’ in the wake of Mumbai terror attacks.                     

• Keep in mind these are 2 nuclear armed countries that have fought 3 wars in the past. Both countries (including Bangladesh previously East Pakistan before 1971) came out of British India empire in 1947.  The separation at birth was painful, racial and religious hatred led to racial/religious wars and bloodshed. The Kashmir region is also at the heart of major conflicts between the 2. Both have territorial claims to it. What is not well known is that there is also a dispute between India and China over the Kashmiri region of Aksai China which led to a war in 1962.  Additionally, China also controls the Trans-Karakoram Tract (Shaksam Valley), that was ceded to it by Pakistan in 1963.
   
• With this historical background, you can understand why China is mostly on the side of Pakistan. They have a defence pack with each other. China has mostly avoided direct confrontation with India over the disputed Kashmir region. And has opted for a diplomatic, rational approach. Neither India nor China wants to see another war between the 2 of them. So some sanity and peaceful desire still exist between the 2 most populous countries.
   
• You can see how the rather complex history and geography of the 3 countries can easily lead to a nuclear war. Nuclear war between Pakistan and India is 1 thing. Nuclear war between China and India will be on another terrifying level.
   
• Earl of Stirling has his to say in  The Dangers of a India-Pakistan War :
   
  The real danger comes from the fact that both are now nuclear armed neighboring states with very short warning times. It has been estimated that the leadership of both India and Pakistan would have as short as two minutes warning once enemy nuclear armed missiles are spotted and confirmed, before first impacts/detonations . That tends to put things on a ‘hair trigger’. A surprise nuclear attack would be aimed at dramatically reducing the opposing state’s ability to strike back with weapons of mass destruction giving the nation striking first a strong advantage. The response to this is to fire at first warning a full counter battery nuclear attack.
  …..
  In 2000, US military intelligence reportedly estimated Pakistani nuclear weapons at approximately 100 in number. A number of 200 in late 2008/early 2009 is very probable.
   ….
  Numbers of actual Indian nuclear weapons vary but assembled weapons are thought to be in the low hundreds with India having perhaps 4200 kg of reactor grade plutonium – enough to build 1000 additional nuclear weapons.
   
• Pakistan denies that the terrorists are from Pakistan. Ask yourself this, why would Pakistan engage any terrorists that implicates Pakistan? Surely Pakistan knows that India will retaliate and war is highly likely.
   
• Quite a few websites are reporting anomaly in the terrorist’s attire in the form of a ‘red (or orange) wrist ban’ . ‘Red wrist bans’ are not worn by Muslims but by Hindus. Take a good look at some of the pictures of gun toting terrorists in your newspaper, you can clearly see a ‘red wrist ban’.
   
  http://www.thejhub.com/home/ViewPost/2058
  http://www.defence.pk/forums/general-images-multimedia/17008-mumbai-attacks-real-story-lol-india-story.html
  http://engforum.pravda.ru/showthread.php?t=233701
  http://www.infowars.com/?p=6332
   
• Things are seldom what they seem. So who would want to engineer a conflict between these 2 countries? As crazy as it sounds, this is likely another false flag terrorist attack to put the blame on Muslims. Will China be lured into this conflict? USA is clearly on the side of India. So this has the potential of becoming WW3 if all hell breaks loose.
   
• Kurt Nimmo writes in Conflict Between Pakistan and India: Realizing RAND’s Plan for World War Three :
   
  Earlier this year Nisar A. Memon of the Pakistan Muslim League-Q alleged in the upper house said that the U.S. plans to foment civil war and strife in order to break up Pakistan, …..
   
  The report said that the political impasse was part of an evolving US foreign policy agenda which favored disruption and disarray in the structure of the state.” An earlier report by the CIA predicted a “Yugoslavia-like fate for Pakistan in a decade with civil war, bloodshed and inter-provincial rivalries as seen in Balochsitan.” …
   
• Paul Joseph Watson and Yihan Dai wrote in RAND Lobbies Pentagon: Start War To Save U.S. Economy on October 30. :
   
  “According to reports out of top Chinese mainstream news outlets, the RAND Corporation recently presented a shocking proposal to the Pentagon in which it lobbied for a war to be started with a major foreign power in an attempt to stimulate the American economy and prevent a recession,” ….“The reports cite French media news sources as having uncovered the proposal, in which RAND suggested that the $700 billion dollars that has been earmarked to bailout Wall Street and failing banks instead be used to finance a new war which would in turn re-invigorate the flagging stock markets.”
   
• Kurt Nimmo again :
   
  A war between India and Pakistan may provide an ideal pretext for U.S. involvement in the region. “Reportedly, the RAND proposal brazenly urged that a new war could be launched to benefit the economy, but stressed that the target country would have to be a major influential power, and not a smaller country on the scale of Afghanistan or Iraq,” Watson notes. “The reported RAND proposal dovetails with recent comments made by Joe Biden, Colin Powell, Madeleine Albright and others, concerning the ‘guarantee’ that Barack Obama will face a major ‘international crisis’ soon after taking office.” As noted above, Obama has made a point of mentioning Pakistan as a target of U.S. intervention. It now appears a brewing war between India and Pakistan is precisely the sort of conflict imagined by the RAND Corporation to stimulate the deteriorating American economy. It will also provide a pretext to declare martial law in America and put the finishing touches on the New World Order’s high-tech surveillance state and control grid.
   
• Some will find it quite hard to accept. It is utter conspiracy nonsense right? Let us listen to a famous World War 1 Hero, Two-Time Congressional Medal of Honor Recipient, Major General Smedley D. Butler, in WAR IS A RACKET  he says :
   
  WAR is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small “inside” group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes. In the World War [I] a mere handful garnered the profits of the conflict. At least 21,000 new millionaires and billionaires were made in the United States during the World War. That many admitted their huge blood gains in their income tax returns. How many other war millionaires falsified their tax returns no one knows.
   
  How many of these war millionaires shouldered a rifle? How many of them dug a trench? How many of them knew what it meant to go hungry in a rat-infested dug-out? How many of them spent sleepless, frightened nights, ducking shells and shrapnel and machine gun bullets? How many of them parried a bayonet thrust of an enemy? How many of them were wounded or killed in battle? Out of war nations acquire additional territory, if they are victorious. They just take it. This newly acquired territory promptly is exploited by the few – the selfsame few who wrung dollars out of blood in the war. The general public shoulders the bill. ……….
   
  Of course, for this loss, there would be a compensating profit – fortunes would be made. Millions and billions of dollars would be piled up. By a few. Munitions makers. Bankers. Ship builders. Manufacturers. Meat packers. Speculators. They would fare well. Yes, they are getting ready for another war. Why shouldn’t they? It pays high dividends. 
   
• The reality is : Modern War is initiated by the Powers that Be, for the ruling elite to make a lot of money at the expense of the sheeple!

end

US Dollar Crisis Begins

• I have been a little puzzled by the behavior of the Treasury Bills/Bonds market in the past few weeks. The market has rallied, so much so that 3 months Bills traded at 0% yield and even went negative for a while. Imagine paying the US government to lend them money? Who would invest in something that returns ZERO percent per year? Why not just keep your money under the mattress? If you are worried about bank insolvency of course.
   
• The most important aspect about this Bond rally is that there wasn’t a stock market crash ! What do I mean by this? Previously in Oct when the stock market worldwide collapsed, the money received from the sale of stocks went into bonds. As investors were afraid of banks collapsing, they decided to put their money in bonds too. That was the reason the bond market rallied in Oct. Why is the treasury market rallying now? The stock market is stable. Banks are being bailed out with trillions of dollars by the US Treasury and FedRes. So what’s the reason?
   
• Some are saying that it is because US banks are parking all their money, given to them by FedRes and US Treasury, into bills/bonds instead of lending it out. And all these money we know are electronically printed out of thin air. So is this rally genuine? If you count such money as ‘real economically’ created wealth I suppose so. If not such demand for bonds/bills are probably the unintended consequences of Quantitative Easing.
   
• Or is it ? The FedRes has openly come out and said they will consider buying US bonds at the long end (10yr, 30yr) to support the market. Gary Dorsch writes in US Fed Opts to Inflate Treasury Bond Bubble : 
   
  There is a massive paranoia in the marketplace, a “safety-at-any-cost mentality,” that has knocked the 30-year Treasury yield to 2.63%, the lowest in history, and 10-year yields have plunged to 2.15%, the lowest since 1962. ….. The US Treasury plans to sell $2-trillion or more of freshly printed IOU’s at ultra-low interest rates, while the Fed plans to churn-out unlimited amounts of US-dollars from its electronic printing press to buy the debt. It’s an age-old process known as “monetization,” 
   
• The current ‘lofty’ in the clouds pricing does present an opportunity. John P. Hussman says in The Dollar Crisis Begins  :
   
  If the Fed ends up buying long-term Treasuries, it will almost certainly be a bad trade, but it may be required in order to absorb the supply from foreign holders set on dumping them. 
    ……
  For foreign investors holding boatloads of U.S. Treasuries, the recent rally in the U.S. dollar, coupled with astoundingly low yields to maturity, have created a perfect time to get out. 
   
• Maybe the FedRes is just creating the perfect environment for foreign bond holders to get out. Foreigners hold trillions of dollars in US bills/bonds. If the market goes down precipitously, all these foreigners will get wiped out ! Bonds become toilet paper overnight. This can create international ‘incidences’, repercussions… and in the past has led to war even. So why not engineer a rally and let them get out and thereafter ….. its definitely not going to be gift giving Christmas time people! Those who are dumb enough to hang on will be wiped out.
   
• John P. Hussman again : 

  In the next several months, we’re likely to observe one of two things. If the dollar holds steady, Treasury bond prices are likely to plunge; if Treasury prices hold steady, the value of the dollar is likely to plunge. Either way, foreign holders of Treasury securities are facing probable losses, and they know it. 

• He is totally on the money. Couldn’t say it better myself. My belief is that USD will tank and with it Treasury bonds. So the worse possible scenario !
   
• The questions are : Will investors hang on to Treasuries when USD is collapsing ?? My answer is NO ! Will investors hang on to USD when Treasuries are collapsing ?? My answer again is NO ! It implies that US is bankrupt. Why would you hang on to a worthless currency?
   
• Clive Maund has this to say in :  Market Forecasts 2009- Gold to Soar, U.S. Dollar and Treasury Bonds Crash 
   
  The dollar breakdown is a signal that the flood of funds from the torrent of forced liquidation is now abating, and that, therefore, one of the principal drivers of the bubble in Treasuries is vanishing – and given the incredibly overbought status of Treasuries, they are now clearly acutely vulnerable to a savage reversal. The dollar breakdown is also the inevitable consequence of the incredible expansion of the money supply in recent months, that is made dramatically clear in the following chart of the monetary base, which shows the sum of the notes and coins in circulation.  
   
     
• Mark O’Byrne has this to say in : Gold the Investment for 2009 Amidst Global Economic Crisis and Competitive Currency Devaluations ,
     
  The sharp decline seen in the dollar in the last month ( US Dollar Index was down 2.43% last week and 10% in less than a month despite a sharp retracement towards the end of the week) is leading to concerns of a disorderly run on the dollar as the creditors of the world’s largest debtor nation get worried about their US dollar denominated assets and need their own currency reserves to help protect and stimulate their own struggling economies. 
   
  It would not require significant selling by the Chinese, Japanese, Russian or OPEC nations to create a run on the dollar and sharp move upwards in long term interest rates (as US government bonds are sold) rather only a sharp reduction in their purchases of US debt instruments.
   
  …the economic meltdown is leading to the US’ creditor nations having their own domestic financial and economic crisis to deal with. A sharp decline in the dollar will likely see other nations devaluing their currencies in competitive currency devaluations which would see the value of all currencies decline relative to gold. 
    
• 2009 is shaping up to be a year like no other. It will be a cataclysmic year IMO. A year that we will talk about with our children many years in the future. It will be remembered much like the 1st Great Depression is remembered.

 

end

Chinese Yuan to be International Currency

• Reports are coming in that the Chinese government intends to internationalize the Yuan (RenMinBi). As a 1st step the government will :  
   
  BEIJING (AFP) — China will use the yuan in transactions with neighbouring economies on a trial basis, state media said Thursday, calling it a potential first step to making it an international currency.The government will allow the yuan to be used in settlements between the Pearl and Yangtze river delta regions — both major industrial areas — and Hong Kong and Macau, the China Daily reported.Similarly, southwest China’s Yunnan province and Guangxi Zhuang region in the south will be permitted to use the yuan in settling trade with members of the Association of Southeast Asian Nations. (ASEAN)
   
• Why would China want to do this? International trade is mainly settled via the USD as it is the world’s reserve currency. The entire forex market, banking system is build around the USD as the base currency where with all other currencies are traded.
   
•  According to central bank governor Zhou Xiaochuan, he warned :
   
  warned earlier this month that settlements using the US dollar would be problematic if the dollar’s value fluctuated drastically.
   
• In other words, many countries are viewing the USD as a big risk and liability. And they are increasingly bailing out of the USD. The profligacy of the US government is alarming. The increasingly bad economic figures out of the US suggest that the US economy may be heading towards a major meltdown in early 2009. Unfortunately, many are in denial and continue to believe in the MSM’s positive spin.
   
• However, this is not the case with other nations who understand simple economics. Maurizio d’Orlando says in :  U.S. debt approaches insolvency; Chinese currency reserves at risk
   
  In the United States, the danger of debt insolvency is growing, putting at risk the currency reserves of foreign countries, China chief among them. 
   
  In 2007, 61.82% [3] of America’s public debt was held by foreign investors, most of them Asian. So the U.S. public debt held by nonresident foreigners is equal to about 109.39% (113.86%) of GDP. According to a study by the International Monetary Fund, countries with more than 60% of their public debt held by nonresident foreigners run a high risk of currency crisis and insolvency, or debt default.
   
  In the early months of next year, when the official data are published, the United States will run a serious risk of insolvency. This would involve, in the first place, a valuation crisis for the dollar. After this, the United States could face a social crisis like that in Argentina in 2001. A crisis in U.S. public debt would likely have a severe impact on the Asian countries that are the main exporters to the United States, China first among them. Chinese monetary authorities, thanks to a steeply undervalued artificial exchange rate, by about 55%, have limited imports (including food) and have achieved an export surplus. This has allowed them to accumulate a large stockpile of dollar reserves. In a currency crisis, China risks losing much of the value of its accumulated currency reserves. 
   
• The writing is on the wall for America. You can only be in denial for so long. When reality strikes home, Americans will realize that they have been let down, lied to, misled… by their own government. This is of course an understatement. The only Congressman I listen to is Ron Paul. He tells it like it is.
   
• The important point is that many countries of the world and their banks hold USD and US Treasuries. Chief amongst them are Asian exporting countries like China, Japan, South Korea, Taiwan, Singapore … Can you imagine what will happen when overnight the USD is devalued 50% or more ? All their forex and Treasuries holdings will be worthed 50% less. What if the USD totally collapses and becomes like the Zimbabwe dollar? All these trillions of USD holdings and USD denominated assets will be like toilet paper.
   
• And what about international trade? The disruption in international trade caused by a USD collapse will be immense. Because settlement of international trade is primarily in USD. This is the other main reason for China coming out to allow the Yuan to be used as settlement for trade. BEIJING, Dec. 25 (Xinhua) :
   
  In China’s neighboring countries, there were calls for the yuan to be used to settle bilateral trade payments, she said. China has signed settlement agreements with eight neighboring countries, including Russia, Mongolia, Vietnam and Myanmar, assuming a voluntarily choice of settlement currency, she added. Many were confident of the yuan and willing to settle trade payments in the Chinese currency, as it remained strong,
   
  Wu said. “China should create conditions for the yuan to become an international settlement currency,” she stressed. It is necessary to expand and deepen the yuan-denominated financial markets and step up the process to realize the full convertibility of the currency and provide investment channels for yuan holders, according to Wu.
   
• Note also the explicit statement by : Wu Xiaoling, former vice governor of the country’s central bank and now the deputy head of the financial and economic committee under the top legislature,
   
  China’s currency, Renminbi, is likely to join other international currencies to be used for forex reserves by other economies,…Prior to making the Renminbi, also called yuan, a currency used for forex reserves by other economies, it may be allowed to be used for trade settlements between China and some other countries and regions, according to Wu. In China’s neighboring countries, there were calls for the yuan to be used to settle bilateral trade payments, she said.
   
• It is quite clear that many countries are worried about the USD and prefer to have as little of it as possible. However, because it is the international reserve, trade settlement, forex currency they have little choice.  Oil is also traded in USD, so every country has to have some at least. This move by China should be seen as a pre-emptive move to divorce itself from the upcoming collapse in the USD and the Treasury market. Asian countries will increasingly dump USD and Treasuries soon, now that an alternative is in place. 
   
• The warning signs are there for the USD and Treasury : China’s forex reserves fall for first time in five years, 
   
  China’s foreign exchange reserves, the world’s largest, have fallen for the first time in five years, according to the comments of a senior forex official reported in the local media.”The forex reserves have fallen for the first time since December 2003,” Cai Qiusheng, an official at the capital account management department under the State Administration of Foreign Exchange, was quoted as saying.
   
• China realizes that it can no longer rely on the large US market for its exports. As long as there is a large trade imbalance in favor of China, the amount of USD accumulated by China has to go somewhere. And in the past it has gone into US Treasuries. Thus China is the largest creditor nation to US (about US$652B of US Treasuries). Now that the exports have dried up, there is no reason for them to continue buying US bonds. In China Says Lending to U.S. Will Not Go On Forever :
   
  BEIJING (AFP) – China warned Wednesday it would not keep lending money to the US economy indefinitely, even as new data showed it had consolidated its position as the top buyer of American government bonds.”China’s increased purchase of US Treasury securities should not be interpreted as an endorsement of the assumption that the US can borrow its way out of the current financial crisis,” the China Daily said in an editorial.
   
• In Japan some are openly suggesting that : Japan Should Scrap U.S. Debt; Dollar May Plummet ,
   
  Dec. 24 (Bloomberg) — Japan should write-off its holdings of Treasuries because the U.S. government will struggle to finance increasing debt levels needed to dig the economy out of recession, said Akio Mikuni, president of credit ratings agency Mikuni & Co. The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes “drastic measures” to help bail out the U.S. economy, Mikuni said.
     
• Imagine writing off US$550 B ! In my opinion quite ridiculous! Japan itself is also facing an enormous national debt (100% of GDP) because of their battle with deflation and stagnation for the past 20 years. They are not that rich. But the reality of the dire situation in US is already striking home. When prominent Japanese starts to even suggest debt forgiveness for America, you know that America is in a pathetic state!

end

For unto us a Child is Born

Isaiah 9:6-7
For unto us a Child is born,
      Unto us a Son is given;
      And the government will be upon His shoulder.
      And His name will be called
      Wonderful, Counselor, Mighty God,
      Everlasting Father, Prince of Peace. 
      Of the increase of His government and peace
      There will be no end,
      Upon the throne of David and over His kingdom,
      To order it and establish it with judgment and justice
      From that time forward, even forever.
      The zeal of the Lord of hosts will perform this.

Isaiah 7:14
Behold, the virgin shall conceive and bear a Son, and shall call His name Immanuel.

Matthew 1:18-24
18 Now the birth of Jesus Christ was as follows: After His mother Mary was betrothed to Joseph, before they came together, she was found with child of the Holy Spirit. 19 Then Joseph her husband, being a just man, and not wanting to make her a public example, was minded to put her away secretly. 20 But while he thought about these things, behold, an angel of the Lord appeared to him in a dream, saying, “Joseph, son of David, do not be afraid to take to you Mary your wife, for that which is conceived in her is of the Holy Spirit. 21 And she will bring forth a Son, and you shall call His name JESUS, for He will save His people from their sins.”

22 So all this was done that it might be fulfilled which was spoken by the Lord through the prophet, saying: 23 “Behold, the virgin shall be with child, and bear a Son, and they shall call His name Immanuel,”  which is translated, “God with us.”

24 Then Joseph, being aroused from sleep, did as the angel of the Lord commanded him and took to him his wife, 25 and did not know her till she had brought forth her firstborn Son. And he called His name JESUS.

Merry Christmas everyone!

Rgds
O Come O Come Emmanuel

Global Shipping in Dire Straits

• World trade is collapsing at an unprecedented rate since Sept 08. Shipping trade volumes have declined dramatically. The Baltic Dry Index is more than 90% down from its peak. The BDI is a measure for freight rates for raw goods like coal, metallic ore and grain. It gives a very early indication of economic trend in the coming months.
    
   
   
• From the chart above you can see that the drop off from the high in June is alarming. The peak was just over 11,400. It is just above 800 today.
   
• When freight rates decline more than 90%, there is no way shipping lines can make money. As many as 100-120 Capesize vessels are ‘mothball’ or ‘parked’ in international waters because the freight rates are so low that it cannot cover cost of operating them.
   
• Bloomberg is reporting :
   
  Port traffic has slowed from North America to Europe and Asia as a recession erodes consumer demand and the credit crisis chokes off loans to export-dependent companies. International trade is set to fall by more than 2 percent next year, the most since the World Bank began measuring it in 1971. Idle ports around the globe are showing how quickly a collapse in trade can spread, undermining growth in each country it reaches. September and October are typically Long Beach’s busiest months as U.S. retailers take deliveries for holiday sales. This year, imports fell 15.8 percent from a year earlier in September, 9.5 percent in October and 13.6 percent in November.
   
  “Everybody expects 2009 to be a bleak year,” said Jim McKenna, chief executive officer of the Pacific Maritime Association, a San Francisco-based group representing dock employers at U.S. West Coast ports. “Now, it looks like 2010 is going to be just as bleak.” At the adjacent ports of Long Beach and Los Angeles, together the largest in the U.S., trade has slowed about 10 percent this year, a record drop. In 2007, volumes slid for the first time in more than a quarter century. …..….One 140-acre tract at Long Beach is filled with more than 25,000 new Toyotas that dealers can’t sell. Toyota Motor Corp., the world’s second-largest automaker, yesterday forecast its first operating loss in 71 years on weak demand. Nearby, scrap metal meant for export to Asia piles up behind a fence. From the observation deck, Lytle pointed to piles of empty containers stacked four high and numbering in the thousands. Some of the dockside cranes “haven’t turned a wheel in months,” he said.
   
• The crisis is hitting emerging economies real hard too :
   
  At the moment in Argentina and Brazil, there is a glut of shipping vessels and very little cargo. In what is known as the slack time between November and March. 
   
  Global shipping is facing the worse crisis in decades, cargo rates have fallen by 90% since July of this year and the shipping boom has turned to bust.
   
  The Greek shipping lines, are the largest in the worlds, followed by Japan, the governments of both countries are in a state of panic, over the short term future of global shipping.
   
  Dry cargo vessels, that could command US$150,000 a day in May, are now taking US$7,000 a day and delighted to get it.
   
  The Genco shipping company, cancelled a US$530 million deal for 6 new vessels last week, forfeiting 10% of the value or US$53 million.
   
  Analysts believe that 30% of new vessel orders, could be cancelled before the end of 2008. 
   
• The decline in new orders for ships is taking its toll on Japanese shipyards :
   
  Shipyards in Japan, the world’s third-largest shipbuilding nation, received 83 percent fewer orders last month as the global financial crisis cut demand for new vessels. The yards received orders for 219,823 compensated gross tons in November, the Japan Ship Exporters Association said today on its Web site. That compares with 1.27 million tons a year earlier. Orders this year have slipped 11 percent to 8.69 million compensated gross tons. The deepening financial crisis has dried up funds and global demand for commodities, prompting owners and operators of vessels to hold back purchases. 
   
• From India : Container shipping operators have started shutting services to the US and Europe :
   
  A consortium of four shipping firms that runs a direct weekly service from Jawaharlal Nehru Port, the country’s biggest, to the US east coast, has decided to shut services from 4 January as consumers in the world’s largest economy cut consumption. ……The US east coast accounts for about 75% of India’s exports to that country.
   
  Another service to Europe, the Asia Europe Container Service 1 (AEC 1), was discontinued on 9 December, 20 days after it was launched by Hanjin Shipping and UASC. …..
   
  “We have discontinued the AEC 1 service and will shut down the Sina service from January due to poor volumes,” said S.H. Lee, managing director of Hanjin Shipping India Pvt. Ltd, the Indian unit of the South Korean firm.
   
  Sina is the second container shipping service from India to US east coast ports—such as New York, Charleston, Damietta, Norfolk and Savannah—that has been withdrawn this year.
   
  In March, state-owned Shipping Corp. of India Ltd (SCI), Zim Integrated Shipping Services Ltd, Orient Overseas Container Line Ltd and Emirates Shipping Line FZE, discontinued the IDX service for the same reasons.
   
  “This clearly shows that container shipping firms are not making money,” said an executive at German container ship operator Hapag-Lloyd AG, who didn’t want to be named as he’s not the company’s official spokesman.
   
  “The Christmas shopping season in the West has come and gone,” said an executive at SCI, India’s largest shipping firm and the only one that owns and operates container ships. “The writing is on the wall for container shipping firms. We are bleeding to death.”

end

Japan November Exports Tumble

• Japan reported a larger than expected plunge in its Nov exports. Overall exports fell at their fastest rate ever of 26.7%. The steepest decline since 1980.
   
• Exports to USA plunged 33.8% also the fastest on record. Exports to EU plunged 30.8% . Exports to rest of Asia plunged 26.7% .
   
• Overall imports fell 14.4% . 
   
• These are alarming figures. Japan is the 2nd largest economy in the world. They are predominantly export driven. These figures basically tells us that the US and EU economy may be contracting greater than 10%. Compare this with sales of GM, Ford and Chrysler  in US plunging 35-45%, and you get the picture that the economy is in free fall.
   
• Just how bad is the Automotive market ? Well : Korea’s Ssangyong delays payroll as sales slump ! 
    
  “  A South Korean automaker said Monday it would be unable to pay workers on time this month, and another announced a temporary shutdown of all its plants as the industry struggled with a slump in demand. ”
   
• There is a worldwide excess capacity issue for car makers. Capacity must contract. There is no 2 ways about it. 1 in 3-4 automakers will not survive.

end

Winter of Our Discontent

• Reuters is reporting :  ” WINTER storms walloped much of the northern stretches of the United States on Sunday, leaving holiday travellers stranded and causing power outages as blizzards and freezing rain struck parts of the East and West.The second winter storm in three days blew across the US Northeast on Sunday, the official start of winter. It delayed flights and snarled traffic on the final weekend day before the Christmas holiday.In the West, the Seattle area and other parts of Washington state were hit on Saturday night, with the heaviest blast in a week of snow storms. “
   
• In China : ” BEIJING (Reuters) – Snow and freezing weather have swept large parts of northern China causing, travel chaos for thousands, state media and the meteorological department said on Sunday.In Beijing’s neighbouring city of Tianjin, all flights were cancelled at the Binhai International Airport due to heavy snow, which also sealed off road and rail links, state television said.Airports in Qingdao and Jinan in Shandong province were also affected by snow, with many flights delayed, the official Xinhua news agency added.  “
   
• Will we look back many years from now and see this winter as the beginning  of all the world’s problems accumulating to a climax? Who knows? The signs are ominous that the world is going to a Kondratieff Winter . From a weather point of view, it is really nothing unusual.. But from a social, economics, historical perspective it is quite clear that events that are happening now is a 1 in a century event. Perhaps even longer. The closest comparison is perhaps the 1st Great Depression that led to WW2.
   
• From a Kondratieff Winter perspective, the world is headed towards a Depression followed by War. In between we will have the usual stuff : Social unrest, riots, famine, diseases, destabilization of countries, governments…
   
• The riots in Greece are still not contained and look like spreading to the rest of Europe and even America.  The Independent reports :
   
  ” First it was Athens. Now the Continent’s disillusioned youth is taking to the streets across Europe….. If Greek students sneeze, or catch a whiff of tear-gas, young people take to the streets in France and now Sweden. Yesterday, masked youths threw two firebombs at the French Institute in Athens. Windows were smashed but the building was not seriously damaged. Then youths spray-painted two slogans on the building. One said, “Spark in Athens. Fire in Paris. Insurrection is coming”. The other read, “France, Greece, uprising everywhere”.  “
   
  More unrest rocks Greece :
  ” STREET violence raged into a third week in Athens as protests sparked by the fatal shooting of a teenager fused with political tension hours from the Greek parliament’s budget vote on Sunday. “
    
  School protests spark clashes in France :
  ” Thousands of French secondary school students took to the streets overnight to protest against Government education reform plans, and some clashed with police in Paris and the south-eastern city of Lyon. “
    
  Is it spreading to America ?? Protesters Wreak Havoc at San Francisco Mall :
   
  “ A band of demonstrators, many wearing black masks, stormed a bustling San Francisco mall Saturday evening, upending garbage cans and foliage and damaging crystal merchandise at one kiosk.An estimated 50 to 75 people were involved in the disruption at Westfield San Francisco Centre, police said….  According to mall management, the protesters were part of a “Solidarity with Greek Uprising” demonstration, which began in the Mission District earlier in the afternoon. An international day of action was called on Saturday to protest the death of a young man in Greece in early December. “
   
• I suppose all these could just be the usual ‘noise’ with economies tanking worldwide. The worry is that this is the beginning of a new phase in world history. Social upheavals and political upheavals marked the period in between the 2 World Wars.
   
• Ulrich Rippert, provides some perspective to the current problems of riots in Greece : The political issues posed by the mass protests in Greece, 
  

  ” Underlying its sustained and militant character is the response of millions of working people and youth who are seeing their conditions of life destroyed and their futures stolen by the unfolding of the deepest global capitalist crisis since the Great Depression of the 1930s.

  The events in Greece have provoked shock and dismay in capitals throughout Europe. Governments in London, Paris, Madrid, Rome and Berlin are well aware that deteriorating conditions at schools and universities are not limited to Greece. Nor are-low paid jobs, mass unemployment, police brutality and a general lack of a future for young people conditions peculiar to the Hellenic peninsula.

  Across Europe and worldwide, the younger generation is confronted with a society in which ruling elites have been able to enrich themselves enormously at the expense of the broad masses of people. Government budgets have been plundered and education and social systems gutted on behalf of a small, immensely wealthy layer which—with the help of corrupt states and parties and armed police—vehemently defends its privileges. Millions of high school and university students are denied meaningful education or a job that guarantees them a future. Instead, they face poverty, war and the militarization of society. “ 

• There is much truth to what he says. But his call for another socialist class struggle by workers against capitalists harks back to the rise of Communism at the turn of the century. I really don’t think there is much difference between so call modern Communist, like those in China and modern Democratic Capitalist like those in the West. In that he says the ruling elites have messed up and created this economic hardship against the common man I am in agreement. A lot less rhetoric and ‘ism’ will be more to my taste. More social chaos and upheavals will ensue should we follow the path taken in the turn of the century with the Communist Revolution.

• We have witnessed the collapse of Iceland. We have also seen the collapse of Thailand’s government. This past weekend saw another casualty : Fortisgate scandal topples Belgian government . No doubt the Belgians will recover and set up another government.

• I wonder how long Ukraine will last : Corruption scandal over Ukraine’s emission money . The country is ‘burning’ but the ruling corrupt elites are monkeying around. If they don’t solve their economic problems soon, they may not have any gas supplies from Russia for the winter. Conspiracy theorists may be right in that : there seems to be a plot to bring down Ukraine to weaken all past Soviet allies. And thus weaken Russia. Policy of encirclement of Russia right ?

• Unemployment is rising worldwide. In America, Las Vegas Sun is reporting :  A vast hunger for work at In-N-Out cattle call ,

  “  …. close to 500 people filed through the hotel lobby, hoping to get a job flipping or serving burgers. Today more of the same is expected, meaning that by day’s end close to 1,000 will have applied for no more than 50 $10-an-hour jobs at an In-N-Out restaurant .. “

• China’s Growing Unemployment is Grim : ” Beijing has admitted that China’s employment market looks grim. Large numbers of labor-intensive, small and medium sized businesses have filed for bankruptcy or halted production. By the end of 2008, the jobless rate will definitely be higher. “ 

• I expect unemployment situation worldwide to worsen. How about a non farm payroll decline in America of 1 million by mid 2009? Currently it is -533,000. For China, despite the massive infrastructure stimulation of about US$600B, I still think that unemployment will tick upwards. China is too reliant on exports. That is the problem. But they should do better than most countries. The current Chinese government is very responsive to the economic situation of the common people. I was pretty surprise at the speed of response to the current crisis.

• What is the outlook for 2009 ? Let’s hear IMF Chief Dominique Strauss-Kahn :
   
  ” ….predicted a “very dark” 2009 which could be worse than expected if states failed to take sufficient action to fight the crisis, facing economies big and small.

  Our forecasts are already very dark, but they will be even darker if not enough fiscal stimulus is implemented,….  “

• The governor of the Bank of Spain was even more pessimistic,
   
  “ .warning the world faced a “total” financial meltdown unseen since the Great Depression of the 1930s.. The lack of confidence is total.. “  
   
•  The problems of the past few months do not give us reasons to be optimistic. Fact is : the economic collapse is unprecedented and the speed is startling. With social unrest spreading and rising unemployment, worse is yet to come.
   
• My suspicion of America and Western Europe is that: all the government bailouts is going to prolong the Great Depression like in 1929-1939. Has it worked so far to stem the tide of economic decline? Has confidence been boosted?
   
• I read some where that only the FedRes and addicted gamblers believe : by throwing more money at the problem it will go away. I couldn’t agree more. Household debt is way past 100% of household equity. Something like 140% I believe. The solution is to get consumers to borrow more money?? 
   
• Things are not looking good. Take care. Please be ultra conservative in your expenditures. The rainy day is here!

end

Massive US Dollar Devaluation Against Gold During 2009

• John Browne writes in : Massive US Dollar Devaluation Against Gold During 2009 , 
   
  ” The Federal Reserve estimates that in the past year losses in real estate, stocks and mortgages have sucked out some $7.2 trillion of wealth from the U.S. economy. Some are now putting the figure at $20 trillion.Investors should also especially be concerned as to who will repay these massive debts. The conventional answer of politicians is “taxpayers”. But this is a serious understatement. Any depreciation of the U.S. dollar means that every American citizen and every single holder of U.S. dollars throughout the world will suffer from monetary loss and a severely reduced standard of living. “
    
• As mentioned in my previous blogs, the solution undertaken by FDR in the 1st Great Depression was : 
   
  ” In 1934, facing a depression President Roosevelt first confiscated gold from every American. Then, he unilaterally devalued the U.S. dollar by 75 percent against gold.At a stroke, FDR wiped out 75 percent of the dollar denominated debt of the U.S. Treasury.As both President-Elect Obama and Fed chairman Bernanke are students of FDR, we face the real possibility of a massive devaluation of the U.S. dollar against gold in 2009. “
   
•  America is Bankrupt ! There is no way the debts can be repaid. Here is how bad it is :  America’s liabilities equal assets, …the report showed “an estimated $56.4 trillion in debts, liabilities and promises for Medicare and Social Security versus a total household net worth of $56.5 trillion.” 
   
• Some kind of financial engineering sleight of hand will have to be used to pay off the debts.
   
  -  America owes something like US$15T (not including Social
      Security and Medicare)
  -  America has 8100 tonnes of Gold. At current prices worth about
      US$250B based on US$800/ounce.
  -  So what kind of Black Magic is the government going to use to pay
      the debts off ?
  -  How about simply declaring that the 8100 tonnes of Gold is now
     worth US$15 T ?? This means that gold prices have to rise ie
      revaluation of Gold, devaluation of USD .
  -  Voila ! Problem solved !
   
• When the USD is devalued,  foreign countries have to decide : devalue their own currencies or they will not be competitive against America. Imagine if USD is devalued 75% against gold, it means that cost in USD will be a lot cheaper by up to 75%.  Countries will embark on competitive devaluation or they will be priced out of economic competitiveness.
   
• With developed countries basically bankrupt or close to it, these countries IMO will opt to devalue all their currencies against gold to pay off their debts. Why not? It is the least costly solution!
   
• Such an act worldwide will be reflationary. It will fight deflation. So why not ? The only problem is that, it may stir the hyper-inflation pot too much. After FDR’s act of devaluing against gold, the US economy was re-inflated but went into another downturn until WW2 started in 1939. ie Devaluation against Gold will not solve all problems. There is still a major rebuilding of the economy needed and a fight against inflation.
   
• Just what amount of price rise are we talking about for Gold? Possibly 10x – 20x to be effective in reducing the national debt. Many analyst are conservatively targeting $2000-5000/ounce.
   
• Adrian Ash says in Gold Stock Vs Paper Fiat Asset Valuations :  
   
  ” In short, the mass people choosing to Buy Gold today remains tiny compared to the value which the world still puts on paper. And it’s only when paper collapses in value – an event you might expect during the worst post-WWII crisis – that gold is likely to hit its true peak for this investment cycle. “
   
• That is : Buy Gold ! See also :
   
  Gold About to SkyRocket ! China Worries about Treasuries and Diversify into Gold !
  Gold Price Set to Soar !
  Dollar Devaluation, Debt Default & Gold
  Great Gold Rush of 21st Century
  Economic Depression and Gold
  Global Monetary Meltdown in 2009 ?
  What’s not to Like about Gold ?
  Obama, Roosevelt, Gold Confiscation and Dollar Devaluation
  Gold Rush Worldwide!

end

Disclaimer : This is not an advice to Buy or Sell or Hold . I have been wrong before so what do I know.

Emerging Market Economic Crisis

• The current crisis is far from over. It is still early days in what will become the Great Depression of the 21st century. Oil prices crash below US$40/barrel on Thursday 18 Dec. This should be good right?
   
• Not necessarily. Latin American countries rely a lot on oil revenue for their tax revenues. So when oil price crashes, countries like Venezuela, Mexico, Ecuador are badly affected. This of course is also true of ME countries and Russia.
   
• The other negative effects are on emerging Green industries to replace oil. Like : Wind turbines/mills, solar photovoltaic, solar thermal, electric cars, fuel cells, bio-ethanol, bio-diesel.. These emerging industries need oil price around US$75-100 for them to be viable. Sustained price below US$70, means that investment in these new industries will stopped. Many such companies will go bust. This will again result in sky high oil prices 5 years down the road when there are less alternatives.
   
• Back to emerging economies, Ukraine’s currency is rocking , Ecuador defaults on Debts, we all know that Argentina has recently nationalized their pension fund. This is in effect a move towards defaulting on their loans. There are fears that many emerging economies will follow suit ie default.
   
•  Jack Crooks writes in : European Banks to be Hit by Collapsing Emerging Markets :
    
  ” Over the last few years, the historic economic growth in emerging markets like Ukraine, South Korea, the Czech Republic, Poland, and others was driven almost entirely by demand for their exports from the U.S. and Europe. Now, with the U.S. and Eurozone economies sliding, that demand has started to evaporate. And because these countries have little domestic demand to drive their economies, they’ve suddenly been thrown into a struggle for their very survival. ”
   
• When emerging economies collapse, Jack says : ” European Banks Loaned These Countries A Staggering $3.5 Trillion. When They Go Down, So Will Europe’s Largest Banks! ” And what are the chances that many emerging economies will collapse? Highly likely. World economy is contracting rapidly and there is simply insufficient reaction time for countries to find alternate growth areas. A sharp demand contraction has been happening for the past 2 months. How do you create new demand, new markets to replace the lost demand in such a short period of time?
   
• The prognosis is not good. More tsunamis to come! Even bigger ones.  Europe can do without this upcoming problem. Many countries in Europe are on the brink of collapse.  UK is doing particularly bad. Sterling slide is worst since 1931 . Iceland hs gone down. The exposure to European banks is estimated at US$75B. Greece is in deep crisis. Spain, Italy.. you name it.
    
• Deutsche Bank, Germany’s top lender, refused to redeem a Euro 1 Billion bond issue this week, shocking the European market. Deutsche Bank shocks markets .
   
• Wherever we look in the world today, every country is in deep trouble. (unless you are living in some 4th world country) . USA, Eurozone, Eastern Europe, Asia, Russia, Latin America… all are rocking. Who is going to bailout the entire world?
   

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Ron Paul – End of Fiat Money and Gold

• I have always been an admirer of Ron Paul for his honesty and courage. It also helps that he preaches sound, responsible Austrian economics.
   
• In : The Neo-Alchemy of the Federal Reserve, he says :
   
  ” The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation.“
   
• More printing of money out of thin air means everyone is poorer. This is in effect a tax on your savings. You become poorer via inflation.
   
  “Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. …. Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard.
   
  Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money”, …
   
  It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do. ”
   
• Is the FedRes not responsible for the current credit crisis, financial tsunami we are in? Have the FedRes not messed up America and also the rest of the world? Where was the FedRes when they were most needed during the ‘anything goes’ past 7 years? Who contributed to the past 2 bubbles : dot com and real estate. What about the “anything goes” financial engineering of derivatives? No oversight, no foresight, no leadership…. sleeping on the job.
   
• Why exactly do we need a private central bank like the FedRes? Taxpayers pay them interest just to print money out of thin air. Why? Do they serve taxpayers’ interest or their own private banker shareholders’ interest? It is obvious. Ron Paul is correct in saying we should abolish the FedRes, nationalize it ! All its functions should be put back to the government.
   
• Finally, in keeping with sound money and to prevent governments from behaving irresponsibly, senator Paul clearly advocates some kind of return to the Gold standard. I couldn’t agree more! Going into 2009, we are going to see the entire world of fiat money in deep distress: ” Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do. “

end