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Home
 The
Coming Economic Depression
– September 2005 Update
This is the
latest update to a series. Earlier sections appear here.
This month’s
update will cover a couple of major issues with an extended
Random Thoughts section. Things are moving quickly and rather
than spend a great deal of time rehashing the events of the last
month, I decided to give a little perspective and commentary to
some broader issues that may affect many of us before long. I
know many of you prefer the hard facts, charts and graphs but
this month I feel strongly that other issues need to be looked
at without delay.
Hedge
Funds
(Financial
Nitro)
Two stories
that may not be getting a great deal of attention are Hedge
funds and derivatives. Many stories are actually transpiring
under the radar. US and global Regulators now are probing hedge
funds. While the story deals mostly with the sales practices of
these funds it shows a renewed interest in these large
investment vehicles.
The
(NASD) regulator, which polices 5,200 brokerages, sent letters
in June to about 10 firms, including Citigroup Inc., Merrill
Lynch & Co. Inc., and UBS AG, people familiar with the probe
said. NASD asked the firms what warnings they gave investors
when selling hedge fund products with minimum investments of
$50,000 or less and whether they paid brokers sales incentives.
– Philly.com
Hedge
funds now are one of the primary methods this author believes
the US will attempt to hide its purchases of its own Treasuries.
The budgetary deficit estimates for next year hovering around
$800 Billion, it seems clear that this much capital will
probably not be available to the US to borrow. Hopes are high
now with the reintroduction of the 30 Treasury note,
historically being one of the most popular and historically
solid of investments. The hope is that the US will be able to
attract the needed capital to fund this monstrosity of
indebtedness. This remains to be seen. While it is clear that
the dollar has risen due to hedge fund demand from these shadowy
investment vehicles, it is never quite clear who actually
is doing the buying. Sadly, hedge funds are a money launderers
delight because of their loose regulation. The number of them
has grown significantly since the beginning of the year,
especially in the Cayman Islands, traditionally known as a place
for illicit financial transactions. It is the perfect place if
you want to hide the purchaser’s identity of large swaths
of US Treasuries from the curious.
According
to published reports, about 80 percent of the global hedge funds
are registered with the Cayman Islands Monetary
Authority. During the first half of 2005, the number of Cayman
Island’s registered hedge fund operators rose
from 5,932 to 6,527. - Hedgeco
The
increase in the number of these funds signals that perhaps some
of these may have been created for the express propose of
propping up the dollar and surreptitiously buying US Treasuries
in the face of our unsustainable deficits. Admittedly there is
no hard evidence for this nor will there be as long as
regulation of these entities is as loose as it is today. Thus,
when one reads stories about Hedge funds and derivatives, one is
forced to read between the lines and draw his or her own
conclusions.
Capital
will be needed and needed badly in the US come October. One can
see the hint of quiet desperation in moves by the treasury to
crack down on companies who shift their profits to ‘low
tax’ jurisdictions. Rather than making a cosmetic and PR
type change a recent change is one that appears to have some
substance
"This
is not a small correction to the existing regulations,"
said William Dantzler, an international tax lawyer with White
and Case, according to the FT. "It is a big deal and is
intended to be." - CFO
This
could be a big blow to corporate balance sheets and the fact
that the Administration would consider such action against those
who have funded him and his political party so generously shows
there may be a view that soon there will be a genuine need for
the additional capital.
Derivatives
(Financial
Glycerin)
But
the financial casino that these hedge funds are dependent upon
contains a large percentage of derivatives. It is in this arena
where there are some rather ominous things transpiring. Pimco,
the world's premier bond traders demanded settlement of a
contract in an actual delivery of bonds. This is almost unheard
of in futures contracts, but demand it they did and this caused
a squeeze on the 10 year note in order to settle the contract.
Typically large investors do not demand the actual delivery of
the underlying bond in such a contract. This transaction has led
to some problems and will lead to more up ahead if more decide
to do the same.
The
introduction of the 30 year bond could reduce the amount of 10
year bonds that traders assumed would come into existence in the
future. Because of their ‘certainty’ that these
bonds would come into existence, contracts for 10 year bonds
that do not even exist yet have already been written.
The
10-year futures contract is based on a theoretical Treasury note
that doesn't exist. Then the CBOT have formulas to convert the
value of existing Treasuries into the theoretical ones. For
example, the cheapest bond to deliver to settle the current
September contract is the August 2012 bond. So you are really
getting delivery of, and contracts are priced from, the
seven-year stuff rather than 10-year stuff. - FT
So
goes the crazy world of derivatives. They’re essentially
selling people ‘Brooklyn Bridges’ that may or may
not be built. The author of the above piece notes with crystal
clarity that the US economy is too leveraged and we are living
in a fool’s paradise if we think that we can use these
sophisticated instruments to reduce interest rate risk.
The
Derivatives problem obviously has the Fed’s full and
undivided attention. In a letter dated August 12th,
the Fed ‘invited’ 14 major banks to discuss an 8.4
trillion dollar industry that is ‘rife
with unconfirmed trades’. The specific industry under
scrutiny? Credit
Derivatives.
These
derivatives have grown by almost a trillion dollars over the
past three years. Essentially, credit derivatives are ‘bets’
as to the ability of companies to pay back their debts to
creditors. The Fed, SEC and Comptroller of the Currency and the
NY State Banking Department are slated to attend the Fed’s
special meeting. This is a global problem and several European
bank representatives have also been invited. This could be a
serious problem in the future as a little noticed story surfaced
on the 24th of August stating that GM and Ford Debt
Divisions have also been cut to Junk status. Yet the
Fed’s actions were to be expected. In July, an esteemed
‘Blue Ribbon’ panel of experts looked that this
issue and issued an important report. The Report called Toward
Greater Financial Stability: Private Sector Perspective is a
report of the Counterparty Risk Management Policy Group II.
Most
of the recommendations and guiding principles relate to measures
that are within the control and reach of individual
institutions. Others entail collective actions by institutions
and their so-called “trade groups.” In that latter
category, I want to call your particular attention to
Recommendations 12, 21 and 22, which call for urgent
industry-wide efforts (1) to cope with serious “back-office”
and potential settlement problems in the credit default
swap market and (2) to stop the practice whereby some market
participants “assign” their side of a trade to
another institution without the consent of the original
counterparty to the trade. Among other things, this practice has
the potential to distort the ability of individual institutions
to effectively monitor and control their counterparty credit
exposures. - CPRMG
Interestingly,
the report offers some rather puzzling recommendations. One
seems to run counter the transparency needed in today’s
financial institutions to avoid fraud and abuse that has
occurred in the past.
CRMPG
II recommends that trade associations, such as the Global
Documentation Steering Committee, continue efforts to attract
widespread acceptance of documentation standards for the
treatment of confidential information. Individual firms should
also continue to independently develop and refine their internal
policies and procedures for managing sensitive client data and
endeavor to address confidentiality issues raised by
counterparties by disclosing and following such policies and
procedures with regard to confidential materials. (page 32)
This is a
fascinating statement. A reader such as myself finds such
statements extremely interesting in light of the fact that this
document largely deals with derivatives. In these ‘sensitive
transactions’ they want to be careful of sensitive client
data. Now let us get this straight; they are not talking about
the average Joe’s checking or savings account information.
They are talking about large accounts that belong to the very
rich, very powerful, and at times very criminal
organizations that
do not want what they are doing generally known. To the
uninitiated this would seem to indicate that they may perhaps be
concerned with identity theft of their customers. Be assured,
your bank has probably already SOLD your personal data to a
myriad of data collection centers that warehouse large amounts
of data on just about every American for a tidy sum. This
document is talking about sensitive transactions. This is a
almost certainly a euphemism for barely, quasi, semi and
outright illegal transactions that they do not want anyone to
know about.
Well,
the good news is that at least someone has recognized there is a
problem. I suspect there may be a major problem brewing under
the surface of the Global economy. Three major institutions have
probably triggered it; Ford, GM and Fannie Mae. As most of you
know, Fannie
keeps on putting off its financial reporting.
Moody’s is considering downgrading
some of its debt.
We are told not to expect a restatement
from Fannie until 2006.
2006!? Yes that is right another year and it will need to hire
1500 consultants to do the job. Yes, you heard the number right,
enough consultants to populate a small, rural town. In addition,
if they keep missing the deadlines, they may get de-listed from
the NYSE. What kind of restatement are we talking about? It
could total as much as $10.8 Billion. The last time Fannie Mae
provided quarterly results was back in July 2004. So while many
would say I am crying wolf when I say there may be something
ugly brewing under the surface of the global economy, well
publicized news items tend to support it. Wheather or not the
mainstream media and other financial pundits wish to put all of
these things in perspective is, of course up to them (and their
banking/financial institution advertisers). I will report it as
I see it and I see something very wrong here.
More
here
http://www.narconews.com/petras1.html
http://news.bbc.co.uk/1/hi/world/americas/197773.stm
http://www.thirdworldtraveler.com/Banks/Dirty_Laundry.html
But
the Fed meeting that is slated to take place on September 15th
is probably mostly going to deal with recommendation #12 (Page
37) as this appears to be a major problems; no proof of a
position held in these instruments.
Market
participants recognize the immediate need to address the backlog
of unsigned confirmations on an industry-wide basis and are
currently committing substantial resources to its resolution.
CRMPG II recommends that, as
a matter of urgency, market participants apply additional
resources to this task, take part in and strongly encourage the
development of electronic trade matching and confirmation
generation systems and work together a well as cooperatively
with trade associations to identify and implement solutions. In
addition, market participants should make use of one or more of
the following: using master confirmations, circulating drafts of
structured confirmations pre-trade, pre-negotiating short form
confirmations pre-trade, signing or initialing term sheets
pre-trade and orally verifying material trade terms promptly
after trade date. Moreover, individual institutions should
periodically inform senior management and their primary
regulator about progress being made in reducing confirmation
backlogs. In extreme cases, senior management should be prepared
to consider whether trading volumes need to be reduced until the
backlog is normalized. CRMPG II endorses the convening of an
industry-wide roundtable in the near term to focus on
aggressively reducing confirmation backlogs by working toward
further technological and operational enhancements, and by
strengthening backoffice operations. (page 37)
So there is a
risk and the FED has seen that it is necessary to get the major
players in credit derivatives on the same page because the
potential for a serious problem is real, much more real that the
banal, technical and somewhat boring report referenced
indicates. Once again, one gets the impression that there is
something big simmering underneath the entire global financial
system.
Housing
The
housing markets are still red hot but there are increasing signs
that things are beginning to cool. First of all houses are
becoming increasingly unaffordable. One has come to expect this
is such markets as California where the median price is over
half a million dollars. In places like In Santa Clara County it
has fallen to the small fortune of $700,000. However,
affordability problems also exist in such places
as Alabama,
one of the less economically vibrant states in the nation.
As
mentioned in last months update the time that houses are staying
in the market is increasing and prices in some markets are
showing signs of either slowing their rate of increase or
actually dropping. I look for prices to stabilize but when
higher mortgage payments hit many homeowners because Adjustable
Rate Mortgages begin to take effect, I expect many houses to
come onto the market and/or a flurry of refinance activity to
take place to lock in rates. I do not see the bubble bursting
just yet. But as I outlined in last months update I expect the
real spoiler in the housing market to be Jobs, the lack of, poor
pay and the existential problems of the jobs that are being
‘created’ by Bush and BLS statistics.
Paul
Krugman the esteemed economist sees trouble too. He sees it
bursting in 2006. While admitting that he could be wrong he does
see problems ahead.
"I'll
give you a forecast which might very well be wrong, but I think
it will burst in the spring of next year," he said at a
derivatives conference in Brazil's winter resort of Campos do
Jordao. - Reuters
These
predictions were echoed by Greenspan who said that there were
dangers from an overheated housing market.
"The
housing boom will inevitably simmer down. As part of that
process, house turnover will decline from currently historic
levels while home price increases will slow and prices could
even decrease." - Greenspan
This
is not good news for the banks and financial institutions that
are in have a large part of their portfolio’s in real
estate. Those values will come tumbling down. Banks already are
beginning to feel a pinch. As this reuters
article shows.
Margins
are now the lowest since the third quarter of 1990, when the
U.S. economy was in recession. Overall second-quarter profit at
the 8,868 institutions insured by the FDIC fell 3.3 percent from
the first quarter to $33.1 billion. - Reuters
While
this is hardly horrible news, it is telling. The banks are
feeling the pinch as well and as the article goes on to point
out that if treasury yields flatten out things could get dicey.
What
does all of this mean? Well it would take a real economist to
tell you, which I am not, but I can tell you that if the housing
markets head south and people start losing homes and jobs due to
recession and can no longer borrow against their homes to make
purchases, a vicious spiral could get out of control and this is
what Greenspan warned about to his unnamed successor. He warned
of asset price rises in general in relation to rather static
income trends and he said that these issues, if housing prices
deflate would complicate policy decisions.
According
to John Mauldin in his excellent news letter, it means that
Greenspan
is targeting your home.
And Greenspan's statements portend changes in the housing
markets in the near future.
In
a generally sanguine outlook at a Fed symposium in Jackson Hole
this weekend, Greenspan said both the excesses of the housing
market and the nation's unprecedented dependence on foreign
borrowing were likely to correct themselves through the normal
function of market forces. - SF
Gate
He
must walk a fine line and not precipitate a crash but he must
bring these outrageous prices under control and he has the means
to do it with. But be assured Greenspan has clearly stated that
he is targeting asset prices and your house is a key asset that
has appreciated 'exuberantly' over the past few years.
Immigration/Border/Drugs
Yes
there is a real drug war going on south and even north of the
border and it is no joke. The drug traffickers and illegal
immigrants have taken off the gloves and are now targeting
federal agents. They are shooting them, downing helicopters, and
the narco-traffickers have gone on a killing spree in the border
states. Yet I believe that the courts are also a real problem as
they are now giving
away the property of Americans to criminals who trespass, steal
and who are here illegally. The government does not want to
do anything and now the courts are threatening ordinary
Americans who try to protect their land with property seizure if
they attempt to do what the Government should have been doing
for years. While the ranchers in question in this seizure
obviously had other issues (illegal gun possession and allegedly
pistol whipping the illegals) the Courts message was clear;
the illegal immigrants have the right to terrorize Americans,
and Americans have no right to do the same. If you have property
on the border and illegal aliens use sections of it for drug
running without your knowledge, you may even lose your property
to the government, because that is the law of the land today
when it comes to drug cases. The rancher will have to
prove his innocence. Yes, that is right, in these kinds of cases
you (or rather your property) are guilty until proven
innocent. The nine black robed thieves in DC have so ruled
regarding property in drug related cases. Folks, I just do not
see the people on the border putting up with this kind of abuse
from their leaders and courts for much longer.
Anywhere
from 70
to 90% of south American cocaine comes in from the Mexican
border much
of it via human mules, but other more sophisticated methods are
also employed. How does this relate to economics? Well an
earlier link should have tipped you off but here it is again.
The US and its Banks launder hundreds of billions
of illicit dollars a year.
Also
you may find this of interest
A
Drug Empire
As
well as this
Secret
Border Wars
And
listen to this two minute clip.
Audio
Interview with former DEA agent.
Once
you do that perhaps you will get a different perspective on why
Bush and Clinton did so little along the US border and why they
each resist it with such determination.
This
does not mean that the US won’t do something about it
soon. I think it will and what it does will stand the hairs on
the back of your neck straight up. The Department of Homeland
Security has a plan. A plan that may sound good at first but
given current legal tendencies by the administration and the
High Court, it could truly be a horror story that will come true
to both illegal immigrants and US citizens alike. I highly
recommend you take a look at this
link.
http://www.ice.gov/graphics/dro/endgame.pdf
Granted
it seems that this operational plan would be a good idea to many
as the immigration problem and the real possibility of terrorism
are not phantom threats. But when one considers that today there
are Americans
in detention that have not been charged or tried,
a far more frightening possibility
emerges.
Random
Thoughts on South America, Bush and our Courts.
The
US is working hard to demonize Hugo Chavez. Pat Robertson,
showing his true imperial colors played the Bush/Rumsfeld game
and threw out a ‘tester’ for the administration by
calling for the murder of Chavez. His rant included calling
Chavez a ‘dictator’. This is a ‘Bush-esque’
kind of lie, but what do you expect from a neo-con? Chavez was
democratically elected, several times by the way and has a 70%
approval rating at home. He answers to an elected body in his
nation and a legislative branch of government. He is not a
dictator. Those who say he is are liars and cannot be trusted.
Chavez is doing what he can to assist the poor of his nation and
this is putting a squeeze on US oil companies and corporations.
Throughout South America a major political shift is occurring.
In Ecuador there is a revolution underway. Protesters were able
to shut down Ecuador’s oil industry and much of the anger
is directed at the US and its corporate elite. The people of
South America are tired of foreign ‘aid’ that leaves
them with massive debts and puts the aid money in the pockets of
companies like Bechtel, Halliburton and Exxon. The US
administration has called Chavez a ‘negative’
influence in the region. Not because he starves his people, or
puts them in concentration camps or invades nations thousands of
miles away, but because he opposes America’s Free Trade of
the America’s (FTAA) and the takeover of Latin America by
what is viewed by many as controlled 'corporate fascism'. How
one views the influence of America and its activities in the
region determines whether one supports Chavez and men like him
or not. The people of South America surely understand these
basic issues as they have suffered under the weight of poverty
and injustice under previous US supported leadership. The people
have voted for change and they mean to get it. With the price of
oil on the rise, it gives Chavez more capital to improve living
conditions for the poor in his country and export his own
‘peoples’ revolution’ throughout Latin
America. This is what Washington is very much afraid of. When
oil prices were low things were different for Chavez, while
still popular, his economic programs faltered because of the
lack of capital. Now Chavez will ride high as long as prices
stay high, and that may be for a very long time. The higher the
price of oil, the louder the cries to oust him will be from
Rice, Cheney and Bush.
So
why do they hate him so much? It can’t be just his
political philosophy. The answer to that is a little more
complex.
On
July 14 in the western city of Maracaibo, Venezuelan government
tax auditors and a prosecutor went to the offices of Chevron
Corp., the second-largest U.S. oil company. They seized boxes of
records to build a case that San Ramon, California-based Chevron
and 21 other energy companies owe Venezuela $3 billion in back
taxes - Bloomberg
The
article goes on to explain that Chavez wants to use the money to
help the poor of his nation. This is not something that the oil
companies or many of the leaders Religious Right in America want
to see happen. You see those people in Latin America are not
'true red, white and blue Americans', they have dark skin and
don’t speak English. These are cardinal sins, in their
eyes. So to these apostles of poverty and murder, this makes
them ineligible for such things as food, shelter, clothing and a
livable wage.
This
is why you have folks like Pat Robertson going on TV to speak to
a predominantly white suburban audience to stir up hate with
half truths and outright lies about what is really happening in
Venezuela and why it is happening. Granted he apologized but the
cat is now ‘out of the bag’ so to speak, but the
empire has spoken, ‘Chavez must go’.
Another
reason the US establishment does not like him is that he is an
impediment to the economic ambitions that are enshrined in the
FTAA agreement. South America already has a free trade Zone
called Mercosur. While there are problems with the trading bloc
it is seen as a threat to US trading interests and globalist
plans for the region which essentially include making it
subservient to Western (US) Corporate interests.
Now
as much as the West likes to blast Chavez his economy and oil
sector are open to foreign investment, which is different than
most of our oil trading partners who do not allow it. Yet Chavez
will not allow foreign control of his nation and this is the
real sticking point between Washington and Chavez. Perhaps now
you can better understand what is really happening in Venezuela
and why they hate him so. Washington is going to have to come to
terms with the revolution going on in South America and make
peace with it and understand that if there is anti-Americanism
there it is well deserved. Consequently, constructive engagement
in the region is better than official statements that say Chavez
is a ‘negative influence’. The real negative
influence in the region and the world is a nation that attacks,
starves and invades nations who have never had any aggressive
tendencies against them. You know… nations like America.
I
know that sounds unpatriotic. I have served my country in peace
and war and I will not listen to any person on these issues
praise what we are doing in Iraq, (and south America) who has
not done so themselves. Those who extol the virtues of American
aggression and greed while they get fat with a remote control in
their hands are beneath contempt, for it is they, not I who have
betrayed America and our uniquely American ideals. I cared once
deeply for our nation and its ideals but I know that America I
once loved is gone. It is as dead as John Kennedy and will never
come back again.
Americans
need to understand what has been done in their names the pat 50
years. They need to understand why the world is turning against
us. Most do not. They are obsessed with getting a new SUV or a
big screen TV or trying to bed their neighbor’s wife. Yet,
increasingly one is hearing more and more of families
struggling just to make ends meet. They also do not
understand it. They know that we have given foreign ‘aid’
to these nations but don’t understand the mechanics of the
aid and the fact that it almost never reaches the people but
enriches American Campaign donors instead. The tricks we have
played on the poor are old and now the people are beginning to
get wise to them. The empire has no recourse but violence. This
is why Chavez has cozied up to the Chinese. He knows that he can
eventually shift his primary customer of his oil from America to
China if the need arises, as China is another oil hungry nation.
China will then have a vested interest in giving him diplomatic
cover in any row with Washington. Here is a key that needs to be
understood as well. The US needs the oil from Venezuela.
Venezuela does not need the US as a customer. The US can
probably get more from other nations such as Nigeria, but it may
not be enough to fill the shortfall. This means that the US and
the South American revolution are on a clear collision course
and that is why Pat Robertson’s call for the murder of
Chavez (quickly repented of) is so important. Many in the
administration want Chavez dead or at least removed from power.
An outright invasion contemplated by some would send the entire
region into an anti-American frenzy and our adventure in Iraq’s
lack of success is no encouragement to such a plan. If America
were to invade or Assassinate Chavez, America’s empire
would suddenly come to an end. Our borders are wide open and do
not think for a minute that saboteurs and what are now
euphemistically called ‘terrorists’ (better known as
dark-skinned victims of American foreign policy) are not here in
America and could not enter with lightning speed to retaliate
for any act of terrorism America might perpetrate on a Latin
American country. What kinds of Terrorism could the US commit?
The
US shelling from a warship 'rebels' (read democratic forces)
inside Venezuela
A
‘surgical’ air strike,
The
insertion of ‘Special Operations’ forces into the
region to terrorize Latin Americans, as we have done so many
times in the past in other Latin American nations.
The
assassination of a democratically elected leader
The
funding of an overthrow of a democratically elected leader.
Let
us note here without any equivocation that when America commits
acts of terrorism and it is called foreign policy.
But
the rhetoric coming out of GOP think tanks, TV commentaries and
web tabloids shows that they are preparing to take some kind of
action against Chavez in the near to medium term. These think
tanks and TV shows are funded directly or indirectly by the very
interests that have abused Latin America since the 1950’s.
By saying that Chavez is ‘in bed’ with drug dealers’
they hope to use the same tactic used against Noriega, who was a
US stooge for years before he began to part with US policy.
Chavez may be peripherally involved with drug dealers in the
region, but
not nearly so much as American Banks and US administrations
past and present
who have sent emissaries to Latin America to beg them to invest
their ill gotten gains in US banks and use these same dealers in
their proxy wars.
So
where in which South American 'tent' will the 'Corporate Camel'
stick its nose? A
good guess is Paraguay, which looks to boost defense
cooperation with the US. The US denies building a base in
Paraguay but its denials seem rather weak,
The
Pentagon used this same rhetoric when describing its actions in
Manta, Ecuador, now the home of an $80 million U.S. military
base. First they said the facility was an archaic “dirt
strip” which would be used for weather monitoring and
would not permanently house U.S. personnel. Days later, the
Pentagon stated that Manta was to serve as a major military base
tasked with a variety of security-related missions. Human rights
groups have linked the U.S. base in Manta to the 2002 coup
against Venezuelan President Hugo Chavez. - Toward
Freedom
The
US obviously wants to commit some kinds of crimes and atrocities
in South America as it is wants all of its troops
immunized from the International Criminal Court's Jurisdiction.
Natural Gas is the prize in the region and the US administration
will scare suburban housewives with mythical tales of Al Qaeda
training camps to get them to support yet another ill advised
military action to secure energy resources. Will it work, in a
nation full of nitwits? You betcha!
The
US is afraid of Chavez’s center left doctrine, which is
business friendly for small and medium sized enterprises but
refuses to allow large US based corporations a free reign in his
nation to undermine competition and monopolize key sectors of
the economy (telecommunications/ Powergrids/ Water/
agriculture). This is why they hate him and hate him to the
death. They have made every attempt to discredit him, his
polices and his nation. The real reason is an age old struggle
between rich and poor. You see, the US administration is working
from economic models that can no longer work. It is
debt-consumption based and requires a large military, massive
capital inflows and quasi-legal apparatus to enforce and
perpetuate its continued existence. Recognizing the inherent
problems with its model, it is trying to destroy the middle
class in its own nation with free trade agreements. A vibrant
and informed middle class is a very good ‘check’
against imperial tendencies from going too far. One look around
the nation and one can see clear and present changes occurring
on the American economic and educational scene. There is a new
model that America’s elite are working from. They know
that consumption of the worlds goods cannot continue at the
present rate and rather than planning prudently for such
inevitable phenomena such as peak oil, it is going to use the
crisis and other economic methods to destroy the middle class.
The new economic model they are working on for our future
harkens back to the days of the dark-ages when there were the
rich-men/nobles and the serfs. In those days the torture
chambers and dungeons were usually full with those who could not
afford nor legally obtain legal counsel. It is an utterly
different economic and political model that they are working
from than the one we Americans have been accustomed to. I have
long firmly believed that the past US administrations since the
days of John Kennedy have had as their primary goal the
destruction of our American ideals enshrined on the
Constitution. One of the most powerful and important results of
the American experiment was a vibrant, informed and basically
moral middle class and this has been the target of those who
have held the reigns of power for the past 45 years in America.
They have succeeded. The Middle Class in America is now just a
debt collectors lawsuit away from poverty.
This
is why you see Supreme Court decisions giving power to the rich
and well endowed to steal property from those who paid for it.
These are EXACLTY the kinds of abuses that the old European
Monarchs committed that caused revolutions. Protections against
these abuses were neatly and clearly enshrined in the US
constitution to protect ordinary people from these abuses. This
was the beauty and success of the American experiment. It
allowed a man to keep his wealth and provided a powerful
incentive for work, inventions, various forms of artistic and
industrial creation, business innovations and personal freedom.
The Supreme Court obviously is not reading the Constitution. It
appears to be reading from something else and given the advanced
age of many of its members, they may not know the difference
between the Constitution and the latest copy of the National
Enquirer.
But
let his disposition have that scope that dotage gives it. -
Shakespeare (King Lear)
The
‘Public Use’ clause of the constitution has now been
expanded to mean rich, private corporate use. What readers must
understand is this; the ideals of the American Revolution and
the American Constitution have been under attack since the
America won its revolutionary war. Those ideals are now called
‘terrorism’ by those who want to destroy the
American experiment. If a man believes that he has a right to a
fair trial, should not be subjected to cruel and unusual
punishment (torture) has a right NOT to sell his property to a
private developer or that he has a right to peacefully assemble,
or to keep his land from draconian drug laws, he is now a
‘terrorist’ or a ‘terrorist sympathizer’
under the current (and future) American administrations whether
they be Democratic or Republican. This is the new political
model our elite are working from and if you think the Democrats
are any better, go look and see who voted for the Patriot Act.
The
bile of GOP TV and radio pundits keeps the fear factor up in
suburbia to keep them supporting the destruction of their
freedoms. The greatest enemy of the Constitution is not just the
Bush administration. They are just a symptom of a much larger
problem, like a hand or foot that falls off, it isn’t the
loss of limbs that is the problem but the leprosy that underlies
it that is the real cause for concern. In short it is the
American-Corporate Model of government that is destroying our
freedoms, nation and eventually will extinguish many of our
lives. The two biggest culprits in this are the People and the
Supreme Court. While others such as the Media can also be
blamed, court decisions could have easily freed up the airwaves
for other views than those with the most wealth and power. The
Court is what needs to be reformed and in short order with a
complete review of major decisions made since the 60’s.
This could be accomplished by a constitutional amendment and the
comfortable retirement of every sitting Supreme Court justice.
But once again you have the media as a primary problem because
most Americans are still dependent on corporate news reporting
and could easily have their minds poisoned by our elite to
stifle real reform.
The
Formula
A
couple of weeks ago I saw a flick that was one of the most
interesting movies I had ever seen. Not because of a great story
though it was good, or great acting, though the actors were
exceptional (Brando and Scott). No, the reason why I found it so
interesting was the theme. It dealt with a formula a formula
that was developed in Nazi Germany and smuggled to the US and
held by US oil companies.
A
little known fact which I covered in a book I wrote back in 1999
is that the Nazi’s were forced to synthetically make much
of its gasoline from coal in the closing years of the war. The
movie was about that formula and the power struggle to obtain it
and make it public. The movie is out of print now and very
difficult to find but they did run on Turner
Classic Movies a couple of weeks ago and I watched
it. Why do I bring this up? Well here is why; Montana’s
Governor has said that he can produce gasoline from Coal
for about a
dollar a gallon.
"I
am leading this country in this desire and demand to convert
coal into gasoline, diesel and aviation fuel. We can do it in
Montana for $1 per gallon," he said. "We can do it
cheaper than importing oil from the sheiks, dictators, rats and
crooks that we're bringing it from right now." -
Reuters
We
will see if this works or if a myriad of administrative and
legal hurdles are not put in his way as he attempts to do what
the Fed’s should have been doing years ago; working on
alternatives. But there is little profit to be made in making
smooth transitions in such a fundamental economic issue. There
is however billions of dollars to be made in creating a crisis
that should never have occurred in the first place.
Something’s
Amiss
What
is going on with the President? Who ever heard of a commander in
Chief taking a six-week vacation in a time of war? Who ever
heard of a commander in chief that announces that we are going
to stay in Iraq ‘as long as he is President’ and the
following day a top commander announces troop withdrawals? Who
ever heard of firing a four star general for having an affair
with a woman not his wife while that general is legally
separated? Now this is Four Star General was once a key member
of the Joint Staff. Who ever heard of a President defending a
man who appears to have exposed one of our security people to
the nation’s enemies? Who ever heard of these things? I
have come to the conclusion that it could be (remotely) possible
that he is no longer really in charge. I have wondered what is
going on because I will tell you under no uncertain terms that
there is complete inertia in some government agencies inside the
beltway. No major decisions are being made; policy decisions
that affect very important programs have not been written. This
sounds like a little thing but if, for example Customs needs
money based on policy guidance, that guidance is essential
before money is disbursed. No policy, no money; no money, no
border control. This goes across many key government agencies
and it is no laughing matter. The National Security apparatus is
especially dependent on this kind of policy guidance. While
the chatter on the net has died down about a possible coup
against Bush, I can tell you that there is something very
unusual about what is going on with the President. What it
is, I do not know but my guess is that they are very concerned
about Fitzgerald’s investigation and where it might lead.
Their poll numbers and our disaster in Iraq also are far from
comforting to the Administration. I also think that there is a
growing and very real move by some powerful people to
marginalize Bush and make him politically impotent or remove the
President from office. You can call this kind of talk what you
want, but observe where they take the President on his moves,
small carefully scripted gatherings usually at military
installations. I also want to add that the talk of the
Presidents dependence on anti-depressants is more that idle
speculation. Members of his own party can’t be pleased
because they are running for reelection in 2006 and Bush’s
poll numbers are abysmal. For America this is a crisis point in
its existence, with annual deficits running at close to a
trillion dollars, this too is a cause of great concern. The
alarm has been rung by some key establishment economists and
news pundits. This is a time when the President needs to build
bridges with the rest of the world, yet in his typical
arrogance, he puts a man like John Bolton into the UN over the
objections of the Senate (via a recess appointment) and most of
the rest of the world. Now he has put the UN into an uproar
because key aid programs that would benefit the poor are under
his scrutiny and may not survive. Sadly, people still wonder why
they hate America’s foreign policy. Now I personally have
never been a fan of the UN, not for a minute. But they have
admittedly done some good and it is those programs that Bolton
seems intent upon destroying. In summary, all I can tell you is
this; Something is not right with our National Security
Chain of Command.
To
my usual readers I apologize if my dissertation is somewhat
troubling long and rambling, but I would feel remiss if I did
not outline some of my deep concerns as they touch on both the
political and the economic. I see several crisis coming to a
head late this year and early next year that could bring in some
unwelcome changes to America’s lavish lifestyle. I
honestly do not think those changes are far off at all. Having
said that a political
crisis or ‘security’ crisis could very well be a
mask for the real one and that being an economic crisis as
America finds that it cannot meet its current fiscal
obligations. If you think that is far fetched then you can tell
me where we can get $800 billion this year while we already pay
interest on nearly $8
trillion (it will be $8 trillion by the time many of
you read this) in debt with a nation of temp workers and
unemployment line-standers.
Finally,
It is not a time to panic. That is the last thing in the world I
want to see anyone do nor should they make any rash decisions.
But as the scriptures say:
A
prudent man foreseeth the evil, and hideth himself: but the
simple pass on, and are punished.
(Proverbs
22:3)
Wise
words from a wise man.
****
I
will try to cover the economic impact of Katrina, Oil and
Insurance next month because I think the storms impact could be
quite substantial and long lasting. I may put up an interim
update if time allows.
By,
Mark
S. Watson
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