Tuesday, December 15, 2009

December 15 2009: Why China won't succeed America

Jack Delano The Age of the Machine December 1942
Chicago & North Western railroad locomotive shops at Chicago

Ilargi: Let's try a history of the world for simpletons. That should make everyone feel smarter.

Not too long after Colonel Drake struck black gold in 1859, oil started to be pumped up out of the earth at an energy ratio of 1 barrel worth of work for 100 barrels of product. It took a while to figure out what to do with the stuff, but 50 years of inventions and innovation later it all fell into place. Oil’s qualities like cost, abundance, transportability and energy density made it a far more interesting source of power than anything that had ever existed beforehand.

One could, for instance, with a few gallons of it, run an engine no bigger than a large suitcase, which provided power equal to 100 horses, to transport oneself over a hundred miles. Therein of course also lies the shadow side of this engine in a suitcase, built into what we came to label the automobile. 1 horsepower equals 8 "manpowers". It therefore takes 800 men to allow 1 man to move over a distance he could also have walked, just a little faster. No, efficiency would be the last thing that comes to mind when one wishes to describe the automobile.

Now, Britain in the preceding century had developed quite a leg up on all other nations through the large-scale and concentrated -industrial- use of coal and the steam engine. That, combined with its warships and the treasury trove it had acquired by plundering far-away nations, made Albion the number one force in the world. Important in all this was the fact that the Brits found massive amounts of coal beneath their own feet, instead of having to import the stuff.

Still, the Brits all through their ascent, carried one fatal flaw on their shoulders, and they never even noticed until it was too late. Britain was a society of classes, in their case an upper class and a very low lower lowest class. Their former colony, the United States of America, was more or less specifically founded on the idea that such a class system was evil. Today, of course, the US has al but forgotten that notion, but back in the day it was all the rage.

It was thus more or less inevitable that an American -of Irish descent, no less, lovely detail-, by the name of Henry Ford, who was an industrialist as well as a prolific inventor, came up with idea to not only streamline the way his products were made -the assembly line-, but also to find a whole new target-group of buyers, namely his own workers. Whereas in Britain workers were considered inherently filthy, dumb, barely better than animals -though way above negroes- and fit to live and die only in the worst squalor that could be provided for them, Ford's new ideas about who his customers were seemed tailor-made for America.

America, by the way, had the advantage in oil that Britain had in coal (though it had that too): huge domestic finds of the preferred energy source, in this case oil. America didn’t just have to not import oil, in also didn't need to export its products. At least not in the early stages. The enormous advantage of having a large domestic client base in the earlier days of its build-up lifted the US above all other -European and formerly feudal- important nations. And it never looked back.

It did get into trouble, but that was of its own making. When people get free gifts, they always screw them up, after all. Remember the 800 men needed to transport the 1 man. In the case of the US, problems started in the 1960’s. Domestic oil was reaching its limits, and imports started; domestic production peaked around 1970. In finance, the dollar got a divorce from gold. Building empires has always been a risky business.

These days, one barrel of oil no longer produces 100 barrels, but maybe 10 or 5 or even just 2. Still, automobiles use the stuff just about as inefficiently as they always have. And there are many more of them. Bad idea. Which has been combined with another bad idea, and possibly even worse, namely that if you CAN transport a man 100 miles a day from home to work using the energy of 100 men, you apparently MUST do so. Super bad idea. But what a fantastical screw-up, when you get to think about it. Brilliant.

And also, wouldn't you know it, America has become the class society it once shed oceans of blood not to be, with upper echelons and filthy poor, and with ever more money and energy devoted towards maintaining the empire that in reality has long since been lost. Empires all travel the same road.

I wanted to do this little history overview in order to look at the future. There are many voices out there who claim that China will be the next world power, as a kind of natural successor to America. I think not.

China has no domestic energy sources it can readily and swiftly put to use. It has to import all of its energy except for coal and a small amount of uranium. That's not a recipe for developing an empire. China has no domestic customer base. Its annual per capita nominal GDP is $3,300 vs $47,000 for the US. Its per capita consumption is $1,150 vs $32,900 for the US. Even if it would try, it would take decades to develop a viable domestic customer base.

Meanwhile, its foreign customer base is rapidly shrinking. China has risen over the past decades to where it is today because it could export its industrial output to relatively affluent societies in Europe and North America. These export targets are now dwindling and may well soon practically disappear altogether. The human talent to screw up fantastically in the face of free gifts has led them to implode simply and only due to the fact that not even the power of 800 men is forever satisfactory for one man, we always want more, and it was too tempting to borrow from the future. That's our present credit crisis in a nutshell. And China will dwindle right along with them, left with a hundred thousand factories designed to produce articles its own citizens don't want or need or can't afford.

China's recent rise has been that of a parasite, fully dependent on its hosts for survival while achieving its present state. There are no other hosts in sight, which means its people will be lucky if it would just retreat into hibernation. Alternatively, it may try to expand in the face of a world in general contraction, in which the last remaining weapons of mayhem, provided by a century of super-abundant cheap energy and dreams of a never ending growth of empire and domination, augment the overall chaos and deterioration. 1.3 billion pieces of cannon fodder may well seem too formidable an opportunity to not at least try for dominance. But a force the scale of the 20th century US it will never be, or at least not for a very long time, measured in centuries or even milleniums.

Ilargi: The Automatic Earth Christmas Fund, top of the left hand column. Need we say more?

40 Million Americans Live Below Poverty Line

Worrisome trends of bank closings in America
Yesterday’s bank closings (three total) evidence a continuation of the worrisome trends we have been seeing over the past several months. These are:
  1. It is costing the FDIC a great deal more than it has historically to protect depositors in the failed banks.

  2. In other words, these banks are in much worse shape financially than they have been historically by the time the FDIC gets around to closing them.

  3. The fair market value of the assets held by these banks is turning out to be dramatically lower than the value at which they are being carried on the banks’ balance sheets. This most likely reflects unrealistic valuations assigned by bank management in the wake of the Financial Accounting Standards Board ("FASB") having suspended fair value accounting rules this year.

  4. The acquiring banks have so little confidence in the value of the assets they are purchasing that they are requiring the FDIC to enter into loss sharing agreements with respect to the vast majority of these assets. Another explanation for this may be that the FDIC prefers to share downside risk rather than accept the amounts the acquiring banks are willing to pay for these assets absent the loss sharing.

The largest of the banks closed this week, Solutions Bank of Overland Park, Kansas, is another example of a bank that on paper appeared to be very well capitalized. It claimed to have assets of $511.1 million against deposits of $421.3 million. Yet the FDIC’s estimate of the cost to close it is $122.1 million, about 29% of deposits. This implies the FDIC and the acquiring bank concluded the fair market value of Solution Bank’s assets was about $299.2 million, only 58.5% of the value claimed.

The acquiring bank purchased essentially all of the assets of Solutions Bank, but the FDIC had to enter into a loss sharing agreement with respect to $411.3 million of these assets. This implies the acquiring bank was only confident in the value of about $99.8 million – approximately 19.5%.

An emerging concern is that the magnitude of the loss sharing agreements the FDIC is entering into is substantially increasing the risk that its cost of closing these banks will be far more than originally projected. For example, there was an article posted on JSMineset yesterday reporting that the closing of Colonial Bankgroup, Inc., was likely going to cost the FDIC $5.8 billion – more than twice its original estimate of $2.8 billion. The FDIC is not specifying the precise terms of the loss sharing agreements it is entering into with acquiring banks. Depending on the terms, the FDIC’s downside risk may be significantly more than 50%.

The second largest of the banks closed this week, Republic Federal Bank of Miami, Florida, on paper had assets of $433 million against deposits of $352.7 million. Yet the estimated cost to the FDIC in this case is $122.6 million – about 34.8% of deposits. Percentage-wise, this is one of the costliest closings so far.

This implies that the FDIC and the acquiring bank valued Republic Federal’s assets at about $230.1 million – only about 53% of the value claimed. In this case the acquiring bank was only willing to purchase $267.1 million of Republic Federal’s claimed assets of $433 million, and it required that the FDIC enter into a loss-sharing agreement with respect to $210.4 million. This indicates the acquiring bank had confidence in the value of only $56.7 million of Republic Federal’s purported assets – about 13.1%.

The third bank, Valley Capital Bank, N.A. of Mesa, Arizona, was relatively small, and its closing illustrates a phenomenon seen several times recently. It is the only one of the three that appeared insolvent on paper. It had stated assets of $40.3 million against deposits of $41.3 million. Yet the FDIC’s estimated cost of closing it was only $7.4 million – about 17.9% of deposits. This is the least costly percentage-wise of the three.

This provides additional evidence that banks that appear on paper to be the healthiest may in fact be in far worse shape than banks that appear weaker. Once again, the problem appears to stem from the FASB’s suspension of fair value accounting requirements this year with respect to banks’ least liquid assets. This gives bank management far too much leeway to value assets at levels far beyond what they could fetch in the open market, resulting in banks’ balance sheets becoming increasingly less reliable indicators of their true financial health.

Biggest expansion of Bank of England's balance sheet in two centuries
There are some interesting stories that have come this morning from the Bank of England’s Quarterly Bulletin. Among them: the fact that households have seen their incomes safeguarded by the cuts in interest rates over the past year (but implying they will face a shock when rates start to rise); the point that markets are getting very jittery about the prospect of inflation in the UK, amid those worries about the UK’s credit rating; also, something investigating why the trade deficit hasn’t diminished despite the 20pc devaluation of the pound. All interesting stuff, but one bit I find particularly fascinating is this chart from the section on markets and operations.

It is, as far as I know, the first time the Bank has investigated just how its £200bn programme of quantitative easing compares with previous episodes of central bank balance sheet expansions in the past. What it shows is that, as the Bank puts it: These unconventional policy measures — alongside those to provide liquidity insurance — have led to a significant increase in the size of the Bank’s balance sheet over the past year. Chart 2 puts that expansion in a historical context: relative to annual GDP, the Bank’s balance sheet has become about as large as at any point in the past two centuries.

What I admit I hadn’t realised, however, was the extent to which the Bank’s balance sheet expanded in the wake of the Second World War. It’s an interesting comparison: back then, too, the Government was facing a deficit of mammoth proportions in the wake of the war (actually higher than today’s, at debt of well over 200pc of GDP, compared with the likely 100pc net debt could reach in the next decade or so). This wasn’t quantitative easing in the sense that we have today, but in many senses the balance sheet expansion has a similar effect. It is interesting that today’s episode of money pumping isn’t quite as unprecedented as most of us assumed.

Cleaners 'worth more to society' than bankers
Hospital cleaners are worth more to society than bankers, a study suggests. The research, carried out by think tank the New Economics Foundation, says hospital cleaners create £10 of value for every £1 they are paid. It claims bankers are a drain on the country because of the damage they caused to the global economy. Bankers reportedly destroy £7 of value for every £1 they earn.

Meanwhile, senior advertising executives are said to "create stress". The study says they are responsible for campaigns which create dissatisfaction and misery, and encourage over-consumption. And tax accountants damage the country by devising schemes to cut the amount of money available to the government, the research suggests. By contrast, child minders and waste recyclers are also doing jobs that create net wealth to the country. The Foundation has used a new form of job evaluation to calculate the total contribution various jobs make to society, including for the first time the impact on communities and environment.

Eilis Lawlor, spokeswoman for the New Economics Foundation, said: "Pay levels often don't reflect the true value that is being created. As a society, we need a pay structure which rewards those jobs that create most societal benefit rather than those that generate profits at the expense of society and the environment". She said the aim of the research was not to target individuals in highly paid jobs, or suggest people in low paid jobs should earn more. "The point we are making is more fundamental - that there should be a relationship between what we are paid and the value our work generates for society. We've found a way to calculate that," she said.

A total of six different jobs were analysed to assess their overall value. These are the study's main findings:
  • The elite banker
    "Rather than being wealth creators bankers are being handsomely rewarded for bringing the global financial system to the brink of collapse
    Paid between £500,000 and £80m a year, leading bankers destroy £7 of value for every pound they generate".
  • Childcare workers
    "Both for families and society as a whole, looking after children could not be more important. As well as providing a valuable service for families, they release earnings potential by allowing parents to continue working. For every pound they are paid they generate up to £9.50 worth of benefits to society."
  • Hospital cleaners
    "Play a vital role in the workings of healthcare facilities. They not only clean hospitals and maintain hygiene standards but also contribute to wider health outcomes. For every pound paid, over £10 in social value is created."
  • Advertising executives
    The industry "encourages high spending and indebtedness. It can create insatiable aspirations, fuelling feelings of dissatisfaction, inadequacy and stress. For a salary of between £50,000 and £12m top advertising executives destroy £11 of value for every pound in value they generate".
  • Tax accountants
    "Every pound that a tax accountant saves a client is a pound which otherwise would have gone to HM Revenue. For a salary of between £75,000 and £200,000, tax accountants destroy £47 in value, for every pound they generate."
  • Waste recycling workers
    "Do a range of different jobs that relate to processing and preventing waste and promoting recycling. Carbon emissions are significantly reduced. There is also a value in reusing goods. For every pound of value spent on wages, £12 of value is generated for society."

The research also makes a variety of policy recommendations to align pay more closely with the value of work. These include establishing a high pay commission, building social and environmental value into prices, and introducing more progressive taxation.

Americans Owe Less. That’s Not All Good.
American consumers owe less now than they did a year ago. Before the current financial crisis, that would have been unthinkable. Figures released this week by the Federal Reserve showed that Americans owed $10.8 trillion on home mortgages at the end of the third quarter, down 2.2 percent from a year earlier and the lowest level since mid-2007. Similarly, the Fed said that outstanding credit card bills in October totaled $888 billion, down 8.5 percent from a year earlier. That number was the lowest since March 2007.

Those trends do not, however, necessarily indicate that Americans have paid down their debts and are starting to lead the more frugal lives that some financial planners have been recommending for years. There has undoubtedly been some of that, but the declines also indicate that banks have been forced to write off a lot of bad debts and have grown more stingy in granting credit.

As can be seen from the accompanying charts, banks’ credit card write-offs have soared, to an annual rate of 10.2 percent in the third quarter of this year. And the Mortgage Bankers Association reported that at the end of the third quarter, 4.5 percent of all mortgages were in foreclosure — one in 22 mortgages. It said another 6.1 percent — one in 16 — were at least two months overdue. Those figures are for all mortgages, not just subprime ones.

The extent to which Americans are really cutting back may become clearer this holiday shopping season, when they decide how much money to spend. If what they tell pollsters can be trusted, they are going to cut back. A poll of 7,500 Americans in November, conducted for Alix Partners, a business consulting firm, found that people expected to save 15 percent of their income when the recession ended. That is about three times the current savings rate, as reflected in government figures. Asked what their largest personal financial concern was, 18 percent cited lowering their debt, more than any other choice.

Spending for some people will be down simply because they now have less credit available. As a group, Americans still have access to trillions of dollars, but the numbers have declined as banks have reduced or eliminated credit lines to many customers. Banks, as a group, reported $3.4 trillion in unused credit card lines at the end of September, according to a compilation by Foresight Analytics of bank reports to the Federal Deposit Insurance Corporation. That was down 28 percent from the peak of $4.7 billion reached in mid-2008.

The banks reported that outstanding home equity loans were down only 1 percent from the peak, to $667 billion. But unused home equity lines of credit came to $539 billion, the lowest since 2005 and down 25 percent from the peak reached at the end of 2007.

Support Grows for Fannie-Freddie Plan
A consensus appears to be growing among academics, investors and housing experts that the federal government should retain a role in the U.S. mortgage market over the long term and that the public-private partnership that has defined Fannie Mae and Freddie Mac should continue in some form.

Policy makers are still unsure how to transform or replace Fannie and Freddie, the two main providers of funding for home mortgages, which were taken over by the government last year amid huge losses on defaults. Still, there is broad support from a range of groups for the idea that private companies should succeed or replace Fannie and Freddie, but with enough government involvement to ensure that 30-year fixed mortgages remain available to most Americans. The idea isn't without opposition, though. Longtime critics of Fannie and Freddie, including some Republicans, argue that the government's ties to the companies or any successors should be cut and their federal subsidies ended.

Although the Obama administration isn't due to release its proposals for reshaping the mortgage market until February, several influential groups have outlined proposals. The latest, to be released at a private meeting on Monday, is from a group assembled by the Center for American Progress, a think tank with close ties to the administration. It calls for explicit federal guarantees on certain mortgage-backed securities and robust federal regulation to ensure that mortgages offered to the public are safe. The group also wants to make sure that mortgages are available to low-income borrowers and others who may be spurned by private-sector lenders.

While the draft report didn't involve the participation of any administration officials, the liberal think tank has played key roles in shaping some of the administration's personnel and policy decisions. Its recommendations promise to be closely studied by Democratic policy makers. A Treasury Department spokeswoman said the administration wouldn't comment on specific options until it puts forward its own recommendations. Most proposals avoid the extremes of turning Fannie and Freddie into national agencies or leaving the market to the private sector, opting instead for a middle ground. While such an approach is easiest to achieve politically, it means the new structure would retain at least some of the public-private conflicts that bedeviled the old, such as tension between shareholders' desire for dividends and political pressure on the companies to support the housing market.

Restarting the government-run finance companies exactly "in their old forms would do nothing but ask for a repeat of recent history," Federal Reserve Governor Elizabeth Duke said in a speech last week, even as she said that recent history suggested that "some form of government backstop may be necessary" to ensure liquidity for home loans. The authors of the latest proposal want to move away from the current situation in which 90% of home mortgages are backed by government-related entities, including Fannie, Freddie and the Federal Housing Administration. They address the potential public-private conflicts by calling for much tougher regulation of the entire mortgage market.

"Federal support is not simply about providing liquidity" but should be also designed to ensure that credit flows to "underserved areas," such as inner cities, said Sarah Rosen Wartell, one of the report's authors and an executive vice president at the Center for American Progress. Like other recent proposals, including one from the Mortgage Bankers Association and another by Credit Suisse analysts, the CAP proposal envisions the government providing an explicit guarantee on securities backed by certain types of mortgages. Without such a guarantee, the costs of a prepayable, 30-year fixed-rate mortgage might become too expensive for many homeowners.

To protect taxpayers, a fee paid on each issue of mortgage-backed securities would fund an insurance pool, and the government would step in to pay bondholders only if the companies and the insurance fund couldn't cover losses. A regulator would determine which mortgage products would be eligible for government backing and how large those mortgages could be. That would replace the current system in which investors have long assumed that the government would stand behind Fannie and Freddie. While the U.S. government has propped up the companies, some foreign investors lost confidence in that implied guarantee and have reduced their holdings of the companies' debt.

But there are sharp differences among experts over how far the government should go in ensuring that mortgages are available to those who may not have access to purely private lenders. The CAP paper says that, in exchange for the government backstop, the companies' profits would have to be regulated, akin to a public utility. The companies would also be required to lend during periods of financial shock and to support affordable housing, including multifamily rental housing.

While the new companies shouldn't be allowed to hold large investment portfolios of mortgages, the report says, they should maintain smaller, heavily regulated ones to support their public purposes. The debt issued to fund those portfolios wouldn't carry any government backing. Under their current structure, Fannie and Freddie are directed to target a big portion of their investment activities toward low- and moderate-income borrowers and communities. Republicans and other critics have argued that these mandates helped encourage Fannie and Freddie to loosen their standards, leading to massive taxpayer losses.

But the CAP paper places much of the blame for the current wave of mortgage defaults on the lending practices of Wall Street firms that during the housing boom sold mortgage securities not backed by any government-related entity. Irrational pricing in that market led Fannie and Freddie to make bad decisions as they lowered their standards in an effort to compete with Wall Street, the paper says. To keep that from happening again, the white paper calls for heavy regulation not only of the new government-backed entities, but also of all private issuers of mortgage-backed securities.

That proposal isn't likely to sit well with industry groups, which say that that more regulation will only raise costs for borrowers. The industry has opposed efforts, including one in the financial regulatory overhaul bill that passed the House Friday, to require financial firms to retain a portion of the loans that they bundle and sell off as securities.

"In retrospect, some very sophisticated investors made poor investment decisions, but the government can't legislate or mandate investment decisions," said Tom Deutsch, deputy executive director of the American Securitization Forum. The U.S. government took control of Fannie and its rival Freddie in September 2008 through a legal process known as conservatorship. To keep the companies afloat, the Treasury has agreed to purchase up to $200 billion of preferred stock in each company. By year's end, the companies will have taken a combined $112 billion in taxpayer money.

Try, Try Again
Proposals from the Center for American Progress for replacing Fannie Mae and Freddie Mac with new entities.
  • Government-chartered firms, known as Chartered MBS Issuers, or CMIs, would finance home loans by selling securities explicitly guaranteed by the government, as opposed to Fannie and Freddie's implied guarantees.
  • CMIs would be privately owned, but regulators would limit their profitability. Fannie and Freddie had no explicit caps on profits.
  • Fees on mortgage securities would pay for insurance against defaults to lessen risks to the government. Fannie and Freddie currently pay dividends to the Treasury on preferred stock.
  • Regulators would set risk standards for all mortgage securities, including those issued by private entities. At present, regulators don't set standards for mortgage securities issued by Wall Street firms.
  • CMIs would have to support rental housing for low-income people.
  • CMIs could hold only limited amounts of mortgages and related securities. Fannie and Freddie have large holdings.

Source: Center for American Progress

Fannie, Freddie Overseer Said to Consider Seeking More U.S. Aid
Fannie Mae and Freddie Mac’s federal regulator is renegotiating the companies’ financing plan with the U.S. Treasury Department and may seek an increase to their $400 billion federal lifeline before the end of the year, according to people familiar with the talks. Treasury and Federal Housing Finance Agency officials are also debating whether to lower the cost of the companies’ dividend payments on their borrowings from Treasury, according to these people, who requested not to be identified describing the internal deliberations.

Fannie Mae and Freddie Mac, the largest sources of mortgage money in the U.S., have used $111.6 billion of their $400 billion in backup financing in less than a year. The companies say their 10 percent annual dividend payment, which comes to about $5 billion apiece, costs more than either have earned in most years and adds to their draws on Treasury. FHFA spokeswoman Stefanie Mullin, Treasury spokeswoman Meg Reilly, Freddie Mac spokesman Doug Duvall and Fannie Mae spokesman Brian Faith declined to comment.

The financing plan instituted for Fannie Mae and Freddie Mac requires them to reduce their $1.57 trillion combined mortgage portfolios by 10 percent annually starting next year and caps their debt issuance at 120 percent of their assets. The Treasury and Federal Housing Finance Agency seized control of the mortgage-finance companies almost 16 months ago amid fears the two were at risk of failing. Officials set up a $200 billion lifeline with the Treasury, which was doubled in May, to keep the companies solvent. If they exhaust that backstop, regulators will be required to place them into receivership.

Treasury officials aren’t likely to take the chance of allowing the companies to fall into receivership, which is a bankruptcy-like process that would increase the companies’ debt costs and disrupt the mortgage markets, said Paul Miller, a former examiner for the Federal Reserve who now analyzes the banking and mortgage industry for FBR Capital Markets in Arlington, Virginia. "The Treasury has shown that their pain threshold is almost" non-existent, and the housing "market is still very fragile," Miller said in an interview.

The companies have said $200 billion apiece may not be enough support. The Treasury Department is facing a Dec. 31 deadline to increase that amount without congressional approval. While Treasury officials are free to renegotiate other terms of the deal, such as the dividend payment and restrictions on debt issuance, at any time, Congress set a deadline of the end of this year on the department’s ability to invest in the companies. "Treasury should be giving confidence to the markets that they will take care of it," said Rajiv Setia, a fixed income analyst for Barclays Capital in New York. "You increase the backstop and it removes the element of doubt."

Washington-based Fannie Mae, which has lost $120.5 billion over the last nine quarters, has requested $60.9 billion from the Treasury this year. McLean, Virginia-based Freddie Mac has tapped $50.7 billion in government capital since November 2008 and recorded $67.9 billion in cumulative losses over the last nine quarters amid a three-year housing slump.

The companies are an integral part of President Barack Obama’s housing-relief plan and have been pushed by the government to help more homeowners modify or refinance their loans to more affordable terms to curb foreclosures. The government-sponsored enterprises, or GSEs, own or guarantee about $5.5 trillion of the $11 trillion in U.S. residential mortgage debt. "With the GSEs being used as public policy tools, it is impossible to quantify with certainty what losses might be in a stress scenario, as the rules of the game might keep shifting," Setia said.

Property Values: Four More Years To Fall

The exhaustive Freddie Mac price index fell 2% nationwide in the 3rd quarter and analysis of its data predicts prices will continue to fall for the next four years.

While Freddie announced Tuesday that its purchase-only index has gained for the past two quarters, the "Classic Series" of the Conventional Mortgage Home Price Index, which includes refinance appraisals as well as purchase values, has fallen 9% from the high in June 2007 and 3.8% for this year.

The projections say homeowners have lost only $1 for every $3 they can expect to lose in the end.

The trends show values will fall for four years through September 2013. Readers should take this estimate as an educated guess. The estimate may have greater relevance than forecasts described in mainstream-media headlines which typically fail to place new data within a long-term trend.

Widespread bullishness has lifted hopes for property values based largely on the definitive Standard & Poor’s/Case-Shiller home price index. The 10-city index has risen 5% from its April low.

A composite of projections derived from four major indexes — Freddie Mac, Case-Shiller, First American, and the Federal Housing Finance Agency – predicts a total fall from peak to trend of 35%. That same average of averages shows values falling nearly 20% further from their current level.

Real estate bears counter the bulls by arguing that record mortgage delinquencies will overpower inventories and that widespread credit-bubble debt will either stunt growth or ruin lenders and homeowners. The federal government is throwing everything including all of its kitchen sinks in to the fight over residential property values.

"The lowest average fixed-rate mortgage rates in a half-century, lower house prices, incentives to encourage first-time buyers, and loan modification efforts to stem foreclosures have worked together to support sales and reduce the inventory of unsold homes," said Frank Nothaft, Freddie Mac Vice President and chief economist.

For more charts on the four major residential property indexes, visit "Residential Property Price Index".

Abu Dhabi Supplies $10 Billion to Dubai
Dubai said Monday that it has received $10 billion in financing from Abu Dhabi, which will pay part of the debt held by conglomerate Dubai World and its property unit Nakheel. Out of this, $4.1 billion will be used to repay Nakheel's Islamic bond, or sukuk, that matures Monday. The remainder of the funds will be used to finance Dubai World's needs up until the end of April 2010. News of the financing sent shares on local stock markets soaring. The Dubai Financial Market's main index opened up 10% at 1866.82 points with heavyweight Emaar Properties rising 15%.

In Abu Dhabi, shares opened up 6.1% at 2772.34 points."This is very positive news, and will be welcomed relief to bondholders in particular," said Ali Khan, managing director at Arqaam Capital. "We are expecting a strong positive reaction to U.A.E. and regional markets." Dubai rocked world markets in late November when it requested a freeze on $26 billion of debt payments by Dubai World in order to restructure the conglomerate. Of immediate concern was the repayment of Nakheel's $3.52 billion bond, seen by many as a litmus test for Dubai's ability to repay more than $80 billion of government and corporate debt.

In a statement on the Nasdaq Dubai, Nakheel said it will repay the bond over the next two weeks "using funds that will be provided by the Dubai Financial Support Fund." "I think Abu Dhabi saw the adverse market reaction to Nakheel debt restructuring news play out over several days and perhaps decided they had seen enough," said Saud Masud, head of research at UBS AG in Dubai. "Market pressure may have dictated this outcome, which while is a big relief in the short term does not address systemic risks and other liabilities still outstanding."

In its statement Monday, Dubai said the U.A.E. central bank will provide support to local banks and that the emirate will focus on addressing the concerns of Dubai World's creditors and contractors. Dubai also announced a bankruptcy framework in case Dubai World can't reach agreement with creditors to restructure $26 billion of the conglomerate's debts. "There will certainly be challenges periodically, just as there are challenges in other major financial centers around the globe," said Mr. Maktoum.

As Fed Uses Fewer Tools, Exit Plan Emerges
A succession of encouraging economic reports has sparked intensified debate about when the Federal Reserve will rein in its substantial support to the U.S. economy. But in fact, an exit by the Fed from its role as economic-rescuer-in-chief has already begun. As Fed officials prepare to gather in Washington on Tuesday and Wednesday to discuss interest rates and other issues, it helps to see how this exit is unfolding to understand where it will go next.

Outsiders tend to look at Fed Chairman Ben Bernanke's choices in just one dimension: Will rates be increased, lowered or stay the same? Currently, investors are wondering when the Fed will stop saying short-term interest rates will remain low for an "extended period." When those words get dropped, the Fed, within a few months, is likely to start trying to push up overnight bank lending rates from near zero. Thus, when Mr. Bernanke used the phrase last week, the market breathed a sigh of relief. "He is still in an 'extended period' mindset," Joseph LaVorgna, chief U.S. economist for Deutsche Bank, assured clients in a note Friday.

Mr. Bernanke, however, sees himself moving in a slow and deliberate way along a continuum of several different dimensions. Early this year, he would do anything it took to revive the economy. Now, he's inching gradually toward a "normalization of monetary policy," as he has described it. The market sees the Fed controlling an on-off switch. Mr. Bernanke is eyeing a dashboard with many different dials.

Emergency short-term bank borrowing from the Fed's discount window has fallen from more than $100 billion last year to $19 billion in early December. Fed purchases of short-term business loans in the commercial-paper market have fallen from $350 billion in January to $15 billion. Loans to foreign financial institutions through overseas central banks have fallen from more than $500 billion to $17 billion. Several programs -- such as loans to Wall Street investment banks and commercial-paper loans -- expire altogether in February, and another program, credit pumped into the consumer-loan market, will follow in March.

Though cautious about the outlook, rhetorically, the Fed has become steadily more upbeat in its assessment of the economy. In August, after a regular meeting of the Federal Open Market Committee, officials said the economy was leveling out and the Fed would use "all available tools" to promote a recovery. By November, they said the economy had "continued to pick up" and they would use just "a wide range of tools." "We have a number of programs to try to keep down interest rates, to improve functioning in key credit markets," Mr. Bernanke told the Senate Banking Committee this month. "We'll have to unwind those programs, and we have a set of ways of doing that."

The latest round of data -- better-than-expected jobs numbers, firmer consumer spending and confidence, improving trade and business inventories rising -- is almost sure to move the Fed further along the continuum when it meets this week. Officials could upgrade their assessment of how the economy is performing. With emergency programs expiring, they could note they are narrowing how many tools they will use to promote recovery. At some point, they could also make it more expensive for banks to take out emergency short-term loans directly from the central bank at its discount window.

They have several reasons to wait on the bigger question about when to start raising short-term lending rates more broadly. They need more evidence that a recovery will be sustainable without so much government support. With the unemployment rate still so high at 10%, they also believe they can afford to wait because there is a lot of slack in the economy that drives down inflation. The timing of rate increases, says Alan Blinder, a Princeton professor and former Fed vice chairman, "depends completely on the progress of the economy."

He sees the economy growing at a robust pace in the coming months, pushing the Fed to start raising rates in June or August 2010. Doves at the Fed, who focus heavily on the high jobless rate, will push to wait even longer. Mr. Bernanke has made clear he's looking at more than just the jobless rate and inflation -- in recent weeks he has pointed to inflation expectations, asset prices and the value of the dollar as other factors in his thinking. While officials wait on the question of "when" to raise rates, they are likely to strategize in greater detail at coming meetings a complicated question of "how."

In the old days, when the Fed wanted to tighten financial conditions, the task was easy. It pulled a few billion dollars out of short-term lending markets by selling Treasury bonds and taking cash in return. That pushed up an interest rate called the Fed funds rate, which banks charge each other on overnight loans, and in turn it pushed up other short-term borrowing rates. Because the Fed has flooded the financial system with so much money, raising the Fed funds rate won't be so simple this time.

The Fed could try to shrink its $2 trillion balance sheet by reducing its large portfolio of mortgage-backed securities and Treasury bonds. It could also borrow money against that portfolio. Either step would drain cash from the financial system and, if done in large amounts, could help push up short-term rates. The Fed could also bid up the cost of borrowing by paying a higher interest rate on the reserves banks leave parked unused at the central bank. That would likely ripple through to higher rates on bank loans. Officials are reluctant to sell down their mortgage-backed securities, because it could hurt the part of the economy most in need of help: housing. They hold out most hope for the final choice, paying interest on reserves. But they haven't yet decided how to use it in combination with other tools when the time comes to raise rates.

U.S. Spend-a-thon Risks Slide Into Greek Tragedy
A Republican takeover of the House may be the only thing between the U.S. and the abyss. The world economy shuddered last week as a rating company downgrade of Greek debt set off fears of default. Investors decided to beware of Greeks bearing bonds, and markets stumbled. While the economic data are showing signs of a recovery, there is a genuine risk that the book on this financial crisis has yet to be completed. We may not even have reached the climax.

Governments around the world have propped up their failing financial institutions with borrowed money. We used to have overleveraged banks; we replaced them with overleveraged governments. Panics start small and spread. If Greece goes down, almost every Western government will be at risk. The sad fact is that Greece is hardly exceptional when it comes to fiscal insanity. If the current Greek budget outlook proves to be accurate, then its deficit over this year and next will average a whopping 10.9 percent of gross domestic product. Small wonder that investors headed for the exits. A deficit that high could easily turn into a fiasco.

As bad as that picture is, it’s worse in the U.S. Our deficit this year, according to the latest estimate from the Congressional Budget Office, will be 11.2 percent of gross domestic product.

Syracuse University economist Len Burman, the modest and sober budget expert who was a top official in President Bill Clinton’s Treasury Department, told the Washington Post that according to a model he has developed to study the current situation, a "catastrophic budget failure" might happen. Burman added, "I try not to get too depressed, because if I really thought it was going to play out the way this model works, I would just move to a cabin in Montana and stockpile gold and guns." The worst need not happen, of course. For the U.S., a clear and reliable indication that our government takes the situation seriously, and plans to address our terrible fiscal plight with tough policy moves, might assuage markets.

Here is what the Democrats have done instead. Health experts have for years been advocating the adoption of so-called game changers, such as reducing physician reimbursements, that could significantly reduce health-care spending. Under current law, Medicare and Medicaid are on a terrifying path to insolvency, having promised tens of trillions more in benefits than we can afford. The plan was to use these game changers to fix the government programs.

Instead, President Barack Obama and his Democratic colleagues have decided to bundle the game changers with a massive expansion of health spending. While they crow about the budget neutrality of the emerging health bill, they have essentially passed on the opportunity to fix the already broken system. A bill that contained only the game changers would have been fiscally responsible. A bill that spends all the savings on new initiatives moves poor Mr. Burman one step closer to a bunker in Montana. It is hard to imagine what other steps we might take in the future to reduce health spending. Obamacare loads us onto a runaway train.

Outside of health care, Democrats have been little more responsible stewards than their Republican predecessors. Last week, the House passed a budget that included a whopping 5,224 earmarks. The bill included funds for such high-priority projects as the Aquatic Adventures Science Education Foundation in San Diego, a water-taxi service for a Connecticut beach town and new bike racks in Washington’s Georgetown neighborhood. World capital markets are looking for us to signal that we are serious. In response, we give them new museum exhibits, scenic running trails and decorative sidewalks.

While the total fiscal damage from the earmarks is relatively slight in the scale of things -- last week’s binge cost taxpayers $3.9 billion -- the spending spree signals a clear lack of appreciation of this seriousness of the situation. And the cumulative damage is eye-popping. When Nancy Pelosi took over as speaker of the House in 2007, U.S. government spending was projected by the CBO to be $2.9 trillion for 2009. Instead, it was about $3.7 trillion. That bad news sticks, with spending ratcheted up as far as the eye can see. First with a Republican and now with a Democrat in the White House, congressional Democrats have increased spending and shown no inclination to stop, even as deficits have skyrocketed.

Last week’s House budget vote suggests that the current spending trend will continue. If so, there are two likely endgames. The first is a takeover of at least one branch of Congress by Republicans. Divided government created a political dynamic that delivered budget sanity when Clinton was president, and it might do so again. Given the failure of both Republicans and Democrats to govern sensibly as the dominant party, divided government may be our only hope. In the second scenario, Democrats continue to rule as they currently are. Anyone who wants to understand better where that will lead should call up the Greeks.

European farce descends into Greek tragedy
by Wolfgang Münchau

I almost fell off my chair when I heard Angela Merkel say that the European Union might sometimes have to take charge of the fiscal policies of highly indebted members. Does this mean that the German chancellor is abandoning her attachment to a rules-based system of fiscal policy co-ordination? Probably not quite. If I interpret her brief statement correctly, she is only talking about times of crisis. Nevertheless, this is probably the most far-reaching economic governance proposal I have heard coming out of Germany.

Her proposal was triggered by the Greek crisis, which has brutally exposed the weaknesses of Europe stability and growth pact. There is still a chance that catastrophe can be averted, if George Papandreou, Greece’s prime minister, announces a robust deficit-cutting plan on Monday. Experience teaches us to be cautious. But if the plan is judged insufficient, this crisis might get out of hand.

The European response is at least in part to blame for this disaster-in-the-making. In November, European finance ministers came up with what they thought would be a clever plan – too clever by half as it turned out. The idea was to bounce Greece into Irish-style austerity – a credible medium-term deficit reduction plan. To underline the urgency of the request, a string of finance ministers and central bankers went on the record with their concerns. Axel Weber, president of the Bundesbank, warned that Greek bonds might not be eligible as central bank collateral forever. Jean-Claude Juncker, president of the eurogroup of eurozone finance ministers, spoke almost daily, one day expressing outrage at Greek malpractices, another day explicitly ruling out default.

Even Fredrik Reinfeldt, the prime minister of non-eurozone Sweden, felt the need to comment. The Greek situation, he said, was "of course problematic, but it is basically a domestic problem that has to be addressed by domestic decisions." His comment reminded me of the now infamous statement by Peer Steinbrück, Germany’s former finance minister, when he confidently declared, shortly after the Lehman collapse, that the subprime crisis was primarily an American concern.

All of this not only failed to solve the problem; it made it worse. Instead of preventing a crisis, European policymakers, obsessed with internal procedural rules and oblivious to global financial markets, almost triggered one. Last week alone, two-year bond spreads between Greece and Germany rose by 1.3 percentage points. The EU’s politicians have confused global investors by appearing to link the unconditional bail-out guarantee, given by Mr Steinbrück in February, to Greece’s compliance with the stability pact. Ms Merkel herself reproduced a weaker version of that guarantee on Thursday, but the conditionality is still not clear.

It is no accident that rating agencies took a hard look at Greek and Spanish debt at exactly the moment when the EU’s policy stance was at its most cacophonous. If the guarantee had been 100 per cent credible, there would be no justification for even a small spread between Greek and German bonds. The markets’ perception of the credibility of this guarantee is absolutely critical. By placing blame on European officials, I am not condoning the way successive Greek governments have behaved. There is no question that the country’s political leadership acted in bad faith, that it misrepresented statistics and that it has made insufficient efforts to stick to the rules. But to provoke a financial crisis is not a constructive way of dealing with this problem.

Most of all, it is bad for the EU. If it ever came to a high-noon showdown between the Greeks and the EU, I would bet on the EU blinking first. We are headed towards a situation in which the risk of financial distress and contagion leads to an unconditional bail-out, whether or not Greece is reforming sufficiently. The reasons we are at this juncture lie in the nature of the stability and growth pact. It is a fair-weather construction, ill-suited to crisis. It collapsed before, in the previous recession.

Reformed in 2005, the pact has become more flexible. But once the financial crisis came, it lost all traction. The problem is not, as is often reported, that countries run budget deficits of more than 3 per cent of gross domestic product. This is perfectly alright during a crisis, even under the existing pact. The problem is the evident failure to co-ordinate binding exit strategies among the member states. The pact is about procedure, and Greece has not been following the procedure in good faith. Nor, in fact, have other member states, including France.

Hence Ms Merkel’s idea of a separate crisis management regime. If she is serious about her proposal, she will to accept that other dimensions of crisis management might need to be included – common financial resolution policies, more effective EU-level bank supervision, fiscal stimulus and structural policies. But there can be no doubt that the eurozone needs a crisis-management regime capable of coping with rough macroeconomic conditions of the kind we face today.

Greece defies Europe as EMU crisis turns deadly serious
by Ambrose Evans-Pritchard

Euroland's revolt has begun. Greece has become the first country on the distressed fringes of Europe's monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation. While premier George Papandreou offered pro forma assurances at Friday's EU summit that Greece would not default on its €298bn (£268bn) debt, his words to reporters afterwards had a different flavour. "Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state," he said.
Were we to believe that a country in the grip anarchist riots and prey to hard-Left unions would risk its democracy to please Brussels? Mr Papandreou has good reason to throw the gauntlet at Europe's feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The Commission says it will reach 125pc by late 2010. It may top 140pc by 2012. If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral.

Ireland may just pull it off. It starts with lower debt. It has flexible labour markets, and has shown a Scandinavian discipline. Mr Papandreou faces circumstances more akin to those of Argentine leaders in 2001, when they tried to cut wages in the mistaken belief that ditching the dollar-peg would prove calamitous. Buenos Aires erupted in riots. The police lost control, killing 27 people. President De la Rua was rescued from the Casa Rosada by an air force helicopter. The peg collapsed, setting in train the biggest sovereign default in history. Economists waited for the sky to fall. It refused to do so. Argentina achieved Chinese growth for half a decade: 8.8pc in 2003, 9pc in 2004, 9.2pc in 2005, 8.5pc in 2006, and 8.7pc in 2007.

London bankers were soon lining up to lend money (our pension funds?) to the Argentine state – despite the 70pc haircut suffered by earlier creditors. In theory, Greece could do the same: restore its currency, devalue, pass a law switching internal euro debt into drachmas, and "restructure" foreign contracts. This is the "kitchen-sink" option. Such action would allow Greece to break out of its death loop. Bondholders would scream, but then they should have delved deeper into the inner workings of EMU. RBS said the UK and Ireland have most exposure, with 23pc of Greek debt between them (mostly for global clients). The French hold 11pc, Italians 6pc.

Remember, Athens holds the whip hand over Brussels, not the other way round. Greek exit from EMU would be dangerous. Quite apart from the instant contagion effects across Club Med and Eastern Europe, it would puncture the aura of manifest destiny that has driven EU integration for half a century. I don't wish to suggest that Mr Papandreou – an EU insider – is thinking in quite such terms. Full membership of the EU system is imperative for a country dangling off the bottom of Balkans, all too close to its Seljuk nemesis. But Mr Papandreou cannot comply with the EU's deflation diktat.

No doubt, EU institutions will rustle up a rescue. RBS says action by the European Central Bank may be "days away". While the ECB may not bail out states, it may buy Greek bonds in the open market. EU states may club together to keep Greece afloat with loans for a while. That solves nothing. It increases Greece's debt, drawing out the agony. What Greece needs – unless it leaves EMU – is a permanent subsidy from the North. Spain and Portugal will need help too. The danger point for Greece will come when the Pfennig drops in Berlin that EMU divergence between North and South has widened to such a point that the system will break up unless: either Germany tolerates inflation of 4pc or 5pc to prevent Club Med tipping into debt deflation; or it pays welfare transfers to the South (not loans) equal to East German subsidies after reunification.

Before we blame Greece for making a hash of the euro, let us not forget how we got here. EMU lured Club Med into a trap. Interest rates were too low for Greece, Portugal, Spain, and Ireland, causing them all to be engulfed in a destructive property and wage boom. The ECB was complicit. It breached its inflation and M3 money target repeatedly in order to nurse Germany through slump. ECB rates were 2pc until December 2005. This was poison for overheating Southern states. The deeper truth that few in Euroland are willing to discuss is that EMU is inherently dysfunctional – for Greece, for Germany, for everybody.

Hard times

Ireland shows the rest of Europe what austerity really means

When the Irish finance minister, Brian Lenihan, in effect cut the pay of public-sector workers earlier this year by introducing a special 7% pension levy, he confessed that Ireland’s European Union partners were amazed at the muted public reaction. There would, he said, have been riots in France. On December 9th Mr Lenihan presented his 2010 budget, inflicting even more pain by imposing steep pay cuts on public employees. This time, the response may not be quite so muted. The police are already threatening to defy a no-strike law in protest, and other public-sector workers are preparing to hold ballots on industrial action.

In a week when Greece and Spain both saw their credit ratings under attack, the budget at least gave the government an opportunity to reassure international investors that Ireland, unlike some other EU countries, is serious about controlling its budget deficit and public-debt burden. Mr Lenihan has done this with the toughest budget in his country’s history. Public servants face pay cuts of 5-8% on salaries up to €125,000 ($190,000); higher earners (who will include the prime minister) will see their pay cut by 15% or more. Unemployment and welfare benefits have also been cut, though not pensions. Next year’s budget deficit, at around 11.6% of GDP, will be similar to this year’s.

The budget came against the background of a sharp contraction in economic activity, far greater than that experienced in other euro-area countries. GDP is projected to decline by 7.5% in 2009 and a further 1.3% in 2010. An unemployment rate of 12% this year is at least showing some signs of stabilising. But consumer confidence remains weak and households continue to save more and to spend less, thereby depressing tax revenues. Next year, almost half of all income earners will pay no tax. In an effort to widen the tax base, the government proposes to introduce a new property tax.

The budget will put the government into direct conflict with trade unions for the second time this year. The pension levy may have been accepted by the general public, but the unions still protested vociferously. In pre-budget talks, the government noted a hostile public reaction to the unions’ proposal for a temporary pay cut for public-sector workers and a promise of big public-sector reform. It chose a permanent pay cut instead.

These measures mark the end of two decades of social partnership, based on a consensus approach to pay bargaining between government, employers and unions. Whether this will usher in a long period of industrial conflict will become clearer in the coming weeks. Public-sector unions are already giving warning of a sustained campaign of strikes. But in these hard times they may not win much support from the Irish public.

France to Tap Financial Markets for $51 Billion Grand Loan
French President Nicolas Sarkozy’s government will earmark 35 billion euros ($51 billion) for its "Grand Loan" to aid manufacturers such as Areva SA, raising the bulk of the money in financial markets. The government will sell 22 billion euros of debt to finance the loan with the remaining 13 billion euros coming from banks reimbursing the government aid they received to help weather the country’s worst economic slump in 60 years, Sarkozy said at a press conference in Paris today.

"This large public and private investment plan isn’t a new stimulus package," Sarkozy said. "These are investments that will have consequences for the next 20 or 30 years." Sarkozy’s grand loan, which may benefit companies including European Aeronautic, Defence & Space Co. and jet-engine maker Safran SA, will add to the country’s debt, which rose to 1.43 trillion euros, or 74 percent of gross domestic product, at the end of the second quarter. Government stimulus spending is boosting global debt levels and threatening to undermine the creditworthiness of some the world’s safest sovereign borrowers.

France’s benchmark 3.75% bond due 2019 gained, with the yield falling 3 basis points to 3.44 percent. The premium that investors demand to buy the French debt over comparable German bond held at 26 basis points. As part of the grand loan the government will earmark 5 billion euros for sustainable development, including for fourth- generation nuclear power plants being built by Areva. The government will spend 4.5 billion euros on high-speed communication networks and other digital technologies and 3.5 billion on research, Sarkozy said. Small businesses will benefit from 6.5 billion euros of the loan.

Sarkozy said that funds will go to building more efficient planes and rockets, benefitting companies such as Safran. Alstom SA may be helped by spending on improved train technologies, while Sanofi-Aventis SA and STMicroelectronics SA may be helped by spending on biotechnology and nanotechnology. The plan includes 11 billion euros in spending to improve higher education, and 750 million euros to digitize French books, art works, and museum contents. The plan will also trigger 25 billion euros of investment from private companies, local governments and European agencies, he said.

American debt bulging between $56-$110 trillion
Last week, we witnessed Ben Bernanke's Senate confirmation hearings for a second term as Fed Chairman. The air was thick with hypocrisy, as Senators vied with each other to cast blame on the Fed Chairman for the fiscal mistakes of the Congress. As an overtly politicized figure who has looked to bolster the poll numbers of successive Administrations, Bernanke certainly should shoulder a large share of the blame for steering the United States towards the brink of bankruptcy; however, he did not act alone. Ironically, many of his co-conspirators are currently his harshest critics.

The truth is that if there were no debt from Congressional deficit spending, there would be nothing for the Fed to 'monetize' with the printing press. By behaving as the voters' 'best friend,' delivering both low taxes and generous entitlements, Congress forced the Fed to play the disciplinarian. Except, not wanting to spoil the party, it didn't. Ben Bernanke, like his predecessor Alan Greenspan, is an intelligent man who knows exactly where reckless spending will lead the country. Yet he refused to hit the brakes.

When former President Nixon broke the last ties between the U.S. dollar and gold, he opened the floodgates to Congressional abuse. Before the 'gold window' was closed, if the federal government ran up too much debt, other countries would start trading their reserves for our gold. Afterward, these creditors were left in something of a pickle: they held huge dollar reserves (built up on the belief that it was 'as good as gold') which now had a value dependent on being able to trade with Americans. This translated into a huge subsidy for America - quickly eaten up by a guns-and-butter spending philosophy directed by Congress.

Recently, under pressure from Wall Street, Congress repealed key provisions of the Glass-Steagall Act. Glass-Steagall created bank deposit insurance through the FDIC, while putting in place safeguards to prevent these now risk-free deposits from being used in speculative investments. Repealing Glass-Steagall without repealing deposit insurance created an environment of private gains and taxpayer losses.

Moreover, in an effort to sell an 'American dream' based on homeownership, Congress subsidized and guaranteed residential mortgages through Fannie Mae, Freddie Mac, and the FHA. This created a perfect speculative play for the combined investment/commercial bank behemoths emerging from the ashes of Glass-Steagall.

These major transgressions of government lie at the heart of the economic decline and financial crisis that now face America. They were the direct fault of Congress, not the Fed. The main charge against the Fed is that it has ignored its vital independence. This began under the stewardship of Chairman Alan Greenspan and continued under his protégé, Ben Bernanke. Both Greenspan and Bernanke could fairly be labeled as 'inflationists,' in that they favor inflation over recession.

Thanks to Nixon, the Fed can create paper money out of thin air by means of book entries in the accounts of Fed member banks. Over the turn of the century, Greenspan, assisted by Bernanke, used this power to finance the greatest asset boom in world history. Today, Bernanke is financing a second great financial inflation, but this time in the face of an economic recession. This will fuel the worst of all worlds: massive stagflation.

Already, total American government debt, including off-balance sheet IOU's to the Social Security Administration, stands at between $56 and $110 trillion. Based on a gross domestic product of some $13 trillion, it is most unlikely that the debt will be repaid. Increasingly, it is being described as the biggest Ponzi scheme in history. This Rake's Progress is not lost on the markets. The U.S. dollar has declined precipitously, both in terms of gold and against foreign currencies, sapping the confidence vital for an economic recovery.

Regardless of who is to blame, Bernanke faces a decision. He may either continue to debase the currency or raise interest rates, likely forcing the Treasury into default. The latter may sound like a political impossibility, but consider carefully the alternative. In our present situation, many countries throughout history have simply revalued their currencies, wiping out a huge chunk of their debt, and started again. But the U.S. dollar has no fixed value, except the external fix of China's currency peg. Since China is our largest creditor, they could theoretically revalue our currency by adjusting the peg. This would have a tremendous impact on the American economy, and we don't get a vote!

The Fed did not create this crisis, but it did abdicate its responsibility to stop it. In doing so, it has essentially exported our major monetary powers to China. We're partying in a house that China owns. If we don't keep ourselves under control, they will wake up and impose some harsh discipline.

The US could yet pay a high price for today's easy money
From the perspective of US financial markets, a Japanese-style lost decade has defined the performance of equities and bonds since the start of 2000. From the heady days of the technology bubble, the S&P 500 is 11 per cent lower over the decade, when you include the reinvestment of dividends. In contrast, an index of long-term Treasury bonds has risen more than 116 per cent, according to Barclays Capital.

The doubling in the value of long-term Treasuries helps explains why the famed "bond vigilantes" of prior decades have been missing in action. This has largely been a decade of disinflationary forces thanks to the internet and globalisation. There have been two very aggressive cycles of rate-cutting since 2000 by the Federal Reserve and it is little wonder that bonds have been the big beneficiary. Instead of "bond vigilantes" worried about inflation and rising deficits, the decade is described by some as one where "risk vigilantes" have ruled the roost.

When the technology bubble popped, the risk of a nasty recession and deflation meant markets moved quickly to price in big rate cuts. On that score, the Fed delivered - an extended period of easy money softened the blow of recession in 2001, sowing some of the seeds of a massive mortgage and credit bubble which culminated in the financial crisis of 2007/2008.

Today, the current policy prescription of even cheaper money has many worried about the value of the dollar and the risk of higher inflation in coming years, given the outlook of massive budget deficits and record issuance of US Treasuries. Amid fears of a new financial bubble in commodities and bonds, some forecast the Fed could start raising rates late next summer and wean the US economy off easy money. Except, by next March, the Fed will cease its planned purchase of $1,250bn in mortgages. The central bank's hefty purchases this year has encouraged investors and banks to buy either corporate bonds and/or Treasuries.

That has kept market rates low, but as new mortgages and other debt is priced into the market next year and the US Treasury keeps pumping out government bonds at a record pace, the odds of the clearing price for debt rising are very short. Unless the private sector is rapidly hiring workers next year, rising long term rates could easily derail a sustainable recovery. Already the market is showing its hand and expects the risk vigilantes to test how far they can push the Fed towards expanding its bond purchases in 2010. This week the difference between two-year and 30-year Treasury yields rose to a record steep level of 3.72 percentage points. Sales of 10-year, and 30-year debt found little demand.

Whether a rapid rise beyond 4 per cent or even 4.5 per cent in 10-year paper sparks a further expansion of quantitative easing by the Fed is an open question. More QE runs the risk of further damaging the dollar and would intensify concerns about inflation risk and the US government's triple A rating. But the Fed, which has been willing to err on the side of accommodative policy this decade, does have some tools at its disposal. One such tool, which could accompany any expansion of bond buying, is a reverse repurchase agreement.

The Fed has been testing reverse repos with dealers. The tool allows the Fed to sell assets such as Treasuries to dealers for cash, with an agreement to buy them back later at a slightly higher price. By draining reserves, it prevents excess money held by the banks, currently around $1,100bn, from entering the broader economy, and igniting inflation. The reverse repo could thus reassure inflation hawks and sterilise further purchases of long term bonds, as additional reserves are contained. That could appease the bond market next year.

All well and good for the risk vigilantes in the near term. But the eventual cost of easy money coming home to roost in the form of a dollar rout and much higher bond yields is still a possible outcome. That would be cold comfort for us all.

Citigroup strikes deal to repay TARP
Citigroup said Monday it has struck a deal with the government to return $20 billion in bailout money to taxpayers. The New York City-based lender said it would raise the money through a combination of stock and debt, the bulk of which would come from a $17 billion common stock offering. "We are pleased to be able to repay the U.S. government's trust preferred securities and to terminate the loss-sharing agreement," Citigroup CEO Vikram Pandit said in a statement. "As I have stated many times over the past year, we planned to exit TARP only when we were convinced that it was prudent to do so."

Citigroup became one of the biggest recipients of bailout money last year after the government injected $45 billion into the company to help stabilize the embattled lender. Concerned about the company's underlying health and ability to endure future loan losses, the government converted $25 billion of its preferred-stock stake in the company into common stock over the summer. That effectively gave U.S. taxpayers a 34% stake in one of the world's largest financial institutions.

Citigroup said Monday that the government would get rid of those shares, starting with the sale of $5 billion worth of stock. The remaining shares would be sold "in an orderly fashion" over the next 6 to 12 months. The company also said it was terminating the loss-sharing agreement it had struck with regulators in November in which the government agreed to backstop some losses against more than $300 billion in troubled assets.

Monday's announcement, while encouraging for taxpayers, is expected to push the company even deeper into the red when it delivers its fourth-quarter results on Jan. 19. Analysts are currently expecting the company to report a loss of $1.1 billion. More importantly, it will ultimately free the company from a variety of government restrictions, namely pay limits for its top executives.

On Friday, White House "pay czar" Kenneth Feinberg capped base salaries for 75 Citigroup employees at $500,000 for the remaining three weeks of 2009. Those changes were expected to serve as the model for their pay next year as well. Fearing such changes, large financial institutions have been scrambling to return bailout money to the government. Last week, rival Bank of America got out from under the government's thumb by repaying the full $45 billion in bailout money it received. Citigroup shares were unchanged in pre-market trading Monday after climbing 2% in the previous session. 

Ilargi: Mistake? Isn’t that a bit of a one-sided view? Citi and BofA are simply free to get into gambling again, and pay "real" bonuses. After that, they're free to come knocking again for the next round of bail-outs. This is Geithner and Obama, remember?! It’s not a mistake if it is intentional.

Another Colossal Mistake
Your government just blew it again.  Big time. How?

By allowing the biggest zombie banks, Bank of America and Citigroup, to pay back TARP before we dealt with the biggest problem plaguing our financial policy of the past few years: Too Big To Fail. 

As long as the banks were on the hook for that TARP money, the government had some ability to dictate reform.  Now it has none. And in case you missed what is really going on here, the banks that repaid TARP are now getting all the benefits of government help with none of the drawbacks.  They just ditched the bad stuff--namely, pay caps--and kept the good stuff (implicit bond guarantees, subsidized super-low interest rates, no obligation to do anything for anyone).  Obama can jawbone all he wants about "fat cats," but that's all he can do.  Wall Street has him and the rest of Washington right where they want him: By the balls.

Why does this matter?  Because, as Alan Greenspan of all people just observed, taxpayers are still on the hook for everything, and the government now has no bullets left.  If all goes well over the next few years--if the economy continues to recover, if the Fed keeps interest rates low, and if the US continues to be able to borrow at reasonable long-term rates--none of this will matter.  This latest gift to Wall Street will just become a bad memory like all the rest. If all does not go well, however--if the economy relapses into a double-dip, if the Fed is forced to raise short-term rates to combat inflation, if loan losses exceed expectations--the government (and Wall Street) will have a big problem on its hands.

If the banks get in trouble again, or if it becomes plain as day that they're never going to start lending because their balance sheets are in rotten shape, the government won't be able to do anything.  After watching the appalling bailouts and bonuses of the past year, taxpayers will start a revolution before they allow the government to put hundreds of billions of dollars directly into the pockets of Wall Street again.  If we come to another crisis, therefore--or even if we simply crawl along sideways--this will put the government into a bind.

In a just world, the way out would be to finally make the bank bondholders pay for their stupidity, converting bank debt to equity and correcting the error made last time.  In the heat of another crisis, however, the government will likely be terrified at the thought of rocking the boat and will fight tooth and nail to give bondholders another free pass.  If this proves politically impossible, the government might actually have to let some firms fail, or risk being run out of town.  And because we have yet to create a system in which banks CAN fail in an orderly manner without taking the whole economy down, this could put us on a path to Japan (zombie banks) or another Lehman-like disaster.

What should the government have done while it still had some leverage?
  • Raise capital requirements, forcing the banks to use their tremendous profits to build big cushions against future problems instead of paying huge bonuses.  Given the forced bailouts of last year, why on earth should banks be allowed to pay out normal compensation ratios for the next few years?  Why shouldn't they be forced to keep this money on hand for a rainy day?
  • Make every bank build "contingent convertible" bonds into their capital structures, thus creating an automatic bailout mechanism whose cost will be borne by the banks' capital providers instead of the taxpayer.   These bonds, which automatically convert to equity if the banks' capital falls below a certain level, eliminate the need for government intervention.  If the bank runs low on capital, the bond converts, and the bank is automatically recapitalized (and its ownership changes accordingly). 

Instead of implementing these simple fixes, however, the government has given up its last bit of leverage.  It continues to implicitly guarantee all the big banks under Too Big To Fail, but now all it can do to shape their behavior is make disapproving noises about "fat cats" (who, by the way, are doing exactly what any sentient being would do under the circumstances, which is take the free money and use it for the benefit of employees and shareholders).

EMI sues Citigroup for $3.25 billion over 'fraud' and 'lies'
Tensions between record company EMI and its bank Citigroup have escalated into an all-out war following EMI owner Terra Firma's filing of a £2bn lawsuit in New York. The lawsuit charges the investment bank with alleged "fraud" and specifically accuses senior Citi banker David Wormsley of lying about the presence of other buyers in the auction to bid up EMI's price in 2007. Terra Firma, which is run by Guy Hands, also accuses Citi of trying to drive EMI into bankruptcy in order to bring about a long-expected merger with rival Warner Music.

It emerged over the weekend that a leading Citi analyst in the US released a research note eight weeks ago stating that if the troubled music giant does not merge with US competitor Warner Music, then it may go bust. The note has been interpreted by City observers as an attempt by Citi to destabalise the business. Citi is also EMI's major creditor after providing it with a loan of £2.5bn in 2007 to buy EMI. The bank was Terra Firma's only creditor in the buy-out, as the bank was unable to syndicate the $4.1bn (£2.5bn) it loaned the firm as credit markets had started to chill. Profits in the music industry have plunged since.
In the note to US clients dates September 15, Citi analyst Jason B Bazinet upgraded his stance on US competitor Warner Music to a speculative buy, arguing that a tie-up with EMI may be "back on the front burner". "Without some financial flexibility on the part of the banks, Terra Firma may be forced to sell its recorded and publishing business to other players in the industry," the analyst said. If the two parties failed to agree on a deal "the possibility of an EMI insolvency could increase." Although Citi is EMI's major creditor, Chinese walls exist to prevent a conflict of interest with its analysts' views.

"EMI's results have improved ...but perhaps not enough," Mr Bazinet said in the note. "EMI's banks have more power to determine the ultimate fate of EMI," he wrote. In mid-November, Citi spurned a request by Terra Firma to write off £1bn of the loan in return for a £1bn cash injection into the music publisher. Mr Hands has admitted that purchasing the group was a mistake. The large debt pile has meant the company has undergone a painful cost-cutting exercise, which has led to the defection of some of its top-name artists, including Radiohead and the Rolling Stones. A spokesman for Citi told The Daily Telegraph that "this suit is without merit and neither Citi nor any of its bankers have done anything wrong. We will defend this lawsuit."

Governor Paterson to withhold 10% from schools, local governments - including NYC
Gov. Paterson called it a "day of reckoning." Lawmakers slammed it as just bad theater. Paterson on Sunday announced plans - first reported in Sunday's Daily News - to shortchange the state's cities and schools 10% of the $1.9 billion in state payments due Tuesday.

New York City will lose at least $84million in funding under Paterson's plan to withhold payments to keep the state afloat this month. "I can't say this enough: The state has run out of money. We are $1 billion short," he said. For the city that means its school aid payment will be about $60 million short and its municipal assistance payment $23.9 million lower than expected, Paterson's budget office said. The city is expected to lose more money at the end of the month when Paterson will withhold nearly 19% of the remaining $3 billion in scheduled payments statewide for a school property tax relief program and human services reimbursements to counties.

Paterson, citing possible federal issues, said he will not withhold any Medicaid payments. While a spokesman for Mayor Bloomberg had no comment, saying the city had not been briefed on the plan, the impact on the city is expected to be negligible. The $60 million being held back in school funds is far lower than the $223 million Paterson originally proposed cutting in October as part of an overall $686 education aid reduction ultimately rejected by the Legislature.
Bloomberg at the time had publicly praised Paterson for "trying to treat everyone fairly with evenly distributed cuts." While the impact on the city and city schools may not, for now, be severe, smaller cities without cash reserves could be in more trouble.

All told, Paterson said he will hold back $750 million in statewide payments due this month. He said the state may eventually pay the money if revenues pick up in the next few months. He placed blame on the Legislature for recently enacting a $2.7 billion deficit reduction package that fell $500 million short of the $3.2 billion in savings he was seeking to help close a current-year budget deficit. He blasted lawmakers for making "irresponsible" and "wrong" choices by putting politics ahead of the state's interests by not addressing the "full ramifications of this deficit and this budget crisis."

Paterson said he expects legal challenges but believes he is on sound footing. He said the budget enacted in the spring stipulates that no local assistance payments can be made until they are certified by his budget director. "The governor's action here is not to balance the budget, it's not to act in lieu of the Legislature, it's to make sure the state doesn't run out of money," he said. "It's to make sure the state does not become insolvent."

Legislators accused the governor of overstepping his boundaries. "Case law says the Legislature is the branch of government with the power to enact and amend the budget," said state Sen. Eric Schneiderman (D-Manhattan). Added Senate Democratic majority spokesman Austin Shafran: "New Yorkers don't want political rancor or self-indulgent theatrics. They want their leaders to work together to get things done." While Senate and Assembly insiders say there is no plan for the Legislature to sue Paterson, education groups have said they are prepared to do so.

Schwarzenegger calls attack on UC Berkeley chancellor's home a 'type of terrorism'
Governor Arnold Schwarzenegger described Friday's attack on the home of the University of California at Berkeley's chancellor as a "type of terrorism" that will not be tolerated. Protesters angry about budget cuts and fee hikes vandalized Chancellor Robert Birgeneau's home on campus at about 11 p.m. Friday night, according to the university. "California will not tolerate any type of terrorism against any leaders, including educators," Schwarzenegger said in a statement released Saturday.

He added that the incident was a criminal act, and participants will be prosecuted under the fullest extent of the law. "Debate is the foundation of democracy, and I encourage protestors to find peaceful and productive ways to express their opinions," he said. University of California President Mark Yudof also offered his support to Birgeneau and his family on Saturday. "The attack on Chancellor (Robert) Birgeneau's residence late last night was appalling," Yudof said in a prepared statement. "The behavior as described went far beyond the boundaries of public dissent, and such lawlessness cannot be tolerated."

At about 11 p.m. Friday, 40 to 70 protesters stormed Birgeneau's home on the north side of the campus and smashed planters, windows and lights while shouting, "No justice, no peace," according to the school's Web site. They also reportedly threw flammable objects into the home. Eight people were arrested for rioting, threatening an education official, attempted burglary, attempted arson of an occupied building, felony vandalism, and assault with a deadly weapon on a police officer, according to UC Berkeley. At least two of the eight arrested are Berkeley students.

Birgeneau urged community members to find more productive ways of expressing their feelings. "These are criminals, not activists," Birgeneau said in a statement posted on the university's Web site. "The attack at our home was extraordinarily frightening and violent. My wife and I genuinely feared for our lives." Earlier Friday, 66 protesters who had been occupying Wheeler Hall for several days were arrested for misdemeanor trespassing or resisting arrest. By the 2010-11 school year, undergraduate fees will increase by more than $2,500, or 32 percent.

Moody's Cuts Calpers' Rating
Calpers may be paying a price for its decision to help financially strapped local California governments. Moody's Investors Service slashed the triple-A rating of Calpers, formally known as the California Public Employees' Retirement System, by three notches to Aa3. The downgrade, made Thursday, in part reflected Calpers' recent spike in unfunded liabilities, following the fund's negative 24% return for the year ended in June. Calpers, the nation's largest public fund with about $200 billion in assets, last month delayed its efforts to offset those liabilities by agreeing to defer an increase in local-government contributions to the fund from 2011 until 2012.

Because Calpers doesn't have outstanding bonds, the downgrade's impact would be felt through Calpers credit enhancement program. The pension fund used its triple-A rating to guarantee the debt of various municipalities from California to New York City and Chicago in exchange for a fee. Calpers' lower credit rating means it may have to reduce its fee. It may even lose some business if municipalities seek out a guarantor with a triple-A rating, industry experts said. "We are confident this downgrade won't impact our ability to run our credit-enhancement program," Calpers spokesman Brad Pacheco said of the downgrade. Calpers has received $20 million in income from the program since its inception in 2003, he said.

Moody's also cut the credit rating of the California State Teachers' Retirement System to Aa3 from Triple-A. Calstrs also has a credit-enhancement program. Moody's said no other public pension fund has a long-term credit rating related to these programs. Standard & Poor's rates the short-term debt of Calpers and Calstrs. Moody's said the credit-enhancement programs played a small role in the ratings downgrade. If a municipality in the program is unable to roll over its debt, Calpers is obligated to support the debt. A Moody's official said that this had occurred on more than one occasion for both Calpers and Calstrs in the past year.

The downgrade underscores the tough choices Calpers faces. Local governments pay a percentage of their payrolls to Calpers, based on the amount of benefits their employees receive. Calpers is trying to reduce its unfunded liabilities, or the difference between assets and obligations, which were $35 billion before the 24% investment loss last year. Yet many California municipalities are struggling with their own budget pressures and didn't welcome higher contributions.

Separately, Calpers is weighing rate increases for state employers, which the board will discuss this week. Gov. Arnold Schwarzenegger would like the state to pay a large increase in 2010 to avoid paying even more in the future. Moody's said the pension fund downgrades were also influenced by the recent deterioration in California's financial situation, which faces a $21 billion budget shortfall through June 2011. Moody's cut the state's credit rating by three notches this year to A2 from Aa2.

Foreclosures fall, but banks bracing for next big wave
While November sees 8 percent fall in foreclosures, loan-modification programs mask the size of the problem.

In November, for the fourth month in a row, the number of foreclosure filings in the United States declined -- an 8 percent drop from October. But foreclosure experts aren't celebrating. They're bracing for the next wave of default notices, foreclosure auctions, and bank repossessions, which could hit early next year. "We don't believe the underlying conditions have actually improved," says Rick Sharga, senior vice president with RealtyTrac, which released its report of foreclosure trends Thursday. Instead, state and federal efforts to help homeowners work out their problem mortgages are delaying foreclosures, he adds.

Even in a normal year, a third of these attempted workouts end up in default, he says. With high unemployment, tight credit, and depressed housing prices, this period will see much higher failures of workout plans, mortgage experts say. For the moment, the number of foreclosures continues to fall. In November, the total fell to less than 307,000, the fourth monthly decline in a row after peaking at 360,000 in July. That's the lowest monthly level since February and, on the surface, represents particularly good news for Nevada.

For the second month in a row, the number of Nevada properties receiving a foreclosure notice fell by a third. Las Vegas, which had topped the list of large cities with high foreclosure rates, fell to No. 5 in November. The problem is that these drops are artificial, brought about because Nevada recently instituted a mandatory mediation program for problem loans, Mr. Sharga says. That's a potential boon for some owners of distressed homes. It may help those on the margin restructure loans that might otherwise default. Such programs are also helping to keep the foreclosure problem from spiraling out of control and sending home prices plunging again.

The challenge is that many of these attempt work-out loans won't work out, so foreclosure isn't averted, it's simply delayed. Of an estimated 7 million troubled home loans in this down cycle, 3.9 million will go through foreclosure, predicts William Campbell, a real estate adviser and head of RPC Group in Little Rock, Ark. "We're going to see a long drawn-out housing recovery that will gradually dispose of these distressed properties over the next three years," says Sharga of RealtyTrac, an online marketplace for foreclosure properties based in Irvine, Calif. "Modifications will help, but they won't solve the problem. It's too big."

Interest Rates Are Low, but Banks Balk at Refinancing
Mortgage rates in the United States have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government. Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out. The scarcity of credit not only hurts homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.

Refinancing could save owners hundreds of dollars a month, which could be spent, saved or used to pay down debts. Extra spending would help lift the economy, and lower payments might spare some people from losing their homes to foreclosure. The plight of homeowners has become a volatile political issue. On Friday, as the House passed a series of new financial regulations, it narrowly defeated a provision that would have allowed bankruptcy judges to modify the terms of mortgages. The measure was strongly opposed by the banking industry.

President Obama, in his weekly address on Saturday, placed much of the blame for the recession on "the irresponsibility of large financial institutions on Wall Street that gambled on risky loans and complex financial products, seeking short-term profits and big bonuses with little regard for long-term consequences." The president is scheduled to meet with banking executives at the White House on Monday in another administration effort to increase the flow of loans to consumers and small businesses. Among those expected to attend are representatives from Citigroup, JPMorgan Chase, Bank of America, Wells Fargo and Goldman Sachs.

An estimated six of 10 homeowners with mortgages have rates that exceed the 4.8 percent rate currently available on 30-year fixed mortgages, the least risky form of home loans. Nevertheless, only half as many refinancing applications were reported last week than were reported at the beginning of January, the peak level for the year. The total dollar volume of refinancing activity in 2009 will be about $1 trillion. In 2003, another year when rates fell, it was $2.8 trillion. (Mortgage applications to purchase houses showed modest improvement for much of the year, but recently fell sharply to their lowest level in 12 years.)

"The government has succeeded in driving mortgage rates down to their lowest level in our lifetime," said Guy Cecala, the publisher of Inside Mortgage Finance magazine. "That hasn’t been a big home run, because a lot of people can’t take advantage of it." It is highly unusual for mortgage money to be available below 5 percent. Average rates fell as low as 4.7 percent in the 1940s, as the government held down interest rates to finance World War II, and stayed just below 5 percent until the early 1950s. Rates went above 5 percent in 1952 and stayed there — until this year.

The super-low rates are not likely to last much longer. The Federal Reserve program that has driven rates to such lows, which involves buying $1.25 trillion in mortgage-backed securities, is scheduled to expire in March, and Fed leaders have said that it would not be renewed. Some analysts believe rates could jump as high as 6 percent in the spring. On a $300,000 mortgage, such a jump would cost an extra $225 a month.

Andrew Knapp, a sales executive in Bartlett, Ill., has tried twice to refinance, which would save his family several hundred sorely needed dollars every month. Lenders said the house had lost value and the Knapps had too much debt. "There was no urgency for them to do anything," Mr. Knapp said. The most recent Federal Reserve survey of lenders found that they were continuing to tighten terms for business and household loans. Banks say they are under pressure from regulators to raise their cash reserves, which means fewer loans. They also argue that a troubled economy breeds extreme caution.

"More than ever before, lenders are very conscious of making good quality loans," said Michael Fratantoni, the vice president for research at the Mortgage Bankers Association. "They are looking at the value of the collateral and the credit quality of the borrower." But some borrowers argue that more refinancings now might well forestall losses for the banks later.

Mark Belvedere bought a condominium in a San Francisco suburb in early 2004 and refinanced it in 2005. He now owes $235,000 on a property that would sell for barely half that today. Mr. Belvedere said he would be willing to live with all that lost equity if he could refinance his loan from a variable rate, which could eventually go as high as 12 percent, into a 30-year fixed term.
His lender said no, citing the diminished value of the property. "It makes no sense and is so frustrating," Mr. Belvedere said. "I’m ready and willing to pay the mortgage for the next 30 years, but they act like they’d rather have me walk away."

When Mr. Belvedere refinanced four years ago, the process was so easy he hardly remembers it. "In those days, a refinance was like a free weekend in Vegas," said Mr. Cecala of Inside Mortgage Finance. "Now it’s between an Army physical and a root canal — and that’s if you’re successful." The current lending freeze owes much to the excesses of the boom. Mr. Belvedere’s lender, IndyMac, failed in 2008 from too many bad loans. "The system was abused, so they threw it out the window," Mr. Cecala said. "Now lenders are paranoid about every loan unless it is guaranteed to be the safest deal on earth."

An Obama administration program to encourage the refinancing of loans owned or guaranteed by Fannie Mae and Freddie Mac, the government-controlled mortgage giants, is off to a slow start. The Home Affordable Refinance Program, known as HARP, was designed to benefit between four and five million homeowners whose loans exceeded the value of their property by as much as 5 percent. But as of Sept. 30, only 116,677 loans had been refinanced. "We’re refining our understanding of borrower behavior," said a Treasury Department spokeswoman, Meg Reilly.

The program was modified during the summer to refinance homes where the loan exceeded the value of the property by as much as 25 percent. But since lender participation is voluntary, they have the option of rejecting these loans — and they often do, mortgage brokers say. Jeff Jaye, a mortgage broker in Danville, Calif., said only three of the refinances he submitted to the program were successful. More than a dozen were rejected for various reasons, including the existence of second loans or the borrower’s lack of equity. "It seems that the lenders are choosing which components of the HARP program to offer to consumers, which is unfortunate," the broker said.

When it comes to refinancing loans that are too big to be in the government system, Mr. Jaye knows the difficulty first-hand. "I have a perfect credit score, I make a good living and I’ve never been late with my mortgage in my life," he said. "But as a self-employed businessman, there is no loan for me." He plans to dispose of his house in what is known as a short sale, where the lender agrees to accept less than it is owed.

At an industry conference last week, the Illinois Association of Mortgage Professionals, a brokers’ group, proposed a federal program that would allow streamlined refinancings up to 175 percent of the median price in a local market. A quarter of the savings from the lowered payments would go into an escrow account to reduce the principal balance. "The theory is simple," said Jeri Lynn Fox, the association president. "If people have jobs and are making their payments at 7.25 percent, they will make their payments at 5 percent."

For Mr. Knapp, the sales executive, any such program would be too late. He has given up on the possibility of refinancing and is trying for a loan modification. If that does not work, there is one more solution: walking away from his home. "We’re a flight risk," he said.

Defense Contractors Resist Fixed-Price Jobs
The Airbus A400M military transporter finally flew for the first time on Friday, but the delayed European airplane is still weighted down by an issue burdening defense projects on both sides of the Atlantic: an inflexible contract. The flying truck is being developed under a type of fixed-price deal that the U.S. and the U.K.—two of the world's biggest arms buyers—largely abandoned years ago because of repeated cost overruns.

But the U.S. Department of Defense is again considering imposing such terms in an effort to trim its bills. Military contractors are grumbling, and some analysts say the A400M shows what can go wrong. "Everybody thought we learned our lessons," said Jacques Gansler, who was the Pentagon's top weapons buyer from 1997 to 2001. Mr. Gansler calls the A400M "a good example of the problem" posed by fixed-price contracts.

When seven countries from the North Atlantic Treaty Organization ordered the four-engine A400M from Airbus in 2003, its parent company, European Aeronautic Defence & Space Co., agreed to build 180 of them for €20 billion ($29 billion). EADS promised to swallow any cost overruns. The project has since blown its budget by several billion euros and EADS wants the seven governments to share the burden that it had promised to shoulder. EADS officials say that would be fair because the extra expense comes partly from changes in contract terms and designs forced on it by the governments.

The governments, whose individual positions vary, say they want to reach an agreement with EADS. The two sides are locked in heated negotiations and hope to strike a deal before year-end that keeps the project alive. "The aircraft is much more complex and expensive than expected," said Domingo Urena-Raso, Chief Executive of Airbus' military division, in a recent interview. "Industry cannot bear the full burden of the project alone."

The complaint reminds some industry veterans of spats in the U.S. before the Pentagon in the 1990s shifted away from fixed-price contracts toward deals that share risk. The U.S. changed its approach because military programs take decades to complete. Their requirements and technology evolve during development, which increases costs. A more common approach now, known as cost-plus, pays a supplier's expenses and guarantees a fixed profit margin. Critics of cost-plus deals say they don't adequately encourage contractors to control outlays.

Opponents of fixed-price contracting, meanwhile, say the rigid approach also fails to control costs, and instead produces expensive legal battles. The Pentagon's last big fixed-price contract, for the A-12 Avenger II airplane, is still being fought out in court, 19 years after its cancellation. Airbus officials were aware of these risks when they signed the A400M contract. At that time, British defense giant BAE Systems PLC owned 20% of Airbus alongside EADS, and BAE was also fighting with the British Ministry of Defense over fixed-price contracts for a surveillance plane and a submarine. BAE's then-chief executive Mike Turner sat on the board of Airbus.

"We would have preferred it was not a fixed-price contract," Mr. Turner said of the A400M deal before he retired from BAE last year. BAE sold it stake in Airbus to EADS in 2006. Airbus officials in 2003 said they could handle the A400M contract using their experience competing with Boeing Co. in the commercial jetliner market. But four years later, EADS chief financial officer Hans Peter Ring said "the logic was wrong" behind that thinking.

Now, the Obama administration wants to use fixed-price deals as one tool to permanently shake up defense contracting and cut its cost of military systems. In August, the Pentagon awarded an Army truck contract worth billions of dollars to Oshkosh Corp. on a fixed-price basis. BAE, whose subsidiary had held the contract for 17 years, and another bidder, Navistar International Corp., lodged protests with Government Accountability Office to challenge the Army's pick. Oshkosh's lower pricing is an issue with the losing companies.

The biggest test of Washington's new approach is a $40 billion tender to buy 179 aerial refueling jets, which the Pentagon wants to handle on a fixed-price basis. When the Air Force issued a draft request for proposals in September, Deputy Defense Secretary Bill Lynn said the approach would "constrain prices considerably" and indicated a broader change in Pentagon policy. "It's shifting the department from a cost-plus world more towards a fixed-price world, and we think that that's going to be an important element in avoiding cost overruns," said Mr. Lynn. Executives at Northrop Grumman Corp. and Boeing—the only potential bidders for the tanker order—are balking at setting prices for a contract that will last almost two decades.

Northrop, which is cooperating with EADS, has objected to many aspects of the contract, including a fixed-price. Northrop now says it may not bid unless major changes are made to the terms. Wes Bush, Northrop's President and Chief Operating Officer, on Dec. 1 told the Defense Department's top weapons buyer in a letter that Northrop couldn't bid on a contract that "places contractual and financial burdens" on the company. Boeing Chief Financial Officer James Bell said recently that the company was taking its concerns to the Air Force. "Fixed price development is a tough contract," he told a conference. "It is very, very difficult."

British Airways Cabin Crew Vote To Strike
British Airways PLC's cabin crew Monday voted to strike over the busy Christmas period, threatening massive disruption for hundreds of thousands of passengers. A 12-day strike is due to begin Dec. 22, trade union Unite said, after 92.5% of workers who voted in a ballot supported industrial action. The union said it remained open to negotiations, but only if BA reverses changes to working practices that it already has imposed. It said it didn't rule out further action.

British Airways in a statement said it was extremely disappointed by the decision, which it said shows a lack of concern for its customers, its business and other employees. "A 12-day strike would be completely unjustified and a huge over-reaction to the modest changes we have announced for cabin crew which are intended to help us recover from record financial losses," it said.

If a strike goes ahead, it will be the first BA has had since Chief Executive Willie Walsh took charge in May 2005. The carrier and unions have clashed over BA's plans to restructure and adjust working practices in an effort to return the company to profitability after posting a GBP292 million loss for the six months to Sept. 30. Strikes are dangerous for airlines because not only are disruptions expensive but they can put off passengers from flying with strike-hit carriers again.

Airlines globally have been badly hit by the economic downturn as passengers traded down to cheaper economy tickets or refrained from travel altogether. Most airlines have swung to a loss this year, while others have gone out of business. The International Air Transport Association forecasts the industry will make an $11 billion loss this year. BA in particular has been hard hit because of its dependence on lucrative premium traffic across the Atlantic, which has fallen in the wake of the financial crisis and economic downturn. Analysts expect BA to make a GBP800 million pretax loss for the fiscal year ending March 2010, compared with a loss of GBP401 million in the previous fiscal year.

After making no progress on talks that dragged on for nine months, BA introduced cabin crew changes Nov. 16 at London's Heathrow Airport--reducing onboard personnel to 14 from 15--after the U.K. High Court dismissed an injunction application by unions. Instead, the two sides agreed to meet in court Feb. 1 to decide whether the changes are contractual or not.

BA insists changes allow the airline to accept more than 1,000 voluntary redundancies among cabin crew and allow 3,000 to shift to part-time work. BA employs 13,500 cabin crew, of whom 11,500 work at Heathrow. Approximately 9,000 work on long-haul routes. It aims to shed 4,900 positions during the fiscal year ending March 31, of which 3,700 will be in the U.K. BA employs about 38,700 workers. "This is a double disaster for British Airways," said Bob Atkinson, travel expert from travelsupermarket.com. "Its customers are now going to be significantly affected and the airline will take a financial hit from the action."

Gerald Celente Trends Forecasts coming true year after year

The Devil and Mr. Obama
by Joe Bageant

Barack promised change -- and sure enough, things changed for the worse

(Note: Patrick Ward, associate editor of the UK's Socialist Review asked Joe to write a piece for the party publication. This is the unabridged text of Joe's submission.)
Well lookee here! An invite from my limey comrades to recap Barack Obama's first year in office. Well comrades, I can do this thing two ways. I can simply state that the great mocha hope turned out to be a Trojan horse for Wall Street and the Pentagon. Or I can lay in an all-night stock of tequila, limes and reefer and puke up the entire miserable tale like some 5,000 word tequila purged Congolese stomach worm. I have chosen to do the latter.

As you may know, Obama's public approval ratings are taking a beating. Millions of his former cult members have awakened with a splitting hangover to find their pockets turned inside out and eviction notices on the doors of their 4,000 square foot subprime mortgaged cardboard fuck boxes. Many who voted for Obama out of disgust for the Bush regime are now listening to the Republicans again on their car radios as they drive around looking for a suitable place to hide their vehicles from the repo man. Don't construe this as support for the GOP. It's just the standard ping ponging of disappointment and disgust that comes after the honeymoon is over with any administration. Most Americans' party affiliations are the same as they were when Bush was elected. After all, Obama did not get elected on a landslide by any means; he got 51% of the vote.

Right now his approval ratings are in the 40th percentile and would be headed for the basement of the league were it not for the residual effect of the Kool-Aid love fest a year ago. However, millions of American liberals remain faithful, and believe Obama will arise from the dead in the third year and ascend to glory. You will find them at Huffington Post. This frustrating ping pong game in which the margin of first time, disenchanted and undecided voters are batted back and forth has become the whole of American elections. That makes both the Republican and Democratic parties very happy, since it keeps the game down to fighting the enemy they know, each other, as opposed to being forced to deal with the real issues, or worse yet, an independent or third party candidate who might have a solution or two.

Thus, the game is limited to two players between two corporate parties. One is the Republican Party, which believes we should hand over our lives and resources directly to the local Chamber of Commerce, so the chamber can deliver them to the big corporations. The other, the Democratic Party, believes we should hand our lives and resources to a Democratic administration -- so it alone can deliver our asses to the big dogs who own the country. In the big picture it's always about who gets to deliver the money to the Wall Street hyena pack.

Americans may be starting to get the big picture about politics, money and corporate power. But I doubt it. Given that most still believe the war on terrorism is real, and that terrorists always just happen to be found near gas and oil deposits, there is plenty of room left to blow more smoke up their asses. Especially considering how we are conditioned to go into blind fits of patriotism at the sight of the flag, an eagle, or the mention of "our heroes," even if the heroes happen to be killing and maiming Muslim babies at the moment. Patriotism is a cataract that blinds us to all national discrepancies.
Much of the rest of the world seems plagued with similar cataracts that keep it from noticing the chasm of discrepancy between what Obama says and what he actually does. The Nobel Committee awarded the 2009 Peace Prize to the very person who dropped the most bombs and killed the most poor people on the planet during that year.

The same guy who started a new war in Pakistan, beefed up the ongoing war in Afghanistan, and continues to threaten Iran with attack unless Iran cops to phony US-Israeli charges of secret nuclear weapons facilities. It's weapons of mass destruction all over again. Somewhere in the whole fracas has been forgotten that Iran has been calling for a nuclear free zone in the Middle East since 1974. Iran has also been consistent in its position that "petroleum is a noble material, much too valuable to burn for electricity," and that nuclear energy makes much more sense, given that our food supply, whether we like it or not, is fundamentally dependent upon petrochemicals and will remain so until the earth's population is reduced to at least half of what it is now. The Iranian attitude has been to use the shrinking petroleum deposits as judiciously as possible.

To which oilman George Bush replied that "There will be consequences for Iran's attitude." Obama has reinforced Bush's sentiment, stating that not only will there be consequences, but that a military strike on Iran "is not out of the question." Although nuclear weapons are in direct opposition to the Muslim faith, 71 million Iranians must have shuddered and paused to think: "Maybe an Iranian bomb isn't such a bad idea after all."

Under cover of being the first "black" president, Obama is looking to best one of the Bush administration's records. And that is causing unshirted hell for anybody two shades darker than a paper bag, particularly if they are wearing sandals (Obama himself being only one shade darker than the bag and given to size eleven black Cole Haans). So far, two million Pakistanis have been, in official US State Department jargon, "displaced" by U.S. backed bombing and gunfire -- which will surely displace a fellow if anything will. A significant portion of them are "living with host families."

Translation: packed into crowded houses ten to a room, wiping out food and water supplies, crashing already fragile sanitation infrastructure, and serving as a giant human Petrie dish for intestinal and respiratory diseases. Many more are still living in the "conflict area." Makes it sound like living next door to a neighborhood domestic squabble, doesn't it? God only knows how many more innocent people will yet be killed in the conflict area of Obama's "war of necessity." You know, the "good war." The war that is supposed to offset the interminable bad one in Iraq, where we continue to occupy and build more bases.

Afghanistan: Grab the opium and run
Then there are Obama's noble efforts to fight terrorism by beefing up troop "deployment" in Afghanistan. Deployment may be construed to mean an American style armed gangbang, in which everybody piles on some wretched flea bitten hamlets for all they are worth, with periodic breaks for pizza and video games.
Now if you look at the deployment of US forces in Afghanistan, compared to NATO country forces there, you'll find them in a nice even line along what could easily be mistaken for an oil pipeline route. One that taps into the natural gas deposits in Uzbekistan and Turkmenistan and, by the purest coincidence, just happens to bypass nearby Russia and Iran. But we all know that "It's about fighting terrorism over there so we won't have to fight it here!" That still plays in Peoria, so we're sticking with it.

At the moment, out-of-pocket cost of America's wars in Iraq and Afghanistan is $900 billion. Interest on the debt incurred, plus the waste of productive resources on the war, pushes the cost to three thousand billion dollars (Nobel economist Joseph Stiglitz). By comparison, the entire 2009 government budget for elementary and secondary education is slightly above $800 billion. Or to look at it another way, how far would three thousand billion dollars go toward establishing energy independence? As Harvard monetary expert Linda Bilmes points out that there is "no benefit whatsoever for any American whose income does not derive from the military/security complex." I sent an email to Obama pointing this out, suggesting that we pull out of Afghanistan, grab the opium and run. I got a nice reply saying that my president is grateful for the input. So there ya go.

Lately there has been a ruckus about our little "slap shop" in Guantanamo Bay, Cuba. Despite Obama's promises to close down, "Cigarland," it is still open for business. Word has it that Cigarland may be moved to an "underused" maximum security prison (one would think a scarcity of criminals for a maximum security prison would be good news, but what do I know?) in the desperately broke community of Thompson, Illinois. Locals there tell the national press, "Sure, put it in our backyard. No problem." Or, "This town is in the prison business. Prisons R Us." Or more bluntly, "We know how to handle these creeps and we need the jobs." It's the kind of job creation Stalin would have understood.

Happiness is a warm tent
But at least the recession is over. This, according to Obama's monetary point man, Ben Bernanke, chairman of the Federal Reserve Bank. For British readers unfamiliar with the US system, the Federal Reserve is not a government agency, despite its agency like name. "The Fed" is an offshore private banking cartel that decides just how much bogus currency can be printed and circulated profitably for bankers without wrecking their Ponzi schemes. And the chairman of that august body has announced that the recession is over. Well halleluja! We can quit rolling our own cigs and buy ready mades, and run recklessly through the Dollar Store scooping up dented canned goods and cheap Chinese tube socks.

That makes us luckier than the three and a half million Americans, most of whom led normal lives a few of years ago, who are now homeless. That includes one million school children sleeping in tents, shelters and other makeshift arrangements, and trying to look presentable each morning at schools that have not even the mercy to let them use the school showers. By the administration's own calculation, the number of homeless and people out of work will continue to escalate at least into the next year. Home foreclosures, and therefore homelessness, "has not topped out yet," says Obama.

But Bernanke has announced that the recession is over. So there you have it. A grateful nation breathes a sigh of relief. And besides, he is right about it being over. The recession is over for the most important members of a capitalist society, the oligarchs and banksters, who have made fortunes off this recession, thanks to our unique economic system, and may now return to their standard garden variety usury.

Economic systems are merely belief systems. I didn't say that. Keynes said that. For instance, if the early Assyrians believed a shekel was worth a jar of wheat, then it was worth a jar of wheat. American style capitalism eventually stretched belief to the absolute limits of fantasy to the snapping point, as regards general credulity. Nobody abroad still believes the dollar is worth folding up and sticking in a wallet, certainly not worth exchanging for a good old fashioned shekel. However, be it shekels or dollars or euros, there is no economic system at all if there is no production. And there is no production if there are no jobs. Hence the obsession with unemployment rates.

The U.S. Ministry of Truth has announced that our unemployment rate is at 10%. I've yet to meet an American who does not know the official unemployment rate is a complete fiction. One half of the unemployed -- the half that has been unemployed for more than one year -- are simply erased from the official count. Poof! The real rate is somewhere around 20%. But if we acknowledged that, we'd have to admit to being on par with Europe's unemployment rate. And by diddle damned we can never do that. Every American fully understands that the purpose of life is to hang onto one meaningless job or another, two of them if possible. And by the state's official numbers more Americans have a white knuckled grip on life's purpose than any of those pussy socialist European nations with their free healthcare, low infant mortality rates and ridiculously long vacations.

But the bad news, which the Obama administration openly acknowledges, is this: Unemployment will in all likelihood go higher. And nobody on earth knows how to reduce it (although no one in the administration is about to acknowledge that). The factories are all but gone and they are not coming back. Not unless American workers are willing to work 13 hours a day for two Chinese yuan an hour, which is about 31 cents. What US factories remain are laying workers off due to high interest rates, and waiting for a lower interest rate policy before deciding if it is feasible to call any workers back into production.

During their wait they can watch hell freeze over. Banks know a fatter hog when they see it. And that hog is the consumer credit business (nobody has figured out yet that consumers need paychecks before they can consume anything, on credit or otherwise ). To that end the Federal Reserve has logically set a low interest rate policy. And in true accordance with banking logic, the banks took the Fed's money, then raised the annual percentage rate (APR) on credit card purchases and cash advances and on balances that have a penalty rate because of late payment. Next they raised the late fee. What the hell? If Americans are on the ropes, struggling to make their payments on time, then the logical thing to do is to stick it to them. Bleed 'em for all they're worth. It's an American free market tradition. We the people do not complain. We expect no mercy. America is a business and the American concept of business is pure ruthlessness.

A Deutsche Bank analyst tells me a near term worst is yet to come. Bank failures and home foreclosures have not peaked. A commercial real estate bust is coming down the pike. He says that, while there will be some minor periodic upswings, the fraudulent value of the dollar is now evident as it falls against every other currency, even the Russian ruble (13%), except those unlucky enough to be pegged to the US dollar. As former Assistant Secretary of Treasury Paul Craig Roberts says: "What sort of recovery is it when the safest investment an American can make is to bet against the US dollar?" My Deutsche Bank friend, who is younger and has a family to think about, has taken what he considers more appropriate action. He's buying gold and moving to an undeveloped Central American country.

But Mr. Bernanke assures us that the worst is indeed over. Despite the outside world's serious doubts, but Bernanke's announcement just might fly in the U.S. We believe whatever our Ministry of Truth tells us. We believed that debt was wealth, didn't we? And we believed in WMDs, and have come to believe warfare is a prerequisite to peace. The saddest thing is that Americans are cultivated like mushrooms from birth to death, kept in the dark and fed horseshit. Consequently, they haven't the slightest idea that there is an alternative to the system in which they labor at the pleasure of corporate and financial elites who own both their government and their every waking hour. That alternative is democratic Socialism. Self governance for the broadest common good. Which the Ministry of Truth has defined for them as fascism.

Healthcare and environment? Ha-ha-ha-ha-ha-ha-ha-ha-ha-ha-ha-ha
I would guess that you have heard about the "debate" over "healthcare reform in America." There really wasn't much debate, just a lot of thuggish behavior and wild tales of geriatric death panels by the right, and groveling capitulation on the left. The "reform" turned out to be a $70 billion a year giveaway to the insurance companies, by forcing those 45 million folks who cannot afford insurance at all to buy it anyway. Taxpayer dollars will make up the difference between what can be wrung out of the working poor, and what insurance corporations can demand and get because they have a throat lock on both of the other parties involved -- the doctors and the patients. As for the doctors, they have played it so cool butter wouldn't melt in theor mouths, and successfully avoided the question of whether their quarter million dollar and up incomes just might be contributing to the exorbitant cost of healthcare. Even with a majority in Congress, the best Obama and the Democratic Party's corporate lapdogs could come up with was total handover to the insurance industry. If this smells a bit suspicious, it is the sweat of cold fear you are smelling. The insurance companies have always made it clear they have billions to spend in defeating and destroying any elected official not on their side.

As for environmental legislation, under the Obama administration environmentalism is pretty much reduced to "cap and trade." In the truest spirit of capitalism, corporations will be able to sell their pollution for a profit, instead of ending it. And even this legislation barely made it through the House of Representatives. Moreover, environmental legislation has had the snot knocked out of it by the economic crash, and opinion polls now show the American public believes the price is too dear. It should be interesting to see what price their children will be willing to pay for oxygen and water.

Goldstone who?
Just when you think your country has reached the limits of raw shame and the outer banks of rogue internationalism occupied by Korea's Kim Jong-Il and Sudan's Omar al-Bashir, it surprises you with some new and worse outrage. America's latest is right up there with holocaust denial in sheer unmitigated abrasive gall -- putting the kibosh on the UN's Goldstone Report. The report documents Israeli war crimes in the Gaza Ghetto, where 1.5 million Palestinians have been held miserable hostages by Israel. Admittedly, leadership both in Gaza and Israel is nothing short of a pack of criminals. But the Israeli attack on civilians and civilian infrastructure such as hospitals and schools, using illegal munitions such as skin melting white phosphorus, was a war crime by every definition. The UN and the world agree that it meets and exceeds the Nuremberg standard that the US established in order to execute Nazis.

But as any American will tell you, the United States has never considered itself part of the rest of the world or in any way obliged to join. So the rest of the world was not surprised when the US House of Representatives voted 344 to 36 to condemn the Goldstone Report. The Obama administration has promised Zionist groups that it will never let the report get to the criminal court. The perps are safe. Zionists everywhere threw their hats in the air and cheered. The AIPAC boys at the back of the room nodded in approval: "Now tell us Congressmen, who's yer daddy?"

I might add at this point that I am not one of those conspiracy freaks who see Zionist plots behind everything. The Zionists are but one of many backstage operators with a death grip on some aspect of U.S. policy. Frankly, of all the greaseballs and thugs muscling US domestic and international policy, I fear the Wall Street and the bankers far more than I fear any Zionist (except maybe that spooky shapeshifting motherfucker, Rahm Emanuel. Brrrr!).

In any case, most Americans have never heard of the attack on Gaza or the Goldstone Report. They were prevented from hearing the outside world's news coverage of the grisly two week long specter. Residing in a free Central American country at the time, I was fortunate (or unfortunate) enough to hear the daily dispatches from inside Gaza, despite Israeli efforts to suppress them. About the only place the Zionist misinformation machinery really worked was in the United States, where it successfully repressed media coverage of Israeli atrocities and genocide. Not that it required great effort. American politicians and media long ago learned, as a client state of Zion, to look the other way. Or if that is not possible, to support one of the prepackaged lies conveniently provided the U.S. media by the Likudnik media management apparatus. "And besides, weren't the Palestinians the fuckers who danced in the streets after 9/11? Screw 'em! We now return to Cable News coverage of last night's America's Got Talent winners, the ZOOperstars!"

The man with the plan
The same day the assault on Gaza began, January 4, 2009, president elect Obama announced he would create or save three or four million jobs during his first two years in office. Ninety percent of them were to be in the private sector, of which about 400,000 would be in building roads, bridges, schools and broadband lines. Another 400,000 were predicted in solar panels, wind turbines, fuel-efficient cars; and one million in healthcare and education. The key term here was "jobs saved." Any job not lost apparently goes in the jobs created column. I'm rather math impaired, but it seems to me that with real unemployment at about twenty percent and rising, and job losses predicted by the administration to continue for at least another year, it's hard to see how the claim can be made. I suppose that as long as three million jobs remain in the US economy, Obama can claim to have saved them. I'd be the first to admit it's all over my head, and a damned good example of why I am not suited for public office. Then too, I never did understand Bill Clinton's surplus either. Political math is done in some fourth dimension anti-space where terrestrial rules do not apply.

One thing I do know is that for every dollar a worker would earn under Obama's plan, a capitalist corporation employing the worker would earn almost two dollars. That Mexican guy balling sod along the new highway's median strip for the contractor may be making eight bucks an hour he wouldn't have otherwise earned. But he is making his employer about $15.50 on the same hour. As a younger man in Colorado I balled sod, hired the Mexicans and passed out the paychecks, so I know. First rule about capitalist math is: The capitalist owner gets to do the math.

So Obama's plan lines more corporate pockets than those of the working man. This being America however, Obama was charged by conservatives with having an anti-capitalist socialist agenda. These businessmen conservatives are more than happy to take the money. But the rule of thumb in America is "Show No Gratitude! Bite the living hell out of any hand that feeds you, on the chance that it may give up more. Maybe even drop everything it is holding so you can grab it up and run while a crowd gathers to stone the alleged socialist."
But the truth is that Obama's jobs would have done nothing to help the economy "recover" anyway. There is no economy left to recover. It moved to China and India. Things such as road projects do not generate capital. Under capitalism roads are worthless unless they make money, and they can do no economic good if there is nothing being manufactured to haul on them.

Likewise education that does not contribute the gross national product (otherwise known as corporate interests) by producing higher wages to exponentially pump up American consumer fetishism is considered worthless. And let's face it, higher education has become, for the most part, another racket. The student is saddled with massive loan debt (again, there is the odor of hyena banker spoor in the air) on the promise of eventual higher wages. Or at least that the graduate will work in a nice warm dry video store and never have to ball sod. Unfortunately, the number of jobs that require "college educated" Americans -- quite an oxymoron, given the caliber of U.S. colleges these days -- is shrinking right along with the Empire. All those jobs middle managing the Republic, such as helping us cheat on our taxes, brainwashing the school kids, and devising sales strategies for beer, grow scarcer by the day. Even book editing and reading medical scans are being outsourced to Asia.

There's a nasty rumor that American medical scans are being read in India by trained Buddhist temple monkeys to save rupees. The US healthcare industry has been mum on the subject. Obama's recovery plan depends on going deeper in hock to the Chinese. For Christ sake, aren't there any of our tax dollars lying around anyplace other than in Wall Street vaults? Apparently not. So the Treasury Department keeps cranking out more funny money to make payments on the pawn ticket for the Empire. Rather like those doddering old Englishmen one meets on estates in rural Kent sporting "The Queen's Own" military ties, we still prefer to think of ourselves as an Empire.

But the Chinese are looking askance, questioning the wisdom of pouring more money down a rat hole, based upon the US Treasury's allegation that the other end of the rat hole comes out somewhere in China and not on Wall Street. Chinese talk shows publicly question American loans, when upcoming powerhouses such as Brazil are so ripe for investment. You can bet that if it's on television in China, the public is being issued an official state sanctioned opinion they may feel free hold as their own.

The big heist
In the end the campaign rattle and prattle about Obama's recovery plan turned out to be moot anyway. Wall Street moved in and heavied up on the whole damned country, in one of the ballsiest heists in American history. It was a stroke of pure genius as theft goes. Following a meeting of the Five Families, Citicorp, Bank of America, Morgan Chase, Wachovia, Taunus Corp., the financial cartels said, "The rip-off is in. We got it all. Now if you don't hand over all the people's savings and assets so we can loan it back to them, the whole flaming ball of shit you call the services and information economy is gonna come down on everybody's asses like a giant meteor. So you can load three trillion bucks for now into the armored cars lined up out front and nobody will get hurt. Or you can watch the national economy shrivel up until the schmucks out there in the cul de sacs and cardboard condos can't even put together cab fare for their ride to the poor house. It's your call Barack."

There are still a few delusional souls out there who believe Obama is trying to do his honest best to fulfill campaign promises, but just cannot get past the pack of vampire financial corporations and cold blooded Republican lizards. Which is true in a sense. He cannot get past the Wall Street pack because he is running in the middle of it. Obama's nefarious relationship with Wall Street's power players has been ongoing for years. It is no accident that Wall Street got to select the members of the president's financial cabinet. My mutton eating friends, it's a sad and sordid tale, one I have neither the space nor the stomach to cover here. Especially since better journalists such as Matt Taibbi and others have written extensively about it in detail.

Last I heard, the banks never un-assed the dough. Never let it circulate in the people's hands or even through business loans. Instead, they declared a profit, divvied it up in bonuses, and congratulated themselves. Indeed, this was the sort of sheer brilliance we have come to expect from the Yale/Harvard MBA crowd. Getting rich by going broke. Then getting even richer by sticking up the US government and the entire American public, and eventually the entire world, leaving 1.5 quadrillion dollar cloud of toxic derivatives girding the world, to hoover up more money for them before imploding like a dark star. And indeed, the derivatives are even astronomical in nature. They represent $180,000 in debt load for every man woman and child on earth (although I cannot understand why, if the money isn't real, why we should consider the debt real). It is impossible to produce our way out of this calamity. There aren't even enough resources left on earth to sustain that scale of production.

For now the financial mobsters have retired to Tuscan villas to savor their haul. The poor schmucks out there in the US heartland are left to devise new ways of hiding the family ride from the repo man. Never once, though, do they doubt capitalism. They figure it is all just a big financial accident. Fate. And that will somehow "work our way out of it," like we always have. These things happen in a dynamic free market economy.

A new mob moves in
To backtrack, that was when the smell of long green flying out of the public -- the insurance industry. Insurance racketeers moved in with their own muscle to fill the void left by the Wall Street gang. The insurance syndicate dispatched its made men and soldiers throughout the halls of Congress, and, voila! They were able to pass the aforementioned $70 billion a year political blackmail job off as "reform legislation." Say what you want to about my country, but pillage and looting have never been so elegantly ritualized, institutionalized and executed.

Realistic people on the left have long known that the last act of American strong-arm capitalism would be a massive gunpoint redistribution of wealth from the public to the owning class through the private financial sector -- which the owning class happens to own. But few would have expected it to be executed under a Democratic majority in both the House and the Senate. Or under a Democratic administration honchoed by the first black president. One liberal blogger wondered aloud, "Imagine what the Republicans would have done had John McCain been elected?" The same thing, brother. The same thing. Only with a different cover story. Both parties exist at the pleasure of the same crime syndicates.

How to join the rackets
As I remember, it was a Mexican diplomat who once told me that graft, theft and bribery are socialized in his and other Latin American countries -- democratically distributed throughout much of society. But in America, he said, this sort of criminal activity is legislatively institutionalized. Only the elites are allowed to practice usury, theft, insurance blackmail and other forms of non-violent looting (violent looting being reserved for oil bearing Middle Eastern countries). The first step in building one of these rackets is to become a legally recognized interest group, in order to access the key Congressional players you wish to bribe or strong-arm into acquiescence or complicity.

The banking mob, the insurance mob, and other criminally organized legislative muscle men, cartels and commodity syndicates, are all officially sanctioned as "interest groups" operating alongside hundreds of others in that whorehouse by the Potomac River.

To list just a few, there are environmental interest groups such as the Sierra Club, which exists so its officers can draw fat salaries and meet movie star environmentalists. There is an interest group for education, which exists to assure the mediocrity of our public schools. Munitions manufacturers are an interest group. Gambling casinos and tobacco corporations are interest groups. There is an interest group to force feed us corn sugar, in order to sustain Midwestern Republican farmers and ensure the future of the ever expanding weight loss and diabetes industries. There are even lobby groups to protect the interests of syndicates in other countries, such as Israel. There is an interest group for everything except we ordinary American pudwhackers. The folks who just want to raise families in peace, and maybe have modest financial security in old age. And there are thousands of interest groups whose purpose is to make damned sure we never get either one.

We ain't mean, just thrifty
Yesterday I watched a CNN host ask two experts: "Is stepping up the war in Afghanistan really the best use of our tax dollars?" The killing, maiming and displacement of untold thousands is discussed in terms of the best use of capital. A dehumanized and monetized capitalist society sees everything in dollars and cents and return on investment. Even infant mortality is rated that way, though seldom does anyone admit it. Saving a black ghetto baby has a low return on investment, according to some human services analysts, as regards their lifetime contribution to the gross national product. I actually heard an expert on a television panel show say this.

Yet Americans sitting in front of their TV sets do not find this one bit odd. Or even mean spirited, much less an indication of a cruel society. No American thinks of himself or herself as cruel, or connected in any way with the world's largest human and environmental killing machine. No American doubts his inalienable right to drive around or run air conditioning or drink wine from grapes grown in Chile at the expense of a national war on the environment and those of the world's people who have been born amid energy resources. If there are things such as cruelty and injustice, we the people aren't the ones doing it. We the voters and taxpayers are not the CIA snatching people off to Uzbekistan and Turkmenistan to be raped with broken bottles and boiled alive to extract those "terrorist confessions" that keep the war on terror alive. We simply finance such operations.

And accountability? Well, on the very slight chance that someday the world will hold America accountable (which will never happen so long as we possess more armaments that the rest of the world combined and are quite clearly willing to use them toward our own ends) we the people can express our shock and disgust as citizens. We good people would never, never, never have approved of all those awful acts. And besides, there is not much the ordinary person can do about such things anyway. Right? Maybe not. But it was Americans who so loudly proclaimed that complicity through silence is no defense, when we rubbed the German people's noses in the grisly filth of the concentration camps and hung their national leadership.

The revenge of Smirking George
We haven't heard much from George W. Bush since he packed up his comics and moved to Dallas. But his policies remain like dog piss stains to stink up the Obama White House. Rendition and assassinations continue, as does warrantless spying on the citizenry, along with other civil liberties violations in the name of the "war on terror."

All of these are terrible things for a president who ran on reform and change to continue to do. But it is the thing Barack Obama and his party did not do, the thing they did not insist upon, that will have the greatest ongoing effect on this country. Obama and the Democrats refused to prosecute Bush and Cheney, ensuring that:
1 -- No quail hunter is Georgia will ever be safe as long as Cheney's pacemaker still functions;
2 -- The precedents set by the most criminal administration in US history remain. Until they are confronted and rectified, America will not to have the opportunity to heal and recover. Honestly speaking though, the patient has been dead since the 2000 election fraud went unchallenged.

Obama's election was the only chance America had to hold the Bush Republicans accountable for their crimes. Now it's gone. Opportunities to exercise moral principles as a nation and a people are rare to begin with, and fast vanishing. At some point they will be extinguished by the exigencies of human species survival. It doesn't take a prophet to know this. Anyone paying attention to planetary population, resource depletion and the eco-collapse understands it in the gut. The mounting worldwide competition for human survival will not allow for much high mindedness. So we should exercise principle and administration of justice while principle and justice are still possible.

There are endless rationalizations proffered as to why Obama has not come within a mile of fulfilling the promise and potential of his presidency, and the Democratic Party is writing more of them every day. Disappointed Democratic voters grab at them, and desperately defend each one on internet forums and in letters to the editor. But we must use our own personal capabilities as free rational human beings to assess Obama, and decide why he is failing. Or not failing. To hell with highly crafted official explanations about "wars of necessity" and trillion dollar blackmail payments.

George W. Bush left office wearing the same smirk he came in with. Perhaps it's congenital. But if Bush was smirking when he left office, he must now be convulsed in crazed hysterical laughter. His gang not only got away clean, but Obama carries on the dark Bush-Cheney legacy. And, almost as if to top the whole black escapade with a cherry of irony, the most inarticulate president in American history is now on the motivational speaking circuit at $200,000 a pop. Never let it be said that the Devil does not care for his own.

Will Americans ever rise up in defense of their own common well being through such things as education, health and a productive peace caring society? Nope. Because it has been seen to that socialism -- the administration of the nation solely for the common good and benefit of all the people without preference or privilege -- doesn't stand a chance in America. For over a century those who have attempted to further socialism have been shot, hanged, burned alive in their beds on Christmas Eve, imprisoned, falsely accused of crimes and falsely convicted, and demonized by the capitalist elites of the corporate state. The cause of socialism has effectively been wiped out in the US. Few Americans can even define the word. Most think it is a political system when it is a social philosophy. Hell, half the socialists these days think it is entirely a political system.

But even if Americans understood socialism, they are too terrified to ever admit to its virtues, much less publicly support the cause. And without free and open public participation in some democratic form of socialism, regardless of the name or label given it, there can be no recognition of the people's common welfare and good. And so the most egalitarian social philosophy ever conceived dies within a nation, with very little chance of being reborn because such an ideal, by its definition, cannot exist within the narrow mindset of bankers and oligarchs. Bush smirks, Obama breakdances in and around the minefield of his false promises, and Wall Street CEO bonuses are higher than ever.

Like I said, the Devil does take care of his own.


ned said...

I don't mean to be disrespectful to all the great work that is done by I&S, but I want to ask a couple of questions. Now that the market decline did not materialise this Fall and you've been wrong on calling the top on a couple of occasions do you think that:
1. You need to adjust your predictions; and
2. Stoneleigh has been talking about Pretchers blind spot being his lack of energy knowledge. Have you ever thought about your 'blind spot', since knowing what it is can help you in your future analyses?
Thanks again

Ilargi said...

"....do you think that:
1. You need to adjust your predictions"


2. Stoneleigh has been talking about Pretchers blind spot being his lack of energy knowledge. Have you ever thought about your 'blind spot'"

All the time, of course. Can't find one.

I know some people don't find that satisfactory, but I don't really mind that. The fact that we expected a crash a little bit before it happens, is not that big a deal. It's the economy we deal with, not the stock markets. That is, other than to say they're still not a good place to be for 99% of the people, because they won't get out in time.

I don't think it's useful to reiterate the same things time and again, so please allow me to quote what I said yesterday:

"[,..] we have never pretended to provide any investment advices; indeed, we've gone out of our way to say that's not what we want to do.

So Prechter is a bit early, and so are we, in our idea of when the shebang will come down. We don't find that particularly interesting.

We look at the economy as a whole, not at stock markets. Which by now are surely not a mirror of that economy.

Jobs numbers have become less reliable as the year went on; the latest ones came under fire from all sides, and there's a reason for that.

Housing is a mess building up like hot gas in a balloon. The number of empty properties that are not put on the market is staggering, closing in on 10 million. Houses sell only through the government; there is no real estate market left outside the FHA, Fannie, Freddie and the Federal Reserve.

America has turned into Bulgaria. if you find that pleasant, again, good on you. But you might want to read the John Williams piece that APC refers to at ZeroHedge. I think he has the timing, and with that the run of events, wrong, but his stats are still on, and they have alarmed him more than ever.

We set out, Stoneleigh and I, as we've always said, to try and save people money, not to help them make more.

There will always be many people who think they can read the markets well enough to get out in time before they start losing."

John said...

Ned, when you realize that the FED and the Treasury can play the "paper" shell game with trillions of fake dollars and help the big banks continue the charades they do, I have come to the point that, yes, things will happen that will not be good for the general population, maybe not on an "expected timetable" but they will. TPTB can play alot longer with electronic money than I think anyone can imagine. So keep up your guard your cards close to the vest. Keep reading and reading and if you do prepare for the worst, however you choose to prepare, and better than the worst happens then you will be looking good my friend, you will be looking good. John

cjinvt said...

If there is no dominant energy source do you believe there will be no dominant political power in the foreseeable future? Like there was nothing to supplant the Roman Empire after it fell?

Mike said...

Fantastic piece by Bageant, thanks for posting.

Tip Jar hit, Happy Holidays

Ilargi said...

Carpe diem,

I won't post your attack on Dr. J., so you won't have to look all that silly.

tickmeister said...

The model T got 25 MPG, the modern fleet 21 MPG average. What's that all about?

Further, if it takes 800 men (or women) to transport a person 21 miles in 20 minutes, their efforts would be worth $1,867.00 at a wage of $7.00 per hour.

Based on that figure, the price of gasoline might go up a bit in the near future.

Wolf at the Door said...

"The fact that we expected a crash a little bit before it happens, is not that big a deal."

Careful with that there Ilargi....I agree it is not a big deal if you are 6 months or a year or even 2 early...but if you are 5-10 years early it is a huge deal.

When some of us here suggested at the end of summer that there was no imminent crash you would respond with scorn saying such ridiculous things as we don't understand the underlying dynamics involved to hold that view, ect...

What happened to the "underlying dynamics"? Did they change? Or did you misread them?

This is not about debating when the whole shebang comes down BTW it is about deconstructing the thought processes behind the analysis....not sure why that would be threatening to anybody.

Of course it will all come down eventually but it does not take any special genius or insight to reach that conclusion. For anybody who is even half awake this is already understood as a given.

jal said...

It would have been nice to have been a fly on the wall to listen to Obama and the big bankers.
There is no need. Let’s say the obvious.
The big banks will fund the small banks, (with gov. backing), for all of the forthcoming commercial loans that are due to default.
No ... you won’t see a major influx of shopping mall that are closing. Rather you will see empty malls with no customers.
Hey! If China can keep their empty malls open with no income so can everyone else.

el gallinazo said ...
I didn't think the PPT, meaning the Fed, Treasury, Oligarchs, and their gunsel programmers and mathematicians could control the S&P500 for many months at a time. I thought it was too big. I was wrong. They can do it, and they have done it.

They have forced the pension managers to risk the working person's money on these bad bets, because they already lost so much of OPM that they would be out on the street if they just got a 0.05% return on the capital funds.
You haven’t seen nothing yet!
There is nothing more secure than buying a shopping mall at pennies on the dollar.
Did you forget about the guy who bought a stadium for pennies?
(The following is the Official thinking/justification)
After all ... we all know that recovery is just a few months away. There is all that pent up demand from the addicted shoppers.
Wait and see ... they will not be able to give up their addiction.
el G. said it well and they cannot stop and must continue their innovative financial bailout.
The waves have been destroyed. Tide is receding ... the middle class is stuck in the mud without a lifeboat.
I suppose that we will all have to learn to live, (not just 40 millions), with the same low standard of living as the majority of Chinese.

Ilargi said...

"you would respond with scorn saying such ridiculous things as we don't understand the underlying dynamics"



Alex_tring said...


Thanks for your articles - very entertaining in a slow motion car crash kind of way.

So as I understand it you are forecasting massive deflation for the US short-term. Is it going to be the same in the UK? If you were in the UK apart from leave what would you do. I have £400 K in various banks and about 10% in precious metals (BullionVault). Should I take money out of the banks and put in Government bonds? If the Government defaults on those do you get your money back? Should I buy an extremely overpriced house (I currently rent in the south east) - I would get a smallholding if this were possible.

Cheryl said...


Do you have any guesses as to how early you are with your predictions for a market crash?

6 months, 1 year, etc?

Stoneleigh insists the markets will start to turn any day now, but then she's been saying that since October.

A man of the sheeple said...

Further, if it takes 800 men (or women) to transport a person 21 miles in 20 minutes, their efforts would be worth $1,867.00 at a wage of $7.00 per hour.

At the standard Chinese wage of $0.31/hr it comes to $81.84 - Still a lot more than a gallon of gas.

sv koho said...

Illargi: even though we peakoilers know the basic match of how many dumb amuerican consumers it takes to screw in a steering wheel, it's nice to see such a clean and clear example. 800 people to move one schmuck down a ribbon of asphalt. Who the hell has only 100 hp? Subaru and nissans have 200-300 hp and even little pussy pickups have nearly 400. The math is more like 2000-4000 men(not women?) to move that chunk of iron. Your comment on economic miracle China is rarely heard but I heartily concur. You forgot to mention they have no water. They have ruined vast swaths of good bottom land and are engaged in a massive road building program for their 10-12 million cars/year.Their industrial cities are cesspools and the populace is quite willing to rise up if sufficiently angered unlike the obese flocks milling around in american pastures. I love reading Joe. He keeps the knee jerk liberals honest and hates hypocrites like Barak Obanker.

Ahimsa said...

Bill Moyers interviews Howard Zinn:


scandia said...

@ alex_tring...If I were you with those assets I'd get myself off the island. The long term energy situation and societal discord does not look promising.

YD said...

Two things,

The sugar wars...It doesn't matter if it is sucralose, aspartame, sucrose, fructose or whatnot. They will all kill you. Some faster than others, some will harm some individuals more than others. I personally hate aspartame, I can't stand the flavor, I don't like the way it makes me feel. I don't even like its politics. All the artificial sweeteners (splenda included) and stevia too are too sweet for my tastes. I can tell if it is in there. Sugar works for me. I have had many patients where the single strongest effect was had by eliminating diet Coke. I have patients that are patently addicted to sugar. Both types need to rid themselves of their smack of choice. Don't even get me started on HFCS!
(I & SThis is where I connect this to our current financial world) the world is made up of bitter and sweet pungent and bland sour and amami ups and downs. You can't grow an economy forever, it is just as pathological to primarily feed yourself mostly sweet. Learn to enjoy bitter, you will live longer.

Second the factor of super criticality
When you have a perfectly clean water and you heat it or freeze it for that matter, if there are not imperfections or foreign crystals in it or its container it can get hotter or colder than its phase change temperature, eg hotter than boiling or colder than freezing without changing form. If you have ever experience a super heated flask of water you know this is a situation to be avoided. Just as the saying of the bigger they are the further they fall, the explosive potential is astounding. The thing is , even though you know the water is over heated and super critical you don't know when it will go through its phase transformation. If you are REAL lucky it may drop back into the safe range so you can add a rock or some other crystaline imperfection into your flask before trying again, but seldom will that happen, usually you will reach for the flask, give it just the wrong jostle and then thar she blows.
Few would read this site if they didn't believe the world financial system was super critical, the when is random, the boom...less so.

zander said...

Listen up folks, FOUR failed 10,500 DJI breakout attempts, I would be out right now if I was long ANY stocks or index.

weinerdog43 said...

"A Republican takeover of the House may be the only thing between the U.S. and the abyss."

Sure, if you're a moron.

We didn't get here overnight. In case people have forgotten, (I haven't) we had 8 years of Republic party misrule prior to our current inept administration.

I'll take our current idiot over the prior morons thank you very much.

Coy Ote said...

SV Koho - "They have ruined vast swaths of good bottom land..."
"Their industrial cities are cesspools..."

Actually I think I live right in the middle of the country you are referring to, the difference being my country is head over heels in debt and China has our IOU's and a growing stock of gold and precious commodities.

Nope, no miracle growth coming from there, (or anywhere at this point) but they are hanging together rather remarkably well for a country with with 1.3B souls to control.

Ilargi - I think Cheryl is close to having her Scepticus moment! ;-)

carpe diem said...


Thanks for the link. I knew the name H. Zinn but wasn't familiar with his thinking.
Please take over for me for awhile....I think you may be far more diplomatic! ;)


Nicely put. Since as far as I know I only have one life and one body I prefer to put natural things in it - not artificial chemicals if I can help it. A little raw honey or maple syrup goes a long way and is good for the body and the soul!


Ilargi and Stoneleigh have responded to that question already on several occasions!
They are not psychics! but are generally right on target regarding most things current and past.
Give them a little wiggle room eh?


carpe diem said...

Today's news:

Octopus' (pi?) are seen snatching coconuts from the ocean floor to use to build their shelters.
First time invertebrates are discovered using a 'tool'.
Not as unintelligent as some people may think it seems.

Greenpa said...

ok, kiddies; "ned"; a personality of no interest to anyone, if you check his profile- is "cheryl", and "is" a couple others, as well. yes, id existed since 2006- it says. ha . about 10 ways to do that.

carpe diem said...

Forgot the link:


Greenpa said...

Ilargi: "The human talent to screw up fantastically in the face of free gifts "

A chunk of wisdom well known to the wise for millennia, but otherwise ignored-

An Iriquois story: "Once maple syrup flowed from the cuts on the tree at full strength. But this made the men lazy, and unappreciative; so the Great Spirit added a lakeful of water to each tree- so than men would have to work- hard- in order to get sugar. And now it's appreciated as a great gift."

Other cultures have similar lessons.

Ric said...

YD writes: When you have perfectly clean water....

I've been trying to think what a psychological analog might be to perfectly clean water (no imperfections or foreign crystals). Sounds like an ideology. You have the people who triumphantly insist the phase boundary no longer exists--and those who say it does appear out of touch with the new reality and are branded doom-mongers. When the system finally blows, idealogues scream no one reputable did anything to stop it. Those who see the phase boundary still have no credibility because people will say they were so bad at communicating they could not even express their warnings in a way people could understand. What's needed is a louder ideology....

Psychologically complete expressions; those containing clear-sighted analytic thought, comprehensive feeling, astute intution, and common sense, by nature exist between small groups of people, if at all.

Greenpa said...

zander said...
"Listen up folks, FOUR failed 10,500 DJI breakout attempts, I would be out right now if I was long ANY stocks or index."

My own guess; there are a big bunch of people who have programmed "sell" instructions when it hits 10,500. Yesterday it looked like the instruction was actually for 10510.

Ever been to the circus? Watched the Flying Trapeze act?

This is how it works:

They do simple stuff. We go "wow!"
They do more complicated stuff. We go "Wow!"
They do much more complicated stuff. We go "WOW!!"

Then, they pause. And announce that Elisabeta and Giacomo are going to attempt one of the MOST DIFFICULT STUNTS EVER ATTEMPTED IN TRAPEZE!!

Just for you.

And- they have consistently FAILED to achieve it- in their rehearsals! But they want to try!

They try- and............. they FALL!!! Our EYES BUG OUT!! Into the big net, of course.

Our hearts go out to them! Then- the ring master announces- they will TRY AGAIN! Oh, such wonderful artists.

They try again. AGAIN THEY FALL!! OH. oh, oh. We're captivated.

But wait! They'll try ONCE MORE!! and.............

they SUCCEED!! The crowd goes INSANE!!

Well, the younger ones do, who've never seen it before.

Now. If I was pump and dumping to squeeze the last nickels out of the peanut gallery- I'd love to have the market "fail" to cross the 10500 "barrier"- several times.

Then- probably after Jan. 1, when people are paying attention again, pull the huge institutional sell programs, and instead pump it up to...10,900?

That will pull in huge numbers of folks still on the sidelines- they'll buy at the peak- before it's too late!

Then you sell everything.

These principles for herd management work across all kinds of categories.

Gravity said...

The massive systemic fraud and wartime censorship are two aspects which were not fully anticipated, this exercise of sustainable unlawfulness has made an unnatural extension of interrelated meta-stability possible, primarily by means of further missymmetrizing information dissemination in order to avoid catastrophic bank-runs while deliberately misalligning or destroying the marketable price-mechanisms that should have caused deflationary decimation by now.

Bryan McNett said...

>I'll take our current idiot over the
>prior morons thank you very much.

If their actions are the same, why do you care at all?

Greenpa said...

tickmeister said...
"The model T got 25 MPG, the modern fleet 21 MPG average. What's that all about?"

Physics, partly- Model T weight: 1400 lbs; avg car today; 3-4,000 lbs.

Plus "acceleration" - the T took off like a fat cow; the average car today like a fast horse. Costs a LOT of fuel.

There are more reasons; but that's a good chunk.

Greenpa said...

carp per diem: "First time invertebrates are discovered using a 'tool'."

Be very wary of "FIRST TIME!" science headlines; 90% of them are garbage; foisted by a grad student with narrow education and passed by a "science writer" with none.

Octopi have been observed using tools for at least 40 years; primarily "sticks" to pry things out of holes.

This coconut thing IS very cool, though- take a look at the video; it's astonishing! Tool/schmool- the coordination needed to move like that is incredible.

jal said...

A gravity
duh ...did you just say what I said?

"The waves have been destroyed. Tide is receding ... the middle class is stuck in the mud without a lifeboat."

gpp said...

The financial problems of the western world are only the symptom of a deeper disease:

a general decline in the quality of the individual citizen on all levels:



Shortening of attention spans,
primitivization of language,
adherence to absurd inconsistent belief systems
(e.g. what do you think of people who gather at a 911 truth lecture and hear "irrefutable" proof that their own government is out to kill them in large numbers with great amusement in the audience and on part of the lecturer, then go home and do absolutely nothing.)


Economist Buiter has stated publicly that it would be a very strange state of mind for a rational economic agent to feel a moral obligation to repay debt.
In other words rational economic agency has no moral dimension.

I do not need to remind you of the widespread corruption at all levels of society. NewSpeak wherein the words mean anything (and therefore nothing) is tolerated with oily ease. Lies and deception come completely naturally. Each falls in line according to general expectation (from the lowly appraiser to the lofty supreme court judge).


Decades of "education" through commercials and social engineering by large corporations have bred a hedonistic consumer that views itself as the crown of creation and its own good as the absolute imperative.

This creature is incapable of sacrifice, subordination to greater goals, enduring effort and recognition and adherence to principles.

It operates in a purely opportunistic fashion.

Every undertaking by such men must fail. It is at first announced with pomposity, then carried on feebly, finally abandoned.

A society is only as good as its citizens. The citizen of today is a hollow man with feet of clay.
This reality carries more import than unemployment rates or debt levels.

TechGuy said...

"China has no domestic energy sources it can readily and swiftly put to use. It has to import all of its energy except for coal and a small amount of uranium."

Well thats not correct. China Domestic Oil Production was 3.8 mbpd in 2008. The US isn't significantly better at about 4.9 mbpd.

If the US economy collapses there would be a lot more supply available to China. In the comming years I suspect we will see a collapse in US oil imports as the commerical airlines go out of business. This has the potential to free up mbpd of global production for China.

Currently China domestic demand is soaring. Its growth in domestic consumption has exceeded the contraction of exports to the US. China now sells more cars in China than the entire US market for cars. Although I doubt it can be sustained beyond the next three years.

Over the long term, you are correct about the plending big energy crunch. The energy crunch will bring an end to global industialization. The big question I have is how with the oil addicted west react to a sudden loss of its huge oil imports? I believe the odds favor a full scale nuclear war as hungry, cold and desperate population demand military action to go get them their oil fix no matter what it takes. Consider that drug junkies will do anything to get their next fix. If someone is standing in their way, they will kill them to get their fix. Oil is no different.

snerfling said...

I&S correctly identify the political manifestation of this crisis, yet revert to analyzing economic elements as if they were the determining factors.

The math is simple: currency, in all shapes and forms, is dwarfed by the sheer size & scale of the credit derivative bubble.

Logic would indicate that even a very small decline in the value of the real property underlying these credit securities would/should completely swamp even a rapidly expanding stock of money.

Hence, the endless debate regarding deflation v inflation, with some like TAE concluding that the dog is simply too much for the tail to bear.

However, and this is a big if, what if global central bankers can read statistical reports just as well as our hosts, and have patiently explained to their dimwitted "leaders" that unless they undertake some very drastic action, the game is up.

Now what? Why, now we're back in the political arena, right where we started. If the world's leading economies (US, EU, Japan & China) have concluded that existing savings (the asset offset to all those huge unpayable liabilities) are going to have to be written off, then what we've got is a political decision to devalue the world's money stock by some incredible factor.

That's a political decision, not a economic one. It also happens to destroy the I&S thesis. It doesn't mean good times are here again; it just means there won't be a complete meltdown crash. You still may want to secure your doomstead, because amongst the many claims that will be defaulted will be around $50T of unfunded liabilities which go by names Social Security, Medicare, etc.

snerfling said...

@Gravity. Exactly - politics trumps economics.

I&S advance the argument that this is primarily a political crisis, yet people complain they're not getting their long anticipated economic crash.

Word to the wise: a hiker will cut off his arm with a pocket knife in order to escape & have a chance at survival, rather than just sit stuck awaiting death.

We haven't even yet begun the hacking nor QE^x. The next stage of this farce isn't the S&P crashing, but rather large-scale social-welfare program cuts combined with massive make-work projects.

Coy Ote said...

carpe diem - " A little raw honey or maple syrup goes a long way"
Yes, and don't forget molasses, great in coffee, tea, and on such as pancakes.

Gravity 6:pm - Right! You took the words right outa my mouth. ;-)

Greenpa - I liked your circus analogy. But watch out for this..."Then- probably after Jan. 1..."
The Cheryl/Ned hermaphrodite will come at you with claws bared if it doesn't happen! ;-)

Frank said...

@Greenpa A story for our "enlightened ones". The Iroquois pounded the crap out of a maple tree with a stone tomahawk and killed it in a decade. It was the European exploiters that learned to use an auger and a spout to tap the same tree for a century and a half. Unlike the the sanctimonious Swiss day grabbers, the Hodenoshonee (sp) have not been too good to learn the lesson.

nyle said...

Respectfully disagree on China:

As global warming shifts the temperate belt northward (4 degrees C. by 2060 some now say), Siberia becomes much more accessible. Siberia is 1/10 of the planet's landmass, with only 32 million occupants, most in the far South along the railroad. Much of Russia's wealth is locked up underground in Siberia, further from Moscow than Beijing. I think China will push North, rolling through Mongolia, all the way to the Arctic ocean, and then take over Russia's undersea mineral claims as well.

To do this effectively, with minimal losses, Russia needs to be attacked financially. That is easy. Russia is number one in natural gas reserves and depends heavily on sales of gas to Europe for its government funds. Iran is number two though. A pipeline across Iraq from Basra to, say, Haifa, could transport the gas in Khuzestan. Chevron and Total already have a joint venture planned for development of Iranian gas from that region.

If Iran were surgically deprived of Khuzestan and Baluchistan provinces, neither Persian and both the object of Cheney black ops for years, Israel, Jordan, and Europe would benefit, Russia would take severe damage economically. Which would weaken it so much that China could grab Siberia, the prize of the century.

I think all the players have signed on to this deal, which will also include a US takeover of Iran's allies Venezuela and Cuba. All we need is another false flag attack, which would certainly benefit the Democrats if it occurs on their watch.

Agreed, the Kabuki has been about resources for a long time. I just see different moves.

The book 1421 documents a push by China, then the most advanced country in the world, to set up a tribute empire. It was aborted by internal political conflict in 1428, after which China turned inward. Not quite 600 years have gone by and they have resumed the expansionist persona -- simply a pause between acts in the play of Chinese history. The Chinese are an industrious, inventive, and disciplined people. We underestimate them at our own risk.

NZSanctuary said...

Dr J from yesterday...


The bit between 8:55 and 9:55 pretty much sums up the whole thing.

As for smallpox, try stuff from the late 1800s till the 1930s, such as this: http://www.archive.org/details/centuryofvaccina00tebb

Greenpa said...

China has one opportunity, herd-wise, that is generally not recognized.

They loathe Japan.

Mostly, at the moment, because of the truly hideous atrocities of WWII; but even before the modern era, they've despised them, racially and culturally.

Ergo: Japan is a beautiful example of how NOT to develop an Asian society. It's really pretty obvious at this point- ape the West- and you wind up screwed.

There's currently a huge push in China to follow that path- but particularly with the example of Japan to scorn- it's not impossible that China might reject the new drive to mimic the west, and pull out of the dive before maximum destruction.

Another big opportunity looming for China- they're building nuclear power plants faster than anyone- and right outside cities.

One good nuclear accident- a sure bet, to me (the head of nukes in China has disappeared- arrested for corruption regarding nuke construction; and he won't be the last) - will bring that to a crashing halt, and generate a good lasting revulsion against the forces that took them there.

Imagine if they are able to escape, eventually, total consumerism/materialism. That would be interesting.

Emma said...

We're finished.

Dr J said...

NZSanctuary - a dated 60 Minutes segment on aspartame and an anti-vaccination screed published in 1898?!

Like I said, I think you and I have different views on what constitutes evidence.

Dr J said...

Re smallpox:

Prior to the launch of the WHO eradication program in 1967, 10 - 15 million cases were occurring annually resulting in 2 million deaths and many millions disfigured.

"What eventually eliminated smallpox was the combined approach of using mass vaccination to reduce disease incidence so that detection and containment could eliminate the remaining endemic foci (Brilliant 1985)"


Using this approach, within 10 years, the disease was eradicated. The last case was reported in 1977.

Dr J said...

From the WaPo:

U.S. gave up billions in tax money in deal for Citigroup's bailout repayment

"While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits."

A shell-game by any other name!


NZSanctuary said...

"California will not tolerate any type of terrorism against any leaders, including educators,"

Uh huh. Not far to go before all protesting is labelled terrorism.

el gallinazo said...

Greenpa said...
"ok, kiddies; "ned"; a personality of no interest to anyone, if you check his profile- is "cheryl", and "is" a couple others, as well. yes, id existed since 2006- it says. ha . about 10 ways to do that."

Well, you're the biologist. Don't hyena queens grow false penises also?


I have been thinking about DY's supercooling / superheating analogy to the economic system. Yeah, anyone who has blown a reflux condenser filled with concentrated acid off a lab ceiling always keeps a small cup of boiling chips near by. But I think the purity analogy breaks down. The only thing pure about the current global economy is that it is built on pure bullshit. But what they have in common is a huge entropy imbalance. The global economy implosion delay leading to this huge entropy disequilibrium is not built on purity but temporal inertia. But the analogy holds that when she blows, it's gonna be quite a show.

The most common vehicle on the road generically in the Costa Rica boonies is the 125 cc, 4 stroke, 1 cylinder motorcycle. Same for Nepal when I was there in 2001. Typical peak hp is about 6 at 10,000 rpm. This is partly because if you move up to 200-250cc, the price almost doubles. I am the newly proud owner of a Yamaha. I went Japanese; the Chinese are pretty enough but just don't have the quality. It seems to have all the bells and whistles including front and rear directional signals, electric start, mag wheels, and a front disk. Typical weight about 110 kg. (Double that with obese rider added). It's quite amazing what these little things can do. Cost new in this high duty country for a Japanese 125cc bike is about $2200 and Chinese about $1700, all included with minimal liability and registration. Cheapest Yamaha I could find on the web in the USA was a 200cc for MSRP of $4200.

snuffy said...

More interesting comments from G. Celente.What starts to sound over the top seems to hold more and more water as the time goes on...the fact he called a few of the "interesting" occurrences the last few years only adds a bit of exquisite tension...What he points out about the working folks KNOWING how they are being creatively financially raped is why I agree that we have some real heavy civil unrest ahead.My friend @ work disagrees...he thinks TPTB remember what happened when the french let it get too far...and lost their scalps.I think too many have made the mistake of believing their own propaganda and ideology and will smile as the train de-rails ....And just wont comprehend what will happen when we suddenly are all living in a third world existences... And they spend the rest of their lives as a target.

I dropped out for a couple of days to pay attention to the meat world.House repairs.Water system repairs.Repair repairs...I am only thankful I know the systems...[because I built them{smile}..]

The gradual disintegration of "the machine" is becoming visible,if you know where to look.Our gentle hosts have the skill to show much of what can be seen in the world of banks...but I see the small things that tell me....
A niece who just became "homeless"...[landed on her mothers couch..]too small of jobs,too much bills.Hubby is moving around trying to get work.

My company has shed 50% of the workforce.Every day I expect a layoff.One day I will be right.

More beggars...even in the cold& rain here

People I speak with KNOW the "recovery"is bullshit.

And people are bone mad.They are not talking.They are thinking.And getting more pissed off every day

My friend thinks O-man has told them "Its time to give it back boys"...and there has to be something for the folks on the bottom...I think hes going to find out they will give nothing,and try to take it all....and will bring on themselves a rage of biblical proportion...The ones who wrote that 4th turning had some interesting "Ideas" that may hold more water than just a pleasant theory to debate on a a warm summer afternoon....

We,as a nation...are sliding off a cliff,and I see no way,absolutely none,that we can hope for any kind of a good resolution...even a "controlled"collapse that will not involve a lot of pain,and hurt and poverty&death for the majority of Americans,as well as the rest of the world.

sleep,and no dreams please..


el gallinazo said...

Joe Bageant

"Now if you look at the deployment of US forces in Afghanistan, compared to NATO country forces there, you'll find them in a nice even line along what could easily be mistaken for an oil pipeline route. One that taps into the natural gas deposits in Uzbekistan and Turkmenistan and, by the purest coincidence, just happens to bypass nearby Russia and Iran. "

Sounds plausible, but I just spent 15 minutes looking at a map of the area and I don't see any way of getting a gas pipe line west of Iran without going through Iran or Russia or going under water. Am I missing something obvious? I don't understand the the national ownership to the sea floor of the Caspian. It's surrounded by 5 countries. You could physically lay a gas pipe line from Turkmenistan under about 300 km of Caspian into Azerbaijan, Armenia, Turkey, and then into Western Europe. Any opinions about this?

Alex_tring said...

Scandia - leaving the country is not really an option.
Ho hum....

el gallinazo said...

When do the USD carry traders panic? 80?

carpe diem said...

Thanks Greenpa,

I'm not on intimate terms with too many invertebrates and was not familiar with their antics! nor do I eat them I might add :). I did see the video and found it amazing. One report I read said it was their way of building a shelter. From the video it seems it's a form of armor. Either way it is facinating. Nature (Gaia) in all of it's myriad of forms is awe inspiring.

carpe diem said...

Coy O,

Blackstrap Molasses also contains B6, selenium, calcium, magnesium, potassium and iron. I personally prefer m.s. in tea and pancakes, organic of course ;). Raw honey too is full of vitamins, minerals and enzymes.


Like the carp per diem. Very cute!

I also wonder if on some level (perhaps subconscious) the Chinese resent the Japanese because the Japanese have taken refinement and raised it to an art form (unlike the chinese). The chinese of course had the tea ceremony, Ikebana, gardens, Kaiga brush painting, etc. first. The Japanese imported these things and then turned them in to something of exquisite beauty. The presentation of Japanese food, packaging etc. is unrivaled. I wonder if the Chinese aren't just a wee bit envious of their neighbors having borrowed these things from them and then turned them in to something considered sublime by many around the world.
Just a thought.

carpe diem said...


Nobody has mentioned Raw Agave Nectar as one of the best and most delicious natural sweeteners. It is extracted from the heart of the Agave cactus.
It is 100% organic, produced at temperatures under 118f to maintain all of the vits and minerals AND is very low on the Glycemic Index. You don't need much of it as it is very sweet. Completely 'natural' and has a wonderful taste with subtle molasses tones.

Ilargi said...

Yegor Gajdar died overnight. He was responsible, in this mid-thirties, as Economics and Finance Minister under Yeltsin, for bringing the shock doctrine to Russia, selling off a large part of the nation's most valuable assets to a bunch of gangsters now known as the oligarchs.

Jeffrey Sachs, who now plays Jesus in Africa, was heavily implicated, both in Russia and in other Eastern European nations, in bringing in the Chicago school shock therapy.

Yeltsin, Sachs and Gajdar are gangsters themselves. Unfortunately, Gajdar doesn't seem to have suffered too much on his deathbed.

carpe diem said...

From CBS -2005


The 'Intelligent' and 'wise' usually err on the side of caution.

Now how's that for diplomacy?


lord.bacon said...


Questions about your vs. Stoneleigh's analytical approach to the economic/political clusterfuck.

In the past, I've sensed an unspoken difference between you and Stoneleigh on the issue of technical analysis tools like Elliot Waves.
I got the impression that you read a lot of things, synthesize what it all suggests, and then reach a kind of gut-level impression of where things are headed and on what time frame they're headed.
Stoneleigh on the other hand doesn't really pay much attention to the ebb and flow of daily events since she doubts the validity of most of the reported numbers and instead focuses on Elliot waves for her analysis of near term events.

scandia said...

@alex_tring...I am not in a position to move either!
Ho hum indeed!
I am not an investor so others on the board may advise as to what to do with your cash.
I keep checking Stoneleigh's article on the sidebar about building a lifeboat.
If I lived in the UK I would look for a mid size community with adequate water supply, a council with a minimum debt load who has paid attention to maintaining infrastructure and like minded people.
I would get out of London as I foresee much suffering there in the future.
I would ensure that I do not live in one of the flood risk areas, not too near rising sea levels but near enough to sail away should that be the only remaining option. Having a boat one can live on in case of emergency could provide enjoyment in the meantime.
Good luck to you!

scandia said...

Citibank being absolved of taxes due by IRS is an interesting outcome in light of the efforts the IRS has made to force Swit and others to reveal names of US citizens not paying taxes. Its like Citi is the favored child in the family.
Now, if I were Swiss, I'd be having a rethink.
I also note that prison for Guantanamo inmates in Illinois is very big. Must be lots of empty cells. Wonder who'll get to reside in them? Not Citibank, that's for sure.

zander said...

greenpa said.....
"ever been to the circus"

I agree, only I think it's possible the circus arrived in town at 10,000 and the scenario you outline has brought us to 10,500.
Not a market participant myself, just an observer, post was in response to the Cheryls, Lord b's et al who use every statisic and movement no matter how trivial to weaken the strength of the TAE viewpoint/argument which seems pretty rock-solid to me - even though where I live in scotland the house prices (honestly) are still near bubble levels and have dropped very little, (jobless no's rising steadily now though)- and I can see this thing coming clear as day, just don't know what it's gonna look like when it arrives.

Woe betide us should either of our predictions be wide of the mark ;)

back to lurkerland


Ilargi said...


Makes me think of Dave Rosenberg's Special Report on Canadian Housing this week, which contains this little list:

•Real GDP -3.2%
•Employment -1.5%
•Retail sales -3.3%
•Shipments -18.6%
•Orders -18.4%
•Exports -18.2%
•Personal income -0.8%
•But home prices are up 22%.

Go figure.


scandia said...

On further Citi reflection, not only the Swiss but Joe Public should be having a rethink on US tax rules. Why not forgive the gander as well as the goose,eh?
Yes, I know I have to relinquish fairmindedness...Hard for me to do so when the " be fair " admonishment is deeply ingrained.
Must be a god-like feeling to decide who pays taxes,who doesn't and ,most importantly,who pays somebody else's tax bill.
I guess that is what lobbyists do?
Also seems quite unfair that Citi shareholders are not held accountable to pay the debts/taxes incured by their chosen investment vehicle? Is that a totally unreasonable idea?

Ilargi said...

Person of the Year 2009

The story of the year was a weak economy that could have been much, much weaker. Thank the man who runs the Federal Reserve, our mild-mannered economic overlord

Now why oh why can't I stop thinking: Shoot Santa, Shoot Santa!!!
A bald man with a gray beard and tired eyes is sitting in his oversize Washington office, talking about the economy. He doesn't have a commanding presence. He isn't a mesmerizing speaker. He has none of the look-at-me swagger or listen-to-me charisma so common among men with oversize Washington offices.

His arguments aren't partisan or ideological; they're methodical, grounded in data and the latest academic literature. [sic!] When he doesn't know something, he doesn't bluster or bluff. He's professorial, which makes sense, because he spent most of his career as a professor.

He is not, in other words, a typical Beltway power broker. He's shy. He doesn't do the D.C. dinner-party circuit; he prefers to eat at home with his wife, who still makes him do the dishes and take out the trash. Then they do crosswords or read. Because Ben Bernanke is a nerd.

bluebird said...

If Citi doesn't pay taxes, that leaves more money for bonuses?

Ilargi said...

Joe Weisenthal at BI has this nice angle:

"Stop and think about the fact that Time Magazine just awarded its Person of the Year award to a man with a 21% approval rating, according to Rasmussen.

It raises the question: is Ben Bernanke the least-liked Person of the year of all time?

Probably not quite. Hitler, Stalin, and the Ayatollah Khomeini have all won the award."

Shoot Santa, Shoot Santa!!

Caith said...

Re: everything going to hell but house prices still rising

Well, if you have a ginormous banking bonus and you're unsure about future currency stability you might as well put it in housing. It guarantees you whatever the rest of us can pay as rental income, and means we still can't afford our own houses. Looks like a good way of maximising future income streams to me.

snuffy said...

One quick point before work...Have you noticed how fast the word "terrorist"came out when those college type went nuts...I expect to see a lot more actions like that...and right where TPTB live...time for more popcorn.Payback is a bitch ain"t it? GO STATE!!!


M said...

Why do posters such as Cheryl-- especially when things look so rosy from that comfortable chair she claims to be sitting in--
Monday morning QB prior economic forecasts only to turn around and ask for more predictions?

Intellectual laziness and/or a certain type of agenda comes to mind.

Get out of that chair and stand on your own two legs. You won’t need to ask questions of the same two you previously dismiss.

sv koho said...

Techguy: I'm glad you brought up the point that China has domestic production which meets a large percentage of its oil needs, so far. I think Illargi meant JAPAN instead of China. China has been very successful bidding for exclusive rights to oil production and thus pulling it off the world market. They have the right to do this just as does Exxon and anyone else. But the collapse in airlines will pull very little oil off our transportation plate as jet fuel is a tiny percent of the 18-19 mbod we use. And nuclear weapons are not the fear you make them out to be. They are well nigh useless as weapons of war. The use of them could turn the world into an ashtray, and really who would use them unless of course you wanted to cast off your earthly pale and beat it to that planet full of virgins.

Ilargi said...

You people in that sugar conversation should have your heads examined. Sugar or no sugar is the last choice you need to worry about. A bunch of unwashed old ladies is what you are.

oilwelldoctor said...

Mr. Ilargi,

always enjoy your writings. Thank you, and yes, I sent you check.

I hope you are wrong btw, but I bet you feel the same.

Got a sick well in Aktau I am minding, gotta get back.

Best wishes,

Steven said...

There can only be a free lunch for so long, eventually we'll have to pay the piper for these decisions. And I feel that until the govt addresses the basic structural problems in our financial system of too much debt, we will not have a sustainable recovery. So while the stock market can stay irrational in the shorter term, in the long run I believe it will go back to reflecting the fundamentals of our boom and bust economy. And that's why I continue to feel that for long term investors a better portfolio allocation is in cash and gold. I think the gold price will continue to rise due to a lack of faith in central banks' policies and in fiat currencies. I recently read a good article on this topic called Gold Price Wobbles Under $1,130 But U.S. Dollar Future Bleak, which discusses the relationship between the dollar, the gold price, and gold mining companies as a result of the Federal Reserve's monetary policies. I thought it was especially helpful for investors to read to get a better sense of the relationship between these asset classes given all the uncertainty in the economy.

el gallinazo said...

Jeffrey Sachs passes himself off as a caring Librul. At least Uncle Miltie didn't hide the fact that Pinochet was his tennis partner and he was bound shortly for hell, or the religious among us can hope.

I have held a hot hatred for Time Magazine since the 60's Vietnam War days. They are consistently wrong about everything. Too bad they are a glossy thereby losing the potential for their one redeeming function. I think Hitler had far higher world positives when he made Man of the Year than Bernanke does. Throw in O-nan winning the Peace prize, and George Orwell must be grinning sadly where ever he is. That Time is supporting Bernanke just indicates that they want their man in purported control for the next four years as they ride the nuclear bomb into the ground. He will play the role of Slim Pickens in the final scene of Dr. Strangelove.

My opinion is that the difference between our hosts is a lot smaller than some of the critics here may project. Stoneleigh is also very much a "fundamentalist" over the long hall. She doesn't have time to read the world press the way Ilargi does because of her day job, but she, of course, reads the TAE as well as all the rejected articles that don't quite cut the mustard. She is just more interested in large herding instincts of the human species, partly as a reaction to the "rational market" BS we hear so much about, and is also interested, as a former physical scientist, in probability theory outcomes. My opinion anyway.

Robert said...

From Wiki:
"Further research resulted in a 1969 study which found the common 10:1 cyclamate:saccharin mixture to increase the incidence of bladder cancer in rats. The released study was showing that eight out of 240 rats fed a mixture of saccharin and cyclamates, at levels of humans ingesting 350 cans of diet soda per day, developed bladder tumors. Other studies implicated cyclohexylamine in testicular atrophy in mice. On October 18, 1969, the Food and Drug Administration citing the Delaney Amendment banned its sale in the United States."
---I was not pleased with the ban on cyclomate. The diet drinks made with cyclomate were tasty, at least in my opinion. I actually put in a stockpile of the original Fresca- better than wine. Alas it is all gone. Today my favorite is diet orange. I buy gallons. It is cheaper that bottled water Somehow I am not influenced by the fright mongers and remain in near perfect health as I approach my 79'th birthday. I do exercise and try to keep my weight at a reasonable level which gives me an excuse to avoid excess calories of all sorts.
Robert Wilson MD

sv koho said...

El gallinazo re: Your comment on Joe's pipeline across Afghanistan. Pipelines through Afghanistan have been in the pipeline so to speak for at least 50 years going every which way. Have you forgotten that old GWB had Taliban leaders at the ranch in Crawford in the 1990's discussing just that? The pipeline Joe I think is referring to is the Trans Afghanistan Pipeline from Caspian Sea countries south to the Indian Ocean passing through Pakistan and India. Good luck getting agreement on that one. A lot of these pipelines are pipe dreams because they are fragile and almost indefensible. The US military spends most of its time guarding the world's energy corridors whether in Indonesia, the Horn of Africa or Iraq and Afghanistan. Our invasions and occupation of these countries has nothing to do with terrorism unless of course you want to expand the definition of terrorism to include anyone who is protesting anything against TPTB. I would guess that security is being beefed up at mansions in the Hamptons, the GS tower and the Capitol because a lot of Americans are getting poorer and poorer and angrier and angrier and with the exception of Yemen, there are more weapons per capita here than anywhere in the world. If I were a GS employee who has received a gigantobonus, I would be getting my concealed weapon permit too, as was recently reported.

Greenpa said...

Re: the recent discussions here about Heisenberg:

"“My act is a parody of a seminar,” he said. “I think my audience is everyone from age 14 who is kind of nerdy to age 65 who is kind of nerdy.”

He joked about linear regression (a rumination about what kind of people post cat videos on YouTube), period doubling in chaos (which he likens to the splitting of behaviors of people as they become more and more drunk) and the Heisenberg uncertainty principle.

He explained this fundamental concept of quantum physics — that the more precisely the position of a particle is measured, the less is known about the particle’s momentum, and vice versa — with a photograph of a men’s room with television screens above the urinals. The designer “clearly didn’t understand the uncertainty principle,” Dr. Lee said."


Dr J said...

Gee, Ilargi, I shower every day and each time I check, the equipment down there is decidedly masculine ;-)

Ahimsa said...

Wow, is one safe from the tentacles of the US Empire anywhere on Earth? Sixteen years ago my husband used an herbal product (Cansema -- currently sold by Greg Caton) on a lesion of basal cell carcinoma and it worked magically.

"FDA Dupes Interpol to Achieve Illegal Kidnapping and Deportation of Herbal Formulator Greg Caton"



"The U.S. Food and Drug Administration today stands accused of taking part in the kidnapping and illegal extradition of a permanent resident of Ecuador, in violation of both international law and Ecuadorian law.

Greg Caton, owner and operator of Alpha Omega Labs (www.AltCancer.com), an herbal products company that sells anti-cancer herbal remedies made with Ecuadorian medicinal herbs, was arrested at gunpoint at a road checkpoint in Ecuador, then transported to an Ecuadorian holding facility to await a hearing on December 14, 2009. Caton was expected to be set free by the Ecuadorian judge at that hearing based on the facts of the case which indicated Caton's permanent residency in Ecuador is legal and valid.

Three days before the hearing could take place, Caton was taken from his holding facility and, with the help of U.S. State Department employees, involuntarily placed on an American Airlines plane headed for Miami. An Ecuadorian judge rushed to the airport in Guayaquil and demanded that Caton be released from the plane, stating that the attempted deportation was illegal, but American Airlines employees reportedly refused to allow Caton to leave the plane, stating that the plane was "U.S. territory" and that Ecuadorian law did not apply there (even though the plane was still on the tarmac in Guayaquil and under the direction of the air traffic control tower there)."

Stoneleigh said...

To me there are very important aspects to the food debate, quite apart from the very real present day metabolic sensitivities some people (such as myself) have to substances like sugar (which would have put me in an early grave not long hence had I not stopped eating it). Of course now we have choices we won't have later. Now there are supermarkets and we can buy whatever we want to suit our own tastes, whether we are Atkins adherents or vegans. Except for those of us with critical sensitivities, we can largely please ourselves.

The present day debate is interesting (to me at least), but the important point, from the perspective of this site, comes in terms of what people need (rather than want) versus what they can store and what they can grow in whatever climate they live in. For instance, the further north you live (at least in my hemisphere), the lower your chances of being a vegetarian going forward, for instance. The growing season is short enough that hunting becomes a far more important component of the traditional life in the region. I think we ignore traditional aboriginal diets at our peril. What people ate in the past was the ultimate reflection of what was naturally available in an area before food imports were possible. Once they are again no longer possible, that is what the people in a given area will have to go back to, if they are lucky and the resources that supported particular foodstuffs still exist (not so for instance for oolichan grease).

People need dietary fats and protein, and dietary fats will be the hardest to come by. People don't need simple carbohydrates, but these are the easiest kinds of foods to store, and therefore the path of least resistance. I would like to see people work on producing and storing, where possible, the right things rather than the easiest things, and understanding the compromises they are going to have to make.

No one is going to have artificial sweeteners, so YD's point about getting away from a sweet tooth is very important, especially for those of us who simply cannot eat sugar. The balance between omega3 and omega6 fatty acids is very important, so people need to give thought to points like Greenpa's (from a while back) on pigs and nuts.

Personally I follow an Atkins type program and that works for me. Had I never overindulged in simple carbohydrates (ie developed a sugar addiction) in my younger years, I would probably not have developed the unfortunate, and permanent, sensitivity I have now. My choices have been narrowed, both by that and by the northern climate I live in. I simply have to plan for that and live with it to the best of my ability. Planning for a constrained future is one of the things we do here.

I would also like to say that I know Dr J personally and find him a fascinating individual. This is not an abstract academic topic for him any more than it is for me.

I. M. Nobody said...

Ahimsa said...

Wow, is one safe from the tentacles of the US Empire anywhere on Earth?

In a word, NO. Oh, MAYBE one could feel somewhat out of reach inside the Kremlin or Mogadishu.

Brian said...

would like to hear your comments on Shadowstats' John Williams: Prepare For The Hyperinflationary Great Depression:



Ilargi said...

El G.

Almost slipped my mind.

For the pipeline data, it's good to remember that both WW 1 and 2 were essentially fought over the region. The central point is Baku, itself the area where the first oil ever was extracted in a commercial sense. Hitler knew all along he'd lose without Baku. And he did. Fischer-Tropsch was not enough.

These days, Baku has extensive refining capacity. There are plans for a sea bottom line from Turkmenistan, but tankers would do for the time being. The (BTC, for Baku-Tblisi-Ceyhan) pipeline everyone was after all the time seems to be pretty much completed. Just a matter of control over the Caspian Sea from here on in. And that will be hard fought over.

jal said...

Re.: Man of the year

The financial system did crash. No one is denying it now.
It caused a huge market meltdown/correction.

Would it have been better not to have interfered and let the system go to a total collapse? (The capitalist solution)

Had the system been left to operate, (bankruptcies), then all savers, (wealthy), and all capitalists with loans would have been wiped out.
By now, you would be seeing those people taking the pitchforks to the bankers.
By now, The regular J6P would be squabbling over portions of cooked rats at a bonfire.

If there would have been a plan B waiting to take over, then ya, but there wasn’t and there is still no plan B.

Ya! Santa brought coal to J6P and candies to the elites.

What could have happened and what should have happened did not happen.

All kinds of chaos situations/scenarios were avoided.

The financial system has not been changed and will cause major political problems in 2010.
Financial Tax Experts, wanting to protect their gains, will not be forthcoming with changes to the tax structures that will save governments.

Socialist saving the capitalist ... that’s okay
Capitalists saving socialist ... heheheh ...
Socialist infrastructures are allowed if they can be gamed for the profit of the capitalists. ( for example ... health care)

The tax loses of 2008, 2009, that will be claimed by the capitalist will cause a plunge in the tax revenues to the point of crippling the ability of gov. to operate.

UK has already announced that it is reducing its military by 10,000.

The political crises is forming.

Get out of the way. Let the "big boys" fight it out.
Prepare your underground economy for your survival.

The Chinese peasants must have some wise words for what is coming.

Ilargi said...

"would like to hear your comments on Shadowstats' John Williams: Prepare For The Hyperinflationary Great Depression:"

Did that a while back, probably Dec 13 comment thread.

el gallinazo said...


The Ecuadoran government should have shot out the tires on the jet liner before it started rolling, and brought in a well armed military platoon or company to the airport to deal with the state department officials.

Brian said...

regarding john williams and his analysis, ilargi said:

Yes, John WIlliams got a jolt of something alright. I wonder for instance how he reconciles his own stats of a falling M3 with his latest predictions. There are many people good with stats that don't do well on vision.

i was thinking the same exact thing... i just thought maybe i was missing something...

thanks for pointing me in the right direction...

Ilargi said...


I do take WIlliams' warning very serious, and I think everyone should. But I also think he, like many others, misses the reason why deflation must first occur. Hey, if only because it is the first and foremost reason to hyperinflate an economy.

TAE Summary said...

* I and S need to adjust their predictions and identify their blind spots; It is difficulty to play the market with unreliable crash dates; Also, my freeze dried food is going rancid; Crash timing is important so that preparation can be JIT; Only losers prepare early

* 800 men can move a car at 60 mph using levers and pulleys; Model T only required 600 men to do the same; This is not progress

* Fed can play the paper shell game for a long time and the electronic shell game even longer; The PPT can control the S&P for months at a time; The Titanic was sold to someone in steerage for $50 just before it sank

* US economy is a dead horse; Even so it it not to big to flail; We will all need to learn to live with a lower standard of living

* The Chinese have no water; They have ruined their farm land; They will steal Siberia; They will be screwed if they ape the west

* All sugars except honey and maple syrup are bad for you and will prevent you from washing your private parts

* Westerners have no intellect, no morals and no will power; Europeans figured out how to suck the life out of a maple tree without killing it

* Dow has failed to reach 10,500 four times; When it reaches 10,900 in January every one will pile in and then the rug will be pulled out; Super heated water is dangerous and explodes when the tea bag hits it

* Octopi use tools to build doomsteads and are smarter than most Americans

* Politics trumps economics; Next leg down will not be the S&P crashing but large scale social welfare problems

* Airliners have diplomatic immunity; On 911 the cockpit of UAL 93 was declared Saudi territory

carpe diem said...

I'm not a fan of Donald Trump in any way however I did find his comments on Larry King yesterday on target. He repeated over and over again that the economy is going nowhere until the banks start lending. He said no bank is lending at this point to anyone - not even to people with great credit.
As I don't follow every detail of what is going on, I wasn't aware of this. I did think they had started lending even if on a limited scale.
What will it take the banks to start lending again?
or will they never lend again?

Coy Ote said...

Ilargi - "...A bunch of unwashed old ladies is what you are...

I remember the line from all the old movies... Oh yeah! OH YEAH!
Well listen mister... I'd rather be an unwashed ole lady than a grumpy ole Blogmaster! ;-)

* Don't forget to pack molasses in your bugout retreat!

Alex_tring said...


Well I live in a town of 120,000. Its a bit too big and too near london. Its reasonably high up though.

Saw my MP for the 3rd time about this peak oil/collapse stuff. Showed the olduvai graph - the one with population falling. She was trying to work out whether this would hit in her lifetime. I Suggested that the government should start implementing plans for rationing. I was told Governments don't do planning!

The problem is that I don't want to move too far from where I am. A property with any kind of land around where I live (south east of England) attached costs more than £1 million (even though half of these have been on sale for over a year and people still don't drop their prices)

I could move up North - my wife's family is from there - but its always raining (which also means the growing season is really short).

Ben Bernanke Time man of the year. The western world has gone completely stark raving bonkers.

carpe diem said...

Scotland's biggest airline goes bust -


scandia said...

Alex_tring...it is discouraging when politicians don't respond appropriately!
England has a within living memory of rationing so I am surprised by her response. Maybe some old plans lying around from the war years that could be useful? Just had a flash idea that a letter to Prince Charles on the subject of ration planning would get his interest?
At least you are flexible,resilient in your current position. You'll spot the right place/opportunity.

jal said...

Re.: BNN and CBC - David Suzuki

Get the video when its available.

It’s been years since he has expressed his anger so forcefully. He’s on fire!
He’s pissed off that there is no real attempt to reduce CO2 emissions.
He is especially mad at the Canadian gov. for trying to move the base measurement from 1990 levels to 2006 levels.

Ed_Gorey said...

Is Citigroup Sinking?

When the oil money starts to yank its deposits, I'd say that's a good sign it's time to hit the eject button if you're a Citi depositor.

Citi seems to be getting in deeper and deeper trouble with its Persian Gulf partners. For example, Kuwait is threatening to yank its deposits:

from the FT.com
"The Kuwait Investment Authority has held internal discussions about scaling back its banking relationship with Citigroup in a move that could include transferring funds currently deposited with the US bank"

Abu Dhabi threatens to sue for "fraudulent misrepresentation" of previous stock sales.

from FT.com:
"Citigroup’s problems mounted on Wednesday as the Abu Dhabi Investment Authority accused the bank of misleading it over a $7.5bn investment"

Now the US gov decides to suddenly halt Citi's plans to pay back the gov. From the NYTimes:
"Two days after Citigroup moved to untangle itself from Washington, the Treasury reversed course Wednesday and backed away from plans to immediately sell a portion of its stake in the banking giant"

aargh! said...

"...how he reconciles his own stats of a falling M3 with his latest predictions.

Come on ilargi, you know how to read a graph, M3 is not falling, it is just not rising as fast.

Anyhow lately CPI has ticked up mainly on energy, while most everything else fell, so a plague on both your houses.OIL rules!


NZSanctuary said...

Dr J said...
"NZSanctuary - a dated 60 Minutes segment on aspartame and an anti-vaccination screed published in 1898?! Like I said, I think you and I have different views on what constitutes evidence."

Comprehensive statistics from the period don't count as evidence for you? Perhaps you prefer cherry-picked revisionist views that toe the party line? Yes, we have very different views.

I work in the publishing industry and with medical textbooks, and I see how lightly and often inaccurately they skim over this stuff.

And you obviously missed the point of the aspartame video completely.

"A great deal of intelligence can be invested in ignorance when the need for illusion is deep" — Saul Bellow

Ahimsa said...

Coy Ote said:

"* Don't forget to pack molasses in your bugout retreat!"

Oh, and a bit of sucanat and that delicious Agave Nectar. Do learn to eat bitter herbs/veggies, such as arugula, watercress and mustard greens. They are yummy and good for your health!

Ahimsa said...

El G,

I suspect only a Chavez or Castro would have the guts to do that!

I urge everyone to learn herbal medicine. I'm making Elderberry tincture, excellent for the prevention and treatment of viral infections. The coming fascist regime will attempt to wipe out alternative medicine.

NZSanctuary said...

Dr J said...
"Re smallpox:
Prior to the launch of the WHO eradication program in 1967, 10 - 15 million cases were occurring annually resulting in 2 million deaths and many millions disfigured. What eventually eliminated smallpox was the combined approach of using mass vaccination to reduce disease incidence so that detection and containment could eliminate the remaining endemic foci (Brilliant 1985)"

Wait, you're referring to a 1980s report? So evidence form the 80s is okay when it comes to smallpox but not aspartame? :)

Now which was it, the vaccination or the detection/containment that got rid of it? According to historical records detection combined with containment/boiling bed sheets/etc works wonders. This is how some smart towns in England virtually eradicated smallpox from their populace in the 1800s. Of course the WHO are going to tout vaccination as the saviour.

I. M. Nobody said...

Coy Ote said...

Well listen mister... I'd rather be an unwashed ole lady than a grumpy ole Blogmaster! ;-)

Caution advised Coy. The grumpy ole Blogmaster decloaked momentarily early this afternoon. He bore a striking resemblance to a Night Elf Mohawk. :)

jal said...

Re.: BNN - David Suzuki


snuffy said...

Well,the axe fell again.The owner personally sent me to have my time "directed"[cut]by the former supervisor.My only thought at this time was at least I can get some work done on the house.I am numb,and tired. My only real satisfaction is knowing whats coming...and knowing they have not a clue...


Stoneleigh said...

Ilargi would like it to be known that he doesn't want anyone discussing diet issues here again. If you have something to say on that topic, you can send it to me at our contact address: theautomaticearth(at)gmail(dot)com. It is an issue I have a great interest in, both as a former biologist and as someone dealing with these things personally every day, but Ilargi feels that the topic is outside the scope of this blog.

Stoneleigh said...


I can think of a lot worse places than Tring to cope with upheaval. It's a particularly nice part of southern England. When I lived in Watford (early 1990s) I vividly remember walking to Tring along the Grand Union Canal (many miles and several blisters, but fun). I still have friends there, and in the surrounding area.

It sounds to me like you are well placed to weather a storm. England will be facing a major one - worse than in most places IMO - but you have plenty of resources. Just make sure you don't lose them to a bank run ;)

Rototillerman said...

What I find amazing in Alex_tring's account is this: he's actually met and had a conversation with an elected representative! Three times! I can barely get my rep's bored staffers to catalog my concerns over the telephone. Bastards.

carpe diem said...


Apropos to your comment @ 8.22pm,

I think a skill that is essential for the times we may be facing is learning to forage for wild plants and herbs which means learning to identify them.
Also helpful is a book or two (or even better a course) on Wilderness Survival. One of the best in the field is Tom Brown who has written many books on the subject and also offers courses on the east coast. One of his finest books is
'Tom Brown's Field Guide to Wilderness Survival'.
Another gem is a DVD by Wildman Steve Brill entitled 'Wild Edible Basics'.


Profound. Many thanks for the Bellow quote.


carpe diem said...


If Ilargi has recently quit drinking and smoking he is bound to be grumpy.
Nobody is perfect and even I have been known to lose my temper at times!
It's a new day.
Tis' the season to be jolly!

Happy Holidays to all :)

Starcade, now from Siren said...

I think the only reason it didn't crash in the Fall is because the cooking of the books has succeeded to a point.

The problem being, ned: It's coming out -- as if oozing out of every pore. I still wonder if we'll be standing come January 25th -- maybe just not in the way I proposed it might go down.

cjinvt: I foresee basically situations in most places where it will be the people with the biggest guns locally basically exterminating anything they don't like. Anything resembling organized government will have to be with that kind of firepower.

Starcade, now from Siren said...

Emma: Yep.

Dr. J: Especially when I can make it pretty clear that, when Schwartznegger tries what I know he's going to try, and will not get a budget otherwise come next July, someone's going after Ah-Nuld...

Protest will soon equal terrorism. Bank on that, if you have a bank left by then.

Ilargi said...

In order to help us all put Ben Bernanke's Person of the Year nomination in the proper perspective, the Associated Press just named Tiger Woods Athlete of the Decade.

JP said...


To be fair to the AP, the award was Athlete of the Decade, not husband of the Decade or some such. Let's face it, Tiger wins a lot of golf tournaments.

*Sigh* You'd think a golfer would know how to keep his nine iron in his golf bag.

Top Cat said...

A different tack on the sugar thing.

Years ago, a good friend of mine, a recovering alcoholic, told me about his own pet theory relating to sugar cane and the New World.

He said that it was his opinion that alcoholism was actually an acute form of sugar addiction. He told me when he was thirteen and had his first couple of beers, he felt like his body said 'wow', the hell with candy bars, I've never been able to get so much sugar/carb into me this quick and easy.

He went on to describe how a lot of folks at AA meetings were noticeable addicted to sugar. They'd eat half a dozen candy bars at a whack at meetings, put ten spoons of sugar in their coffee, that kind of thing. It was actually a running joke at many AA meetings he attended.

This lead him to surmise about the sugar cane business that opened up with the discovery of the 'New World' and it's impact on Europe.

He said Europeans loved sugar at the time but were constrained in consumption of it by price and availability.

New World sugar cane plantations changed that big time.

Slavery was the missing input for cheap available sugar for Europe.

That 'problem' was solved.

The song by James Taylor called "Sugar Trade" addresses this.

"While down in the African slavery trade,
stealing young men to cut sugar cane,
rum to New Bedford and codfish from Maine,
they were building a wall that will always remain.

Oh, the crown and the cross, the musket and chain,
the white man's religion, the family name.
Two hundred years later and who is to blame?
The captain or the cargo or the juice of the sugar cane?"

John Henry Newton was an English Anglican clergyman and former slave-ship captain who wrote the hymn, Amazing Grace.

The song "The House of the Rising Sun" is almost a perfect beat for beat, bar for bar match with the song "Amazing Grace."

Here's a wonderful version of it sung by The Blind Boys of Alabama in that vein.

Chaos said...

I found today's NYTimes article on water pollution in the US interesting, for a few reasons. If you are concerned about water quality, don't miss it. You can check local water systems in your area, well, at least the largest ones. This really points out the value of the Big Berkey water filters, in my opinion. I feel much better cooking with and drinking the filtered water after reading about the many chemicals whose health effects are simply unknown. Efforts to change the situation are, as expected by readers of Tainter, met with great difficulty. Yet another wicked problem...

(I assume readers can find the article on the front page of the Times...)

Coy Ote said...

S&L - "Ilargi would like it to be known that he doesn't want anyone discussing diet issues here again."
Fair enough, (and some of mine was for humorous purposes anyway ;-)

I feel similar about Tiger's award that I felt regarding Pete Rose of baseball fame and the Hall of Fame issue.
OK, niether Pete nor Tiger is a boy scout. If the baseball HOF is about a player's accomplishments then Pete (4000+ hits--best ever) should be in there.
If athlete of the decade is about golfing ability, then the best in the world earned it. Otherwise, no.

As to our economic/political crises I am very glad some of the prognostications, though founded on astute observations, are turning out to be a little belated. That means we all have more time to get better prepared.

One question on my mind concerns PM's. I am hoping for a new contraction in gold/silver pricing--not for investment--just to secure a little more for long term asset security. I or S do you have an idea about that? Board?

Ilargi said...

"Ilargi would like it to be known that he doesn't want anyone discussing diet issues here again."

I'd like it to be known that I never said that. I simply don't want certain people to engage in such discussion, because they have -very- repeatedly and despite -very- numerous requests failed to behave in a civil manner. And I don't want to discuss that any further either.

As for Tiger Woods and Ben Bernanke, they deserve their prizes as much as Obama deserves the Peace Prize.


I. M. Nobody said...

Much attention is being paid to why the market has not crashed just like 1929. Perhaps the reason is actually very simple.

My reading of 1929 was that just about everybody and their brother-in-law had a sheaf of stock certificates in their grubby little hands. Twenty years ago I was informed at a company seminar that almost all stock is in the even grubbier mitts of institutional investors, AKA Grub Staked Gamblers (GSG). The GSG are playing with OPM, so it's just a game to them. When Ma and Pa see trouble ahead they want cash. The GSG only care about their own personal cash, see insiders selling over buying at a ratio of over 80:1. The GSG are the market and have no reason to bring it down. If they do, the pitiful pile of cash would have to be given back to Ma and Pa and the GSG would have to go back to playing penny-ante poker in the garage.

If this back-of-the-envelope conception holds water, the stock market may be among the last things to collapse. As we are often reminded, history doesn't repeat it just rhymes. Forget the DOW, keep an eye on the ratio of clerks to customers at local stores and the responsiveness of online merchant sites. If they ever get busy, happy days are here again.

Cheryl said...

Re: Discrepancy between TAE bank losses and Roubini/Simon Johnson bank losses

Nouriel Roubini and Simon Johnson and the IMF report that US and European banks are sitting on about $1.5 - $2 trillion in unreported losses.

I&S have mentioned repeatedly that there are $10s of trillions of unrecognized losses.

Could someone articulate what accounts for the 10 fold difference in loss estimates. A list of items the I&S are including to come to a total in the $10s of trillions would be nice.

And by the way, I'm not interested in defending my identity with anyone. What a childish waste of time. My husband and I read and discuss these issues all the time. I like to stay informed and I like to know the facts. I challenge my assumptions and I recalibrate them on a regular basis. Sharpen you knives if you wish, but you are wasting your time if you think I'm going to address these immature criticisms any further.

el gallinazo said...

Top Cat

I thought that the connection between sugar and alcohol addiction was a given. Never occurred to me otherwise.

Also, I am finishing up Bill Bryson's A Short History of Nearly Everything (which I heartily recommend to scientists and non-scientists alike) and came upon this wonderful tidbit near the end.

Also found at Lake Turkana by Kimeu was KNM-ER 1808, a female 1.7 million years old, which gave scientists their first clue that Homo erectus was more interesting and complex than previously thought. The woman's bones were deformed and covered in course growths, the result of an agonizing condition called hypervitaminosis A, which can only come from eating the liver of a carnivore. This told us first of all that Homo erectus was eating meat. Even more surprising was that the amount of growth showed that she had lived weeks or even months with the disease. Someone had looked after her. It was the first sign of tenderness in hominid evolution.

The mind reels with the various implications :-)

redcatbiker said...

Top Cat said: Years ago, a good friend of mine, a recovering alcoholic, told me about his own pet theory relating to sugar cane and the New World....

Top Cat, you should know that your friend is a thief: I've read that theory (the same words you have quoted as your friend's theory) in the book "Sugar Blues" by William Dufty.

el gallinazo said...

I think Ed Gorey has probably called Citi's debt rattle pretty accurately. Least we forget, the architect of Citi's demise is also the King Rat who is behind all of O-nan's decisions and appointments, the undoubtable Robert Rubin. To paraphrase Herbert Morrison, the announcer of the Hindenburg disaster, "Oye the humanity!"

Re I.M. Nobody

The stock market is pretty much following the 1929-1935 model other than the first bear market rally has been prolonged. I ascribe this to the manipulation of the Fed which has given the banksters huge amounts of free money to prop the corpse up by arranging price discovery through trading the shares to each other "like unwashed old ladies" handing each other their respective laundries. We all know that the insiders, i.e. the corporate officers of the various institutions who must file with the SEC, are leaving ship faster than rats on the Titanic. Of course this is **their* money.

In regards to OPM, the Fed is also the culprit. They have forced interest rates so low that the pension fund managers, who lost a bundle for their worker drones on the first leg down both in equities and real estate, are forced back into equities or face certain immediate corporate execution.


An initial template for all the bogus shill commenters to I&S:

"I don't mean to be disrespectful to all the great work you two have done, but don't you think your analysis is all fucked up?" bla bla bla

Ilargi said...


I'm guessing your examples don't include potential losses on derivatives. Even then their estimates are very low. It's hard to see through the fog of Bada Bing! accounting, but it should be clear that the losses are much bigger than can be proven using either the banks' own numbers or those of for example the government, parties that have enough vested interest to be seen as talking moral hazards.

Hence, if you count only what can be proven with what's made available, as I fear Roubini and Johnson do, you get a distorted picture.

If all the paper that presently resides at level 3 or off-balance sheet, would be forced into the open, everything would look very different from what is presented.

Coy Ote said...

The number of newly laid-off workers filing claims for unemployment benefits unexpectedly rose last week as the recovery of the nation's battered labor market proceeds in fits and starts.


el gallinazo said...

We have much MSM discussion about the Treasury sale of Citi equity, and the rush for the top scum at Citi to get out of any TARP restrictions so that they can cast off as Santa arrives from the Titanic with their lifeboats full of plunder. But no where in these discussions do I find the Treasury's guarantee against $300B (with a capital B) of Citi bonds. Was this simply a figment of a nightmare that I recall as a real meatworld event? And if not, what are the implications for a Citi collapse? Reminds me of the contrived photo opportunity of the fall of the great Sadam statue.

Snuffy, sorry to hear your news, but you are more prepared than most, particularly with what you know and can do. The husband of my dentist here in Costa Rica owns a small organic farm with cows (only for dairy), sheep, tilapia ponds, and crops. It is only a couple of km from where I live, and I had it set up that I would become "intern" labor to try to learn some new stuff in my old age. And then I ripped up my rotator cuff and everything is on hold :-(

VK said...

@ Cheryl

If there were only 1-2 Trillion in losses remaining, that would be peanuts. The FED printed up 1.55 Trillion to buy up toxic MBS and Treasury paper. And still the problem has not been cured, in fact there is no solution in sight in the current paradigm.

Think about it this way, the US Govt has implicitly and explicitly guaranteed, loaned, subsidized and given about $12.8 Trillion to US banks when banks have only $10 Trillion or so in 'Assets'. Why is the US Govt giving so much assistance, infact a sum that is far greater then all the assets combined of the US banking system?

Simple really, the derivatives aka bets are far larger then global GDP even at 1,500 Trillion or so estimated. JP Morgan holds 90 Trillion or so in derivatives bets and the US GDP per annum is 14 Trillion or so, that's a sum 6 or more times greater!

So those bets have gone bad and gone wrong and they have been kept hidden with fictional accounting practices in level 3 assets in banks and in off balance sheet items.

Ultimately this is going to lead to a severe cash flow problems that will cause the system to unravel. 2008 and 2009 we were just getting warmed up for the main show.

The losses are real, the bets went bad, the US govt is attempting a show of CONfidence to prevent a systemic collapse but if the markets call bluff on the US govt, which they will, then they will realize the US is the naked emperor, with no money to back up those guarantees for failed enterprises. There are three things in life that man can't prevent - death, taxes and Mr Market calling the bluff.

el gallinazo said...

Nice summary, VK.

And when Mr. Market calls the bluff, pushes his chips to the middle of the table, and starts to finger his derringer, how do you see the details playing out?

jal said...

I am learning.
You are learning.
We are learning.

Blogs, such as TAE, the Market Ticker, Zero Edge, TOD, etc. are noting and discovering new facts and connections every day about what happened and what is going on in the financial system.

It was not operating as most thought, as per the “Rule Book”.
Since the financial meltdown, it was required, to throw out the “rule book” to be able to stabilize and manipulate the system.
Out of this financial chaos, there is a new system with new “rule books” that will emerge.
Trying to reestablish, and expecting, the financial system to return to what it was is an illusion.

If the “architects” can implement their plans then the best that we can hope for will be a ”soft W”. This would be a stepwise reset to a lower sustainable level of operation.

If the “architects” get it wrong or if there is a black swan event then expect a “hard W” which would be a sharp decline of the market with years of instability as the “architects” attempt to enable a new mechanism.

With “peak everything” on the horizon you can forget your concerns about the massive debts that your grand children will have to pay. Your grand children will not be aware of it. Just like +60% of the present population of today. They will/are too busy putting food on the table.

~~~ since I am learning,
I reserve the right to change my mind ~~~

Ahimsa said...

El G,

"The husband of my dentist here in Costa Rica owns a small organic farm with cows (only for dairy), sheep, tilapia ponds, and crops. It is only a couple of km from where I live, and I had it set up that I would become "intern" labor to try to learn some new stuff in my old age."


Wish your rotator cuff heals quickly. Eating turmeric and fresh ginger might help, along with homeopathic remedy Arnica Montana. Perhaps Costa Ricans could suggest an effective indigenous remedy...

Carpe Diem,

Yes, we should empathize with Ilargi. :)


Salud y Paz!

Top Cat said...

I'd like to toss another semi-related issue out their. It has to do with the insurance industry.

The banking mafia seems to draw most of the media attention, but the insurance racket is a close and very related second.

Lately, I've been getting reports from friends and extended family of insurance companies sending out house inspectors on residential home owner's policies. While most insurance companies traditionally did this with commercial real estates policies, few bothered with home residences.

Several people have said that in thirty or forty years of home owners policies, they've never been the target of such aggressive inspections (or any inspections for that matter). Lately, the smallest infractions in the house's condition can get your policy canceled. The tolerance factor is shrinking.

Even though most house insurance doesn't cover things like defective workmanship or defective building materials, the insurance companies want to force you to repair the defects at your cost because it might contribute to a possible claim in the future.

I ran this whole issue by a retired high end businessman I know. He said his first reaction was that an insurance company suddenly going anal on home owner policies is a sure sign of desperation. They have probably lost 30 to 40% on their own investment portfolios, just like most individuals and pension funds etc.. They're like health insurance companies who only want to insure healthy people. Traditionally, in most cases if you lose your house insurance, the bank can foreclose on the house, this is standard boiler plate in a mortgage.

I asked this retired CEO, who in his prime made the earth shake in his neck of the business world, what he would recommend to home owners suddenly being treated to this 'bums rush' service by the insurance bookies. He said each state licenses insurance carriers within their jurisdiction. One of the main requirements on their license application is that they show that they have a certain amount of liquid assets available to cover the bets/policies they have on their books. He said he would bet dollars to donuts that a lot of insurance carriers no longer have the reserves to back up their 'book'. This is very bad. If the insurance commissioner of the state in question 'revisited' an insurance company's license application and found those assets pledge to be inadequate, either their license would be withdrawn or they would have to pony up millions extra in reserves. I don't think that insurance companies operating on a state level have the same 'fix in' as big banks do at a national level. Banks are also loath to foreclose on a house because the insurance is canceled. They're thrill the mortgage is still being payed, screw the insurance companies. Look at all the foreclosed houses not resold. Insurance companies revenues are drying up and stopping claims is paramount.

Insurance companies are like bookies:

I'll bet you a hundred bucks your house won't burn down this year.

A gangster pushing a 'protection service' can sound similar:

I'll bet you a hundred bucks your house won't burn down this year.

Coming to a town near you.

I. M. Nobody said...

Cheryl said...

Could someone articulate what accounts for the 10 fold difference in loss estimates.

Well, Cheryl is nothing if not articulate. Me, not so much, but I'll try.

The words unreported and unrecognized are not usually taken to be synonyms. Let us suppose that in the world of banking an unreported loss is one that is that is known, but thanks to the Accounting Fairy we don't have to talk about it. A loss would be unrecognized if it can't be seen, by anybody. And how could that happen? Oh, that's easy. If you can't possibly know what you are actually invested in, then you can't know if it represents a loss or a gain. And that is the black hole of derivatives. KD speculated this morning that some of the playerz may have inadvertantly slipped into a circular swap vortex.

Cheryl also said, I challenge my assumptions and I recalibrate them...

A curious turn of phrase. I know a good bit about calibration. It's pointless unless done against a fixed and trusted standard. I'm sure everyone would be interested to know what that fixed and trusted standard might be, Cheryl? Maybe you meant to say that you adjust your assumptions by a process of successive approximation. In any event, by all means share with us some of your assumptions.


I. M. Nobody said...


I poured all that sweat onto the keyboard and you had already described it so much more elegantly.

I bow in your general direction.

@el g

Ah, the derringers are certainly not to be scorned, but I'm thinking that invoking an image of something like Dora might better focus minds on the problem.

el gallinazo said...

"Or I can lay in an all-night stock of tequila, limes and reefer and puke up the entire miserable tale like some 5,000 word tequila purged Congolese stomach worm. I have chosen to do the latter."

-Joe Bageant

Amazing essay. If that it what it takes, keep the tequila, limes, and reefer flowing.

I sent it out to my contacts with the subject heading, "An essay that explains everything you didn't want to know."

Ahimsa said...

Chaos and El G,

Thought this might be of interest.

"Why is Costa Rica Smiling? This Central American Country tops the Happy Planet Index"


scandia said...

Recently,on learning that the film director, Werner Herzog, shares my appreciation for a Polish journalist, Ryzard Kapucinski, I decided to explore Herzog's huge repetoire of films.
May I highly recommend a documentary, a true story of survival:
Little Dieter Needs to Fly by Werner Herzog( 1998 ).

Greyzone said...

Losses not yet stated:

1. $1+ trillion of toxic mortgages now on the Federal Reserve's balance sheet, most of which are worth, at best $0.30 on the dollar and many of which will be totally worthless.

2. Citigroup alone has nearly $1 trillion in "off book" items that it cannot value at market rates or they blow up in their face.

3. There's an estimated $900 billion in CRE loans that are going sour and that is if the current default rate holds steady over the next year and doesn't increase at all (an unlikely scenario).

4. JP Morgan has over $1 trillion in "off book" obligations that it also cannot value at market rates.

5. Bank of America has something over $400 billion in "off book" obligations that are toxic trash.

6. Deutsche Bank, the last time I could find actual data for it, was leveraged 60-1 and the way it got around European banking regulations to do that was because it bought "insurance" (CDS) from... AIG. That's a couple trillion right there that can explode, based on housing bubbles in Greece (seen Greece lately), Ireland (another failing Western democracy), and Spain (hoo boy - housing bubble there is way worse than the US).

7. Dubai's total debts are close to $200 billion, not the mere $25 billion mentioned in the press. Do you think the rest of that debt is getting paid when the first $25 billion is in default?

8. The Chinese government pumped over $500 billion into its economy, which is being used to do things like build highways in Hunan province, tear the highway down, and build it again. I think that same highway is on its third buildout... because building counts towards GDP, even if it wasn't necessary.

9. And none of the above even attempts to quantify the general derivatives problem in the room (other than the Deutsche Bank CDS comment) for which there are $700 trillion in claims against an annual global GDP of less than $60 trillion dollars. In other words, there are $11 in casino style bets for every real dollar of goods and services. How do you think that is going to end up, honestly?

Finally, Roubini specifically was talking about real estate loan losses for banks, not total losses, because he doesn't even want to discuss the derivatives elephant (and has said as much before) or other factors.

Oh yeah, there's been an estimated $2.8 trillion in retirement losses since this crisis began as well as US housing losses of $6 Trillion and that's a number from 2008, so it's worse now.

Now what were we saying about orders of magnitude in losses?

P.P.S. Roubini and others are stating losses under current accounting rules which are about as fraudulent as Enron. If the FASB proposal to mark to market ever goes through, you can tack at least 70% of Citigroup's $1 trillion off book numbers on to that total right there. Rinse and repeat for all the big banks and what do you get?

scandia said...

@VK...I don't see why it is assumed that the Market will call
the boyz. While the data remains hidden the Market can't see any better than the rest of us.
What do I not grasp about the market?

gylangirl said...

re china not replacing the us:

Of course no-one will achieve the same scale of dominance in a post carbon world. All nations will face lower standards of living. The question is, which region will be the relatively dominant among all other regions.

I think the manpower issue that Ilargi raises will settle that question. If the world must go back to manpower, then which regions have the greatest slave labor options? The ones with the most labor supply and the most repressive and best-armed governments, I would guess.

Let's see how the states stack up...

Well armed government. Check.

Habeas Corpus has been dead for years and so are most of the the Bill of Rights thanks to the ongoing W.O.T. Check.

Add in an increasingly cash poor population and soon to be stolen state safety nets. Check.

Rapidly dwindling ability of American women to control their number of offspring, combined with the increase in immigration... so the labor supply is increasing nicely. Check.

Therefore the USA is certainly in the running for post carbon world dominance.

As for China, they've already got repression, arms, slave labor supply. I wouldn't count them out either.

el gallinazo said...

I.M. Nobody

Anatomy of the processes of a barely functional brain:

Dora> the film, The Guns of Navarone> first contact with the word Scopolamine, used by the "humane" SS officer to avoid torturing their client captives>kicking nicotine

So coming back to the kicking coffin nails, I have noted a huge variation among the human population as to the intensity of the addiction. This variation is often ascribed to "will power." Admittedly, the more intense the addiction and consequent withdrawal symptoms, the more of that rare elixir, will power, is required, but IMO they are independent variables. If you were a smoker who kicked the habit with relative ease and little suffering, do not assume that this is the case for all. While withdrawal from nicotine caused intense suffering for me, withdrawal from alcohol was a total walk in the park - almost went unnoticed until after the fact. Yet many actually die from alcohol withdrawal. Do not assume one size fits all.

(This is not directed at I.M. Nobody. Simply his reference to "Dora."}

VK said...

Well Mr Market is a master player is he not, first he creates a mini panic that has many people crying out, "head for the hills" then he deftly creates a slope of hope, which we are in now, where all the suckers who ran for the hills realize how 'naive' they were and start buying any risky asset in sight.

This year Mr Market has gotten quite a leg up in emerging markets, the anti USD play, Gold, stocks, corporate bonds but all year long Mr Market has been giving people cause for worry, what is it with those pesky 10 Year bonds! Why are they so low some people say? Then why did the difference between the long end of the curve and short end of the curve reach new highs?

Mr Market gives hints to those who see and those who listen. What goes up, must come down. As Bill Bonner says, the extent of the correction is equal and opposite to the deception that preceded it.

So Mr Market gives us hints and the hints are obviously the rising USD, the fall in Gold, the problems re-emanating across Dubai, Spain, Greece, Ireland etc. So the flight to safety will be grand, when those on the slope of hope get caught up at the greasy bit, when they suddenly lose grip and tumble far down the world.

So the USD will rise in value much to the shock of all, maybe even double in value from present values. Oil will fall substantially, a return to 10 dollars per barrel or less is in the cards. Gold must fall, eventually I see Gold returning to 600 or less.

Emerging markets will get battered hard, I mean the wind will get sucked out of them much faster then the US. Remember emerging markets are peripheries, the flight to safety will see them crumble as money rushes to the perceived safety of the core countries.

The world will groan and moan, for as yet we have not seen a real bust, whether it's the gravity defying Australia whose economy must contract sharply or bubbly Canadian house prices whose vintage is decidedly toxic or those overpriced hovels in England, their true value must eventually come out. Mr Market believes in the truth and the truth is that all those factories are worth Zero in China, those houses are worth close to Zero and my how wages will fall! It will certainly be a sight to behold.

Corporate bonds will get hammered and many companies will default as they simply can't pay back, this will damage or end many too big to bailout entities. Even the strongest companies are not worth the risk as cash flow all but dries up like quality entertainment on US television :)

The long end of the curve is an attractive place to be, the differential between the long and short ends is far too large IMO. 30 years will shoot up in price and go substantially down in yields. I'm thinking a huge flight to safety could see 30 year yields at 1% or less, it all depends on Mr. Market of course, he alone is the giant amongst men.

Obviously a bank run could definitely accelerate events rapidly! We could see Stoneleigh's cascade event in the middle of next year or earlier as people lose confidence in the system. Once fear grips the population, I suspect Mr Market will be looking forward to creating bank holidays and closures of the stock market. Banning those 'evil' short sellers etc etc.

So next year we look all set for shortages of goods and services as companies go bust due to their target market having no money. At massive bank runs and heightened fear, but always remember at the height of that fear, Mr Market will once again create a slope of hope much like 2009 but much worse yet at the time it will a God send, a recovery is finally here the battered and the wounded will say only to find they are yet again on a slope of hope. The slope leading to the abyss.

Ilargi said...

New post up.

(20)10 Trends: The Year of the Wake-up Call


el gallinazo said...

Hi Ahimsa,

I have been aware for a while of Costa Rica being number one on the world happiness index. I wonder how much of it has to do with most of the pretty girls over 17 carrying around infants :-) However, it is not a total paradise. Some other problems:

1) It has an extended "monsoon" season which can be pretty depressing. I actually had to put my clothes in the electric oven occasionally.

2) It has by far the highest cost of living index of any LA country I have visited. In many respects similar to the non-urban USA with appliances and cars far more expensive. Food is comparable to non-urban USA but better quality. Tough on fixed income SS geezers. However, rents are really cheap.

3) An established bureaucracy of Orlovian lunch eaters who make their tax derived incomes from needlessly wasting your time.

4) A recent substantial growth in the FIRE economy and a growth in income disparity.

OTOH, I recently came up with this list in correspondence vis-a-vis Stoneleigh's lifeboat:

Re: the San Isidro area:

1) Have strong family and community relationships. Everybody knows everybody. Small communities do their own projects when they get fed up waiting for the federal lunch eaters. Good example is washed out small bridges. Social democracy though the divide between rich and poor has been growing in the last decade and the FIRE corpses are growing also, sucking the life blood of the country. There is an old elite oligarchy here descended from the original coffee barons. We met one of them outside the original capital of Cartago. Very charming, elegant guy. Social contract mentality is that people have to take care of each other to some degree. View Usaco medicine with horror and disbelief. Every medical caregiver I have met had this opinion of the USA system. Their position is "We are doing fine charging reasonable fees and we take care of people."
2) Get most of their electricity from hydro power
3) Have a strong agricultural base and grow their own food. Fish from the Pacific an hour away by motor vehicle. Lots of tilapia pond farming. Grass fed beef. Grass grows like bamboo :-) Terrain conducive to organic farming. Never seen a stronger emphasis on sustainability and preservation of the environment. Very strong public education for Latin America. Affordable medical. Single payer government insurance in place though not nearly as strong as France and Germany.
4) Haven't eaten all their horses or forgotten how to sit on them
5) Use no energy for heating or cooling, but drying clothes during the monsoon months a problem. Had to occasionally stick them in my electric oven set to 75 C :-(
6) More good water than they know what to do with. Strong possibilities for private hydroelectric on select properties with small rivers and large brooks.
7) Younger people mainly use econo125cc bikes to get around including many of the girls
8) Currently well disposed to Gringos. Many older Gringos married into the Tico community.
9) Military has been constitutionally banned since the 1948.

carpe diem said...


My cup floweth over with empathy for Ilargi!

I think he should receive 'most civil' man of the year award with El Gal coming in a close second.
I'll be the runner up.


I. M. Nobody said...

el g,

My friend you gave me a WTF moment there. But, since you left-handedly dragged me into that conversation, I will admit that I was once a smoker. Up to three packs a day during my GI days.

All it took for me to quit was a pretty lady I was smitten with asking me to smoke outside, as I was about to light up. I tossed the pack across the room and that was that. Yes, I am easy.

Never tried giving up alcohol, but I often go a week between moderate imbibing, so I don't think you could actually call me addicted. I ain't givin it up tho.

007Billion said...

Kevin Hasset - trickle down Republican shill.
And you reprint his drivel about deficits and "earmarks" and tax and spend liberals.
Totally irrelevant, 1984 take meant to harp, confuse and obfuscate the real problems while pretending that the last ten years never happened.
Amazing you reprint this crap.