My 5 billion mark German postage stamp.

Source: BobWaldrop.net.

“Those who do not learn the lessons of history are doomed to repeat them. ”

The primary government response on the table thus far to the unfolding financial crisis is to dump money from helicopters all over Wall Street. Supposedly, this is to prevent a financial collapse of our economy. Bad debt is being moved from the balance sheets of financial institutions onto the government’s balance sheet, which means, “distributed among the entire population.”

Nice work if you can get it. Which you can, if you are a member of the financial aristocracy.

The entire corrupt bail-out was pushed through by a shock and awe campaign — “the ATMs will stop working”, and “there will be civil disorder”.

The bad debt on balance sheets was blamed for the credit freeze, but we have due cause to wonder if that is really true.

One issue with the credit freeze is lack of transparency. Potential lenders can’t be sure of the actual financial condition of the borrowers at their doors. Without total transparency and accurate accounting, there will be no credit. Government policies and rules are in place that prevent full transparency and accurate accounting.

A second question is whether the United States is about maxed out on debt. If so, it isn’t a surprise that credit is drying up. Suppose a family gets in debt to the point where their payments equal 125% of their income. Will anyone loan them any more money? No, they won’t.

Now think about that at a national level.

That’s a bigger oops.

While these are difficult questions that are hard to discern, the answer to the problem of bad debt is not at all hard to understand: bad debts must be written off, and if that leads to a bankruptcy, then that is the price of the bad financial decisions that led to the problem in the first place. Moving them from the balance sheets of financial institutions to the government’s ledger only expands the problem — instead of being a problem for those financial institutions and their stockholders, officers, and emploees, they become the problem of the entire population. This is not a step in the right direction, but it sure is saving the financial bacon of a number of very wealthy institutions from the consequences of their greed and incompetence.

Note that one option was simply to help out the homeowners who were in financial trouble. If they don’t default on their mortgages, then the loans aren’t bad, but that option was never on the table. The financial aristocracy looks after itself, families with mortgages in foreclosure can be left behind for the wolves to devour, for all that the Wall Street parasites care.

If these big institutions had gone into bankruptcy, their assets would be evaluated by the marketplace and bought. Business would have gone on, but the originators of the problem would probably not be carrying on that business. That would be good, since we obviously have a surplus of greedy and corrupt and incompetent people at the top of our very large financial institutions.

Writing off these debts forces transparency on the financial system. With transparency comes accountability, and with accountability comes change.

Instead, we got a financial coup that has stolen hundreds of billions of dollars and put that money in the worst place possible, in a way that is virtually guaranteed to cause an even worse situation in the months and years to come.

You don’t just create trillions of dollars out of thin air without affecting the entire economy. The people who get that money first get the most value, since it has not depreciated yet. But as it works its way through the economy — more money chasing a stagnant supply of goods and services — its value declines.

So we’re throwing money, which will ignite inflation, and since the money thrown thus far won’t be enough, even more money will be thrown. . . and then somewhere along the line we get something like the Weimar Republic after World War I. In my stamp collection, I have a first class stamp from the Weimar Republic that originally cost someone five BILLION marks. Before WW I, there were maybe 3 or 4 German marks to the dollar, and the dollar was defined by law as 1/20th of an ounce of gold. So we see what happened to the mark under that hyperinflation.

What did the Germans get out of it? The Nazis.

History suggests that the German experience is typical — the most common social and political response to a collapse of a monetary system is a nasty authoritarian regime. The rapid inflation and collapse of the French revolutionary currency in the 18th century led directly to the Reign of Terror.

What’s to be done? Well, the long shot is to get the goobermint to change course and as I have recently written about, mandate transparency, reduce leverage, and basically force a giant house-cleaning of the financial masters of the universe cozy little aristocratic club.

And it’s true, if that could happen, we would be in much better shape. But if the French aristocracy had gotten their act together and reformed themselves, they wouldn’t have lost their heads in the Reign of Terror. If the Czar had been smart, there would not have been a Bolshevik revolution. If the Allied Powers and the Weimar Republic had had competent leadership, I wouldn’t have a 5 billion mark stamp in my collection and we might never have had the Nazis.

And so six million Jews and millions of others would have lived instead of being cruelly exterminated in the death camps.

That’s the price we are looking at, if our financial system continues its present path.

One thing we have is foreknowledge and thousands of years of history from which we can learn desperate lessons in a time of grave need.

We cannot let ourselves be pushed around by our political and economic aristocracies. We must empower ourselves, our households, and our communities to not only stand against the gathering economic storm, but create new structures in the midst of the collapsing ruins of the old.

If we don’t do this, then we will make an inevitable detour into a likely violent and chaotic period of authoritarian rule.

Every person’s preparation begins at home, as we get our own house’s in order. Next come our communities, which includes our actual geographic locations, but also expands to include our civil society networks (clubs, religious associations, civic groups, etc.), our economic relationships (workplaces, businesses), and cyberspace (social networking, discussion groups, websites, etc.)

Many tools are available, one of them is my list of 20 tasks now that the election is over, which is also available as a PDF that can be downloaded, reprinted, published, copied, and redistributed at will without permission. Make copies for friends, family, co-workers, people at your church, hand them out door to door, put them on windshields in parking lots, hand them out on street corners, leave them in public literature racks at stores, libraries, schools, wherever.

The time to build creative local economic alternatives is before the economic system collapses. Since that collapse has begun and is unfolding before our eyes every day, there is no time to waste.

Is the Federal Reserve Engaged in Acts of Economic Warfare Against America?

Source: Natural News. This makes up for the old news story they posted as new about the CA homeschool ban.

In 1942, German intelligence officers rounded up skilled Jewish prisoners and launched Operation Bernhardt, a clever scheme designed to counterfeit hundreds of millions of dollars worth of British Pounds and destroy the British economy by flooding it with counterfeit money. Located in the Sachsenhausen concentration camp, Operation Bernhardt was, even by modern standards, a runaway success that resulted in the creation of forged bank notes worth 132 million British Pounds.

This “economic warfare” operation resulted in a devastating economic effect on the British economy. You can read the true history of this operation here: http://en.wikipedia.org/wiki/Operation_…

It is important to note that Operation Bernhardt was an act of war, specifically pursued for the purpose of destroying Britain’s economy by creating so much new money that the value of the money already in circulation would plummet. This was considered a strategic attack, just as effective as carpet-bombing tank factories or mowing down soldiers on the field with German-made MG42 machine guns.

What does all this have to do with the Federal Reserve?

Today, the Federal Reserve is engaged in an eerily similar operation, counterfeiting trillions of dollars in U.S. bank notes and flooding the U.S. money supply with money created from nothing. The result, of course, is the same as was intended by Operation Bernhardt in 1942: The economic destruction of the target nation. Only this time, the target is the United States of America.

Hilariously, the Fed claims it’s doing this to save the economy. Yet the laws of economics tell us that flooding the money supply with trillions of dollars in new money actually harms the economy. And the Fed has been hard at work causing this harm: $250+ billion two weeks ago, $600+ billion last week and $900 billion earlier this week! It’s beginning to crank up the printing presses to the tune of a trillion dollars a week, and by doing so, it’s contributing to the destruction of the U.S. economy at a pace the Third Reich could have barely imagined.

Has the Fed declared war on the working class?

If the actions pursued by the Federal Reserve were being masterminded by Al-Qaeda, they would be denounced as acts of war. In World War II, such actions were deliberate acts of war. Targeting the economy for destruction by flooding the money supply with counterfeit currency is, by any measure, a threat to any nation.

So why is the Federal Reserve engaged in actions that, if committed by other nations, would warrant a military response? This is not an idle question. I’m not asking this in a satirical way. I’m quite serious about this: Why is the Fed committing acts of economic warfare against the United States of America? (The Fed, by the way, is a private company. It is not, as you’ve been led to believe, part of the U.S. government.)

The answer is obvious. You’ve probably already figured it out: The Federal Reserve is at war with America. It’s an economic war, of course, not a bombs-and-bullets war. The casualties, though, are just as real: Savings accounts, retirement funds, bank accounts, jobs, businesses, pensions and much more.

By counterfeiting trillions of dollars like a Sachsenhausen operation on steroids, the Fed is carpet-bombing the U.S. economy with an unprecedented flood of fiat currency, causing the exact same economic destruction intended by the Nazis in World War II (but on a much more devastating scale). And it’s doing this as part of a new economic war.

Class warfare has begun

What war? The war between the wealthy elite and the working class. The Fed is working hard, of course, to protect the wealthy elite. Over a trillion dollars of taxpayer money has already been earmarked to bail out the rich, elite bankers who lost other people’s money in a series of idiotic bets on fictitious financial instruments.

And what are these bankers doing with this taxpayer money? According to an Associated Press report published yesterday, executives of the failed insurance company AIG were sent on a $440,000 retreat “to a posh California resort” less than one week after the U.S. government bailed them out. At the spa, AIG executives enjoyed spa treatments, massages, organic food buffets and bodywork therapy, all while the American taxpayers footing the bill were slaving away in real jobs, doing real work. Want to see the invoice for yourself? View it here: http://www.naturalnews.com/images/AIG-i…

That’s how this new class warfare is taking shape: YOU (the working class) get all the debt, all the losses, and all the financial burden. THEY (the wealthy elite) get all the profits, all the luxury spa treatments, all the tax breaks and billions of dollars in free money from the Federal Reserve.

In the 1942 Operation Bernhardt, the Germans literally planned to load hundreds of millions of dollars in British Pound bank notes and air-drop them over London. The resulting chaos, it was believed, would shut down the British economy, halting the flow of money needed by Britain to fund its war effort. In the United States today, the Fed is taking a different approach: Air-dropping trillions of dollars into the laps and bank accounts of wealthy bankers and financial institution CEOs, concentrating the massive creation of fiat currency into the hands of less than 1% of the population.

And just to make sure the economic carpet-bombing is a complete success, the Federal Reserve and U.S. government are conspiring to create more than a trillion dollars in new money each week, then flood those funds into banks, businesses and insurance companies. This will, of course, devastate the value of the dollars being saved, held or earned by the wage slaves who labor their lives away under this economic regime. (That would be you and me.)

It’s a brilliant plan… if you’re interested in destroying a nation. This kind of attack would bring almost any nation to its knees. It’s an act of war that requires no violence, no bombs and no destruction of real infrastructure. And yet it achieves what every war in history has ever sought to achieve: The transfer of power from the hands of the many to the hands of the few.

The Federal Reserve, in effect, has become a modern-day economic Third Reich, and it has set its sights on the U.S. economy.

Acts of economic terrorism?

The Federal Reserve is now doing to the U.S. what the terrorists could never have accomplished: The destruction of a large portion of its economy, its currency and the savings of its people.

The economic losses of 9/11 pale in comparison to the financial destruction that has been unleashed onto America by the Federal Reserve.

Yet, amazingly, it wasn’t “terrorists” who put this plan into place. Who was it, exactly? Your Congressional representatives played an important role in allowing this to happen. In a grand, historical betrayal of the American people, members of your own U.S. House of Representatives and Senate voted to initiate a massive economic coup in America, violating the wishes of 99% of the American people (who are aligned against bailing out the rich on the backs of the poor).

Of course, to hear them explain it, their actions are meant to save the taxpayers. Yep, that’s their plan: To save YOU, the taxpayer, by confiscating your money and handing it over to the wealthy elite. And whatever money can’t be stolen from the taxpayers will be counterfeited by the Fed’s money-creation machine.

The Real Agenda: A Massive Transfer of Wealth

We are not watching an economic rescue, friends. We are watching an economic coup. Creating and dumping trillions of dollars into the money supply is an act of war. But it’s a war with a specific purpose.

What’s happening right now is that the United States is being taken over by King Henry and his accomplices. More than fifty percent of the housing and nearly twenty percent of the entire U.S. economy is now controlled by one person — Henry Paulson — and that person answers to no one. He isn’t elected, he can’t be removed from office, and he’s subject to no law.

King Henry controls unlimited funds. He can print any amount of money, or confiscate any amount from the taxpayers (by spending taxpayer dollars to bail out his rich friends). If the Federal Reserve is the new Third Reich, King Henry is its Hitler.

The economic war has already been lost by the People. It was lost on September 30, 2008, when Congress surrendered the U.S. economy to King Henry. The People now own nothing but paper money and ephemeral digital account numbers, all of which could be turned into worthless digits overnight by a single decision from King Henry.

In this economic bailout and the Fed’s unlimited creation of new money, America has suffered the greatest act of economic warfare in our nation’s history. Note carefully that it wasn’t conducted by the Nazis, Saddam Hussein or Al Qaeda. It was, in fact, put into place by 172 Democrats and 91 Republicans in the House, and a similar majority in the U.S. Senate. (See the complete list below.)

So what can YOU do right now?

A system of exchange is not dependent on the dollar alone. Commerce will survive the collapse of one currency. Trade will go on after this economic chaos passes, and businesses will continue to be an important part of our economic future.

People will still need food, clothing, nutritional supplements, fuel, services, computers, tutoring, services, pet products, children’s products, cars, MP3 players and much more. The end of the U.S. dollar is NOT the end of the world. It is simply the end of one empire…

In my view, the best way to financial survive this economic warfare being conducted by the Federal Reserve against the People is to create your own economic abundance by owning (or launching) your own independent income sources.

In fact, I’ve written an entire report on how to accomplish this. It’s called How to Build Your Financial Safety Net. Due to this economic crisis, I’ve decided to release it at no charge, and it’s available right now at: http://www.naturalnews.com/report_finan…

Read it if you want to be empowered, informed and insulated from the demise of the dollar. Using the strategies you’ll find in that report, you can drastically limit your losses in this economic carpet-bombing of the U.S. economy. In fact, I believe you can emerge with greater wealth than you had when it all started.

You probably won’t be getting paid in dollars, however. Expect a new currency to be the future system of exchange in America. But building reliable income streams now is a smart way to survive the coming economic implosion that will put corporations, governments and non-profits out of business. (If you work for a paycheck, your paycheck may be in danger right now.)

What’s Really Radical

By the way, do you think this article is radical? Some people have told me that my reporting on the economic situation is “radical.” You know what I told them?

I said imagine two households. One household balances its budget, spends only what it brings home in income and has no debt. The other household spends twice as much as it earns. It owes $50,000 on credit cards and borrows money from loan sharks to meet the minimum payments on its credit cards.

Which household is “radical?”

Now consider this: The second household sneaks into the first household and steals money to pay its own debts. On top of that, it has a counterfeit cash printing machine in the basement, and it’s cranking out thousands of dollars a week just to attempt to pay off its credit cards. It’s immune to the law because it buys off the local police for criminal immunity.

Which household is headed towards financial disaster? Which household has a real future, and which one doesn’t?

That second house, of course, is the United States government. My reporting on the U.S. financial situation is downright tame compared to what’s really going on behind the scenes. I can’t get radical enough to accurately describe the degree of deception and outright theft that’s taking place in Washington right now.

History will show that not only were my warnings accurate, they were understated by a wide margin. Reporting the truth is a delicate thing. People can only stomach so much truth at any one time. Few people can handle the whole truth, which is why I usually refrain from reporting it. There are things stated in this article that only hint at much bigger stories that will someday be told by others.

Only the most open-minded, skeptical thinkers can even mentally consider the real truth of what’s happening in our world today. Most people have been brainwashed into living in a fictional world, and they are unable to even consider truths that threaten their grip on reality.

As a result, the public has to be led by the hand from one realization to the next, little by little, until they attain the ability to see the world as it really is rather than the illusion that has been constructed for them by the very people running this financial scam.

Video: How Money Creation Actually Works

Check out this video to see how the Fed (and the fractional-reserve banking system) creates money out of nothing:

http://www.naturalnews.com/News_000340_…

How Congress Voted

Here is the list of those Congressional representatives who surrendered your economic future to King Henry. A “Y” means a “Yes” vote (in favor of the financial bailout legislation).

This is, in essence, a list of those who have betrayed the People by conspiring to instigate acts of economic warfare against We the People. (“N” means they voted No. “Y” means they voted Yes.”)

ALABAMA
Democrats – Cramer, Y; Davis, Y.
Republicans – Aderholt, N; Bachus, Y; Bonner, Y; Everett, Y; Rogers, Y.

ALASKA
Republicans – Young, N.

ARIZONA
Democrats – Giffords, Y; Grijalva, N; Mitchell, Y; Pastor, Y.
Republicans – Flake, N; Franks, N; Renzi, N; Shadegg, Y.

ARKANSAS
Democrats – Berry, Y; Ross, Y; Snyder, Y.
Republicans – Boozman, Y.

CALIFORNIA
Democrats – Baca, Y; Becerra, N; Berman, Y; Capps, Y; Cardoza, Y; Costa, Y; Davis, Y; Eshoo, Y; Farr, Y; Filner, N; Harman, Y; Honda, Y; Lee, Y; Lofgren, Zoe, Y; Matsui, Y; McNerney, Y; Miller, George, Y; Napolitano, N; Pelosi, Y; Richardson, Y; Roybal-Allard, N; Sanchez, Linda T., N; Sanchez, Loretta, N; Schiff, Y; Sherman, N; Solis, Y; Speier, Y; Stark, N; Tauscher, Y; Thompson, Y; Waters, Y; Watson, Y; Waxman, Y; Woolsey, Y.

Republicans – Bilbray, N; Bono Mack, Y; Calvert, Y; Campbell, Y; Doolittle, N; Dreier, Y; Gallegly, N; Herger, Y; Hunter, N; Issa, N; Lewis, Y; Lungren, Daniel E., Y; McCarthy, N; McKeon, Y; Miller, Gary, Y; Nunes, N; Radanovich, Y; Rohrabacher, N; Royce, N.

COLORADO
Democrats – DeGette, Y; Perlmutter, Y; Salazar, N; Udall, N.
Republicans – Lamborn, N; Musgrave, N; Tancredo, Y.

CONNECTICUT
Democrats – Courtney, N; DeLauro, Y; Larson, Y; Murphy, Y.
Republicans – Shays, Y.

DELAWARE
Republicans – Castle, Y.

FLORIDA
Democrats – Boyd, Y; Brown, Corrine, Y; Castor, N; Hastings, Y; Klein, Y; Mahoney, Y; Meek, Y; Wasserman Schultz, Y; Wexler, Y.
Republicans – Bilirakis, N; Brown-Waite, Ginny, N; Buchanan, Y; Crenshaw, Y; Diaz-Balart, L., N; Diaz-Balart, M., N; Feeney, N; Keller, N; Mack, N; Mica, N; Miller, N; Putnam, Y; Ros-Lehtinen, Y; Stearns, N; Weldon, Y; Young, N.

GEORGIA
Democrats – Barrow, N; Bishop, Y; Johnson, N; Lewis, Y; Marshall, Y; Scott, Y.
Republicans – Broun, N; Deal, N; Gingrey, N; Kingston, N; Linder, N; Price, N; Westmoreland, N.

HAWAII
Democrats – Abercrombie, Y; Hirono, Y.

IDAHO
Republicans – Sali, N; Simpson, Y.

ILLINOIS
Democrats – Bean, Y; Costello, N; Davis, Y; Emanuel, Y; Foster, Y; Gutierrez, Y; Hare, Y; Jackson, Y; Lipinski, N; Rush, Y; Schakowsky, Y.
Republicans – Biggert, Y; Johnson, N; Kirk, Y; LaHood, Y; Manzullo, N; Roskam, N; Shimkus, N; Weller, Y.

INDIANA
Democrats – Carson, Y; Donnelly, Y; Ellsworth, Y; Hill, N; Visclosky, N.
Republicans – Burton, N; Buyer, N; Pence, N; Souder, Y.

IOWA
Democrats – Boswell, Y; Braley, Y; Loebsack, Y.
Republicans – King, N; Latham, N.

KANSAS
Democrats – Boyda, N; Moore, Y.
Republicans – Moran, N; Tiahrt, N.

KENTUCKY
Democrats – Chandler, N; Yarmuth, Y.
Republicans – Davis, N; Lewis, Y; Rogers, Y; Whitfield, N.

LOUISIANA
Democrats – Cazayoux, N; Jefferson, N; Melancon, Y.
Republicans – Alexander, Y; Boustany, Y; McCrery, Y; Scalise, N.

MAINE
Democrats – Allen, Y; Michaud, N.

MARYLAND
Democrats – Cummings, Y; Edwards, Y; Hoyer, Y; Ruppersberger, Y; Sarbanes, Y; Van Hollen, Y.
Republicans – Bartlett, N; Gilchrest, Y.

MASSACHUSETTS
Democrats – Capuano, Y; Delahunt, N; Frank, Y; Lynch, N; Markey, Y; McGovern, Y; Neal, Y; Olver, Y; Tierney, Y; Tsongas, Y.

MICHIGAN
Democrats – Conyers, N; Dingell, Y; Kildee, Y; Kilpatrick, Y; Levin, Y; Stupak, N.
Republicans – Camp, Y; Ehlers, Y; Hoekstra, Y; Knollenberg, Y; McCotter, N; Miller, N; Rogers, N; Upton, Y; Walberg, N.

MINNESOTA
Democrats – Ellison, Y; McCollum, Y; Oberstar, Y; Peterson, N; Walz, N.
Republicans – Bachmann, N; Kline, Y; Ramstad, Y.

MISSISSIPPI
Democrats – Childers, N; Taylor, N; Thompson, N.
Republicans – Pickering, Y.

MISSOURI
Democrats – Carnahan, Y; Clay, N; Cleaver, Y; Skelton, Y.
Republicans – Akin, N; Blunt, Y; Emerson, Y; Graves, N; Hulshof, N.

MONTANA
Republicans – Rehberg, N.

NEBRASKA
Republicans – Fortenberry, N; Smith, N; Terry, Y.

NEVADA
Democrats – Berkley, Y.
Republicans – Heller, N; Porter, Y.

NEW HAMPSHIRE
Democrats – Hodes, N; Shea-Porter, N.

NEW JERSEY
Democrats – Andrews, Y; Holt, Y; Pallone, Y; Pascrell, Y; Payne, N; Rothman, N; Sires, Y.
Republicans – Ferguson, Y; Frelinghuysen, Y; Garrett, N; LoBiondo, N; Saxton, Y; Smith, N.

NEW MEXICO
Democrats – Udall, N.
Republicans – Pearce, N; Wilson, Y.

NEW YORK
Democrats – Ackerman, Y; Arcuri, Y; Bishop, Y; Clarke, Y; Crowley, Y; Engel, Y; Gillibrand, N; Hall, Y; Higgins, Y; Hinchey, N; Israel, Y; Lowey, Y; Maloney, Y; McCarthy, Y; McNulty, Y; Meeks, Y; Nadler, Y; Rangel, Y; Serrano, N; Slaughter, Y; Towns, Y; Velazquez, Y; Weiner, Y.
Republicans – Fossella, Y; King, Y; Kuhl, Y; McHugh, Y; Reynolds, Y; Walsh, Y.

NORTH CAROLINA
Democrats – Butterfield, N; Etheridge, Y; McIntyre, N; Miller, Y; Price, Y; Shuler, N; Watt, Y.
Republicans – Coble, Y; Foxx, N; Hayes, N; Jones, N; McHenry, N; Myrick, Y.

NORTH DAKOTA
Democrats – Pomeroy, Y.

OHIO
Democrats – Kaptur, N; Kucinich, N; Ryan, Y; Space, Y; Sutton, Y; Wilson, Y.
Republicans – Boehner, Y; Chabot, N; Hobson, Y; Jordan, N; LaTourette, N; Latta, N; Pryce, Y; Regula, Y; Schmidt, Y; Tiberi, Y; Turner, N.

OKLAHOMA
Democrats – Boren, Y.
Republicans – Cole, Y; Fallin, Y; Lucas, N; Sullivan, Y.

OREGON
Democrats – Blumenauer, N; DeFazio, N; Hooley, Y; Wu, Y.
Republicans – Walden, Y.

PENNSYLVANIA
Democrats – Altmire, N; Brady, Y; Carney, N; Doyle, Y; Fattah, Y; Holden, N; Kanjorski, Y; Murphy, Patrick, Y; Murtha, Y; Schwartz, Y; Sestak, Y.
Republicans – Dent, Y; English, N; Gerlach, Y; Murphy, Tim, N; Peterson, Y; Pitts, N; Platts, N; Shuster, Y.

RHODE ISLAND
Democrats – Kennedy, Y; Langevin, Y.

SOUTH CAROLINA
Democrats – Clyburn, Y; Spratt, Y.
Republicans – Barrett, Y; Brown, Y; Inglis, Y; Wilson, Y.

SOUTH DAKOTA
Democrats – Herseth Sandlin, N.

TENNESSEE
Democrats – Cohen, Y; Cooper, Y; Davis, Lincoln, N; Gordon, Y; Tanner, Y.
Republicans – Blackburn, N; Davis, David, N; Duncan, N; Wamp, Y.

TEXAS
Democrats – Cuellar, Y; Doggett, N; Edwards, Y; Gonzalez, Y; Green, Al, Y; Green, Gene, N; Hinojosa, Y; Jackson-Lee, Y; Johnson, E. B., Y; Lampson, N; Ortiz, Y; Reyes, Y; Rodriguez, N.
Republicans – Barton, N; Brady, Y; Burgess, N; Carter, N; Conaway, Y; Culberson, N; Gohmert, N; Granger, Y; Hall, N; Hensarling, N; Johnson, Sam, N; Marchant, N; McCaul, N; Neugebauer, N; Paul, N; Poe, N; Sessions, Y; Smith, Y; Thornberry, Y.

UTAH
Democrats – Matheson, N.
Republicans – Bishop, N; Cannon, Y.

VERMONT
Democrats – Welch, Y.

VIRGINIA
Democrats – Boucher, Y; Moran, Y; Scott, N.
Republicans – Cantor, Y; Davis, Tom, Y; Drake, N; Forbes, N; Goode, N; Goodlatte, N; Wittman, N; Wolf, Y.

WASHINGTON
Democrats – Baird, Y; Dicks, Y; Inslee, N; Larsen, Y; McDermott, N; Smith, Y.
Republicans – Hastings, N; McMorris Rodgers, N; Reichert, N.

WEST VIRGINIA
Democrats – Mollohan, Y; Rahall, Y.
Republicans – Capito, N.

WISCONSIN
Democrats – Baldwin, Y; Kagen, N; Kind, Y; Moore, Y; Obey, Y.
Republicans – Petri, N; Ryan, Y; Sensenbrenner, N.

WYOMING
Republicans – Cubin, Y.

The Agonist: Don’t Be Fooled by Wall Street’s Happy Talk

http://agonist.org/numerian/20080613/dont_be_fooled_by_wall_streets_happy_talk

The next phase of the financial and economic crisis is creeping up on us. You can see the signs in the U.S. stock market, where all the major indexes have reversed a three month rally and are now declining back to their March lows. This decline is led by the Dow and is in fact accelerating, taking with it last month’s cheerful prognostications that the U.S. not only has escaped a recession, but is bouncing back into full growth mode for the second half of this year.

The economic data do not confirm this picture at all. The employment situation continues to worsen, industrial production and factory utilization are lodged firmly in recessionary territory, and the only retail stores showing any sign of life are the deep discounters like Wal-Mart, benefiting temporarily from the tax rebates. Wall Street executives are telling us that the credit crisis is halfway over, but their behavior suggests otherwise. Lehman Brothers, for example, assured us last week that it was well-capitalized and fully in control of its future, but a few days later it announced a $2.8 billion loss and was forced to turn to the stock market and private investors to raise $6 billion more in capital. Where have we heard this story before?

Wall Street continues to underestimate the spreading default carnage that is going to bring down a few more financial powerhouses before this crisis is over. The big story emerging in the housing markets is the galloping number of foreclosures affecting “decent ordinary folks” with prime mortgages (as opposed to the sub-prime customer species that kicked off the housing market crisis). Defaults and foreclosures on alt-A and prime mortgages are jumping to record levels. It seems that quite a lot of these customers, just like their sub-prime brethren, never really had much equity in their houses in the first place, and now that housing prices are declining across the nation, nearly 20% of them are in a negative equity position. If you can’t afford the mortgage in the first place, why continue to make payments on a property that is continuing to lose value?

These people are not typically walking away from their mortgages, as the “jingle mail” stories suggest. They would like to stay in their homes, but they can no longer make the payments. In many cases, the financial entity that they need to talk to in order to obtain some relief is a “mortgage servicer” who doesn’t own the mortgage, and can’t possibly get agreement from all the hundreds of investors worldwide who own a tiny sliver of the mortgage that was long since sold off in a security. Congress can pass all the legislation it wants to provide relief from foreclosure for these homeowners, but it will be mostly fruitless. The securitization of mortgages in the past eight years has legally and practically destroyed the ability for the financial industry to come through with any accommodations, so the homeowner is ejected and the banks wind up owning the property.

The banks now own so many homes through foreclosure that cities across the U.S. are suing them to force them to keep the properties in decent shape. It most places it costs thousands of dollars to get the lawn mowed and trash picked up, and there are many circumstances where the home has been vandalized, costing the banks much more. The banks are learning a terrible lesson last experienced in the Depression – foreclosure is something to be avoided at all costs. It doesn’t just destroy the profit a bank may have had in the mortgage – it can destroy the bank. We are now seeing banks dump whole subdivisions onto the real estate market at 20% of the value at the market peak in 2006.

The bond market has learned that the mortgage crisis is just the beginning of the problems that banks are facing. Stage two is underway with deterioration in corporate debt, starting with the bonds issued by real estate developers, but spreading now to the high yield securities and bank loans of poorly capitalized and over-leveraged corporations. Well over 50% of all the corporate debt issued in the past eight years has been rated as junk debt, meaning it is not even investment grade (Baa rated or higher) and it has a very high probability of default. These probabilities are now working against the holders of these bonds, and the banks that have lent to these companies.

In normal circumstances the economy can work through these excesses, as consumers and corporations reduce their leverage and banks absorb the losses on bad debts. But these aren’t normal circumstances. The U.S. is no longer entirely in control of its economic destiny, and it isn’t even the engine that drives the global economy. China and India have created their own self-reinforcing economic dynamic, in which exports finance a growing demand for raw materials, starting with oil. As the price of petroleum has now crossed $130/bbl., an intolerable burden is being placed on a U.S. economy sinking in recession.

Consumers are increasingly turning to public transport – if it is available – to avoid paying over $4/gal. for gasoline. Part of the pricing pressure on the suburban McMansions built in the past five years comes from the cost of commuting to these homes built 50 miles or more from any jobs. Independent truck drivers are going out of business because the cost of diesel fuel over $5/gal. has shredded what were already dangerously thin profit margins. Their trucks are piling up on dealer’s lots, and used car dealers are now hesitant to accept any more SUVs. General Motors is thinking of canceling altogether its Hummer model, a war-chic road hog that at its best gets only 11 miles to the gallon.

The high price of oil is now clearly affecting all facets of the global economy, with one exception: wages. Workers are not being given pay increases, but instead are being pressed to put in longer hours, which is always management’s way of coping at first with an economic downturn. But usually around six months into a recession, companies cave in to reality and start letting people go. We’ve just passed the six month mark for this downturn, so expect the unemployment data to noticeably deteriorate; last month the unemployment rate jumped up ½% of a percentage point alone.

Just about the last people in America to recognize that we have an inflation problem are the esteemed governors of the Federal Reserve, who preferred to concentrate on the fictitious construct of “core inflation”, which eliminates from the calculation energy and food costs. But even Fed chairman Ben Bernanke is now beginning to face up to everyday reality, and has announced this month that Fed policy is now focused on combating inflation and fighting any further depreciation of the dollar on the foreign exchange markets. The days of interest rate declines are over, and the market is now estimating there is more than a 75% chance that the Fed will raise interest rates at their next Open Market committee meeting.

That’s just what the economy needs: higher interest rates on top of raging energy and food inflation, at the same time the entire housing sector is deflating. Obviously the Fed wouldn’t be piling on to our economic woes if it had a choice. The fact that it has no choice, and that it is trapped in the policy dilemma it now faces, is in good part its own fault. It’s not enough to blame China and India for oil price increases. There is still a lot of loose cash around the world that is being pumped into oil futures, which has helped as well to push prices to record levels. Most of this loose cash has been generated by the United States. We continue to flood the world with Treasury securities to finance both our domestic federal budget deficit, and our current account deficit, which combined exceed $1.5 trillion per year. On top of this, Bernanke’s dramatic interest rate cuts in the past six months have added yet more “liquidity” to the market. The banks aren’t using these funds to make loans, and investors aren’t eager to plow the money into the stock market given the inevitable decline ahead in corporate profits. That leaves the last great bubble as the only investment alternative: the commodities market, and specifically energy.

You’ve read no doubt about the nasty speculators who are involved in the commodities bubble. While there are certainly hundreds of hedge funds engaged in this speculative exercise, most of the money is coming from staid mutual funds, pension plans, university endowments, and other respectable entities desperate to find some investment vehicle that returns anything even matching the rate of inflation. Senator Joe Lieberman already has a bill submitted to restrict speculators from investing in commodity funds, but we’ll see how far this measure gets when Yale University’s endowment management have a quiet word with him about just who is going to get hurt if the bill is passed.

What can we expect in stage two? Expect first of all for the credit crisis to return with a vengeance. The omens are already lining up. Remember when Congress was all excited a few months ago about turning loose the Federal Housing Administration, and allowing them to jump-start the mortgage market with low-cost loans and down payment guarantees? It turns out the FHA isn’t interested in these broad new powers. It has enough problems of its own with its existing portfolio, which took a $4.6 billion write-down this past quarter due to rising foreclosures. That ate up over 25% of the FHA’s equity, and the commissioner had to reassure the market that the FHA itself isn’t facing bankruptcy – it just may need to turn to the Congress for an “appropriation.”

Right behind the FHA will be Freddie Mac, the Home Loan Banks, and the behemoth of them all, Fannie Mae. All of these federally chartered agencies are under stress from the worsening housing crisis, and all of them operate on thin amounts of capital. Congress thinks at the moment it has the luxury of opening up the taps of federal largesse in order to do something about the housing crisis, but the reality is that the agencies set up to help at a time like this will all have their hands out looking for taxpayer money just so they can survive.

The second thing you should watch for is the coming wave of corporate and municipal bankruptcies. Too many corporations are poorly capitalized and completely unprepared to meet their liabilities in a weak economy. Too many state and local governments are seeing tax revenues plummet, just at a time when decades of promises on employee pensions and medical plans are coming due. Something will have to give here, and ultimately the weakest players will seek protection from the bankruptcy courts.

That will leave hundreds of thousands of retired government workers facing an abrupt shift in their fortune, and equally large numbers of currently employed workers suddenly facing unemployment. That’s the third thing you should watch for: large-scale layoffs in the public and private sector, with significant second order economic effects on consumer spending. This is all part of the vicious cycle common with recessions – stressed out employers let staff go, leading to declines in consumer spending, leading to yet more pressure on corporations and government to fire even more workers. The difference now is that the viciousness of this cycle will far outweigh whatever pain was experienced in the last oil recession of 1974. This recession will be lucky to avoid being labeled as a depression when it is over.

Fourth, this recession is spreading globally. Housing markets in the U.K., Spain, Australia and Ireland are all reversing direction and following the U.S. into an implosion of foreclosures. Energy costs are rising everywhere, driving up as well the cost of basic food and things like livestock feed and fertilizer. This has led to riots in many emerging markets where fundamentals such as wheat and rice are hard to come by. Even the oil producing countries in the Gulf States are not immune to food scarcities. Central banks everywhere are talking tough about battling inflation, and a few are raising interest rates. Many of them are also raising margin requirements in the commodities markets to prevent speculation, and there is widespread condemnation of profiteers.

This is a very nasty situation for the central banks, forced to choose between accepting inflation that is accelerating well beyond target ranges, or raising interest rates and throwing the global economy into a much worse recession. As part of this conundrum, there is serious doubt about the value of repeating the Fed’s rescue for a financial firm like Bear Stearns, but if another such disaster crops up, letting yet another large bank or broker fail could lead to a systemic crisis of unimaginable magnitude. At some point though, governments including their central banks have to do something about the plight of the average citizen rather than continue to coddle millionaire bankers. To do otherwise is to risk social disorder.

These dreadful policy choices are only now beginning to play out in the U.S. electoral campaign, which is also beginning to focus on the domestic burden of continuing to fund the Iraq war. The American public has already turned against this war because of the high price that is being paid in death and injury, but the interplay between the war and America’s economic woes is beginning to become apparent. You can expect the Democrats to emphasize this linkage, and to ask Americans how fair it is that they are spending $12 billion a month to build Iraq, a country rich in oil, when at home people are losing their jobs, their pensions, their medical insurance, and in many cases their homes and the ability to feed their family. It will be the first time that the electorate will have to confront the economic costs of maintaining the vast American empire.

There is a point of inflection in any economic crisis where it becomes apparent to everyone that something has gone dramatically wrong and painful course corrections are needed. It often takes a major bankruptcy, or a sharp rise in unemployment, or a stock market crash, to awaken the public to the realities they have ignored or that have been hidden from them. The U.S. could experience any or all of these calamities, and at any time now. Heaven help the Republicans if this should occur prior to the first Tuesday in November.

Bob Chapman: The Formula For Hyperstagflation

How come you don’t hear much about the Airbus Defense Contract scam?

Source: The International Forecaster.

Inflation predicted over the next year, expect rate hikes over the next 12 – 18 months, failures pile up, failed measures to save the economy to have a cumulative effect, orgy of Wall Street fraud causes credit crunch, a worldwide disaster in the making, commodities rigging has a golden lining

The acceleration of inflation is baked into the economic cake for, at minimum, the next 12 to 18 months worldwide. Fed jawboning won’t change that. Phony PPT dollar rallies won’t change that. Fed rate hikes won’t change that. The reduction of money and credit won’t change that. Falling oil prices won’t change that. Lies about economic statistics, and especially about inflation data, won’t change that. So, why can’t the rate of inflation be changed for the next 12 to 18 months, you might ask? The reason is because inflation is not determined by smoke and mirrors, or by gimmicks and false data. It is determined by the rate at which the total supply of money and credit is being expanded or contracted (what economists call M3), which is measured by determining how much money and credit is being fed into, or subtracted from, each nation’s financial system by its central bank over the course of a given month, as compared with the amount determined for the previous month. That figure is then annualized. Basically, the annualized rate of M3 that is determined for any nation becomes that nation’s rate of inflation (expansion) or deflation (contraction), with a delay that usually runs about 6 to 18 months.

Contrary to what the fane-stream media, pusillanimous pundits and Wall Street shills might tell you, inflation is caused by too much money and credit chasing after too few goods, and today’s oil and food crisis is now providing everyone with a textbook example of how profligate expansion of money and credit can ruin an economy in a frighteningly short period of time. The baked-in inflation rate for the US will run from its current 12.625% to as high as 18% over the next 12 to 18 months, even if the Fed totally cuts off all money and credit tomorrow and then throws rate hikes in for good measure! Our current actual (as opposed to official) rate of inflation of 12.625% is running at a lag of about one year from the time M3 had reached the 12.625% level, and that is why we see 12 to 18 more months of 12.625% to 18% inflation. We have extended our projection out to 18 months because we do not see M3 going below 12% any time soon.

If the Fed and the traitors in the White House and Congress want to see stagflation gone wild, just go ahead and let the Fed raise rates and/or contract the supply of money and credit. The baked-in inflation will then continue even as the economy goes into a thermonuclear meltdown! The Dow will lose 500 to 1000 points on each .25% rate hike as de-leveraging accelerates, margins are tightened and liquidity is drained from the system. Bond markets will be destroyed as principal plummets. The situation is now so bad that even a substantially weaker yen cannot bring enough carry trade liquidity into the system to hold up the general stock markets. It now takes 3.5 more yen to buy a dollar or a euro than it did with the Dow was just over 13,000, yet the Dow is now at just over 12,300. Part of the current stock market weakness is due to the lack of support from the PPT, which is trying to minimize the liquidity and profits available to large specs that could be used to rally metals. Hence, the need for protective derivatives.

Further, any dollar strength achieved by any such Fed rate hikes will have little impact on gold and silver because the resulting destruction of the economy will send everyone to gold and silver as the safe-haven of choice. Treasuries and money markets will still be yielding negative rates of return while the banks are getting hammered by the next round of the ongoing real estate debacle. As attention moves from the hundreds of billions of toxic waste held by banks in off-balance sheet SIV’s to the hundreds of billions in toxic waste held by banks in off-balance sheet VIE’s (Variable Interest Entities), any dollar-denominated treasuries and money markets aren’t going to cut it any more as the real estate market drops into an even deeper, darker pit, sending the various real estate derivatives, and bank balance sheets, further down into the depths of the abyss. You will then watch precious metals go up with the dollar instead of running contrary to one another, and food and energy commodities might keep going up as stocks, bonds and other paper assets continue to be shunned by traders despite the stronger dollar. Throw in bank failures, heavy toxic waste write-downs, earnings disappointments, a consumer spending crisis, a credit default swap crisis, a new false-flag attack and/or a new theatre of conflict, and only precious metals will be going up with oil as the dollar gets taken out by the ensuing recession.

Rate hikes, coupled with weaker real estate values, and thus huge declines in both bond principal value and bond collateral value, could set off a bear market in bonds that could take the whole system down even more quickly than the credit-crunch and subprime debacles combined.

Note that when the Fed was on its rate hike campaign that terminated at 5.25%, inflation continued to grow because M3 was wildly expanded during the entire rate hike campaign. That is what separates the current inflationary debacle from all other periods of inflation. During all other periods of high inflation, the cure for an overheated economy was applied by either an increase in interest rates or by a contraction in M3, or by both. The current inflationary cycle is the first period of high inflation where interest rate hikes were totally offset, and overwhelmed by, the expansion of money and credit which totally negated any slowing of the economy that might have been achieved by the rate hikes. The Fed, Wall Street and our bought-off and compromised government officials conspired to keep up the speculation that was used to power the ongoing derivatives fraud by pumping out prodigious amounts of money and credit while lying to us about inflation, which was skyrocketing as a result. That is the precise reason why the Fed’s rate hikes failed to cool the economy and to slow inflation. Instead, the derivatives fraud led to the credit-crunch, which then cooled our economy. Then, in order to attempt to save our economy, rates had to be cut back by the Fed while money and credit were expanded even further, the perfect formula for hyperinflation which you are now witnessing as we write this issue of the IF. In addition, the economy was not saved, and now inflation is getting worse as the direct outcome of the failed measures to save our economy, thus causing further and additional damage to our economy as food and energy costs skyrocket and US consumers are tapped out. That, in turn, is the perfect formula for hyperstagflation.

Note that our economy was destroyed already before the credit-crunch by free trade, globalization, off-shoring, outsourcing and both legal and illegal immigration, and now we have rampant inflation to boot. Precious metals and their related shares, professionally managed Forex accounts and Swiss franc-denominated government bonds are your only options at this point to avoid being beggared and impoverished by the Illuminati.

As mentioned above, an orgy of Wall Street fraud has brought us an economy-killing credit-crunch. That credit-crunch has forced the Fed to initiate a maniacal expansion of money and credit to keep Illuminist insider financial institutions from imploding. Much of the money and credit from that maniacal expansion is not being re-loaned because all confidence in the system has been lost due to rampant, rampaging fraud, much of which was committed by Illuminist insiders against other Illuminist insiders, proving once again that there is no honor among thieves. So where is this huge portion of all that money and credit going if it is not being re-loaned? A very large portion is being used to make substantial, speculative profits from a whole bevy of commodities, especially from crude oil and agricultural products, by virtue of a loophole provided by the depraved group of village idiots who run our country (Congress), a loophole that allows big banks to operate in the commodities markets without position limits, allowing them to run amok in those markets with privileges that are not extended to other, non-elitist players. Our government regulators always provide us with such a level playing field, don’t they? What an absolute disgrace.

Inflation is destroying the world economy as central banks around the globe pump out money and credit until it inundates everything, and the leading creator of inflation and destroyer of the world economy is the Federal Reserve, a private banking concern, a majority of which is owned by two shareholders, namely, JP Morgan Chase and Citigroup, the main fraudsters of Wall Street. Wherever you see financial chicanery, these two malfeasants are usually somewhere in the mix. Ask Enron and Bear Stearns shareholders. And now the Fed’s machinations, in cahoots with elitist banks around the world, have caused a worldwide stock market crash and have sent the world financial system into an inflationary quagmire, perhaps to pave the way for world government. You have already seen us drop from a high last year of about 14,200 on the Dow to today’s roughly 12,300, a 13%+ loss. That would have been triple or quadruple were it not for the PPT. Then there is China, whose stock market has shed 50% from its peak, India, whose markets have shed 27% from their peak, Japan, whose stock markets have been in a state of implosion for two decades and Brazil, which is about to watch its currency implode for the second time in a decade. China uses 5 times more oil per unit of GDP produced than does the US. What do you think oil prices are doing to them? So much for free trade and globalism, and so much for the hypothesis that emerging markets can carry the world financial markets while the US and other western economies in Canada and Europe go under. What you have is a worldwide disaster in the making, with food shortages, starvation, social upheaval and revolution on their way. The would-be lords of the universe have really done it this time. We expect that very few of them will survive when people find out what they have done.

Robert the Bruce stopped the British Black Nobility from imposing their draconian feudal system on Scotland in 1314 at the Battle of Bannockburn. Our Founding Fathers fought and won two wars against the perfidious British Black Nobility to keep them from imposing their mercantilism and European-style, debt-based, private fractional reserve banking system on America with victories in the Revolutionary War and the War of 1812. Now we can add Ireland, whose citizens have stopped the European Union and its free trade, globalist agenda, both supported by the British Black Nobility and the other Black Nobility of Europe, dead in their tracks with a vote against the Lisbon Treaty, which was the EU’s attempt to short circuit the common folk of Europe to establish their regional dictatorship and regional currency in preparation for a diabolical one-world government and one-world currency. Let’s hope that the citizens of the US do the same with the clandestine North American Union and the Amero. This adds to the EU’s woes as a one-interest-rate-fits-all policy continues to alienate the weaker EU members from the EU’s economic powerhouse, Germany, the vast majority of whose citizens want their old Deutsche Marks back. While that group of weaker members may include Ireland, and while Ireland has shown considerable weakness from an economic point of view lately, that weakness does not appear to extend to their political wisdom. Let’s hear it for the Irish! ERIN GO BRAGH!!!

Retail sales rose 1.0% for the month of May. Big whoop! That figure is not adjusted for the actual rate of inflation, which also just happens to be approximately 1.0% per month here in the US. That means retail sales were actually flat, with all growth attributed to price increases and not a smidgeon to an increase in the amount of goods which consumers purchased. Thus, our 160 billion-stimulus package netted a big fat goose egg.

It is clear that oil and food are being driven up while gold and silver are being suppressed, so that when it comes time for the next precious metals rally, everything else will be hit and the dollar will be talked up. Apparently the cartel has not yet figured out that all the money from the sell-off of oil and other commodities will have to find a home somewhere, and precious metals are a very likely resting place. No one believes anything emanating from Bernanke, the Fed or our Treasury anymore. They have been dead wrong about every prediction they have made, and have lied pathologically. We will likely see rate cuts before we ever see rate hikes. The next debacle is on its way, and as soon as Ben the Bear Killer gets wind of it, he’ll drop rates faster than JP Morgan Chase took over Bear Stearns with a big, juicy taxpayer gift courtesy of the Fed. Meanwhile, we must endure the poppycock drivel that the Fed and our Treasury support a strong dollar, with M3 still over 16% and ongoing, unbridled speculation by banks in the commodities markets with easy cash and credit from the Fed, received in exchange for toxic waste collateral. Again, perfect.

Not only does the nominal price of gold and silver tell you how desperate we are financially, but the degree of manipulation should also be considered. If gold and silver are used as hedges, especially gold, then why do they go down when everything else is going up? Oil was only at 112 when gold was over 1000. Now we have 870 gold with oil at 135 and many food commodities doubling, tripling and quadrupling. Does that make any sense to anyone? If it does, then they are either a cartel insider, or they are just plain dumb. Three cheers for ETF’s and mint certificates, backed by the gold and silver of the proletariat which is now being used by the elitists to suppress precious metals by selling and leasing the very gold and silver which the duped proletariat think they own, while resource shares are ignored or naked-shorted. This transpires as bullion banks are paid to take out short-term silver leases and as specs continue to gamble in rigged casinos owned by the elitists while refusing to purchase and take possession of their gold and silver for cash. Welcome to corporatist, fascist America, where the sheople continue to confirm P. T. Barnum’s famous quote. Detach yourself from the Matrix, or get reamed.

If you think employment is bad now, wait until thousands of municipalities go bankrupt. They are the only ones making any significant contributions of good-paying jobs at this point. Their tax receipts are dropping into the tank as their bond insurers go belly up, as their ratings drop off a cliff, as their lending rates double, triple or more, and as the auction rate municipal bond market goes the way of the dodo bird, while the 330 billion owned by auction rate municipal bondholders goes up in flames since there exists no market where they can be sold, and bank’s do not intend to revive the old one. The state and local governments are about to join consumers in the big “Sorry-We’re-All-Tapped-Out” final binge party as they make appointments to have consultations with their bankruptcy attorneys. This transpires as they are forced to take over houses that have been abandoned by people who should never have owned them in the first place and as they make accommodations for the tent cities that are growing in size and number by the hour. Wonder what corporate earnings will look like when the municipal tits are shut off.

Previously our Defense Department gave a $35 billion air fleet tanker contract to EADS, which manufactures the Airbus, rather than to Boeing – a contract that should have never been written in the first place. The US doesn’t need the tankers. In that process 44,000 well paying US jobs were lost to Europeans. As it turns out the bid-awarding process was corrupt. The EADS fleet will cost American taxpayers dearly and the model is less safe than the Boeing model. Boeing could have saved taxpayers $90 billion. The EADS contract will cost us $40 billion. The aircraft is less capable. EADS is using illegal subsidies. EADS won exemptions from key national security laws. The Boeing model produces 25% less carbon dioxide, reducing greenhouse gases and offers a 24% fuel savings – a cost borne by taxpayers. Even as the contract for $40 billion is being handed over, the federal government is aggressively pursuing legal action against EADS at the WTO for getting grants and loans at unfairly favorable rates.

The key Senator John McCain (R-AZ) played a crucial role in blocking the deal to build air tankers from going to Boeing. The position fattens his campaign coffers.

The question is who arranged the payoffs and who received them?

The McDonalds Falling US Dollar Menu

Besides shrinking the size of the servings, I’ll bet they’ll start using cheap ingredients like soy flour in addition to wheat in their buns. I’ve noticed that some regular breads at the supermarket now contain it. One staple at the Kandylini household is Trader Joe’s organic sprouted bread, whose price has gone up a full dollar in the last six months. It may be time to invest in a grain grinder!

By: Michael Pento, The Market Oracle.

McDonalds Corp (MCD) held its annual meeting last Thursday, May 22 nd , and stated it has no plans to tamper with its highly successful dollar menu, which accounts for 14% of the company’s sales. However, The Golden Arches must wish that its dollar menu was on the McGold standard instead of being based on a currency that has fallen 40% in the last 6 years. That dollar decline is putting the squeeze on the Oak Brook, Illinois-based firm, as agricultural input prices are surging while consumer food prices are only up about 4% since last year.

Indeed, the price of food ingredients has risen sharply in recent years. Since the start of 2006, rice is up more than 200%, wheat more than 130% and corn has increased 125%. Meanwhile, the World Bank has stated that average food prices are up 250% since 2002.

Unfortunately, the future also looks bleak. According to projections from McDonald’s itself, the price of cheese should increase another 13-14% in 2008 alone. While it is true the higher input cost of agricultural commodities is partly due to wealthier consumer’s diets in developing economies as well as the ethanol phenomenon, the falling dollar is responsible for much of the elevated prices in many commodities. For example, if the US dollar kept parity with the Euro the price of oil would be just over $80 a barrel instead of $133 where it is today.

One must wonder how much longer the dollar menu can be priced in dollars. Perhaps a suggestion would be to price the menu in Euros. However, what is more likely to occur is that they will keep the menu at par and use something akin to reverse hedonics.

Hedonics, of course, is a method used in the calculation of the Consumer Price Index which reduces prices for improvements made in the quality or features of a good or service. In the case of McDonald’s it may be necessary to reduce the quantity or quality of items on the dollar menu in order to maintain the price. If neither of those methods is employed, it is reasonable to deduce that a serious compression of the company’s margins would occur and impact their earnings going forward. The bottom line is that the consumer will most likely be hurt by reduced quality, higher prices or a combination of both.

The company’s CEO Jim Skinner said last week that they would try to allay higher food costs by speculating in the futures market. While I’m not at all confident investors can count on the trading skills of Ronald McDonald to defray higher input costs, Skinner himself admits that not all costs can be offset. Under this environment of pricing pressure, it is astonishing that the company’s stock is up 15% year over year and has a trailing P/E multiple of nearly 20. Aside from its international growth prospects, the most plausible explanation is that the highly stressed consumer is downsizing his cuisine standards and switching from more upscale dining.

Still, the company faces very difficult choices as it struggles to maintain cost and quality. Will McDonalds’ costumers soon borrow a slogan from Wendy’s and ask, “Where’s the beef”? To maintain its dollar menu, diners at McDonalds may have to look forward to eating hamburgers containing a series of ever-smaller concentric circles as their patties suffers from the dreaded “shrinkage.” Unfortunately, to maintain its dollar menu, the company may have to become a microcosm of America ‘s shrinking standard of living.

We all have a lot to worry about indeed when the US dollar loses value against the Happy Meal.

SLIDE SHOW EXPLAINING ECONOMIC FORECAST 2008-2011

http://www.slideshare.net/contrarian2day/us-economic-outlook-200811/

A nice, concise “Economics for Dummies” slide show.

Behind the Rise in Prices: A Plan to Torpedo the Dollar

By Danny Schechter, Common Dreams.

Who do you think was one of the Bush Administration’s key players on the economy?

If you say Paulson or Bernanke, you might be half right. But there’s another no-name lurking around in the background who tends to be doing the wrong thing at every key moment in the covert history of he Bush (or should we day “Bush League”) Republic.

His name is Jim Wilkinson. He helped organize the GOP protest/obstruction of the Miami election recount in 2000. He was the White House’s key media spinner at the Doha Coalition Media Center. A reporter from Texas said he used techniques first perfected by Stalin. He was an architect of the Republican convention in New York in 2004. He was later dispatched to keep an eye on and act as ‘dissembler in chief’ for Condi Rice.

But at a crucial moment in the history of the western world, Mr. “I work in the shadows” Wilkinson became chief of staff to Treasury Secretary Hank Paulson, the Goldman Sachs Embed in the Cabinet.

Operative Wilkinson was then given the assignment of monitoring the world’s financial markets in a secret operation modeled no doubt on the great intelligence plan that produced the Iraq War.

His qualifications for this historic role?

See above.

As Mike Whitney reported at the end of October in 2006 – a day before Halloween – the US was then engineering the drop in the dollar to “improve competitiveness” – ie subsidize US exports in a flawed attempt to reduce the growing balance of trade gap. The result was summed up in the headline: “The U.S. Dollar is kaput. Confidence in the currency is eroding by the day.”

Whitney saw then what our media has still yet to report or understand. Was it a “trick or treat?” Read on:

“The financial crisis that we now face was created by design. It is intended to destroy the labor movement, crush the middle class, quash Medicare, Medicaid and Social Security, reduce our foreign debt by 50 or 60%, force a restructuring of America’s debt, privatize all public assets and resources, and create a new regime of austerity measures which will divert more wealth to the banking and corporate establishment.”

This was months before the subprime meltdown in August 2007, or the more recent hike in food prices and oil prices. Their plan, blessed by business and the banks, was implemented step by step. The consequence was intended.

News, as we know, passes by so fast, and unless a story is repeated ad-nauseum, no one remembers it or looks for the context and background of breaking developments.

Whitney quoted Richard Daughty from “his prescient article, The Phase of Impact” the Federal Reserve and the Treasury Dept have already manned the battle-stations.

Here’s an excerpt: “Mr. Paulson, the Secretary of the Treasury, is, by virtue of his ascension to the throne, now the head of the shadowy President’s Working Group of Financial Markets (which was created by Presidential Order 12631) and he is insisting that they meet more often, namely every 6 weeks!

This whole Working Group thing was originally set up as a fallback, ad-hoc, if-then defense to deal with possible economic emergencies, but now they are routinely meeting every 6 weeks. He has even ordered Jim Wilkinson, his chief of staff, to ‘oversee the creation of a Treasury Command Center to track markets world-wide and serve as an operations base in a crisis’! (Wall Street Journal) World-wide!!

The American government is moving to take control of the world-wide economy as the result of an anticipated crisis? Yikes!”

Now let’s fast-forward to the present, well after this widely foreseen crisis erupted. As oil prices climb, the public is angry. And who do they mostly blame? The oil companies and the oil producing states, of course. They have no clue that this crisis was the consequence of decisions made by the Bush Administration to devalue the dollar with its “crisis manager” Jim Wilkinson playing a central role.

Political writer Jerry Policoff questioned the “politicized polls” on who is responsible for the oil hikes. He noted that most people and pollsters don’t realize that the fall of the dollar precipitated all of this.

I asked him if he thought this squeeze had been orchestrated.

His response:

“I don’t think there is any doubt about that, and the Saudis said as much when Bush asked them to rev up production to bring down the price. Their reaction was pretty much that the U.S. should stop undermining the value of its own dollar before asking other countries to take a financial hit on oil.“

And sure enough, once again, as AP reported, last Friday, President Bush “failed to win the help he sought from Saudi Arabia to relieve skyrocketing American gas prices.”

The President’s own bombast was also faulted for driving oil prices higher, as Bill Scher noted, “Bush’s saber-rattling with Iran raises concerns of war and more disruption of oil supplies, which prompts speculators to raise prices.”

A day later, Treasury Secretary Paulson was asked what he was going to do to strengthen the dollar. He waffled – claiming a “strong dollar” is important but then changing the subject to “market fundamentals” in a speech to pump up CONfidence. (The first three letters of that word gave the real mission away.) He avoided a straight answer with a flurry of “uh, uh, uh,” halting phrases and contradictory assertions. The speech was characterized as “optimistically pessimistic.”

Ah so, so maybe there’s more to this than meets the eye and the wallet. In Europe the press is already blaming the banks for their role in the continuing economic collapse.

On May 13th, the President of Germany, Horst Kohler, a former head of the International Monetary Fund lashed out at bankers, calling them, get this, MONSTERS.

It takes one to know one.

In a page one story in the Financial Times, he said global financial markets have become a “monster” that must be “put back in place” for their “massive destruction of assets.” He called for tougher and more efficient regulation.

This is the strongest criticism of bankers by a European leader since 2005 when German Vice-Chancellor Franz Muntefering attacked Hedge Funds as “SWARMS OF LOCUSTS” whose profit maximization strategies.”posed a danger to democracy.”

No one was listening then. Is anyone listening now?

Crises just don’t happen out of the blue unless there is a natural disaster, and even they are made worse by a deranged military junta like the one in Burma, inadequate preparations, and flawed building standards thanks to corruption.

When I was in China visiting the Three Gorges Dam, for example, I was told about a major revolt in the National People’s Assembly against the dam because it was in a known earthquake zone. The leadership then imposed its will. So far, the big Dam is safe, but 400 others aren’t. 50,000 people are not alive either.

There is a financial quake still underway today with its own shocks and aftershocks. Will anyone in our media look at the precipitating role played by the bankers and the Busheviks including our old friend/fiend Jim Wilkinson?

You can almost predict that wherever he shows up, there’s gonna be a disaster.

And you can also predict that the mainstream press will be looking the other way, more than happy to attack any critics suspected of telling the truth or living in what the all knowing New York Times columnist David Brooks so cleverly sneers at as “Noamchomskyland.”

Ha! Ha!

Tell that to the cashier the next time you pay too much for a loaf of bread.

Devalue US Debt Through Inflation? Three Lessons from History

Source: Adrian_Ash, The Market Oracle.

“…Might the scam work? Can the United States really settle its debt with devalued dollars, free of all historical fall-out…?”

“WE CAN PAY ANYBODY by running a printing press,” said Thomas Gale Moore, one of Ronald Reagan’s economic advisors, when the United States became a net debtor to its foreign investors in 1986.

“Frankly, it’s not clear to me how bad [being a net debtor] is,” he added. And for the next two decades or so, owning fewer assets overseas than foreigners laid claim to inside the United States didn’t seem so bad at all.

The long boom delivered by a steady inflow of foreign credit and cash delivered the greatest stock market gains ever enjoyed by US investors. When they topped out, the party switched straight into real estate – adding more than one-third to America ‘s household wealth on the Federal Reserve’s metrics.

So what if non-US claims on that surging wealth rose faster still? Now the party’s over, inflating away the value of America ‘s debt will worked just as beautifully as it always before. Right?

“In my view,” says John H.Makin – a visiting scholar at the American Enterprise Institute writing in the Wall Street Journal – ” the least bad option [in fixing the financial crisis] is for the Federal Reserve to print money to help stabilize housing prices and financial markets.”

” America is a country that owes money,” agrees Philippa Malmgren, a former Bush advisor and now head of a risk consultancy in London . “It is natural when you are a debtor that you lean in the direction of inflation, because it makes paying it back so much easier.”

The logic is simple: inflate the number of Dollars in issue, and you’ll shrink the real value of each outstanding Dollar you owe. But if escaping your debts really could prove that easy, how come history is littered with the mischief that inflation causes instead…?

Restoration England , 1668

Charles II – still playing his “divine right” as king some 20 years after Parliament cut off his father’s head – steps up the issue of new bonds. Then called “stocks”, they let the King raise cash for yet another losing war against the Dutch.

Charles side-steps Parliamentary approval for these new debts, and starts selling stocks against the promise of future tax receipts (the same wheeze adopted by governments worldwide today, of course). Come 1671, however, all the new money raised went straight to paying interest on the outstanding loans. So Charles opted to default, wiping out 11 of London ‘s 14 biggest goldsmiths – those early banks who’d first lent the Crown money – and destroying his credit with England ‘s loyal subjects.

The upshot? The King strikes a secret deal with France, promising to stay out of its war against the Dutch in return for regular cash pay-offs. But the deal – uncovered amid a rash of anti-Catholic panics in London – undermines all support for the Stuart royal family. Fifteen years later, and with the English crown bankrupt once more, his brother James II is overthrown in a popular and (pretty much) bloodless coup.

He’s replaced by William of Orange …head of the Dutch Republic !

Revolutionary America , 1775

Lacking a mandate to tax its population while fighting a war, the second Continental Congress authorizes the “limited” issue of paper money. The new notes, known as Continentals, are backed by neither Gold nor silver, but by the expectation of future tax receipts.

Effectively acting as tradable bonds – but exchangeable for goods and services amongst the Patriots, rather than hard currency – the Continentals will only be redeemed when the Colonies win their independence from Great Britain . But long before that happy day, they race towards zero, becoming progressively worth less as their supply increases.

During the first six months, the supply of Continentals goes from $2 million to $6m. By 1779, the total supply reaches $242m on one estimate – more than twenty times the volume of gold & silver money in circulation before the war began.

“A wagonload of currency will hardly purchase a wagonload of provisions,” complains George Washington. In March 1780, Congress announces a plan to redeem the Continentals at one-fortieth of their face value, effectively stuffing the American people and taxing the new citizenry more aggressively than George III ever did.

“So much for Congress’s honor,” notes Thomas E.Woods for Mises.org today. But for once, at least, these un-backed and over-inflated notes don’t end with political or military defeat. Other than for the Patriots’ cry for lower taxation, that is.

Weimar Germany , 1920

Besides losing 13% of its territory and 10% of its population under the Versailles Treaty after World War One, Germany also owes “reparations” to the Allied victors worth almost 37,000 tonnes of gold – around one-third of the world’s entire above-ground supplies at the time.

Expected to settle the final payment seven decades later, the German government opts instead to pay early by printing money. The volume of Reichsnotes in issue rises 35 billion times over between 1918 and 1924 – and “the young and quick-witted did well,” as the German journalist Sebastian Haffner will record, fifteen years later.

Equity prices in Berlin rose some 2,772,164% by the time a loaf of bread cost a wheel barrow-full of banknotes. The value of those Reichsnotes, however, went the other way – sinking from 8.0 per US Dollar to 4.2 billion per Dollar.

The resulting chaos, now regularly blamed for the rise of Hitler during the Great Depression of the early 1930s, saw “wages paid twice a day and promptly and completely spent within the hour,” notes Glyn Davis in his History of Money .

“Large sections of society, including the middle classes, became impoverished; food riots were common; there was a complete flight from money, which had clearly become worthless to hold.”

A more honorable legacy, perhaps, was the inflation-fighting Bundesbank of the 1970s and ’80s. Staffed by bankers and academics who’d lived through both the Weimar inflation and its World War Two replay – which saw worthless coupons issued as money to Nazi citizens, Wehrmacht troops and even concentration camp victims – the West German central bank refused to devalue the Deutsche Mark alongside the Dollar, British Pound and French Franc by setting interest rates low.

The Bundesbank kept inflation far below the double-digit rates suffered by UK and US households as Gold Prices rose 20 times over against the Dollar. It finally bit the bullet with the birth of the Euro in 1999.

The new European Central Bank has since let slip its money-supply growth target of 4.5% per year. At last count, the supply of Euros was expanding by 10.3% per year, just below 2007′s three-decade record for Europe monetary inflation.

The Global Banking Crisis, 2008: ” US money supply growth is running at a 47-year high,” notes Bedlam Asset Management, “as the authorities seek to inflate away the debt bubble and prop up house prices.

“Clearly printing such huge amounts of money is not great for the exchange rate. A weak Dollar has forced the hand of other central banks as they try and keep their currencies competitive with it.”

But might the scam work? Not if China , Japan and the big Dollar-holders of the Arab oil kingdoms can help it. Will they really let their own currencies rise…just so the United States stuffs them by paying its debts with devalued Dollars?

Inflation, it’s claimed, eases the burden of settling your debts. But for government and private debtors alike, that’s only true if your income rises faster than your on-going cost of expenditure. Otherwise, you end up struggling to make ends meet today, only to leave yesterday’s debts for repayment tomorrow again.

Middle-class families and savers looking to get ahead of the game – both inside and outside the Federal Reserve’s fast-inflating currency zone – might want to consider Buying Gold as defense. Because however this latest attempt to inflate away debt pans out in the long run, it’s sure to make history.

And history says – time and again – that solid Gold Bullion holds its value whenever man-made currencies are forced to lose value.

Economic ‘misery’ more widespread

These stories are scary, especially since a lot of economic commentators are saying we haven’t hit rock bottom by a long shot. And I don’t see things dramatically improving if Obama or Clinton get elected.

Source: Chris Isidore, CNNMoney.com.

Americans are feeling a lot more economic pain than the government’s official statistics would lead you to believe, according to a growing number of experts.

They argue that figures for unemployment and inflation are being understated by the government.

Unemployment and inflation are typically added together to come up with a so-called “Misery Index.”

The “Misery Index” was often cited during periods of high unemployment and inflation, such as the mid 1970s and late 1970s to early 1980s.

And some fear the economy may be approaching those levels again.

The official numbers produce a current Misery Index of only 8.9 – inflation of 3.9% plus unemployment of 5%. That’s not far from the Misery Index’s low of 6.1 seen in 1998.

But using the estimates on CPI and unemployment from economists skeptical of the government numbers, the Misery Index is actually in the teens. Some worry it could even approach the post-World War II record of 20.6 in 1980.

“We’re looking at government numbers that are really out of whack,” said Kevin Phillips, author of the book “Bad Money.”

No inflation if you don’t eat or drive

According to the government’s most recent Consumer Price Index, a key inflation reading, consumer prices rose 3.9% in the 12 months ending in April, down slightly from the 4% annual inflation rate in March despite record gasoline prices.

But Phillips argues that consumer prices are probably up at least 5% and perhaps more than 10%.

Part of the disconnect may be due to the fact that nondurable goods, such as food and gasoline, makes up only 12% of CPI.

In addition, food and energy prices are eliminated from the so-called core CPI, which many economists tend to focus more closely on because they claim food and gas prices are volatile.

But food and energy costs are a very important part of household budgets. And those prices have been skyrocketing: Gas prices were up about 21% over the 12 months ending in April.

However, due to seasonal adjustments in the CPI, the government reported that gas prices were down 2% in April, even though on a non-adjusted basis, gas prices rose 5.6% from March.

And even that number may be too low. Measures of gasoline prices by AAA and the Department of Energy suggested prices rose as much as 10% in April.

Meanwhile, food prices rose 5.1% over the last 12 months, according to the report. The nearly 1% one-month jump in food prices in April was the biggest spike in 18 years.

To that end, nearly half of the respondents of a recent CNN/Opinion Research Corp. poll said inflation was the biggest problem they face.

CPI missed the housing bubble…and bust

Another problem with the CPI figures, according to skeptics, is that it doesn’t accurately reflect what’s going on in the housing market. That’s significant because the cost of buying a home has twice the impact on CPI as does the prices of all nondurable goods combined.

The CPI showed only an 11% rise in home ownership costs from 2002 through 2006, a time that the National Association of Realtors reported that existing home prices soared 34%.

The reason for the low CPI reading is because the CPI looks at equivalent rents, rather than home prices. So inflation was understated during this period, according to Phillips. He argues this may have helped feed the housing boom since it kept mortgage rates lower than they should have been.

Now that the housing boom has gone bust, the CPI appears to be missing the declines in home prices as well; it estimates that the cost of owning a home posted a 12-month increase of 2.6% in April.

But because the CPI figure was so far behind tracking the increase in home values, the housing component of CPI still is leading to a lower inflation reading than what it should be, Phillips said.

The inflation ‘con job’

The unusual way that housing prices are estimated isn’t the only peculiarity of the CPI report. Over the past ten years, there have been other changes in the calculations, particularly for big ticket items.

Cuts to estimated prices for items like electronics and cars that are thought to have improvements in quality year-after-year have lowered the overall CPI. In addition, changes in the way certain products, such as food, are tracked by the government, have also contributed to lower readings than otherwise expected.

Bill Gross, the manager of Pimco Total Return, the nation’s largest bond fund, refers to the CPI as a “con job” that deliberately understates the price pressures faced by Americans in order to keep Social Security payments and other government costs pegged to the index unduly low.

In a report about the CPI, he noted that some of the adjustments don’t accurately reflect how much consumers pay for goods. Pimco estimates that the changes have shaved more than a percentage point off the CPI.

“Did your new model computer come with a 25% discount from last year’s price?” Gross wrote. “Probably not. What is likely is that you paid about the same price for memory improvements you’ll never use.”

Another flaw with the CPI numbers is that the government now assumes that higher prices for one item will lead consumers to buy more of a substitution item. That may be true. But if people buy fewer steaks and more hamburgers, for example, it’s unrealistic to say that inflation isn’t a problem, skeptics maintain.

“The government can claim there’s no inflation but all they’re measuring is a reduced standard of living,” argues Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments.

With all this in mind, California economist John Williams argues that CPI is understating inflation by at least 3 percentage points and perhaps as much as 7 percentage points. So instead of an annual inflation rate of 4%, the true number could be between 7% and 11%.

Unemployed, but not counted

Finally, there’s the unemployment rate. It was at a relatively low 5% in April. But according to Williams’ Web site, ShadowStats.com, the actual rate may be between 8% and 12% if you use a more accurate reading of those out of work.

Even the government’s own numbers show there are many unemployed people not showing up in the unemployment rate. The official reading does not include 4.8 million people who want to work but haven’t found a job, for example.

Many of these people are dropped from the official calculation because they have become so discouraged from looking without success that they haven’t looked in the previous four weeks. Simply adding those people to the number of unemployed takes the current unemployment rate to 7.8%.

The Bureau of Labor Statistics, which produces both the CPI and unemployment readings, says changes in both measures were made to more accurately reflect the real world. The BLS also says the changes have resulted in changes of less than 1% for each measure.

Still, the Labor Department’s own broadest measure of unemployment, which includes as jobless those working part-time jobs because they can’t find full-time positions as well as some discouraged job seekers, puts the unemployment rate at 9.2% in April, the highest level for that reading in more than three years.

So if you take that number and add that to the 7% that Williams thinks is a more likely annual inflation rate, you’re looking at a “Misery Index” of 16.2, much worse than the 8.9 you get from the official numbers.

And while that may seem a bit high, it’s probably a more accurate gauge of how bad the economy is for many Americans.

Who Are You Going To Believe: The Government or Your Thinner Wallet?

It’s not the price of oil that’s the problem, but that the dollar is worth less (worthless?).

Source: NationalEconomist.com.

The government really does like to mess with its numbers, although the Bureau of Labor Statistics did state in their report that the price of gasoline was up, when it came time to record the price change for gasoline in their seasonally adjusted index, they recorded a decline in the price of gasoline. Here’s the BLS in their own words:

On a seasonally adjusted basis, …the transportation index declined 0.7 percent in April, reflecting a 2.0 percent decrease in the index for gasoline.

Wall Street rallied yesterday on this bit of bogus inflation data.

Here’s the real scoop from The Daily Fuel Gauge Report from the Automobile Association of America: In April gasoline prices were up 11.5% from their price of $3.39 a gallon a month earlier. And, the cost of gasoline has risen 22% from its year-ago price of $3.10 a gallon.