The Silent Super Power

[Nur]

SOLeNuri Presents:

 

 

The Silent Super Power

 

 

"And every nation has its appointed term; when their term is reached, neither can they delay it nor can they advance it an hour (or a moment)".

 

Holy Quran, Al Acraaf Verse 34.

 

 

There is no a single day that goes by without being reminded of the omnipresence of a sole remaining superpower after the collapse of the former Soviet Union, defeated in part by the Ragtag guerrillas of the Afghan Mujahideen assisted by the CIA with stinger missiles and military advice.

 

Once the Soviet Union was brought down as a result of its own uncontrolled weight, You know what happens to overweight people if they don't watch out for their weight as a result of their insatiable appetite? The USA, as the "sole" remaining energy hungry Superpower went on a spending spree of its treasury to sharpen its claws and spread its wings widely on the whole globe due to absence of any formidable force in its way to accomplish all of its global aspirations of hegemony and control of the remaining planets resources The US representing 5% of world population, consumes 80% of world energy resources

 

Enter the new world order, when the remaining Superpower of Judeo-Christian denomination takes on the planet, challenging the entire world Cowboy style to " Bring em on!" so that it can fashion the world according to its own vision, this is also known as "War On Terror", just like it says in the Bible that God Created man in His own image

 

The New World order practically began with September "Plane Accident, since its not supposed to be a "conspiracy". Story according to officially released records goes that some 19 Fanatics who hate freedom, who were having an all night drinking and dancing party at a Florida Night Club just the night before their attack( Not a good way to meet God, I guess), have succeeded in penetrating the most complex defense system of the remaining Superpower, armed only with box cutters and flawlessly crashed three large body planes on very low targets Trained for few months on light Cessna aircraft.

 

The attack infuriated the Superpower Lion who vowed to capture these bad boys and their leaders to bring them to justice, and to raise the funds that would pay for the expensive cost of their capture with convenient Oil resources coincidentally available near their hideouts.

 

This unfortunate accident would later provide a blank check for all of the wishes of the remaining Superpower as most nations sympathized by helping the lone Superpower to chase away the bearded bad boys from the global neighborhood, and the caves, the biggest wish of the Superpower being Oil, with proven energy resources such as Iraq's oil fields or the planned Caspian Sea pipelines that go through Afghanistan's rugged terrain to India.

 

Its amazing how, whenever the sole Superpower goes after the domination of the energy rich areas of the globe, the Superpower discovers that with every barrel of oil, comes a bearded guy shouting Allahu Akbar! What a frightening scene! That is Terror! So, A global war on terror is in order!

 

Which brings us to the topic of discussion, the Silent Super Power.

 

Just Who is this Silent Super Power?

 

You see, my dear Paesano, the present US administration saw a great opportunity in securing energy for its people by invading Iraq and other energy promising countries (at times through proxy, like in the case for Somalia) all the while brandishing the sword of " War o Terror", which in Iraq alone has costs the USA so far $463,652,557,974.

 

But while this arrogant Super Power is busy chasing the bearded bad boys around the global block, a silent Super has been quietly undermining his efforts, possibly for greed driven crimes. But like Great Kings of History like Pharaoh of Egypt, King George Bush seems to be oblivious to the signs being sent by the silent Super Power. He cant read the signs, and some of his people are still following him out of curiosity.

 

Call it Mother Nature, if you don't subscribe to any faith, but in Islam, nothing happens out of the control of Allah. So, for a moment, think along the line that Allah, as a Silent Super Power, is pulling the strings that are shaping current events to the disadvantage of the official "Sole" remaining Superpower!

 

The combined cost of natural disasters in the USA to date is close to 400 Billion since the unfortunate 911 disasters, add to the above war, the cost in Iraq war to get close to One Trillion Dollars, enough to build 10 Million houses for the poor Americans, or hire additional 16 Million public school teachers for a year, or to upgrade dwindling education quality, or provide 40 Million college students with scholarships for one year, or insuring every child's health for 6 years.

 

Now, when the USA indirectly causes 1 Million of Iraqi civilian deaths for Oil due to false pretext of invasion to stop Saddam's bogey Nuclear WMD Now , the cost rises to 200 Billion more (if cost of Iraqi life is valued as that of Lockerbee victims).

 

So, Does all the above mishaps seem to be somehow related?

 

Well, Pharaoh in his downward spiraling did not suspect it either, great nations collapsed in the past because they were in the wrong lane of a hidden highway policed by a silent Superpower!

 

Allah, the Silent Superpower, had seen nations rise and nations go down in shame, but was Allah just a monitoring God or an active manipulator of events to turn it to His right way without appearing to be in the picture?

 

To get the real answer for this question, we have to connect with the Quraan's accounts of the past stories of arrogant nations, nations that Allah SWT blessed with plenty of resources, who then ungratefully used it against the design of the Silent Super Power.

 

If Power corrupts as the saying goes, then, according to the Quraan, Pride Blinds. When you combine the two ailments, you have a Corrupt and Blind nation that spirals down while its citizenry are oblivious of where the trend will lead, simply because, those in command cant see, and those following them are kept in the dark of what is important to them by those wielding Media power.

 

Allah, the silent Super Power tells us in Surah Fussilat:

 

He said: " As for 'Ad, they were arrogant in the land without right, and they said: "Who is mightier than US in strength?" , See they not that Allah, Who created them was mightier in strength than them. And they used to deny Our Ayat (proofs, evidences, verses, lessons, revelations, etc.)!

 

16 . So We sent upon them furious wind in days of evil omen (for them) that We might give them a taste of disgracing torment in this present worldly life, but surely the torment of the Hereafter will be more disgracing, and they will never be helped.

 

17. And as for Thamud, We showed and made clear to them the Path of Allah (Monotheism) through Our Messenger, (i.e. showed them the way of success), but they preferred blindness to guidance, so the Sa'iqah (a destructive awful cry, torment, hit, a thunderbolt) of disgracing torment seized them, because of what they used to earn ( Crimes).

 

As can be seen from the above verses, when Allah causes blindness to those intoxicated with power, "Sh.. Happens" Donald Rumsfeld's words

 

So, we have Sh.. everywhere on the globe, from Afghanistan to Somalia. and no end in sight!

 

 

Al Haqq, meaning Righteousness which is also one of Allah's 99 attributes, was once asked by a poet: (Arabic Transliteration):

 

Su ila al Xaqu Yawman " Ayna kunta fii sawlatil baatil"?

 

Fa Ajaab : " Kuntu Ajtathu Juduurah"

 

Translation:

 

"Where have you been in the face of Evil's arrogant defiance and challenge?

 

The Haqq answered: I was buried deep under it, to permanently remove its (evil) roots"

 

 

The Silent Super continues trimming the evil-doing power of this "Superpower", in many stealthy ways, just like He reduced Pharaoh's power to a tourist attraction in Cairo's Museums, cutting evil to size, because, if all the pieces falls in right place for evils advantage, then the Divine wisdom in the Holy scriptures will be lost forever.

 

 

The Silent Super Power tells us in the Quraan, that those intoxicated with power are driven to commit heinous crimes by their perceived supremacy, which they fail to realize that Allah provided them in the first place, and if He so wills, can pull the plug to release natural disasters the size of Katrina and the California Fires gulping entire neighborhoods in a matter of days, while the phony Super Power looks on helplessly except for consoling the victims with a federal emergency aid that is in turn is in the form of printing more Dollars by the US Mint, a Currency that does not have enough gold to cover it's rear end, which is fast becoming like the German Mark after the second world war.

 

 

 

To Be continued........... .................... .

 

 

2007 SOLeNuri Political Spirituality

Connecting Faith to Policies

[Nur]

Destroyed Homes, The Media and Public Knowledge

 

Liberty can not be preserved without general knowledge among people' John Adams 1775

 

By David Halpin FRCS

 

11/02/087 "ICH" -- -- The fires in California are dying now. Eighteen hundred homes and businesses have been consumed. Many thousands are homeless and a quarter of a million people were evacuated. About one dozen people lost their lives but charred bodies of Mexican immigrants who were camping in the canyons are being discovered. The Federal Emergency Management Agency - FEMA had its faked press conference with employees posing as reporters and then ate humble American pie. But then Hollywood was down the road. A resident star, John Travolta, 'admits he was forced to fly his helicopter over the region to ensure his family were safe'. Arnie, the Governor, visited the fires several times; most recently he raised the likelihood of arson. He promised the forces for right would hunt the perpetrators down. 'Smoking them out' might have seemed tasteless.

 

This element of nature has been known in these hills for millennia during drought and the sprawl of building into them has risked this disaster. There was a time perhaps when fire was used by the white colonist to drive the North American Indians from their tepees and their caves. Gunfire, fire, smallpox and other imported disease erased twenty million natives from the land of open sky and prairie. The colonist's descendants and the many late comers would not have dwelt on the justice of these acts of God but instead heat gave rise to hyperbole.

 

Firefighters described scenes of devastation, with one pilot battling fires in San Diego telling his commanders: "It looks like an atom bomb is going off over there," the Los Angeles Times reported. Another firefighter, Mitch Mendler, said the area "was like Armageddon. It looked like the end of the world." Good that a US citizen has had a glimpse of both.

 

The President, George W Bush, flew in and promised the wretched ' a better day'. Anyone whose building was not insured was promised a low interest loan by him. Such magnanimity is yet to be shown to the fifty million without health insurance but they are poor and often black.

 

Another element carried by a storm surge breached the levees of New Orleans as forecast. Homes and people were submerged in filthy water and many drowned. At least several thousands died. People in a nursing home were abandoned by its staff. It was a difficult tragedy of the greatest proportions but FEMA was slow and inadequate in its response. Guests who were stranded in a luxury hotel were whisked away it was said. Unusually, BBC reporters like Peter Marshall gave it straight. So straight that Bush asked Blair to get the message blunted on the box. Many felt that if the low lying areas had been occupied by the white bourgeosie then the responses would have been quicker and more competent. The social distress has been terrible with poor families separated and re-building slow; some have returned to their homes to find security firms barring entry. The US can demolish Iraq from 4000 miles and install a 'missile defence system' but capital reacts like capital where there is no clout. Consider how the socialist country of Cuba responds as a nation to the hurricanes which batter it.

 

In Palestine, peoples homes – in this case tin shacks belonging to Bedouin – are being bulldozed right now in the Negev (Gush Shalom)

 

Altogether eighteen thousand Palestinian homes have been demolished since 1967. Fire or water are not the agents. Instead D9 bulldozers, swing shovels with demolition picks or engineers of the Israeli Occupation Force are the tools. The latter set high explosive charges in the base of these temples of the family. The main pretexts are the absence of a building permit or a connection between the house and a resistance fighter. Whilst he is tried in summary fashion in a military prison and often tortured, collective punishment is meted out to a grieving bitter family.1

 

The family is charged for the cost of demolition whilst the Red Cross generously provides a tent if there is no room in a relative's house. Not too many 'advanced democracies' are demolishing houses with such abandon except for the two main allies of Israel, those being the US and the UK. These crimes are fully documented but there is almost total silence amongst the nations of the world. Just hand out the tents. The strategy if one can call it such, is to break the spirit of the Palestinian and to drive him from his land. Mr Olmert has recorded his vision. 2 If approximately 120,000 Druze and Arabs were expelled from the Syrian Golan Heights in 1967 and their villages (134 in number) were completely demolished, that makes about 20,000 more demolished homes, assuming six people per family unit. 3 Then add the many thousands of homes demolished during el nakba – the catastrophe of 1948 – or the War of Independence as the Israelis call it. Symbolic of this lawlessness and deepest cruelty is the case of Salim Shawamreh of Anata. His home did not have a building permit. It has been demolished thrice and rebuilt yet again by ICAHD volunteers and money. How many people have seen the fires in southern California on TV? At least a billion. How many know that Palestinian homes have been demolished in very large numbers in '48 and since '67 as at Emmaus. A few percent of the European and US populations, and some of those remain mute. Self-obsession and greater tolerance of the other's pain might be barriers to awareness of such cruelty but the conscientious human is bound to rely on the broadcast and print media. And that is the rub. The media are determined to shield the populations from the grotesque excesses of the Israeli state (and the 'coalition of the willing in Iraq and Afghanistan'), whilst they fill the screens and thus the minds with loss by fire of eighteen hundred homes – by act of God. Evil is the act of demolishing one home in the remnants of Palestine. Is it the lesser evil for the western media to hide that?

[Nur]

On Track for U.S. Collapse

 

By Michael S. Rozeff

 

10/29/07 "LewRockwell" -- -- Bush and Cheney are steering the U.S. into a collapse. Only strong public voices by influential people can prevent the coming disaster. We desperately need for men and women who are known to the public and have credibility to speak up in the critical period ahead to avoid catastrophe.

 

A few weeks ago, Israel bombed a alleged nuclear facility in Syria. This is a warm-up for an attack on Iran.

In the last few days, the U.S. unilaterally tightened sanctions on Iran. Russia and China do not support this move.

A week ago Bush warned Iran that its attainment of nuclear arms would lead to World War III.

Russia, which has been assisting Iran in its nuclear construction program for decades, regards Western military action against Iran as unacceptable.

China has been arming Iran with missiles. Its relations with Iran have been improving for years.

We know that Bush and Cheney are capable of pre-emptive attack. We know that Bush will act if he believes he is right no matter what the costs are. In his distorted worldview, Iran with nuclear weapons is a scenario worth any cost to avoid.

 

We know that Bush, Cheney, and Rice have repeatedly warned Iran of meaningful consequences if Iran arms itself with nuclear weapons. We know that their terms in office end in 15 months. These are the critical months.

 

But it is by no means clear that the front-running candidates for office who may replace them hold substantially different views. Hillary Clinton has publicly called for sanctions against Iran and has called Iran a threat to Israel.

 

Why may an unprovoked attack on Iran lead to WWIII and why may it lead to the collapse of the U.S.?

 

Imagine this scenario. The U.S. encourages Israel to bomb the Natanz nuclear facility in Iran. Russia attempts to restrain an Iranian response but fails. Iran responds in any of many ways, such as launching missiles on Israel, firing on shipping in the Straits of Hormuz, mining the Straits of Hormuz, sending troops into Iraq, or allying its military with Hezbollah and attacking Israel from Lebanon.

 

The U.S., citing Iran’s aggressions (that will be the story), launches a full-scale attack on Iran designed to devastate the country. This attack has actually been planned by the U.S. for years. Syria is unable to maintain neutrality and quickly becomes a battleground between Iran and Israel.

 

The price of oil by this point has already soared to $200 a barrel. The U.S. begins to use its strategic reserve and to divert Iraqi production. Russia responds by taking steps to prevent its oil production from reaching the U.S. China responds by cutting off its support of the U.S. Treasury market. Venezuela halts oil shipments to the U.S. The first stages of WWIII are economic warfare designed to cripple the U.S. and halt its war-making capacity.

 

The U.S., unable to finance its deficits and fund its sovereign debt, is forced into raising interest rates drastically in order to borrow. The Fed is forced to print money. An inflationary spiral occurs. Meanwhile the high interest rates and high oil prices, not to mention the shock of a spreading conflict, drive the U.S. economy into severe decline. The U.S. attempts to raise taxes in order to fund itself, further crippling the economy. Gold soars to $1,500–$2,000 an ounce.

 

The U.S. attempts to bolster its military forces. The draft is reinstated. The severity of the emergency allows Bush and Cheney to assume emergency powers and begin a dictatorship. Elections are postponed.

 

The U.S. collapses.

 

Unfortunately, even if this scenario does not occur, the position of the U.S. is so precarious that any number of other scenarios equally disastrous lie in wait. This house needs urgently to be put in order or it will fall, and especially if it does not terminate its imperial adventures. The very fact that Bush and Cheney (or any major U.S. political officials) gain by starting WWIII is a terrible indictment of our entire political system.

 

Who can stop this? Who can prevent this? It will only take a few well-placed people to prevent this catastrophe. My guess is 5–20 people could sway public opinion against war or provide enough cover for Congressional dissenters to screw up their courage. Maybe even as few as 3 or 4 influential people could derail the Bush-Cheney train to disaster. They need to speak out at the right times and they must be heard. Previously mute or muted voices simply must speak out. They know who they are. They know that their silence will mean silent approval of a U.S. collapse.

 

October 27, 2007

 

Michael S. Rozeff is a retired Professor of Finance living in East Amherst, New York.

[Nur]

Hegemony’s Cost

 

By Paul Craig Roberts

 

“See, in my line of work you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." ( Bush, at the Athena Performing Arts Center at Greece Athena Middle and High School Tuesday, May 24, 2005 in Rochester, NY) http://www.prisonplanet.com/audio/260505bushism.mp3 )

 

 

 

11/02/07 "ICH" --- - When he departs the White House on 20 January, 2009, the current resident will bequeath to the American people and the next administration an interminable war in the Middle East and a depreciated currency.

 

And that’s the good news. It assumes there is a successor administration and that no Cheney-contrived “national emergency” will make it possible for Bush to test drive National Security Presidential Directive/NSPD-51 and Homeland Security Presidential Directive/HSPD-20 to cancel the 2008 election.

 

Neoconservatives led by vice president Dick Cheney remain determined to effect “regime change” in Iran. The allegation of weapons of mass destruction falsely brought against Iraq is now being deployed against Iran.

 

The International Atomic Energy Agency says that there is no evidence that Iran has a nuclear weapons program. The IAEA is the institution that polices the Nuclear Non-proliferation Treaty by inspecting the nuclear facilities of the signatories to the treaty of which Iran is one. However, the neocon/Cheney/Bush regime is prepared to bomb Iran on the basis of fibs alone.

 

Faithfully repeated by the propaganda ministry that masquerades as the “mainstream media,” those fibs have been trotted out so many times in recent months that significant numbers of Americans now believe themselves to be in peril from nonexistent Iranian nukes.

 

In this way the regime gains the complicity of the American people and their representatives in Congress for what will be unprovoked aggression against a third Middle Eastern country, a third war crime under the Nuremberg standard.

 

The “war on terror” is a hoax. It serves as a cover for the drive for US and Israeli hegemony in the Middle East. Iraq, Iran, and Syria became neoconservative targets, because they were the only Middle Eastern countries that are not American puppet states or dependencies.

 

Afghanistan was attacked, because the Taliban were uniting the country under the banner of Islam, a development that, if successful, could lead to the overthrow of the governments in America’s puppet states and dependencies.

 

The war rhetoric against Iran ratcheted up when the White House belatedly realized that the result of “bringing democracy to Iraq” was to empower the majority Shi’ites, thereby creating a Shi’ite crescent from Iran to southern Lebanon and alarming America’s Sunni Saudi Arabian dependent.

 

Israel’s goal is to have the Americans eliminate the Muslim states that support Hamas and Hezbollah’s opposition to Israel’s theft of the remainder of Palestine and southern Lebanon, whose water resources Israel covets. Israel’s goal thus precisely coincides with that of the Cheney regime.

 

The “Cakewalk War” in Iraq was supposed to be over in a few weeks and to pay for itself out of Iraqi oil revenues. The war is now five years old and has cost American taxpayers, and those left dependent on government programs by decades of a welfare state, $1 trillion in out-of-pocket and already incurred future costs.

 

As large and troublesome as this cost is, it pales in comparison to the damage the war has done to the value of the dollar and its role as reserve currency. Since 2001, the Euro has risen 60 percent against the dollar.

 

This means much more to Americans than the higher cost of a European vacation and status symbol German cars. The US dollar is losing its reserve currency role when the Euro, the currency of a nonexistent country--Europe--becomes so much more desirable than the dollar that it rises 60 percent in value.

 

The Euro is a monetary unit that has run far ahead of the political entity whose currency it is. Europe still consists of separate sovereign states, and many of them are unhappy with the Euro. Yet, since 2001 people throughout the world have been shifting from dollars to Euros.

 

It is not normal for people to flee from the reserve currency. It only happens when people believe it cannot continue to fill that role.

 

The US dollar is under double assault. One assault is from the offshoring of American jobs, which turns US GDP into foreign GDP and worsens the US trade deficit. It is not possible to achieve a trade balance when the production of goods and services for the US market is being moved offshore by US corporations.

 

The other assault is from the US budget deficit. Americans have become so hard pressed that their savings rate is negligible. The US government has to rely on foreigners to lend it money for its annual expenditures. Washington’s two biggest bankers are China and Japan, the countries with the largest trade surpluses with the US.

 

The transformation of the Iraq “cakewalk” into an interminable war has run up a one trillion dollar price tag, and an even larger war with Iran is looming. US generals and neoconservative ideologues predict a decade or multi-decade long war in the Middle East. Washington’s bankers are waking up to the reality that they will not be repaid.

 

The only reason the dollar has not already lost its reserve currency role is that the only alternative is the currency of a non-existent political entity. Yet, even the Euro, a virtual currency, may have taken the dollar’s role by the end of 2008.

 

Full of hegemonic hubris, the US government does not understand that US power and hegemony have always depended, not on missiles and military force, but on the financial power conveyed by the dollar’s role as reserve currency.

 

The reserve currency is world money, good in any country to pay any bill. The reserve currency country is not a debtor in the usual sense. As the reserve currency can be used to settle international accounts, the reserve currency country can borrow at will until lenders lose confidence in the currency.

 

There is abundant evidence that the loss of confidence in the dollar is underway. When it is complete, the US will no longer be a superpower.

 

The decline in American power and influence could be dramatic. Part of America’s power results from European countries going along with Washington. However, the sharp rise in the Euro’s value has hurt European exports, squeezing profit margins, wages, and encouraging offshore production. Fights over monetary policy between European capitals could doom both the EU and the Euro, leaving the world with no reserve currency and America with embittered former allies.

 

By going to war for hegemony, the Bush Regime has brought about American decline. While the neocons have spent two administrations trying to deracinate Islam, real threats to America’s power have been neglected. Offshoring, which turns US GDP into imports and larger trade deficits, together with war debts, has eroded the dollar’s status as reserve currency, undermining the foundation of American power.

 

Paul Craig Roberts wrote the Kemp-Roth bill and was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is author or coauthor of eight books, including The Supply-Side Revolution (Harvard University Press). He has held numerous academic appointments, including the William E. Simon Chair in Political Economy, Center for Strategic and International Studies, Georgetown University and Senior Research Fellow, Hoover Institution, Stanford University. He has contributed to numerous scholarly journals and testified before Congress on 30 occasions. He has been awarded the U.S. Treasury's Meritorious Service Award and the French Legion of Honor. He was a reviewer for the Journal of Political Economy under editor Robert Mundell. He is the co-author of The Tyranny of Good Intentions. He is also coauthor with Karen Araujo of Chile: Dos Visiones – La Era Allende-Pinochet (Santiago: Universidad Andres Bello, 2000).

[Nur]

Sinking Currency, Sinking Country

 

By Patrick J. Buchanan

 

11/04/07 -- -- - The euro, worth 83 cents in the early George W. Bush years, is at $1.45.

 

The British pound is back up over $2, the highest level since the Carter era. The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.

 

Oil is over $90 a barrel. Gold, down to $260 an ounce not so long ago, has hit $800.

 

Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?

 

Nope. The dollar has plummeted in value, more so in Bush's term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.

 

Is it all Bush's fault? Nope.

 

The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.

 

The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.

 

In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are unsustainable and must lead to a decline of the dollar.

 

A sinking dollar means a poorer nation, and a sinking currency has historically been the mark of a sinking country. And a superpower with a sinking currency is a contradiction in terms.

 

What does this mean for America and Americans?

 

As nations realize that the dollars they are being paid for their products cannot buy in the world markets what they once did, they will demand more dollars for those goods. This will mean rising prices for the imports on which America has become more dependent than we have been since before the Civil War.

 

U.S. tourists traveling to the countries whence their ancestors came will find that the money they saved up does not go as far as they thought.

 

U.S. soldiers stationed overseas will find the cost of rent, gasoline, food, clothing and dining out takes larger and larger bites out of their paychecks. The people those U.S. soldiers defend will be demanding more and more of their money.

 

U.S. diplomats stationed overseas, students and businessmen are already facing tougher times.

 

U.S. foreign aid does not go as far as it did. And there is an element of comedy in seeing the United States going to Beijing to borrow dollars, thus putting our children deeper in debt, to send still more foreign aid to African despots who routinely vote the Chinese line at the United Nations.

 

The Chinese, whose currency is tied to the dollar, and Japan will continue, as long as they can, to keep their currencies low against the dollar. For the Asians think long term, and their goals are strategic.

 

China -- growing at 10 percent a year for two decades and now growing at close to 12 percent -- is willing to take losses in the value of the dollars it holds to keep the U.S. technology, factories and jobs pouring in, as their exports capture America's markets from U.S. producers.

 

The Japanese will take some loss in the value of their dollar hoard to take down Chrysler, Ford and GM, and capture the U.S. auto market as they captured our TV, camera and computer chip markets.

 

Asians understand that what is important is not who consumes the apples, but who owns the orchard.

 

Other nations that have kept cash reserves in U.S. Treasury bonds and T-bills are watching the value of these assets sink. Not fools, they will begin, as many already have, to divest and diversify, taking in fewer dollars and more euros and yen. As more nations abandon the dollar, its decline will continue.

 

The oil-producing and exporting nations, with trade surpluses, like China, have also begun to take the stash of dollars they have and stuff them into sovereign wealth funds, and use these immense and growing funds to buy up real assets in the United States -- investment banks and American companies.

 

Nor is there any end in sight to the sinking of the dollar. For, as foreigners demand more dollars for the oil and goods they sell us, the trade deficit will not fall. And as the U.S. government prints more and more dollars to cover the budget deficits that stretch out -- with the coming retirement of the baby boomers -- all the way to the horizon, the value of the dollar will fall. And as Ben Bernanke at the Fed tries to keep interest rates low, to keep the U.S. economy from sputtering out in the credit crunch, the value of the dollar will fall.

 

The chickens of free trade are coming home to roost.

 

Mr. Buchanan is a nationally syndicated columnist and author of "The Death of the West," "The Great Betrayal," "A Republic, Not an Empire" and "Where the Right Went Wrong."

[Sharmarkee]

Thanks ya sheekh Nur, that was not only a good read but an eye opener. Wa lilaahi fi khaliqihi shu'uun.

[Nur]

US is‘worst’ imperialist: archbishop

 

 

Times on Line ^ | November 25, 2007 | Abul Taher

 

 

Posted on 11/25/2007 4:41:18 AM PST by Huber

 

 

THE Archbishop of Canterbury has said that the United States wields its power in a way that is worse than Britain during its imperial heyday.

 

Rowan Williams claimed that America’s attempt to intervene overseas by “clearing the decks” with a “quick burst of violent action” had led to “the worst of all worlds”.

 

In a wide-ranging interview with a British Muslim magazine, the Anglican leader linked criticism of the United States to one of his most pessimistic declarations about the state of western civilisation.

 

He said the crisis was caused not just by America’s actions but also by its misguided sense of its own mission. He poured scorn on the “chosen nation myth of America, meaning that what happens in America is very much at the heart of God’s purpose for humanity”.

 

Related Links Troops need our support, say clerics 'Realignment' of Anglican Communion underway Williams went beyond his previous critique of the conduct of the war on terror, saying the United States had lost the moral high ground since September 11. He urged it to launch a “generous and intelligent programme of aid directed to the societies that have been ravaged; a check on the economic exploitation of defeated territories; a demilitarisation of their presence”.

 

He went on to suggest that the West was fundamentally adrift: “Our modern western definition of humanity is clearly not working very well. There is something about western modernity which really does eat away at the soul.”

 

Williams suggested American leadership had broken down: “We have only one global hegemonic power. It is not accumulating territory: it is trying to accumulate influence and control. That’s not working.”

 

He contrasted it unfavourably with how the British Empire governed India. “It is one thing to take over a territory and then pour energy and resources into administering it and normalising it. Rightly or wrongly, that’s what the British Empire did — in India, for example.

 

“It is another thing to go in on the assumption that a quick burst of violent action will somehow clear the decks and that you can move on and other people will put it back together — Iraq, for example.”

 

In the interview in Emel, a Muslim lifestyle magazine, Williams makes only mild criticisms of the Islamic world. He said the Muslim world must acknowledge that its “political solutions were not the most impressive”.

 

He commends the Muslim practice of praying five times a day, which he says allows the remembrance of God to be “built in deeply in their daily rhythm”.

[Nur]

Saint Joe and the Impending Global Financial Crisis

 

By Mike Whitney

 

12/06/07 "ICH" -- -- -The wreckage in the housing market just keeps piling up. Sales of existing homes in October dipped 23.5% from last year. Prices on new homes dropped 13% year over year. Third quarter foreclosures skyrocketed to 635,000, a 94% increase over last October and an all-time high on the Misery-Meter. The real estate market is in free-fall and the real trouble hasn't even begun yet.

 

California, Nevada, Arizona and Florida are mired in a full-blown housing depression. Inventory is off-the-chart. Presently, there's a 10.8 month backlog and the numbers are steadily rising. If foreclosures continue at the current pace, by the end of 2008, there'll be a 14 month inventory. That means that every builder in the country could take off his tool-belt right now and stop working FOR MORE THAN A YEAR before the market would clear. Contractors would be filling out job-applications at Red Lobster or looking for an empty street-corner with a tin cup.

 

We're now entering the crisis phase of the biggest housing bust in US history; Greenspan's remake of Three Mile Island; only this time the whole country will be vaporised by a subprime-radioactive cloud.

 

As bad as the housing market is now; it's going to get a whole lot worse. Judith Levy sums it up in her article “ARM Resets to Hit Fan in 2008”:

 

“In 2008 interest rates will be reset upward on $362 billion worth of adjustable-rate subprime mortgages [ARMs] ....The 'real crest of the reset wave' has yet to take place, which promises more pain for borrowers, lenders and Wall Street.... In addition to the $362 billion of subprime ARMs, $152 billion of other adjustable-rate loans are scheduled to reset in 2008, including jumbo mortgages and Alt-A loans. The Mortgage Bankers Association estimates that 1.35 million homes will enter foreclosure in 2007 and another 1.44 million in 2008, up from 705,000 in 2005.”

 

$514 billion in resets. 3.5 million foreclosures.

 

Did I say Three Mile Island? I meant Nagasaki.

 

California is bound to be the state that's hardest hit by the housing slump. Homeowners can expect to see price depreciation that could rival the Great Depression. As Broderick Perkins says,

 

“The California Association of Realtors reported the median price of an existing, single-family, detached home in California dropped 9.9 percent in October, compared to the same month a year ago. The decline was the largest year-to-year decline in CAR's history books....

 

We believe that a downturn is imminent, with sales volumes down 52 percent from the peak (in January 2005) and inventory (11.8 months) up 100 percent since last year. House price depreciation and credit deterioration go hand-in-hand. We anticipate residential mortgage credit deterioration to follow house price declines in California. Presently, credit quality (in absolute terms) is better in California versus the national average, but the rate of deterioration is much worse. For instance, in the second quarter of 2007 delinquency rates for prime ARMs and subprime ARMs rose 92 percent and 73 percent year-on-year respectively in California, versus 53 percent and 38 percent nationally," Goldman Sachs reported.”( Broderick Perkins, “Record Home Price Declines Portend Extended Downturn”, Seeking Alpha)

 

Wow. Home prices dropped 10% in a MONTH! Inventory is up 100%. Sales volumes are down 52%. Its the trifecta!

 

Its getting so hard to sell a house in California, that people are resorting to divine intervention. A number of websites have popped up on the Internet promoting transcendental or occult techniques for attracting potential buyers. Luckymojo.com recommends an old favorite; “burying a statue of Saint Joseph upside down in the yard”. The site even features its own “Real Estate Spell Kit” which includes:

 

1 Dressed and Blessed Saint Joseph Candle

1 Statuette of Saint Joseph

1 Bottle Saint Joseph Oil

1 Saint Joseph Chromo Print

1 Saint Joseph Holy Card

Luckymojo even provides an optional prayer that can be recited during the ceremonial burying of St. Joseph:

 

Saint Joseph, I am going to place you

in a difficult position

with your head in darkness

and you will suffer as our Lord suffered,

until this [house/property] is sold.

 

Then, Saint Joseph, I swear

before the cross and God Almighty,

that I will redeem you

and you will receive my gratitude

and a place of honor in my home.

Amen.

 

Following the prayer, the supplicant takes the statue of Saint Joseph and plugs him into the ground upside down and waits for the phone to start ringing. Who needs a realtor anyway? “If there's no yard, then dig a hole in a large potted plant.” St. Joe won't mind. All of this can be done without chanting, amulets, prostrations, or messy sacrificial animals.

 

It's worth a shot.

 

But sorcery won't work for everyone and the deteriorating housing market is sending tremors through the broader economy. In fact, the accelerating rate of foreclosures has put Washington in full panic-mode. Treasury Secretary Henry Paulson has been frantically trying to put together a bail-out package that will keep millions of homeowners from losing their homes. Here's Paulson's statement from earlier in the week:

 

“As we are all aware, the housing and mortgage markets are working through a period of turmoil, as are other credit markets, as risk is being reassessed and re-priced. We expect that this turbulence will take some time to work through, and we expect some penalty on our short-term economic growth.

 

To speed up the modification process, Treasury is working through the “HOPE NOW” alliance with the American Securitization Forum to convene servicers and investors so they can develop categories of borrowers eligible for appropriate modifications and refinancings, and an industry-wide solution....I am confident they will finalize these standards soon. And I expect all servicers will implement them quickly, and create benchmarks to measure their progress along the way. As a result, what was a fragmented, cumbersome process can be a coordinated effort which more quickly helps able homeowners.”

 

Who does Paulson think he's kidding? He knows the plan is a non-starter. Why would homeowners opt to make outrageous monthly payments on homes that are quickly losing value, when they can just park the keys on the kitchen counter and vamoose. There's no incentive for them to be shackled to a home if prices are going down. They'd be better off loading up the U-Haul, grabbing the dog, and letting the bank worry about it. That's who Paulson is really worried about anyway. “Helping the homeowner” is is just a red herring.

 

There are a number of glitches to Paulson's scheme. For example, if he freezes monthly mortgage payments, then bondholders won't get what they bargained for and the market for mortgage-backed securities (MBS) will dry up. As Tom Deutsch, deputy executive director of the American Securitization Forum, said, ``If they no longer invest in mortgage-backed securities, you've cut off the credit available for refinancing, you cut off the lifeblood of being able to give better loans.” (Bloomberg)

 

That's right. If investors don't get the returns they were promised---or if the government arbitrarily changes the terms of the deal—bondholders will just take their money and put it somewhere else. It's as simple as that. That would trigger a run on the MBS market and put the kibosh on Paulson's plan.

 

One thing is certain, investors will not sit by quietly while their rights are trampled and their profits are slashed so that people can stay in their homes. That won't happen. Any viable bailout plan will have to be evenhanded, so that everyone shoulders part of the burden. Besides, these bonds are covered under contract law and the investors have rights. Paulson seems to thinks he can just make up the rules as he goes along. But he's wrong. If he tries to void or rewrite the contracts he'll be hit with class-action lawsuits that will stop him in his tracks.

 

The best summary of Paulson's plan appeared in the Wall Street Journal:

 

“This whole scheme is an act of eminent domain, except the government isn't formally seizing property rights, but emboldening private parties to do so. Why is no one calling a spade a spade?”

 

It's ironic that the biggest boosters of free enterprise—like Paulson---are the first to do an about-face at the first whiff of grapeshot. Whatever happened to principles? Does Paulson really want to promote a scheme that forces the revision of contracts as well as repeals basic property rights? Needless to say, Paulson's metamorphosis into Leon Trotsky has not been warmly received on Wall Street where he has been lambasted by friend and foe alike.

 

The housing blowup is having dire effects on global financial markets. The credit crunch has spread throughout Europe where lending standards are tightening and industrial growth is threatened by the falling dollar. Consumer confidence has plummeted in Europe just like in the US. Last week, the Dow Jones slipped below its August low of 12,850 following the path of the Transports. The stock market continues to lurch back and forth furiously like an overloaded washing machine; soaring 100 points one day and then, plunging 200 the next. The volatility is just another indication that we are entering a primary bear market. Dow Theory suggests that the trajectory will continue downward into recession.

 

The subprime debacle has cast doubt on whether the “structured finance” model of securitizing debt will survive. On Monday, there were crucial new developments in this story that will have profound effects on the future of many the country's largest investment banks. E*Trade Financial has been forced to liquidate $3 billion of its mortgage-backed securities. Up to now, the banks, hedge funds an other holders of these toxic MBS and CDOs have been reluctant to sell, fearing that trillions of dollars in asset value would be immediately wiped out (for similar investments) once a firm “market price” is established.

 

Well, the Day of Reckoning arrived on Monday and the only thing missing was the funereal dirge and the wreath of fresh lilies.

 

According to Reuters:

 

“Financial analysts on Friday said E*Trade got anywhere from 11 cents to 27 cents on the dollar for its $3.1 billion portfolio of asset-backed securities. The portfolio sale was part of a $2.5 billion capital infusion from a group led by hedge fund Citadel investment Group.

 

"The portfolio sale, one of the few observable trades of such assets, has very clear, generally negative, implications for the valuation of like assets on brokers' balance sheets," Credit Suisse analyst Susan Roth Katzke said.”

 

$.27 on the dollar! Yikes. No doubt they'll be pulling a few weepy bankers off the ledge before the week is out.

 

What is particularly distressing about the E*Trade sale is that over 60% of the $3 billion portfolio “WERE RATED DOUBLE-A OR HIGHER”. That means that even the best of these mortgage-backed bonds are pure, unalloyed garbage. This is really the worst possible news for Wall Street. It means that trillions of dollars of bonds which are currently held by banks, insurance companies, retirement funds, foreign banks and hedge funds will be slashed to $.27 on the dollar OR LOWER. Banks will have to hoard reserves to meet the new capital requirements on the falling value of their assets, which means that they'll have less money to loan to businesses and consumers. In fact, this is already taking place. (which is the real reason the Fed keeps injecting money into the banking system) The E*Trade “firesale” confirms that the country--and perhaps the world---is now headed into a downward deflationary spiral. The Fed will HAVE to cut interest rates 50 basis points on December 11, just to keep the financial system from freezing up entirely. That will, of course, further emasculate the dollar and send food and energy prices through the roof.

 

There's really no way to overstate the importance of the E*Trade sell-off. It is the equivalent of a neutron bomb detonating in the heart of the financial district. Yes, everyone is still milling around with their caramel Macchiatos clutching their Blackberries just like before. But the game is over. Trillions of dollars of market capitalization will be lost and some of the biggest names in banking will be carted off to the boneyard. It will be a miracle if the Fed's interest rate cuts are enough to keep the economy sputtering along while the losses are written-down and the country recovers its footing.

 

$.27 on the dollar should be inscribed on the headstone of every Wall Street fraudster and every chiseling “financial innovator” who transformed the world's most powerful and resilient markets into a carnival sideshow. It should include every subprime “no doc--no down” homeowner who lied on his loan application to goose the system and get another 50 grand for a jet-ski and 42” liquid TV; every cheesy realtor who fudged the paperwork to put unemployed busboys with bad credit in $550 McMasions in Loma Verde; every ratings agency stooge who got carpal-tunnel from stamping each shaky subprime loan with with AAA seal of approval; every lacquer-hair banker in a two-toned shirt who bundled up garbage loans and dumped them on Wall Street; every shabby hedge fund manager who used the subprime loans to beef-up his own personal administrative fees by leveraging the MBSs and CDOs at rates of 10 to 1; every regulator who serenely looked the other way while the market was dousing itself in jet-fuel and reaching for the matches; and, of course--above all--the Federal Reserve, who initiated this whole boondoggle by producing trillions of dollars of low interest credit which flooded the system creating the greatest speculative frenzy in the world history. Alan Greenspan—the Ponzi Ringleader-- deserves a place of honor at the head of the chain-gang as they are frog-marched to some remote black site where they can pay for their transgressions.

 

The rest of us will have to stay put and endure the fallout from a “completely avoidable” Great Depression. We're dead ducks.

 

Managing Director of Pimco Managed Funds, Bill Gross, summarized our present conundrum in a recent article:

 

“What we are witnessing is essentially the BREAKDOWN OF OUR MODERN DAY BANKING SYSTEM, a complex of levered lending so hard to understand that Fed Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August. My PIMCO colleague, Paul McCulley, has labeled it the "SHADOW BANKING SYSTEM" because it has lain hidden for years—untouched by regulation—yet free to magically and mystically create and then package subprime mortgages into a host of three-letter conduits that only Wall Street wizards could explain.” (Bill Gross, “The Shadow Knows”, Pimco Funds)

 

A few months ago, Gross's observations would have been dismissed as the ravings of a doomsday alarmist. Now they are part of mainstream analysis. Gross is a realist. The financial markets are broken; it's time to strap the patient to the gurney and wheel it in to I.C.U. No more band aids, thank you.

 

Closing Thoughts

 

The President of the St. Louis Fed, William Poole, discussed many of these issues in a speech last week. Poole insisted that it is not the Fed's intention to “pump up the stock market” or to protect investors from losses by lowering the Fed's Fund Rate. Rather, the rate cuts are supposed “to restore normal market processes. He said, “ An active financial market is central to the process of economic growth and it is that growth, not prices in financial markets per se, that the Fed cares about.”

 

Fair enough.

 

He added, “One of the most reliable and predictable features of the Fed’s monetary policy is action to PREVENT SYSTEMIC FINANCIAL COLLAPSE. If this regularity of policy is what is meant by the “Fed put,” then so be it, but the term seems to me to be extremely misleading. The Fed does not have the desire or tools to prevent widespread losses in a particular sector but should not sit by while a financial upset becomes a financial calamity affecting the entire economy.”

The Federal Reserve is now actively trying to forestall “a systemic financial crisis”. (Poole's words) The trillions of dollars that were loaned to mortgage applicants--and which ignored traditional criteria for lending---have created the likelihood of a decades-long downturn in the housing industry as well as a meltdown in the broader financial markets. The bundling of dodgy subprime liabilities and selling them as valuable assets to unsuspecting investors; is a scam that any competent regulator should have spotted immediately. And stopped. It doesn't take genius to see that offloading sketchy MBSs and “marked to model” CDOs to gullible institutions is wrong and a danger to the entire system.

Financial innovation has created a dilemma for which there is no easy solution. The Genie cannot be put back in the lamp. Paulson's remedies have no chance of succeeding. Mortgage-backed securities have been so chopped up and spread throughout the system; it would be easier to to unravel a bowl of spaghetti , separate each strand, one by one, and lie them next to each other without touching. It can't be done. The bad debts will have to be written down, banks will have to fail, and government will have to investigate affordable housing alternatives for millions of defaulting homeowners.

Deregulation has created a monster. The prevailing Reagan-era, “supply side”, free market doctrine has removed tariffs, subsidies and other state-created price-distortions, but it has also eliminated all oversight and accountability. Government agencies no longer play an active role in policing the markets and, as a result, US financial institutions have fallen into disrepute.

This is, first of all, a credibility problem and it will require astute leaders with a strong moral foundation, not evasive bureaucrats who're looking for a painless way to “cut their losses” and and keep the wheels of industry clanking along. Asset-backed commercial paper--a $2 trillion business--“is hardly trading at all.” The securitization of credit card debt, mortgages and car loans has slowed to a crawl and is in danger of stopping altogether. Many of the main engines for generating revenue for the banks—the repackaging of debt and amplifying it through levered derivatives—has vanished overnight. The financial markets have never been under such stress. There's so much mortgage-backed gunk in the plumbing, the system is grinding to a halt. This is no the time for “business as usual” “garbage in, garbage out”. We need people who really understand what is going on to step up to the plate and propose coherent “fiscal” policy options that will steer the global economy away from the reef.

Forget about Paulson's “quick fix” snake oil. It's utter bunkum. The credibility of the system is at at stake. It's time to get serious.

[Nur]

The Collapse of American Power

 

By Paul Craig Roberts

 

18/03/08 "ICH" -- -- In his famous book, The Collapse of British Power (1972), Correlli Barnett reports that in the opening days of World War II Great Britain only had enough gold and foreign exchange to finance war expenditures for a few months. The British turned to the Americans to finance their ability to wage war. Barnett writes that this dependency signaled the end of British power.

 

From their inception, America’s 21st century wars against Afghanistan and Iraq have been red ink wars financed by foreigners, principally the Chinese and Japanese, who purchase the US Treasury bonds that the US government issues to finance its red ink budgets.

 

The Bush administration forecasts a $410 billion federal budget deficit for this year, an indication that, as the US saving rate is approximately zero, the US is not only dependent on foreigners to finance its wars but also dependent on foreigners to finance part of the US government’s domestic expenditures. Foreign borrowing is paying US government salaries--perhaps that of the President himself--or funding the expenditures of the various cabinet departments. Financially, the US is not an independent country.

 

The Bush administration’s $410 billion deficit forecast is based on the unrealistic assumption of 2.7% GDP growth in 2008, whereas in actual fact the US economy has fallen into a recession that could be severe. There will be no 2.7% growth, and the actual deficit will be substantially larger than $410 billion.

 

Just as the government’s budget is in disarray, so is the US dollar which continues to decline in value in relation to other currencies. The dollar is under pressure not only from budget deficits, but also from very large trade deficits and from inflation expectations resulting from the Federal Reserve’s effort to stabilize the very troubled financial system with large injections of liquidity.

 

A troubled currency and financial system and large budget and trade deficits do not present an attractive face to creditors. Yet Washington in its hubris seems to believe that the US can forever rely on the Chinese, Japanese and Saudis to finance America’s life beyond its means. Imagine the shock when the day arrives that a US Treasury auction of new debt instruments is not fully subscribed.

 

The US has squandered $500 billion dollars on a war that serves no American purpose. Moreover, the $500 billion is only the out-of-pocket costs. It does not include the replacement cost of the destroyed equipment, the future costs of care for veterans, the cost of the interests on the loans that have financed the war, or the lost US GDP from diverting scarce resources to war. Experts who are not part of the government’s spin machine estimate the cost of the Iraq war to be as much as $3 trillion.

 

The Republican candidate for President said he would be content to continue the war for 100 years. With what resources? When America’s creditors consider our behavior they see total fiscal irresponsibility. They see a deluded country that acts as if it is a privilege for foreigners to lend to it, and a deluded country that believes that foreigners will continue to accumulate US debt until the end of time.

 

The fact of the matter is that the US is bankrupt. David M. Walker, Comptroller General of the US and head of the Government Accountability Office, in his December 17, 2007, report to the US Congress on the financial statements of the US government noted that “the federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations as of September 30, 2007.” In everyday language, the US government cannot pass an audit.

 

Moreover, the GAO report pointed out that the accrued liabilities of the federal government “totaled approximately $53 trillion as of September 30, 2007.” No funds have been set aside against this mind boggling liability.

 

Just so the reader understands, $53 trillion is $53,000 billion.

 

Frustrated by speaking to deaf ears, Walker recently resigned as head of the Government Accountability Office.

 

As of March 17, 2008, one Swiss franc is worth more than $1 dollar. In 1970, the exchange rate was 4.2 Swiss francs to the dollar. In 1970, $1 purchased 360 Japanese yen. Today $1 dollar purchases less than 100 yen.

 

If you were a creditor, would you want to hold debt in a currency that has such a poor record against the currency of a small island country that was nuked and defeated in WW II, or against a small landlocked European country that clings to its independence and is not a member of the EU?

 

Would you want to hold the debt of a country whose imports exceed its industrial production? According to the latest US statistics as reported in the February 28 issue of Manufacturing and Technology News, in 2007 imports were 14 percent of US GDP and US manufacturing comprised 12% of US GDP. A country whose imports exceed its industrial production cannot close its trade deficit by exporting more.

 

The dollar has even collapsed in value against the euro, the currency of a make-believe country that does not exist: the European Union. France, Germany, Italy, England and the other members of the EU still exist as sovereign nations. England even retains its own currency. Yet the euro hits new highs daily against the dollar.

 

Noam Chomsky recently wrote that America thinks that it owns the world. That is definitely the view of the neoconized Bush administration. But the fact of the matter is that the US owes the world. The US “superpower” cannot even finance its own domestic operations, much less its gratuitous wars except via the kindness of foreigners to lend it money that cannot be repaid.

 

The US will never repay the loans. The American economy has been devastated by offshoring, by foreign competition, and by the importation of foreigners on work visas, while it holds to a free trade ideology that benefits corporate fat cats and shareholders at the expense of American labor. The dollar is failing in its role as reserve currency and will soon be abandoned.

 

When the dollar ceases to be the reserve currency, the US will no longer be able to pay its bills by borrowing more from foreigners.

 

I sometimes wonder if the bankrupt “superpower” will be able to scrape together the resources to bring home the troops stationed in its hundreds of bases overseas, or whether they will just be abandoned.

 

Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand.

[rudy-Diiriye]

looks like its time to pack up and head back to the homeland...i cant take 32% tax rate no more and its gonna go higher since demos will be soon in town.

[Nur]

The Incredible Shrinking Superpower

 

By MASSIMO CALABRESI/AL JANADRIYAH

 

20/05/08 "Time" -- 19/05/08 -- Worried about the high cost of filling up? President Bush is on the case. Last Friday he arrived in Riyadh to urge King Abdullah, the leader of the world's largest petroleum producer, Saudi Arabia, to put more oil on the market.

At the sun-bleached airport, Bush was greeted with the Gulf's signature mix of garish oil wealth and tinpot amateurism. A large retinue of royalty watched as a band played an off-key version of the U.S. national anthem. Bush walked through the cavernous air terminal to his motorcade and drove to the monarch's "farm" at al Janadriyah. Through the enormous gates and along alleys of dying shrubs and trees fed by miles of futile drip hoses, he made his way to the King's "villa," a marble-clad, poured concrete palace. Through a foyer with a statue of a cheetah felling an antelope and anterooms full of attendants, Bush strolled deep into Abdullah's inner sanctum, past the portly King's private exercise pool, his Stair-Master and his "Vibromass" anti-cellulite belt-massager, to his personal study, where a console of 24 small TVs filled one wall and two overstuffed chairs coddled the leaders.

 

It was there, after much pomp and circumstance, that Bush made his request. And it was there that the King still said no.

 

That was the sum result, anyway, of Bush's efforts to ease your gas bills on his visit to Saudi Arabia. In fact, Bush didn't do much better on the rest of his five-day trip to the region. Oil prices aren't the only issue America faces in the Middle East; they may not even be the most important. The Iranian regime is busy gaining the ability to build a nuclear weapon. Bush made no progress convincing allies to pressure it to change course. Iran is also arming and training anti-Israeli forces in Gaza and Lebanon. Instead of backing down, those groups stepped up attacks on America's allies before and during Bush's trip. Even the nominal purpose of the trip, bolstering Palestinian-Israeli peace talks, produced no progress, unless progress includes the inauguration of a general election battle between Bush and Barack Obama over national security.

 

But if a record number of Americans disapprove of Bush's performance as President, the issues he spent five days not fixing in the Middle East may not be ones he — or anyone else in America — can do much about. Bush is a lame duck, and foreigners know it. But his successor, Republican or Democrat, will find that America's influence in the world is at its lowest point since the end of the Cold War. The question these days isn't "how weak is Bush?", it's "how weak is America?"

 

Bush's trip offered a sobering answer. After the President's meetings with the Saudis, his National Security Advisor, Steve Hadley, came to the "villa" where the traveling press corps was working and made a prolonged effort to explain why, even if the Saudis did boost oil production, it wouldn't reduce the cost of gas in the U.S. "The bottom line is," said Hadley, "the problem of high gas prices is more than just about oil, it's more than just about Saudi, and it's more than just about short-term production." All of which is true. Unsaid was the fact that even if the Saudis could reduce gas and oil prices, why would they? They're making a lot of money and the U.S. doesn't have much leverage to convince them they ought to make less.

 

The Arab-Israeli peace process is no one's idea of an easy fix, but it's failing now, in part, because of American weakness. Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas pledged to work on a framework for an eventual settlement that could be signed by the end of the year, even if the two sides couldn't make peace on the ground while they are negotiating. But the militant group Hamas, which controls Gaza, opposes a peace deal and is gaining power from Abbas and launching attacks on Israel with greater frequency, taking advantage of public skepticism there for any kind of peace agreement. The U.S. has tried to rally Arab pressure on Hamas, only to see it grow stronger.

 

The most important of the tough issues Bush's successor will inherit in the region is the confrontation with Iran. In Israel and the Arab states there is mounting unease, in some cases outright fear, at the idea of a nuclear Iran. But Iran is shrugging off U.N. sanctions that Russia and China are ensuring remain half-hearted. And with the U.S. pinned down in Iraq and Afghanistan there's little Washington can do to scare Iran into changing its ambitions. On Sunday, on the flight back to Washington, when Condoleezza Rice was asked if there was any progress on pressuring Iran, she said, "The important thing is that the President significantly advanced the discussion about really using the strengths that this community of states [in the region] has." Translation: no.

 

Americans tend to think of the presidency as all-powerful, but much of its authority comes from the ability to convince the public to follow, and the same is sometimes true in diplomacy. The time when George W. Bush could perform that trick has long passed. But if Americans are adjusting to the idea of a weak Bush, an even tougher mental leap awaits them once he leaves office: accepting that the U.S. isn't the force abroad it was just a few years ago. The next President's hardest job may be getting the country used to that.

[Nur]

The Old Titans All Collapsed. Is the U.S. Next?

By Kevin Phillips

Sunday, May 18, 2008; B03

 

20/05/08 "Washington Post" -- - 18/05/08 -- Back in August, during the panic over mortgages, Alan Greenspan offered reassurance to an anxious public. The current turmoil, the former Federal Reserve Board chairman said, strongly resembled brief financial scares such as the Russian debt crisis of 1998 or the U.S. stock market crash of 1987. Not to worry.

 

But in the background, one could hear the groans and feel the tremors as larger political and economic tectonic plates collided. Nine months later, Greenspan's soothing analogies no longer wash. The U.S. economy faces unprecedented debt levels, soaring commodity prices and sliding home prices, to say nothing of a weak dollar. Despite the recent stabilization of the economy, some economists fear that the world will soon face the greatest financial crisis since the 1930s.

 

That analogy is hardly a perfect fit; there's almost no chance of another sequence like the Great Depression, where the stock market dove 80 percent, joblessness reached 25 percent, and the Great Plains became a dustbowl that forced hundreds of thousands of "Okies" to flee to California. But Americans should worry that the current unrest betokens the sort of global upheaval that upended previous leading world economic powers, most notably Britain.

 

More than 80 percent of Americans now say that we are on the wrong track, but many if not most still believe that the history of other nations is irrelevant -- that the United States is unique, chosen by God. So did all the previous world economic powers: Rome, Spain, the Netherlands (in the maritime glory days of the 17th century, when New York was New Amsterdam) and 19th-century Britain. Their early strength was also their later weakness, not unlike the United States since the 1980s.

 

There is a considerable literature on these earlier illusions and declines. Reading it, one can argue that imperial Spain, maritime Holland and industrial Britain shared a half-dozen vulnerabilities as they peaked and declined: a sense of things no longer being on the right track, intolerant or missionary religion, military or imperial overreach, economic polarization, the rise of finance (displacing industry) and excessive debt. So too for today's United States.

 

Before we amplify the contemporary U.S. parallels, the skeptic can point out how doomsayers in each nation, while eventually correct, were also premature. In Britain, for example, doubters fretted about becoming another Holland as early as the 1860s, and apprehension surged again in the 1890s, based on the industrial muscle of such rivals as Germany and the United States. By the 1940s, those predictions had come true, but in practical terms, the critics of the 1860s and 1890s were too early.

 

Premature fears have also dogged the United States. The decades after the 1968 election were marked by waves of a new national apprehension: that U.S. post-World War II global hegemony was in danger. The first, in 1968-72, involved a toxic mix of global trade and currency crises and the breakdown of the U.S. foreign policy consensus over Southeast Asia. Books emerged with titles such as "Retreat From Empire?" and "The End of the American Era." More national malaise followed Watergate and the fall of Saigon. Stage three came in the late 1980s, when a resurgent Japan seemed to be challenging U.S. preeminence in manufacturing and possibly even finance. In 1991, Democratic presidential aspirant Paul Tsongas observed that "the Cold War is over. . . . Germany and Japan won." Well, not quite.

 

In 2008, we can mark another perilous decade: the tech mania of 1997-2000, morphing into a bubble and market crash; the Sept. 11, 2001, terrorist attacks; imperial hubris and the Bush administration's bungled 2003 invasion of Iraq. These were followed by OPEC's abandoning its $22-$28 price range for oil, with the cost per barrel rising over five years to more than $100; the collapse of global respect for the United States over the Iraq war; the imploding U.S. housing market and debt bubble; and the almost 50 percent decline of the U.S. dollar against the euro since 2002. Small wonder a global financial crisis is in the air.

 

Here, then, is the unnerving possibility: that another, imminent global crisis could make the half-century between the 1970s and the 2020s the equivalent for the United States of what the half-century before 1950 was for Britain. This may well be the Big One: the multi-decade endgame of U.S. ascendancy. The chronology makes historical sense -- four decades of premature jitters segueing into unhappy reality.

 

The most chilling parallel with the failures of the old powers is the United States' unhealthy reliance on the financial sector as the engine of its growth. In the 18th century, the Dutch thought they could replace their declining industry and physical commerce with grand money-lending schemes to foreign nations and princes. But a series of crashes and bankruptcies in the 1760s and 1770s crippled Holland's economy. In the early 1900s, one apprehensive minister argued that Britain could not thrive as a "hoarder of invested securities" because "banking is not the creator of our prosperity but the creation of it." By the late 1940s, the debt loads of two world wars proved the point, and British global economic leadership became history.

 

In the United States, the financial services sector passed manufacturing as a component of the GDP in the mid-1990s. But market enthusiasm seems to have blocked any debate over this worrying change: In the 1970s, manufacturing occupied 25 percent of GDP and financial services just 12 percent, but by 2003-06, finance enjoyed 20-21 percent, and manufacturing had shriveled to 12 percent.

 

The downside is that the final four or five percentage points of financial-sector GDP expansion in the 1990s and 2000s involved mischief and self-dealing: the exotic mortgage boom, the reckless bundling of loans into securities and other innovations better left to casinos. Run-amok credit was the lubricant. Between 1987 and 2007, total debt in the United States jumped from $11 trillion to $48 trillion, and private financial-sector debt led the great binge.

 

Washington looked kindly on the financial sector throughout the 1980s and 1990s, providing it with endless liquidity flows and bailouts. Inexcusably, movers and shakers such as Greenspan, former treasury secretary Robert Rubin and the current secretary, Henry Paulson, refused to regulate the industry. All seemed to welcome asset bubbles; they may have figured the finance industry to be the new dominant sector of economic evolution, much as industry had replaced agriculture in the late 19th century. But who seriously expects the next great economic power -- China, India, Brazil -- to have a GDP dominated by finance?

 

With the help of the overgrown U.S. financial sector, the United States of 2008 is the world's leading debtor, has by far the largest current-account deficit and is the leading importer, at great expense, of both manufactured goods and oil. The potential damage if the world soon undergoes the greatest financial crisis since the 1930s is incalculable. The loss of global economic leadership that overtook Britain and Holland seems to be looming on our own horizon.

 

Kevin Phillips is the author, most recently, of "Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism."

[Nur]

Fading superpower, rising rivals

 

By Bernd Debusmann

 

31/08/08 "Kuwait Times" - -- At the Beijing Olympics, China trounced the United States in the contest for gold medals. In the Caucasus, Russia inflicted a humiliating military defeat on Georgia, America's closest ally in the region. At home, the US economy is in deep trouble. The misery index, a combination of the rates of inflation and unemployment, stands at its highest in 16 years (11.3 percent in July) and there are forecasts of worse to come.

 

The Olympics marked China's status as a world power and the first time since 1996 that Americans did not win most gold medals. In the Caucasus, Russia showed that it can do as it sees fit in its own backyard, no matter how loudly Washington protests. That includes recognising as independent states the two breakaway provinces, South Ossetia and Abkhazia, that Georgia claims as its own.

 

In the Great Power game in the region, the score so far is Russia 1, US nil. Does all this mean that the oft-predicted end of America's role as the world's only superpower is near? Depends on the definition of "near". Political power grows from the barrel of a gun, as China's Mao Tse Tung observed, and the United States spends more on its armed forces than the rest of the world combined. There are more than 700 US military bases in some 130 countries.

 

And despite its current troubles, the US economy is larger than those of the next three countries put together. Still, the US is no longer number one in all the fields where its dominance was once taken for granted. The world's leading financial center, for example, is no longer New York, it is London. The world's largest investment fund is in Abu Dhabi. The world's tallest building will soon be in Dubai.

 

Predictions of shrinking (or rising) American power have been wrong in the past. In his book "the Rise and Fall of Great Powers," the Harvard historian Paul Kennedy foresaw the imminent decline of the United States. The book was published just before the Soviet Union collapsed, a turn of history that left the US as the world's only superpower. On the opposite end of wrong forecasts was Francis Fukuyama's famous essay "The End of History," written after the fall of the Berlin Wall in 1989. It argued that m

ankind's "ideological evolution" had ended, to be replaced by "the universalization of Western liberal democracy as the final form of human government." Things didn't quite turn out that way.

 

In an essay for the Washington Post this month, Fukuyama, a professor at Johns Hopkins University, conceded that "today, US dominance of the world system is slipping; Russia and China offer themselves as models, showing off a combination of authoritarianism and modernization that offers a clear challenge to liberal democracy. They seem to have plenty of imitators.

 

Both Russia and China are members of the world's biggest emerging market economies, the so-called BRIC club - Brazil, Russia, India and China. They account for 40 percent of the world's population, sit on vast foreign exchange reserves, and have geopolitical ambitions. BRIC foreign ministers had their first formal meeting in May, in the Russian city of Yekaterinburg.

 

Given the perils of crystal-gazing into the future shape of the world, it is not easy to find an expert willing to hazard a guess on how long American supremacy will last. But there is at least one, Nouriel Roubini, an economics professor at New York University who two years ago correctly forecast the bursting of the US housing bubble and the dismal chain of events that followed. At the time, many of his fellow economists snickered.

 

Roubini thinks that it will take a couple of decades for "US policy mistakes in economic, financial and foreign policies (to) ... erode the power of the American empire." That would make it relatively short-lived. Depending on how you count, the Roman empire lasted more than 500 years, the British 460 or so, the Spanish around 400. One of America's most serious problems, Roubini writes on his website, is the fact that the US is the world's biggest net borrower and net debtor. The countries financing the Am

erican deficits are its rivals, China and Russia, and Middle Eastern oil exporters.

 

History, he says, provides lessons on the importance of financial prudence. "Empires ... tend to be net lenders, i.e. run current account surpluses. The decline of the British Empire started in World War II when the British fiscal deficits in the war and the current account deficits turned the empire into a net borrower and a net debtor." The British twin deficits were being financed by a rising power that was a net lender and a net creditor - the United States. Whether it will ever return to that state depends, in part, on the competence, or lack of it, of the next US administration. President George W Bush's team did not set a good example

[Nur]

Hey U.S., welcome to the Third World!

 

It's been a quick slide from economic superpower to economic basket case.

By Rosa Brooks

 

19/09/08 "LA Times" - -- Dear United States, Welcome to the Third World!

 

It's not every day that a superpower makes a bid to transform itself into a Third World nation, and we here at the World Bank and the International Monetary Fund want to be among the first to welcome you to the community of states in desperate need of international economic assistance. As you spiral into a catastrophic financial meltdown, we are delighted to respond to your Treasury Department's request that we undertake a joint stability assessment of your financial sector. In these turbulent times, we can provide services ranging from subsidized loans to expert advisors willing to perform an emergency overhaul of your entire government.

 

As you know, some outside intervention in your economy is overdue. Last week -- even before Wall Street's latest collapse -- 13 former finance ministers convened at the University of Virginia and agreed that you must fix your "broken financial system." Australia's Peter Costello noted that lately you've been "exporting instability" in world markets, and Yashwant Sinha, former finance minister of India, concluded, "The time has come. The U.S. should accept some monitoring by the IMF."

 

We hope you won't feel embarrassed as we assess the stability of your economy and suggest needed changes. Remember, many other countries have been in your shoes. We've bailed out the economies of Argentina, Brazil, Indonesia and South Korea. But whether our work is in Sudan, Bangladesh or now the United States, our experts are committed to intervening in national economies with care and sensitivity.

 

We thus want to acknowledge the progress you have made in your evolution from economic superpower to economic basket case. Normally, such a process might take 100 years or more. With your oscillation between free-market extremism and nationalization of private companies, however, you have successfully achieved, in a few short years, many of the key hallmarks of Third World economies.

 

Your policies of irresponsible government deregulation in critical sectors allowed you to rapidly develop an energy crisis, a housing crisis, a credit crisis and a financial market crisis, all at once, and accompanied (and partly caused) by impressive levels of corruption and speculation. Meanwhile, those of your political leaders charged with oversight were either napping or in bed with corporate lobbyists.

 

Take John McCain, your Republican presidential nominee, whose senior staff includes half a dozen prominent former lobbyists. As he recently put it, "I was chairman of the [senate] Commerce Committee that oversights every part of the economy." No question about it: Your leaders' failure to notice the damage done by irresponsible deregulation was indeed an oversight of epic proportions.

 

Now you are facing the consequences. Income inequality has increased, as the rich have gotten windfalls while the middle class has seen incomes stagnate. Fewer and fewer of your citizens have access to affordable housing, healthcare or security in retirement. Even life expectancy has dropped. And when your economic woes went from chronic to acute, you responded -- like so many Third World states have -- with an extensive program of nationalizing private companies and assets. Your mortgage giants Fannie Mae and Freddie Mac are now state owned and controlled, and this week your reinsurance giant AIG was effectively nationalized, with the Federal Reserve Board seizing an 80% equity stake in the flailing company.

 

Some might deride this as socialism. But desperate times call for desperate measures.

 

Admittedly, your transition to Third World status is far from over, and it won't be painless. At first, for instance, you may find it hard to get used to the shantytowns that will replace the exurban sprawl of McMansions that helped fuel the real estate speculation bubble. But in time, such shantytowns will simply become part of the landscape. Similarly, as unemployment rates continue to rise, you will initially struggle to find a use for the expanding pool of angry, jobless young men. But you will gradually realize that you can recruit them to fight in a ceaseless round of armed conflicts, a solution that has been utilized by many other Third World states before you. Indeed, with your wars in Iraq and Afghanistan, you are off to an excellent start.

 

Perhaps this letter comes as a surprise to you, and you feel you're not fully ready to join the Third World. Don't let this feeling concern you. Though you may never have realized it, you've been preparing for this moment for years

[Nur]

Trouble in Banktopia

 

By Mike Whitney

 

27/09/08 "ICH" -- - The financial system is blowing up. Don't listen to the experts; just look at the numbers. Last week, according to Reuters, "U.S. banks borrowed a record amount from the Federal Reserve nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression." The Fed opened the various "auction facilities" to create the appearance that insolvent banks were thriving businesses, but they are not. They're dead; their liabilities exceed their assets. Now the Fed is desperate because the hundreds of billions of dollars of mortgage-backed securities (MBS) in the banks vaults have bankrupt the entire system and the Fed's balance sheet is ballooning by the day. The market for MBS will not bounce back in the foreseeable future and the banks are unable to roll-over their short term debt. Game over. The Federal Reserve itself is in danger. So, it's on to Plan B; which is to dump all the toxic sludge on the taxpayer before he realizes that the whole system is cratering and his life is about to change forever. It's called the Paulson Plan, a $700 billion boondoggle which has already been disparaged by every economist of merit in the country.

 

From Reuters:

 

"Borrowings by primary dealers via the Primary Dealer Credit Facility, and through another facility created on Sunday for Goldman Sachs, Morgan Stanley, and Merrill Lynch, and their London-based subsidiaries, totaled $105.66 billion as of Wednesday, the Fed said."

 

See what I mean; they're all broke. The Fed's rotating loans are just a way to perpetuate the myth that the banks aren't flat-lining already. Bernanke has tied strings to the various body parts and jerks them every so often to make it look like they're alive. But the Wall Street model is broken and the bailout is pointless.

 

Last week, there was a digital run on the banks that most people never even heard about; a "real time" crash. An article in the New York Post by Michael Gray gave a blow by blow description of how events unfolded. Here's a clip from Gray's "Almost Armageddon":

 

"The market was 500 trades away from Armageddon on Thursday...Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level - a 22 percent decline! - while the clang of the opening bell was still echoing around the cavernous exchange floor. According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.

 

The panicked selling was directly linked to the seizing up of the credit markets - including a $52 billion constriction in commercial paper - and the rumors of additional money market funds "breaking the buck," or dropping below $1 net asset value."

 

The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt." (New York Post)

 

Commercial paper is the lubricant that keeps the financial markets functioning. When confidence vanishes (because the stewards of the system in Washington are buffoons), investors withdraw their money, normal business operations become impossible, and the markets collapse. End of story. So, rather than restore the public's confidence by strong leadership and behavior designed to reassure investors; President Bush decided to give a major prime-time speech stating that if Paulson's emergency bailout package was not passed immediately, the nation's economy would vaporize into the ether. Go figure?

 

 

Last week, the commercial paper market, (much of which is backed by mortgage-backed securities) shrunk by a whopping $61. billion to $1.702 trillion, the lowest level since early 2006. So, Paulson's bailout will effectively underwrite CP as well as the whole alphabet soup of mortgage-backed derivatives for which there is currently no market. The US taxpayer is not only getting into the plummeting real estate market, he is also backstopping the entire financial system including defaulting car loan securities, waning student loan securities, flailing home equity loan securities and faltering credit card securities. The whole mountainous pile of horsecrap-debt is about to be stacked on the back of the maxed-out taxpayer and the ever-shriveling greenback. Paulson assures us that its a "good deal". Booyah, Hank!

 

PAULSON'S $700 BILLION BOONDOGGLE

 

How did Treasury Secretary Paulson figure out that recapitalizing the banking system would cost $700 billion? Or did he just estimate the amount of money that could be loaded on the back of the Treasury's flatbed truck when it sputters off to shower his buddies at G-Sax with freshly minted greenbacks? The point is, that Paulson's calculations were not assisted by any economists at all, and they cannot be trusted. It is a purely arbitrary, "back of the envelope" type figuring. According to Bloomberg: Swiss investor Marc Faber, known for a long track record of good calls, believes the damage may come to $5 trillion:

 

"Marc Faber, managing director of Marc Faber Ltd. in Hong Kong, said the U.S. government's rescue package for the financial system may require as much as $5 trillion, seven times the amount Treasury Secretary Henry Paulson has requested....

 

``The $700 billion is really nothing,'' Faber said in a television interview. ``The treasury is just giving out this figure when the end figure may be $5 trillion.''(Bloomberg News)

 

Most people who follow these matters would trust Faber's assessment way over Paulson's. In his latest blog entry, economist Nouriel Roubini said that "no professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan." Roubini added:

 

"The Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown."

 

 

Roubini is right on all counts. So far, more than a 190 prominent economists have urged Congress not to pass the $700 bailout bill. There is growing consensus that the so-called "rescue package" does not address the central economic issues and has the potential to make a bad situation even worse.

 

 

BANKER'S COUP?

 

Financial industry rep. Paulson is the ringleader in a banker's coup the results of which will decide America's economic and political future for years to come. The coup leaders have drained tens of billions of dollars of liquidity from the already-strained banking system to trigger a freeze in interbank lending and hasten a stock market crash. This, they believe, will force Congress to pass Paulson's $770 billion bailout package without further congressional resistance. It's blackmail.

 

As yet, no one knows whether the coup-backers will succeed and further consolidate their political power via a massive economic shock to the system, but their plan continues to move jauntily forward while the economy follows its inexorable slide to disaster.

 

The bailout has galvanized grassroots movements which have flooded congressional FAXs and phone lines. Callers are overwhelmingly opposed to any bailout for banks that are buckling under their own toxic mortgage-backed assets. One analyst said that the calls to Congress are 50 percent "No" and 50 percent "Hell, No". There is virtually no popular support for the bill.

 

From Bloomberg News: "Erik Brynjolfsson, of the Massachusetts Institute of Technology's Sloan School, said his main objection "is the breathtaking amount of unchecked discretion it gives to the Secretary of the Treasury. It is unprecedented in a modern democracy."

 

"I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout," said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory." (Mish's Global Economic Trend Analysis)

 

Brynjolfsson's suspicions are well-founded. "Market Ticker's" Karl Denninger confirms that the Fed has been draining the banking system of liquidity in order to blackmail Congress into passing the new legislation. Here's Denninger:

 

"The Effective Fed Funds rate has been trading 50 basis points or more below the 2% target for five straight days now, and for the last two days, it has traded 75 basis points under. The IRX is demanding an immediate rate cut. The Slosh has been intentionally drained by over $125 billion in the last week and lowering the water in the swamp exposed one dead body - Washington Mutual - which was immediately raided on a no-notice basis by JP Morgan. Not even WaMu's CEO knew about the raid until it was done....The Fed claims to be an "independent central bank." They are nothing of the kind; they are now acting as an arsonist. The Fed and Treasury have claimed this is a "liquidity crisis"; it is not. It is an insolvency crisis that The Fed, Treasury and the other regulatory organs of our government have intentionally allowed to occur."

 

Bingo. This is a banker's coup cooked up and facilitated by the deep-money guys who operate stealthily behind the political sideshow. The only time they emerge from their stinkholes is when they're flushed out by a crisis that threatens their continued dominance. Grassroots resistance, spearheaded by Internet bloggers (like Mish, Roubini and Denninger) are demonstrating that they can mobilize tens of thousands of "peasants with pitchforks" and be a factor in political decision making. It also helps to have elected officials, like Senator Richard Shelby, who stand firm on principle and don't faint at the first whiff of grapeshot (like his weak-kneed Democratic counterparts) Shelby has shouldered the full-weight of executive pressure which has descended on him like a Appalachian rockslide. As a result, there's still a slight chance that the bill will have to be shelved and the industry reps will have to go back to Square 1.

 

Market Ticker has provided charts from the Federal Reserve that prove that Bernanke has withdrawn $125 billion from the banking system in the last 4 days alone to create a crisis situation that will incite credit market mayhem and increase the liklihood of passing the bill. This is coercion of the worst kind. http://market-ticker.denninger.net/archives/2008/09/24.html

 

The country's economic predicament is steadily deteriorating. Orders for manufactured durable goods were off 4.5 percent last month while inventories continued to rise. Unemployment is soaring and the housing crash continues to accelerate. Credit Suisse now expects 10.3 million foreclosures (total) in the next few years. Numbers like that are not accidental, but part of a larger scheme to use monetary policy as a way to shift wealth from one class to another while degrading the nation's overall economic well-being. More alarming, the country's primary creditors are now staging a rebellion that is likely to cut off the flow of capital to US markets sending the dollar plummeting and triggering a deflationary credit collapse. This is from Reuters:

 

"Chinese regulators have asked domestic banks to stop lending to U.S. financial institutions in the interbank money markets to prevent possible losses during the financial crisis, the South China Morning Post reported Thursday. The China Banking Regulatory Commission's ban on interbank lending of all currencies applied to U.S. banks, but not to lenders from other countries, the report added."

 

Bloomberg News reports that Dallas Federal Reserve Bank President Richard Fisher has broken with tradition and lambasted the proposed bailout saying that it "would plunge the U.S. government deeper into a fiscal abyss."

 

From Bloomberg: "The plan by Treasury Secretary Henry Paulson to buy troubled assets from financial institutions would put 'one more straw on the back of the frightfully encumbered camel that is the federal government ledger,' Fisher said today in the text of a speech in New York. 'We are deeply submerged in a vast fiscal chasm.'...The seizures and convulsions we have experienced in the debt and equity markets have been the consequences of a sustained orgy of excess and reckless behavior, not a too-tight monetary policy," Fisher said to the New York University Money Marketeers Club." (Bloomberg)

 

Surely, the cure for hyperbolic "credit excesses and reckless behavior" cannot be "more of the same." In fact, Paulson's bailout does not even address the core issues which have been obscured by demagoguery and threats. The worthless assets must be written-down, insolvent banks must be allowed to go bust, and the crooks and criminals who engineered this financial blitz on the nation's coffers must be held to account.

 

The carnage from Greenspan's low interest rate, "easy money" binge is now visible everywhere. Inflated home and stock values are crashing as the gas continues to escape from the massive equity bubble. The FDIC will have to be recapitalized--perhaps, $500 billion--to account for the anticipated loss of deposits from failing banks caught in the cross-hairs of asset-deflation and steadily contracting credit. Recession is coming, but economic collapse can still be avoided if Paulson's misguided plan is abandoned and corrective action is taken to put the country on solid financial footing. Market Ticker lays out framework for a workable solution to the crisis, but they must be acted on swiftly to rebuild confidence that major systemic changes are underway:

 

1--Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Do it now. (Editor: In other words, no more Enron-type accounting mumbo-jumbo and no more allowing the banks assign their own "values" to dodgy assets)

 

2--Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy.(Ed: If trading derivatives contracts can damage the "regulated" system, than that trading must take place under strict government regulations)

 

3--Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly. (Ed: The collapse in the "structured finance" model is mainly due to too much leverage. For example, Fannie Mae and Freddie Mac had $80 of debt for every $1 dollar od capital reserves when they were taken into government conservatorship)

 

If there's going to be a bailout, let's get it right. Paulson's $700 billion bill does nothing to fix the deep structural problems in the financial markets; it merely pushes the day of reckoning a little further into the future while shifting the burden of payment for toxic assets onto the taxpayer. It's a real turkey. The entire system needs transformational change so that the activities of Wall Street mesh with the broader objectives of the society it's supposed to serve. Paulson's business-model is busted; it does no one any good to try to glue it back together.