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Socio-Economics & History Commentary

Why Obama’s Stimulus Package Is Doomed to Failure – The Marginal Productivity of Debt

  • I am an avid reader of professor Antal E. Fekete articles on economics. In this article he explains the problem of stimulating the economy using debt. Can a government perpetually borrow money and spend its way out of economic depression? Will there be a point in time when an additional dollar of debt to stimulate the economy will result in no growth or even negative growth? It appears to be so.
     
  • I am not in agreement with him regarding the final conclusion: deflation. I still think America is heading towards a hyper-inflationary depression. At the moment, assets that need debt financing to purchase will fall into deflation. That is: assets that requires consumers to borrow money from a bank to buy will fall into deflation. But goods that are purchased by cash will tend to fall into inflation. For example: House, car… deflation, food – inflation . However, with the astronomical increase in the money supply by the FedRes – we will eventually see inflation throughout the economy much like Zimbabwe.
     
  • Professor Antal Fekete writes :
     
    In this article……..I shall show that new money created on the strength of a flood of new debt, is tantamount to pouring gasoline on the fire, making prices fall and the economy contract even more. The Obama administration has missed its historic opportunity to stop the deflation and depression inherited from the Bush administration because it entrusted the same people with the task of damage-control who had caused the disaster in the first place: the Keynesian and Friedmanite money doctors in the Fed and the Treasury.
      
    Watching the wrong ratio
    The key to understanding the problem is the marginal productivity of debt , a concept curiously missing from the vocabulary of mainstream economics. Keynesians take comfort in the fact that total debt as a percentage of total GDP is safely below 100 in the United States while it is 100 and perhaps even more in some other countries. However, the significant ratio to watch is additional debt to additional GDP , or the amount of GDP contributed by the creation of $1 in new debt. It is this ratio that determines the quality of debt . Indeed, the higher the ratio, the more successful entrepreneurs are in increasing productivity, which is the only valid justification for going into debt in the first place.
     
    Conversely, a serious fall in that ratio is a danger sign that the quality of debt is deteriorating, and contracting additional debt has no economic justification. The volume of debt is rising faster than national income, and capital supporting production is eroding fast. If, as in the worst-case scenario, the ratio falls into negative territory, the message is that the economy is on a collision course and crash in imminent. Not only does more debt add nothing to the GDP, in fact, it causes economic contraction, including greater unemployment. The country is eating the seed corn with the result that accumulated capital may be gone before you know it. Immediate action is absolutely necessary to stop the hemorrhage, or the patient will bleed to death.
     
    Keynesians are watching the wrong ratio, that of debt-to-GDP. No wonder they constantly go astray as they miss one danger signal after another. They are sailing in the dark with the aid of the wrong navigational equipment. They are administering the wrong medicine. Their ambulance is unable to diagnose internal hemorrhage that must be stopped lest the patient be dead upon arrival.
     
    Melchior Palyi’s early warning
    In the 1950’s when the dollar was still redeemable in the sense that foreign governments and central banks could convert their short-term dollar balances into gold at the fixed statutory rate of $35 per ounce, the marginal productivity of debt was 3 or higher, meaning that the addition of $1 in new debt caused the GDP to increase by at least $3. By August, 1971, when Nixon defaulted on the international gold obligations of the United States (following in the footsteps of F.D. Roosevelt who had defaulted on its domestic gold obligations 35 years earlier) the marginal productivity of debt has fallen below the crucial level 1. When marginal productivity fell below $1 but was still positive, it meant that total debt (always ‘net’) was rising faster than GDP. For example, if the marginal productivity of debt was ½, then $2 in debt had to be incurred in order to increase the nation’s output of goods and services by $1. An increase in total debt by $1 could no longer reproduce its cost in the form of an equivalent increase in the GDP. Debt lost whatever economic justification it may have once had.
     
    The decline in the marginal productivity of debt has continued without interruption thereafter. Nobody took action, in fact, the Keynesian managers of the monetary system and the economy stone-walled this information, keeping the public in the dark. Nor did Keynesian and Friedmanite economists at the universities pay attention to the danger sign. Cheerleaders kept chanting: “Gimme more credit!”
     
    I learned about the importance of the marginal productivity of debt from the privately circulated Bulletin of Hungarian-born Chicago economist Melchior Palyi in 1969. (There were altogether 640 issues of the Bulletin; they are available in the University of Chicago Library). Palyi warned that the tendency of this most important indicator was down and something should be done about it before the debt-behemoth devoured the economy. Palyi died a few years later and did not live to see the devastation that he so astutely predicted.
     
    Others have come to the same conclusion in other ways. Peter Warburton in his book Debt and Delusion: Central Bank Follies ThatThreaten Economic Disaster (see references below) envisages the same outcome, although without the benefit of the concept of the marginal productivity of debt.
     
    The watershed year of 2006
    As long debt was constrained by the centripetal force of gold in the system, tenuous though this constraint may have been, deterioration in the quality of debt was relatively slow. Quality caved in, and quantity took a flight to the stratosphere, when the centripetal force was cut and gold, the only ultimate extinguisher of debtthere is, was exiled from the monetary system. Still, it took 35 years before the capital of society was eroded and consumed through a steadily deteriorating marginal productivity of debt.
     
    The year 2006 was the watershed. Late in that year the marginal productivity of debt dropped to zero and went negative for the first time ever, switching on the red alert sign to warn of an imminent economic catastrophe. Indeed, in February, 2007, the risk of debt default as measured by the skyrocketing cost of CDS (credit default swaps) exploded and, as the saying goes, the rest is history.

     
    Negative marginal productivity
    Why is a negative marginal productivity of debt a sign of an imminent economic catastrophe? Because it indicates that any further increase in indebtedness would necessarily cause economic contraction. Capital is gone; further production is no longer supported by the prerequisite quantity and quality of tools and equipment. The economy is literally devouring itself through debt. The message, namely that unbridled breeding of debt through the serial cutting of the rate of interest to zero was destroying society’s capital, has been ignored. The budding financial crisis was explained away through ad hoc reasoning, such as blaming it on loose credit standards, subprime mortgages, and the like. Nothing was done to stop the real cause of the disaster, the fast-breeder of debt. On the contrary, debt-breeding was further accelerated through bailouts and stimulus packages.
     
    In view of the fact that the marginal productivity of debt is now negative we can see that the damage-control measures of the Obama administration, which are financed through creating unprecedented amounts of new debt, are counter-productive. Nay, they are the direct cause of further economic contraction of an already prostrate economy, including unemployment.
     
    The head of the European Union and Czech prime minister Mirek Topolanek has publicly characterized president Obama’s plan to spend nearly $2 trillion to push the U.S. economy out of recession as “road to hell”. There is absolutely no reason to castigate Mr. Topolanek for this characterization. True, it would have been more polite and diplomatic if he had couched his comments in words to the effect that “the Obama plan was made in blissful ignorance of the marginal productivity of debt which was now negative and falling. In consequence more spending on stimulus packages would only stimulate deflation and economic contraction.” 
     

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March 31, 2009 Posted by | Economics | , , , | 1 Comment

As History Repeats Itself, Time to Buy Gold and Silver

goldbullion

  • We seem to be seeing a repeat of the 1929 – 1933 stock market action. In the 1929 Great Depression stock had a major bear rally before collapsing 89% from its peak. So where should we park our money?
     
  • Peter Cooper opines :
     
    For an excellent assessment of what a stock market crash can mean for the future we have only to turn to The Great Crash 1929 by Professor JK Galbraith.
     
    It is all there, a complete repeat of the run up to the stock market crash of last autumn, and its consequences – thus far. There was the Florida real estate crash as a prelude to the main act, and then a 50 per cent plunge in the Dow Jones in late 1929, just like the one in 2008.
     
    March rally
    March 1930 saw a huge rally in stock prices. March 2009 has just given us the biggest rally since 1974 (a previous market crash year). But hold on a minute, what does JK Galbraith tell us happened next?
     
    In 1930 stocks weakened a little in April and then moved sideways into June when they plunged down again. Then they continued falling month after month for the next two years.
     
    Our governments know this, and it does help explain the rush to push money into the economy by means fair and uncertain. The aim is clearly to break the cycle and avoid the down trend.
     
    But will it be successful? Nobody really knows. Is it worth trying? Yes, but the evidence so far is that the Great Recession is tracking a course that is out-of-control, or rather following a pattern last seen in the 1930s.
     
    Perhaps we should be more optimistic, and think that something more like the 1970s ‘lost decade’ is upon us. 1974 was a terrible year for global stock markets and was followed by stagflation – a mixture of low growth and high inflation.
     
    Inflation
    Indeed, inflation is the only way to bail out an economy consumed by debt. In the 1930s debt deflation was allowed to take its disastrous course with public spending cuts and trade barriers making an already deteriorating cycle considerably worse.
     
    However, anybody who has just bought into the stock market rally should really think about selling and staying out for a while. This is a time to park money in gold and silver and even exit cash, although you might care to note that cash and precious metals were the best performing asset class of the 70s, while in the 30s gold was the real star.
     
     

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March 31, 2009 Posted by | Economics | , , , , , , | 2 Comments

Peter Schiff – Fault Lines Emerges !

  • The world is about to face a dramatic financial earthquake that will re-define the 21st century economic order. Many inside America still refuse to see the end of the USD hegemony. The recent warnings from foreign bureaucrats are for all to see. Peter Schiff gives his most excellent analysis on what just happened in the past few weeks :
     
    For a few fleeting, horrifying moments this past week the fault lines that underlie the global economic crisis erupted into plain view. With deft and quick effort leaders in Washington, Europe and Asia papered over the fissures and fears largely subsided. But the shock of plain truths which resulted in violent currency movements are the latest reminder that the 21st century economic order will bear little resemblance to the world we now know.
     
    The tremors began in Beijing, where a essay from the governor of the People’s Bank of China seemed to favor the creation of an IMF currency to replace the U.S. dollar as the world’s reserve. In Europe, the rotating president of the European Union, outgoing Czech Prime Minister Mirek Topolanek, characterized America’s plan to combat the widening global recession as the “road to hell.” At same time, British Member of the European Parliament Daniel Hannan made headlines the world over with his stinging rebuke of the inflationary and debt-focused policies of the current UK government.
     
    As a result of these clearly voiced frustrations, the U.S. dollar suffered a drubbing. However, Treasury secretary Geithner and his ministerial counterparts in Berlin, Paris and London did their best to convince everyone that the world is pulling together as one to combat the economic crisis. The charm offensive was effective in restoring calm.
     
    Given the size and scope of the remedies that the Obama Administration is cajoling the world to adopt, it is likely that the unease will grow until many countries emerge in open revolt to America’s plans.
     
    President Obama and the majority of our leadership on both sides of the aisle are confident that the right mix of monetary and fiscal policy can restart the spending party that defined America for a generation. And as the bleary-eyed revelers wisely reach for a cup of black coffee or stumble into a rehab center, Obama is pouring grain alcohol into the punch bowl hoping to lure the walking zombies back onto the dance floor. Europe and Asia fully understand that Obama will ask them to lend the booze.
     
    Washington is telling us that our problems result from a lack of consumer spending. Therefore, the solution is for government spending to pick up the slack. However, if Americans are too broke to spend, then how can our government spend for us? The only money they have is taken from us through taxation. To postpone immediate tax hikes (adding interest for good measure), Washington plans to borrow more from abroad. However, if our foreign creditors refuse to pony up, much of the money will simply be printed instead.
     
    Printing money is merely taxation in another form. Rather than robbing citizens of their money, government robs their money of its purchasing power. Many people assume that if government provides the funds we can spend our way back to prosperity. However, it’s not money we lack but production. If the government simply prints money and doles it out, we will not be able to buy more stuff; we will simply pay higher prices. The only way to buy more is to produce more. It is production that creates purchasing power, not the printing press!
     
    Our current predicament resulted in part from our efforts to maintain consumer spending at unsustainable levels, primarily by the reckless extension of consumer credit. Pushing up consumer credit to levels not supported by market realities required government subsidies and guarantees. In addition, Wall Street pitched in with securitization and credit default swaps, which created a false sense of confidence among our creditors that high risk consumer loans could actually be repaid. However, now that all those gimmicks have blown up, the entire farce has been exposed. There is simply no way to sustain an economy based on consumer credit.
     
    The Administration argues that more debt will restore growth which will then allow the repayment of borrowed money. First, our government has never, and will never, repay anything. Second, the assumption that additional borrowing and spending will restore growth is flawed. In fact, more consumer debt and government spending will undermine our economy and restrain growth.
     
    To solve our problems we must first come to terms with their source. That is what the voices from abroad are telling us. We borrowed and spent ourselves to the brink of bankruptcy, and now we must save and produce ourselves back to prosperity.
     
    Of course, this simple solution is rejected by Keynesian economists who insist that we must keep spending. The “paradox of thrift,” as they call it, holds that if we stop spending the recession will worsen. While this is true, it is hardly a paradox. As they say in the fitness game, “no pain, no gain.” No one said this was going to be easy, but the only way to rebuild a viable economy is to let the phony one collapse. If we follow the Keynesians, the fault lines will continue to widen until our wealth, our lifestyle, our very ability to prosper is swallowed up. The calls from abroad will only get louder until we face this ugly truth.

     
  • See also :
     
    Peter Schiff – Bernanke Completely Clueless!
    Peter Schiff – US Dollar and Bond Bubble
    Peter Schiff tells Saudis : Nobody Will Want Dollar ! Buy Gold and Gold Mining Shares.
    Max Keiser Interviews Peter Schiff on Middle East Oil Economies, Inflation & Quantitative Easing.
    Peter Schiff – Stimulus Bill Will Lead to Unmitigated Disaster
    Peter Schiff on US Economy
    Peter Schiff – Obama Stimulus Plan and Big Government

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March 31, 2009 Posted by | Economics | , , , , | 4 Comments

Ambrose E. Pritchard on Gold

Vodpod videos no longer available.

  • Financial journalist Ambrose E. Pritchard gives his view on gold.

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March 31, 2009 Posted by | Economics | , , , , , | Comments Off on Ambrose E. Pritchard on Gold

1.5 Quadrillion Dollar Derivatives Bubble at the Heart of Financial Crisis.

  • The current estimated US$14 Trillion of bailout, guarantees, loans… by the US government will not revive the economy. It is simply trying to paper over the $1.5 Quadrillion (1000 Trillion) derivatives problem. No amount of money can paper over this financial black hole. The derivatives market is a financial casino that the banksters have been running and it is totally out of control.
     
  • ACTIndependent.org statement to the G20 :
     
    On the eve of the long-awaited London conference of the G-20 nations, we are rapidly descending into the chaos of a Second World Economic Depression of catastrophic proportions.  In the year since the collapse of Bear Stearns, we have moved toward the disintegration of the entire globalized world financial system, based on the residual status of the US dollar as a reserve currency, and expressed through the banking hegemony of London, New York, and the US-UK controlled international lending institutions like the International Monetary fund and the World Bank.  This is a breakdown crisis of world civilization, prepared over decades by the folly of deindustrialization and the illusions of a postindustrial society, ….. If current policies are maintained, we face the acute danger of a terminal dollar disintegration and world hyperinflation. 
     
    The G-20 leaders are must deliberate a new set of policies capable of leading humanity out of the current crisis.  We must first identify the immediate cause which has detonated the present unprecedented turbulence. That cause is unquestionably the $1.5 quadrillion derivatives bubble. Derivatives have provoked the downfall of Bear Stearns, Countrywide, Northern Rock, Lehman Brothers, AIG, Merrill Lynch, and Wachovia, and most other institutions which have succumbed.  Derivatives have made J.P. Morgan Chase, Bank of America, Citibank, Wells Fargo, Bank of New York Mellon, Deutsche Bank, Société Générale, Barclays, RBS, and money center banks of the world into Zombie Banks. 
     
    Derivatives are financial instruments based on other financial instruments– paper based on paper.  Derivatives are one giant step away from the world of production and consumption, plant and equipment, wages and employment in the production of tangible physical wealth or hard commodities. In the present hysteria of the globalized financial oligarchy, the very term of “derivative” has become taboo: commentators prefer to speak of toxic assets, complex securities, exotic instruments, and counterparty arrangements. At the time of the Bear Stearns bankruptcy, Bernanke warned against “chaotic unwinding.” All of these code words are signals that derivatives are being talked about.
     
    Derivatives include such exchange traded speculative instruments as options and futures; beyond these are the over-the-counter derivatives, structured notes, and designer derivatives. Derivatives include the credit default swapsso prominent in the fall of AIG, collateralized debt obligations, structured investment vehicles, asset-backed securities, mortgage backed securities, auction rate securities, and a myriad of other toxic variations.  These derivatives, in turn, are pyramided one on top of the other, thus creating a house of cards reaching into interplanetary space. 
     
    As long as this huge mass of kited derivatives was experiencing positive cash flow and positive leverage, the profits generated at the apex of the pyramid were astronomical.  But disturbances at the base of the pyramid turned the cash flow and exponential leverage negative, and the losses at the top of the pyramid became immense and uncontrollable. By 2005-6, the disturbances were visible in the form of a looming crisis of the automobile sector, plus the slowing of the housing bubble cynically and deliberately created by the Federal Reserve in the wake of the collapse of the dot com bubble, the third world debt bubble. and the other asset bubbles favored by Greenspan.
     
    Financiers are trying to blame the current depression on poor people who acquired properties with the help of subprime mortgages, and then defaulted, thus – it is alleged — bringing down the entire world banking system!  This is a fantastic and reactionary myth. The cause of the depression is derivatives, and this means that the perpetrators to be held responsible are not poor mortgage holders, but rather globalized investment bankers and hedge fund operators, the derivatives merchants.
     
    We are now in the throes of a world wide derivatives panic.  This panic has been gathering momentum for at least a year, since the fall of Bear Stearns.  There is no power on earth which can prevent this panic from destroying most of the current mass of toxic derivatives.  It is however possible that the ongoing attempts to bail out, shore up, and otherwise preserve the deadly mass of derivatives will destroy human civilization as we have known it.  We must choose between the continued existence of derivatives speculation on the one hand, and the survival of human society worldwide on the other. If this be crude populism, make the most of it. 

       
  • Unless this derivatives problem is resolved, there is no way the world economy is not headed towards a massive 7-10 years Great Depression. ACTIndependent.org again :
     
    FREEZE DERIVATIVES FOR THE DURATION OF THE CRISIS
    The G-20 must remove the crushing mass of derivatives which is now dragging down the world economy. Derivatives must be banned going forward, but this by itself will not be sufficient. The ultimate goal must be to wipe out and neutralize the existing mass of $1.5 quadrillion in notional values of toxic derivative instruments. Some governments may be able simply to decree that derivatives be shredded, deleted, and otherwise liquidated, and they should do so at once.  Virtually all governments should be able to use their emergency economic powers to freeze derivatives and set them aside for at least five years or for the duration of the crisis, whichever lasts longer.  Legal issues can be settled over the coming decades in the courts. Humanity is in agony, and we must act against derivatives now. Going forward, we must ban the paper pyramids of derivatives in the same way that the Public Utility Holding Company Act of 1935 banned the pyramiding of holding companies.
     
  • American Investment banks and the Federal Reserve are at the heart of this problem. These banksters do not want to face reality and want to perpetuate this derivatives market forever. They will not succeed. The US$14 trillion committed is equivalent to the entire USA GDP output. Why isn’t the economy turning around? With US$14 T you can pay all the outstanding mortgage loan amount, all the credit card debts and have some left over. Where did all these money disappear to ? Stop blaming Main Street sub prime mortgages for this problem. They are not the real cause at the heart of the problem.
     
  • If this problem is not resolved, look at what happened during the 1st Great Depression. Similar unresolved issue led to World War 2.
     
    Derivatives pose the question of fictitious capital — financial instruments created outside of the realm of production, and which destroy production. In 1931-2, fictitious capital appeared as tens of billions of dollars of reparations imposed on Germany, plus the war debts owed by Britain and France to the United States.  These debts strangled world production and world trade. Bankers and statesmen tried desperately to maintain these debt structures. But US President Herbert Hoover proposed the Hoover Moratorium of 1931-1932, a temporary freeze on all these payments.
     
    The Lausanne Conference of June 1932 was the last chance to wipe out the debt permanently. But the Lausanne Conference failed to act decisively, and passed the buck. By the end of 1932, there was near-universal default on reparations and war debts anyway. And by January 1933, Hitler had seized power. We urge the London G-20 to defend world civilization against derivatives. It is time to lift the crushing weight of derivatives from the backs of humanity before the world economy and the major nations collapse into irreversible chaos and war, as seen during the 1930s.
     

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March 30, 2009 Posted by | Economics, GeoPolitics | , , , , | 5 Comments

Collapse of America to Lead to New World Order?

  • This financial crisis is an engineered crisis by the Illuminati Satanists to drive the world to global government and global financial dictatorship –> ‘666’. The Illuminati’s motto is : Order Out of Chaos. They have created this chaos and will make it worse so as to drive the world to their pre-planned New World Order, World Government dictatorship!
     
  • It is getting clearer by the day where we are headed. Adam Abrams opines :
     
    Is the U.S. about to lose its status as the dominant global superpower? Will the dollar collapse? If so, what would become the new global reserve currency and what would replace U.S. hegemony in a new world order?
     
    American troops are currently stationed in over 150 countries around the world and have been actively engaged in combat since the beginning of the war in Afghanistan in 2001. The pretext for the invasion of Afghanistan was provided by the 9/11 attacks.
     
    A second front in the U.S. “war on terror” was opened in 2003 with the invasion of Iraq. As well these military expenditures, the U.S. has an outstanding national debt of $10.8 trillion and rising. 
    Although U.S. President Barack Obama has outlined a timetable for complete U.S. troop withdrawal from Iraq by 2011, he has ordered an increase of 17,000 more U.S. troops in Afghanistan. With no clear end in sight to U.S. military engagement and with the U.S. national debt growing at an accelerating rate, it seems reasonable to ask whether or not the U.S. might be irreversibly overextending itself.
     
    What does “new world order” mean? There are two distinct variations. Both expressions – a new period of history evidencing a dramatic change in world political thought and the balance of power and the advent of a cryptocratic or totalitarian world government – have relevance.
     
    The global geopolitical climate is changing rapidly and appears to be on the verge of a realignment. This has become more apparent since the start of the world financial crisis, which finds its roots in the U.S. economic downturn.
     
    So how would a new world order emerge? It seems that the global population would only be willing to accept the implementation of a new world order, in either form, in the event of a major global crisis, such as the complete economic collapse of the United States of America.
     
    The U.S. is at the heart of the global economy because the U.S. dollar is currently the reserve currency of the world. Oil, gold and all major commodities are measured in U.S. dollars. If the U.S. were to collapse in the same way that Iceland and Latvia already have, the whole world would be affected. A new world order would need to be formed that no longer relied on U.S. global hegemony.
     
    Many experts believe that this is not only possible, but likely. According to Professor Willem Buiter, a former member of the Monetary Policy Committee who is now at the London School of Economics, “There will, before long … be a global dumping of U.S. dollar assets, including U.S. government assets… The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the U.S. materially weakened financially, economically, politically and morally.”
     
    Other economic gurus agree. Peter Schiff, an American economic commentator and president of the stock brokerage firm Euro Pacific Capital Inc. was mocked by economist Art Laffer, when he accurately predicted, in 2006, that the U.S. housing market “bubble” would burst. Schiff now predicts that gold will climb to $2,000 per ounce in response to the U.S. dollar dropping “like a stone” and losing its status as the global reserve currency.
     
    Schiff was also an economic adviser to Ron Paul during his 2008 presidential campaign. Paul has been articulating similar concerns regarding the U.S. financial system for over 30 years, and advocates the legitimization of gold and silver as currency, as well as the elimination of the U.S. Federal Reserve System. This he says, “will allow Congress to reassert its constitutional authority over monetary policy.”
     
    Paul sees the Federal Reserve as the main culprit in perpetuating and exacerbating the current U.S. financial crisis: “Americans have suffered a steadily eroding purchasing power because of the Federal Reserve’s inflationary policies. This represents a real, if hidden, tax imposed on the American people.” He has repeatedly introduced a bill to the U.S. Congress that would allow for the auditing of the Federal Reserve Board and provide transparency into its dealings, to no avail.
     
    Meanwhile, the man who accurately predicted the stock market crash of 1987 and the collapse of the Soviet Union has an intriguing prediction that goes even further. Gerald Celente, the CEO of Trends Research Institute, has forecast that by 2012 there will be a revolution in the U.S., accompanied by food riots and tax rebellions.
     
    So, with this in mind, who or what could replace the United States as the world’s dominant player? One possibility is that the United Nations will take on the role of a global government. This theory seems to be supported in a speech by then-president George H. W. Bush before Congress on March 6, 1991, following the expulsion of Iraqi forces from Kuwait.
     
    “…We can see a new world coming into view,” said Bush. “A world in which there is the very real prospect of a new world order. In the words of Winston Churchill, a ‘world order’ in which ‘the principles of justice and fair play … protect the weak against the strong …’ A world where the United Nations, freed from cold war stalemate, is poised to fulfill the historic vision of its founders. A world in which freedom and respect for human rights find a home among all nations.”
     
    Until recently, the advent of a global government seemed unrealistic, and reserved for conspiracy theorists. But since the acknowledgement by then-president George W. Bush in September 2008 that the United States is indeed “in the midst of a serious financial crisis”, there have been numerous calls for a “new world order” by global leaders and prominent intellectuals.
     
    In January, Henry Kissinger told CNBC reporters that the current world economic crisis is a “great opportunity” for President Barack Obama to help form a “new world order.”
    British Prime Minister Gordon Brown actually began the call for a new world order before the acknowledgement of the current financial downturn.
     
    Speaking in June 2007, Brown said: “I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created.”
     
    The British leader has continued to press for a new world order since that speech. Even a few weeks ago he declared the need for a “global new deal.”
     
    “Britain and America may be separated by the thousands of miles of the Atlantic, but we are united by shared values that can never be broken. And as America stands at its own dawn of hope, I want that hope to be fulfilled through us all coming together to shape the 21st century as the first century of a truly global society.”
     
    Could this “truly global society” be the same society that Bush Sr. spoke of, with the UN fulfilling “the historic vision of its founders”?
    It is certainly possible, but would be rather difficult to implement. The government of every nation in the world would either have to willingly surrender sovereignty to the United Nations or be forced into doing so by the use of military force. Both options are utterly improbable -unless an unpheaval on a massive scale resulted in a new-found willingness by the big players in the global arena to submit to an international body.
     
    The only such event that seems even remotely likely is the end of Western global dominance and the transfer of global hegemony to the Eurasian powers. Perhaps it would not be a “global government”, but a “new world order”, with the central power of the world residing in Asia.
     
    This seems to be the most realistic scenario, particularly as China is the largest creditor to the U.S. If the Chinese government decided to dump all of its U.S. dollars, the entire U.S. economy would collapse overnight. But would China do that? The motivation would be two-fold; firstly, the U.S. Federal Reserve’s “inflationary policies” (as described by Ron Paul) devalue the U.S. currency to the point that China no longer has an incentive to hold U.S. dollars, and secondly, China sees an opportunity to become the dominant player in the new world order.
     
    Perhaps this is the scenario that Buiter envisions when he describes a “global dumping of U.S. dollar assets.” If the Chinese government were to abandon the U.S. dollar it would certainly trigger such a “dumping” of U.S. assets.
     
    In fact, just last week China’s premier hinted that Beijing is concerned about its creditor-debtor relationship with the U.S.: “We have lent a huge amount of money to the United States. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”
     
    In addition, the Kremlin last week called for the creation of a “supranational reserve currency” to be on the agenda at the upcoming G20 meeting in London. Zhou Xiaochuan, the governor of China’s central bank, has expressed a similar desire for a new global reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.”
     
    China and Russia have both experienced severe economic downturns since September 2008, but both blame the U.S. for initiating the global crisis. If such a currency were to be formed, one that was “disconnected from individual nations,” it is possible that some form of global bank would be the creditor. According to Zhou Xiaochuan, the International Monetary Fund is one potential candidate for this role. The U.S. president, meanwhile, has said that he does not support a global currency.
     
    Looking at history, there is only one circumstance under which a very large and diverse population would be willing to accept such a massive override and restructuring of the global order. That circumstance is chaos.
     
    The collapse of the United States of America would certainly create the chaos necessary to justify the formation of a new global reserve currency and ultimately a new world order, with its central power residing in Eurasia. 
     

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March 30, 2009 Posted by | Economics, EndTimes, GeoPolitics | , , , , | 16 Comments

UN & IMF Back Agenda For Global Financial Dictatorship

  • The calls for a new financial order are getting louder. The past few weeks have seen both Russia and China pressing for a 1 World Currency. Don’t be deceived by the double talk of some of these ruling Illuminati elite ‘against’ the global currency to replace the USD. These are just mis-direction, bait and switch tactic to confuse the sheeple. Their intent is to create a 1 world currency totally controlled by them. Behind the scenes, the wheels have been set in motion.
     
  • Paul Joseph Watson reports :
     
    Both the IMF and the United Nations have thrown their weight behind proposals to implement a new world reserve currency system to replace the dollar as part of the acceleration towards a global financial dictatorship, in the same week that Treasury Secretary Timothy Geithner told CFR globalists that he was “open” to the idea.
     
    As we reported yesterday, Timothy Geithner initially renounced a Chinese and Russian proposal to supplant the dollar with a new global currency, but he later told CFR elitists, who have consistently lobbied for a global currency as part of a wider agenda for global government, that he was “open” to the idea. Indeed, before Geithner was appointed by Obama when he was still president of the Federal Reserve Bank of New York, he argued for a new global central banking system shortly after attending the 2008 Bilderberg meeting.
     
    Now the U.N. and the IMF have thrown their weight behind the move and reports indicate that the matter will be a major point of discussion at the upcoming G20 conference, with officials having initially dismissed speculation that a global currency would be on the agenda.
     
    “A UN panel of expert economists pressed Thursday for a new global currency reserve scheme to replace the volatile, dollar-based system and for coordinated steps by rich countries to stimulate their economies,”
    reports AFP.
     
    “A new Global Reserve System — what may be viewed as a greatly expanded SDR (Special Drawing Rights), with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations, could contribute to global stability, economic strength and global equity,” the panel said.
     
    In addition, “IMF managing director Dominique Strauss-Kahn said that talks on a new global reserve currency to replace the US dollar were “legitimate” and could take place “in the coming months,” according to the report.
     
    As we have repeatedly warned, the introduction of a new global currency system is a key cornerstone in the move towards global government, centralized control and more power being concentrated into fewer hands.
     
    The swift and ruthless exploitation of the economic meltdown on behalf of globalists and central banks who caused the problem in the first place revolves around their drive for a global monetary union, which is a directive coming from the very inner core of the CFR and the Bilderberg Group.
     
    The Federal Reserve is already is a private organization and as such unaccountable to the American people. A global central bank, which is effectively what a new global reserve currency system will create, will establish a de facto financial dictatorship which will wield power over the economies of every country on the planet with no accountability whatsoever.
     
    The ruling elite resolved long ago to force a global currency down our throats. In fact, a global currency is at the very core of their plan to dominate the world. Control money and you control the destiny of states, you eliminate national sovereignty. “The control of money and credit strikes at the very heart of national sovereignty,” A.W. Clausen, president of Bank of America once observed.
     
    As Georgetown professor and CFR historian Carroll Quigley noted, the goal of the banking families and their minions consists of “nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole… controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences.”
     
    In 2007, Robert Mundell, “the father of the euro,” noted that “international monetary reform usually becomes possible only in response to a felt need and the threat of a global crisis.”
     
    That very crisis arrived shortly after, providing the elite
    with the perfect opportunity to ram through a massive program of financial centralization by posing as the saviors – when they created the problem in the first place.
     
    The very actions of the elite will continue to worsen the financial crisis, providing the necessary political capital for them to institute what they had planned all along – a new global currency for the global government that they plan to implement thereafter. 

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March 30, 2009 Posted by | Economics, GeoPolitics | , , , | 16 Comments

Bob Chapman – The Illuminati’s Lust for Gold

  • Bob Chapman of International Forecaster, gives his insightful perspective on the Illuminati’s lust for gold :
      
    The big secret that the Illuminati don’t want you to know about is that they are gold-bugs themselves, and are even more fervent about precious metals than you are. They are, of course, closet gold-bugs, hiding their wanton desire for the “barbaric relic” to make it look like it is a cumbersome thing of the past, an ancient curiosity from a bygone era that no longer serves a valid or useful purpose.  They hide their lustful desire for precious metals from the public so that the public remains moribund about owning the King and Crown Prince of currencies, gold and silver.  They don’t want any monkey-see, monkey-do, from their pool of future indentured servants.  Their worst nightmare is that the serf proletariat would come to own thousands of tons of gold and silver bullion like they do.  All their institutions and front companies, like central banks, bullion banks, investment banks and brokerage houses, all de-emphasize investment in precious metals for one reason, to keep it out of the hands of the public.
     
    In the meanwhile, the Illuminati are pilfering gold from their own financial institutions at fire-sale prices like the sales conducted by Gordon Brown, the King of Fire-Sale Gold, when he sold the UK’s national gold at the bottom of the gold market, or by outright pilfering as was done with the gold held in Fort Knox, allegedly by the Rockefellers. American Illuminists have been collecting their gold and silver hoards for over a century, while European Illuminists have been collecting their hoards for many centuries.  All their gold and silver lies in Swiss vaults, or in secret offshore locations.  These hoards serve as their insurance policy if their plans to become masters of the universe should go astray.  In addition, their mounds of gold and silver might be offered as reserves for a new world currency in order to sell that concept to the public, thereby giving control of the world currency to private bankers who would operate outside of government control.  Or there might still be government control, as long as they, the Illuminati, control the world government, of course.
     
    In summary, the Illuminist gold cartel is a conspiracy of outward suppression of precious metals, while inwardly it is one of aggressive acquisition of both gold and silver.  They acquired control over national holdings of gold and silver via the system of central banks around the world, and they have systematically looted their own financial institutions and gold reserves to gain control over what they know is the only real currency recognized as such around the world. 
     
    Always remember, if you lose control over your nation’s currency, you lose your sovereignty and become a bond servant to the Illuminati.  As Thomas Jefferson said, central banks are more dangerous than standing armies.  By extrapolation, a single world bank would be dangerous beyond your wildest imagination.
      …….  
    This is why mints around the world have curtailed the amount of gold and silver bullion that is made available to the public.  This also explains why gold and silver, in what can now be termed the “physical black market,” are trading at such hefty premiums to the prices cited in the futures markets. You are being starved of precious metals intentionally and malevolently to hinder you from doing the only thing that will prevent these miscreants from bringing you to your knees financially so they can shove their one-world government down your throat.
     
    They will grudgingly allow you to own paper gold and silver.  The futures markets in precious metals, along with the mints and the new ETF’s, were set up specifically for that purpose.  They knew that the demand for precious metals would grow as they intentionally sabotaged fiat currencies and economies around the world to pave the way for world government.  So they set up all these paper markets as a trap for lazy investors to acquire an interest in precious metals without taking physical possession so that they could retain control of the physical inventories and therefore the price for same. 
       …..
      ….  consider the cartel’s decades long suppression of precious metals via futures contracts, and also the recent games played with prices for oil and food futures.  We rest our case.  As long as you do not take physical delivery, they will continue to control the physical supplies of gold and silver via leasing and lying, using “smoke and mirrors” and “creative accounting methods” to hide their nefarious dealings, such as those conducted through the Exchange Stabilization Fund, the London Gold Pool, the naked-shorting of shares in the silver ETF and the leasing of ETF gold and silver to cover short positions of the Illuminist commercials in the paper markets such as CRIMEX futures contracts and OTC derivatives contracts. 
     
    The Illuminist financial institutions are down to the dregs as far as their physical institutional holdings are concerned, but their shortage is not being sufficiently challenged and exposed quickly enough because physical delivery is not being utilized as extensively as it should be, which allows them to lie about their bullion inventories.  They will not be able to lie anymore when demand outstrips supply and they run out of precious metals in deliverable form to satisfy demands for physical delivery, which is why you should be demanding physical delivery of both gold and silver by the truckload.
      …….
    The miscreants who run the gold cartel use their control over paper markets, which is enabled by insufficient physical off-take caused by the diversion of hard money capital into paper gold and silver assets (other than resource stocks), to suppress precious metals prices.  This allows the Illuminist Puppet Masters and their henchmen to clean up in the paper markets with all their short positions, which are mostly naked.  These short positions are monopolistic, manipulative and illegal, but regulators like the SEC and CFTC do nothing about them because our regulators are also criminals and are part of the cover up.
       
    The Illuminati also want to control the availability of food, water, weapons and ammunition to the public for exactly the same reason as they control the availability of, and public desire for, gold and silver.  You must take steps immediately to own all of these items, which they are suppressing or are attempting to gain absolute control over.  Otherwise, we suggest that you acquire a large, thick, comfortable pad on which you can drop to your knees to do obeisance to the Illuminati.
      
    Buck-Busting Ben and the Fed have made gold suppression JOB ONE.  This is obvious by his support of the Treasury market, which is gold’s only serious competition for safe-haven money.  He wants to buy another $300 billion of treasuries to drive their prices up and rates down.  Presumably this is being done to assist the continually imploding real estate market by reducing mortgage rates which is the bogus excuse they give, when what they are really trying to do is help the treasury bonds compete with gold and silver for the capital of terrified investors.  This new acquisition of treasuries is in addition to the illegal purchases of unauthorized treasuries that have been made by the Fed through off-shore entities already.  You will never hear about such illegal purchases from the Fed or the fane-stream media, but you will hear about it in the IF.
    (International Forecaster)
       
  • See also :
     
    Depression, World Currency and Digital Gold
    World Financial System in a State of Insolvency !
    Bob Chapman – America Has To Come To Grips With The Fact It Is Bankrupt!
    Bob Chapman – Economic And Financial Systems Deliberately Destabilized
    Professional Runs on Banks Has Begun !
    Economic Meltdown 2009 – Gerald Celente, Bob Chapman & Robbie Noel
    The Great Depression of 2009 – Bob Chapman

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March 30, 2009 Posted by | Economics | , , | 1 Comment

Max Keiser – Gold Price Suppression and Central Banks Buying Gold !

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March 30, 2009 Posted by | Economics | , , , | 6 Comments

Max Keiser – Financial Terrorists should be Decapitated !

  • Max Keiser is the man ! Finally, someone with the gumption to tell the truth instead of all the shills in the MSM. Max Keiser :
     
    – I would not rule out decapitation
    – This is a pre-planned financial holocaust by financial terrorists
    – Alan Greenspan is one of the worse of the worst
    – Revolving door between Washington and Goldman Sachs
    – They need to be prosecuted under RICO laws
    – Systematically undermining the entire system
    – Riots all over the over due to this pre-meditated financial terrorism
    – They are the worst criminals of all. They do the most damage
    – Governments are rewarding robbery.
    – If governments will not defend the people. The people will rise up.
    – People around the world should not be enslaved by banksters
    – Return to sound money: Gold and Silver.
    – Get rid of all these chicanery
      
  • Spread the word people. Spread the word !

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March 30, 2009 Posted by | Economics | , , , , | 3 Comments

Obama – We are at War in Pakistan !

  • Change for the better? I don’t think so. This is just a continuation of old policies and even an escalation into dangerous areas. Pakistan and China are allies. This is the real reason US has become best buddies with India recently. We all know India and China are ‘not friends’. They fought a border war in the 60s. So who is the real final target here ? China???
     
  • Noah Shachtman reports :
     
    Perhaps you were wondering whether or not the U.S. was really at war in Pakistan, as well as Afghanistan. Well, President Obama just put those questions to rest.
     
    With everyone from Hillary Clinton to Robert Gates to General David Petraeusat his side, Obama announced this morning “a comprehensive, new strategy for Afghanistan and Pakistan.”  Not Afghanistan, with an
    occasional cross-border drone strike. Afghanistan and Pakistan.
     
    “I want the American people to understand that we have a clear and focused goal: to disrupt, dismantle, and defeat al Qaeda in Pakistan and Afghanistan, and to prevent their return to either country in the future. That is the goal that must be achieved. That is a cause that could not be more just.”
     
    Obama also made it clear that the military won’t just go after the militants sowing mayhem in Afghanistan, but the ones undermining Pakistan’s government, too. Specifically, Obama all-but-called-out Pakistani militant leader Baitullah Mehsud, the leading suspect in the
    assassination of Prime Minister Benazir Bhutto and the September 2007 bombings in Rawalpindi, which killed 25. In recent weeks, American drones have hit his network, over and over again. 
     
  • So what is Obama’s grand strategy ? Or is is the Same O Same O? Anti-War News comments :
      
    The ‘New’ Strategy – Did Obama Expand the War Into Pakistan?
    Is The Real Change a Massive Escalation Into Pakistan?
     
    When President Barack Obama unveiled his “
    comprehensive, new strategy” for the war in Afghanistan it struck many how decidedly old most of the strategy looked. A vague justification for throwing more money and troops at the seemingly endless war, bundled with posturing about how vital the war’s success ultimately would be.
     
    But is that the whole story? Was the much-heralded new strategy just about polishing up the same old escalation in Afghanistan and selling it as a change? Perhaps the real novelty in this plan takes place outside of Afghanistan, in neighboring Pakistan.
     
    Indeed, while they emphasize Afghanistan in public comments about this plan,
    the white paper (PDF) distributed by the White House on the strategy looks decidedly Pakistan-centric. It calls for “a more capable, accountable, and effective government” in Afghanistan, but promises “a vibrant economy” for Pakistan. It pledges to “disrupt terrorist networks in Afghanistan and especially Pakistan.”
     
    While promising “A New Way Forward” (not so coincidentally
    the working title of the 2007 escalation in Iraq), it seems that all roads lead to Pakistan. The government will be getting billions in new aid, the US is committing itself to fight militants in the area (above and beyond the repeated drone attacks). They’re not even ruling out sending ground troops.
     
    So Afghanistan has its new strategy, which is its old strategy with more guys. But maybe the real story here is that President Obama has made the equivalent of a de facto declaration of war against Pakistan’s border regions.
     
  • For all those out there who are still worshipping their Obama messiah, wakey wakey! 

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March 30, 2009 Posted by | GeoPolitics | | Comments Off on Obama – We are at War in Pakistan !

Russia Backs Return to Gold Standard To Solve Financial Crisis

  • Why should you invest in gold? Gold is money. Real money that no central banks in the world can create out of thin air. All fiat currencies end up debased and worthless throughout history.
     
  • The Telegraph UK reports :
     
    Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system. 
     
    Arkady Dvorkevich, the Kremlin’s chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.
     
    Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal. 
     
    Mr Dvorkevich said it was “logical” that the new currency should include the rouble and the yuan, adding that “we could also think about more effective use of gold in this system”.
     
    The Gold Standard was the anchor of world finance in the 19th Century but began breaking down during the First World War as governments engaged in unprecedented spending. It collapsed in the 1930s when the British Empire, the US, and France all abandoned their parities.
     
    It was revived as part of fixed dollar system until US inflation caused by the Vietnam War and “Great Society” social spending forced President Richard Nixon to close the gold window in 1971.
     
    The world’s fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible – or less likely – under the discipline of gold.
     
    Russia is a major gold producer with large untapped reserves of ore so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank of gradually raise the gold share of foreign reserves to 10pc.
     
    China’s government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the “Bancor” proposed by John Maynard Keynes in 1944. 
     

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March 30, 2009 Posted by | Economics | , , | 2 Comments

Obama – Wars on a Greater Scale!

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March 30, 2009 Posted by | EndTimes, GeoPolitics | , | 13 Comments

NYSE Runs Out of 1 Kg Gold Bars ?

  • We all know by now that the world is facing a tight supply of gold. Demand has gone up any where between 3-5 fold. So much so that gold mints are unable to supply gold coins :
     
    American Eagle Gold Proof Coins
    Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .” 
     
  • See also :
      
    World Mints Report Soaring Demand for Gold Coins
    US Mint Suspends Production of More Gold and Silver Coins
     
  • Now we hear the New York Stock Exchange (NYSE) Liffe futures exchange is running out of 1 Kg gold bars! Avery Goodman reports :
      
    The NYSE-Liffe futures exchange has, it seems, run out of 1 kg bars of gold. Futures markets, like NYSE-Liffe and COMEX, try hard to maintain the fiction that they will deliver physical gold, in completion of executed contracts. Indeed, to prevent fraud, U.S. law requires clearing members to keep a stockpile, of one kind or another, consisting of a minimum of 90% of metal. Up until October, 2008, it didn’t matter. Only about 1% of long buyers of paper gold futures contracts typically took delivery. Now, the situation is very different. Demand has surged and, it appears, one major futures exchange, NYSE-Liffe, and by extension, the COMEX gold warehouses it shares with its larger cousin, are unable to meet the requirements of their contracts, visa vi, delivery of 1 kg bars.
       …..
    In summary, there is now so much demand for delivery of the mini-contracts that the exchange can no longer deliver 1 kg bars. 
     
  • Will the supply situation improve? Will the bears be right about gold? Will gold price plunge back to the US$700/ounce as some say? Avery Goodman again :
      
    There has been a lot of talk, over the past year, by bearish gold commentators, claiming that the shortage of gold and silver is merely a fluke of the retail market. However, one kg bars of gold are NOT a retail denomination. They are the primary unit used in most commodity futures markets. Unlike the American exchanges, the 1 kg bar dominates deliverable contracts, for example, on the Tokyo Commodities Exchange, as well as many other commodities exchanges around the world. They were also the primary unit of the mini-gold contracts (YG), offered by NYSE-Liffe, prior to the technical default. In other words, the retail gold shortage has spread into the wholesale market. What’s next? Will there be a shortage of 100 ounce bars? No exchange rule can be used to hide from a technical default on delivery of 100 ounce bars. But, vast numbers of 100 ounce bars are stored at the iShares COMEX gold trust (IAU). So, a default in delivery of 100 ounce bars will take a while.
     
    All that said, however, given that the Fed printing press is running overtime, things are going to get tighter. It will take only a few months of delivery percentages similar to those seen in December, 2008, before all the 100 ounce gold bars are gone. What will the futures exchanges do? Hand out little slips of paper entitling contract holders to a ¼ interests in 400 ounce banker’s bars? There is no rule that allows that. What happens when people start taking mass delivery of the 400 ounce bars? Will they hand out fractional shares in gold mines, along with picks and shovels?
     
    The only way that remaining supplies can be rationed is by a rise in price sufficient to deter some of the buying. For some reason, the supply and demand for gold on the futures market is significantly out of synchronization. This implies that those who claim that the price of gold is manipulated are probably correct, because the situation could not happen in a completely free market. But, even if the gold market is manipulated, the manipulators cannot stop this from happening if the demand for delivery continues. In a more practical sense, coupled with the nearly complete removal of all small retail denominations of gold from store shelves around the world, demand is clearly outstripping supply by a considerable measure.
     
    With the U.S. and the U.K. now engaged in quantitative easing (printing new dollars and pounds), and other central banks ready to join, we can reasonably assume that the desire to exchange paper money for gold will get stronger. If the price does not rise significantly, and quickly, it is only a matter of time before this shortages reach the 100 ounce bars, and, then, on to the 400 ounce banker’s bars. That is what happened, back in the 1930s, and it is happening again. The main difference is that, in the 1930s, the price was fixed by the government, so the conversion of dollars to gold could not be controlled by a rise in price. Now, however, the price of gold can go up until, potentially, it is high enough to discourage more buying by the public. It is impossible to say whether or not this means a rise to $2,000 or $2,500 per ounce by the end of 2009, as some have predicted. But, it does mean that the price will surely rise, that the rise is going to be huge, and, probably, that it will be fast and furious, at some point in the near future.

     
  • The more central banksters manipulate the price of gold to make gold unattractive, the bigger the supply dislocation will be. When price rise, demand contracts and supply expands. This market mechanism automatically adjust demand and supply. But because price is kept artificially low for gold, demand is still there and supply did not increase. Gold is somewhat different when it comes to the demand curve. When people realize that gold is real money and expects gold price to increase, people will hoard gold. So, on expectations of rising prices supply will contract but demand will increase. Those who buy and sell gold are more than aware that Comex paper gold prices are highly likely manipulated. Thus, we see physical gold selling at a large premium to paper gold.

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.

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March 28, 2009 Posted by | Economics | | 10 Comments

The Inescapable Inflationary Realities of Quantitative Easing and Economic Stimulus

  • Is the world economy on the road to recovery? Many seem to think that the government’s fiscal stimulus and Quantitative Easing actions are taking traction and economy should rebound in 2010. Really?
     
  • Ty Andros comments :
     
    $14 million, million, or stated another way $14 trillion. The annual GDP of the US is approximately $14 trillion or $46,666 for every man, woman and child in the US – either way you view it, this is the INCONCEIVABLE amount that has been spent, printed or guaranteed since January 2007 in the US; it does not include the government machinations in other G7 countries. And what have you and your family received from that $46,666 per person? MOSTLY nothing and you will get mostly nothing from the next $46,000 and the next $46,000; but you will get one thing from it:
    the bill.
     
    The greatest transfer of wealth from those who hold their money in paper to those who don’t has commenced. A “Crack-up Boom” approaches.
     
    So far, the governments and central banks of the US , UK and Switzerland have embarked upon QUANTITATIVE easing, aka “printing money out of thin air,” to liquefy their financial systems, generate financial system bailout funds and devalue their currencies for competitive reasons. This is set to continue indefinitely as public serpents socialize the costs of their follies and transfer the benefits of it to their elite special interest campaign supporters.
     
    The Euro zone shall soon be forced to do so in a defensive measure and as a practical response to the credit markets increasingly ceasing to function;and the bulk of the problems have not been addressed, so future efforts will dwarf what has gone before. The demise of the G7 financial and currency systems is, as some would say, “baked in the cake”. The only thing we do not know are the various roads we will travel in reaching the ultimate destination. It is a battle between Mother Nature, the government and banking elites. I know who will win this battle, and it is not man.
     
    The Federal Reserve balance sheet has expanded from under a trillion dollars to over $2 trillion since September, and with last week’s announcement of an additional $750 billion MBS (mortgage backed securities) and $300 billion long-dated US treasuries in the next six months, it can be expected to rise to over $4 trillion during this period. Before this crisis is over, this balance sheet EXPANSION will probably approach $15 to 20 trillion. Bill Gross of Pimco estimates another $5 trillion is needed; unfortunately, that is just what is needed in the next two years;and they will tax you to death and print it to SAVE you.
     
    This has rightfully provoked outrage by the groups holding dollars or treasuries, most notably the Chinese, Japanese and Russians. Less than a week after Obama assured the world of the soundness of US issues, the US Fed threw another $1.3 million, million ($1.3 trillion) into the pool of FIAT US currency. An instant stealth tax on all dollar holders as their money SITS in the bank and dollar-denominated bonds. Contrary to government assertions, this $1.3 trillion of printed money and all printed money everywhere is a TAX on the poor, middle class and everyone’s earnings and savings.
     
  • Isn’t it great the FedRes has decided on QE to monetize treasury bonds, so that interest rates will be lower and consumers will benefit? The FedRes say this is their reason for buying 2-30 years treasury bonds. How altruistic ?!? I don’t think helping American consumers with their mortgage payments and credit card debts is the real reason. Ty Andros again :
     
    Of course, the Federal Reserve HAD TO, as the TIC’s data (treasury flow of foreign funds data) revealed that foreign buyers of US treasuries and agency bonds went negative to the tune of approximately $149 BILLION, and signaling the growing rejection of debt offerings by increasingly INSOLVENT issuers. As the US Congress makes mincemeat of the international belief that we have the rule of law and honor our contracts, the fed will increasingly have to step in to fund the deficits and mortgage markets because no one will buy those issues. Now much of the deficit spending will be financed by printing money just as BANANA republics do. An additional note is the failure of a recent Gilt auction by the UK government, echoing a similar failure at a Bund auction in Germany . These are just anecdotes as investors increasingly shun G7 Bond offerings in FIAT currencies. 
     
    The spending excesses of the current Congress and administration in Washington DC are dwarfing any seen in the recent past. The federal government’s share of the GDP is poised to explode from approximately 21% to over 28% in less than a year. …..  Additionally, the private debt markets will be significantly starved, so corporations will be starved for cash and funding on an increasing basis, which is not a recipe for economic growth. 

      
  • G7 governments are running their economies to the ground and enslaving their population for many generations to come. Worse is yet to come.
     
    The G7 governments are at war with their citizens, only the citizens are largely unaware of it. Citizens have been dumbed down and the media spins the government line to dupe the public into believing that government is for them rather than against them in this period of time. The DARWINIAN struggle to survive and grow is now a showdown between the public sectors, government elites and special interests versus the private sectors and the public at large. As the governments increasingly DESTROY the ability to create wealth in the private sector, incomes have and will continue to collapse, as will tax receipts on the endless list of taxes and fees now imposed.
     
    As these sources of income recede, the only options will be to borrow from future generations through treasury issuance to the central banks, aka “PRINTING THE MONEY”. Since there is this little timeless truth known by non-governmental economists as “there is no such thing as a free lunch”, we are headed toward the demise of the G7 financial systems.
      …..
    Look no further than recent LOUD outbursts by the G7’s largest creditors such as the Chinese, Russians, Indians and Brazilians, illustrating their dismay. They should, because when the debasement occurs, it is a theft of the purchasing power they store in G7 currencies and bonds. The rallies in stock indexes are nothing more than bounces in ongoing bear markets. 
        ……
    There is no way to avoid the unfolding, ultimately inflationary great depression because public servants are incapable of doing what is right for their constituents, rather than what is politically beneficial. But profits and opportunities will abound for the astute and informed investor. The abuse of the ability to issue debt and print money will be abused until such time that the financial, currency and banking systems collapse and are shunned by the world publics
    .
      …….
    So it is once again: Hi ho, Hi ho, off to the printing press they go; selling treasuries to create the money and sending you and your children the obligation to pay for it 

     
  • See also :
     
    ECB About to Activate Quantitative Easing !
    Quantitative Easing – Death Knell for Dollar, Re-Igniting the Gold Rocket !
    Let the Currency Wars Begin?
    World Financial System in a State of Insolvency !
    Global Financial & Economic Meltdown
    Global Monetary Meltdown in 2009 ?
    Dollar Devaluation, Debt Default & Gold

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March 28, 2009 Posted by | Economics | , , , , , , , , , | 1 Comment