Economic Cogitations

This small update is to help the ordinary person get 'real' about what is happening in the markets and to explain why what we are seeing now is just the lull before another wave of real trouble hits our markets. The next wave however, is likely to show its face not just on Wall street but will make is hideous appearance on Main Street as well, in the form of layoffs, bankruptcies, foreclosures, severely curtailed credit access, followed by homelessness and yes, even real hunger, in the once land of the free and the formerly home of the brave.

There is a lot of information that is not hitting the mainstream airwaves on the reality of the credit crisis. Simply put, our economic elite are trying to 'cook the books' in secret to make our present situation appear far better than it is. Some of the new methods the Fed has cooked up to bail out the banks (at the expense of ordinary folks, I might add) is to quietly change the kinds of collateral they will accept in order for a bank, or any other politically connected financial institution to obtain a ~~bailout~~, ur... I mean loan from the Fed. Let us see how one commentator put it.

The Fed, as those who have been following the gyrations of this August institution know, created a new “thingie” loosely called the PDCF or Primary Dealer Credit Facility (not to be confused with the TSLF, or more formally The Term Securities Lending Facility or the TAF or Term Auction Facility). The Fed has met this burgeoning crisis, not only with their usual (and in this case, panicked) interest rate cuts, but also through the creation of many new instruments, first for their bank constituency and, more recently, for a broader defined group, including investment banks which are qualified to bid on new government issues. Our folks at the Fed need to get Treasuries to this group and those “thingie’s” such as the TAF or Term Auction Facility, early on created for the banks a way to get around the unwieldy next day payback of Federal Funds borrowings. The original idea was that the Fed would give scarce Government Securities to the “clearing banks” or takers of “Govies” for 28 days. The Fed was to receive as collateral stuff known as “Level 1.” We are presuming that this is the Level 1 known under the Basel Accord as Level 1. Such is the stuff in the “investment banks” that actually trades regularly and at some kind of spread smaller than the .

THE FIRST TSLF AUCTION WILL BE A LOAN OF TREASURY SECURITIES AGAINST SCHEDULE 2 COLLATERAL RATHER THAN AGAINST THE SCHEDULE 1 COLLATERAL PREVIOUSLY PROPOSED”

We are making the assumption (you know what an assumption can do to the “assumer”), and we may have to take the consequences - but we are equating Level 1, Level 2, etc. to Schedule 1, Schedule 2 etc.

TO FACILITATE THE OPERATIONAL PROCESSES OF THE FACILITY, THE FEDERAL RESERVE HAS ALSO E X P A N D E D! THE LIST OF ELIGIBLE COLLATERAL FOR SCHEDULE 2 TO INCLUDE AGENCY COLLATERALIZED-MORTGAGE OBLIGATIONS (CMO’S) AND AAA/aaa RATED COMMERCIAL-BACKED SECURITIES (CMBS), IN ADDITION TO THE PREVIOUSLY ANNOUNCED AAA/aaa-RATED PRIVATE LABEL RESIDENTIAL MORTGAGE-BACKED SECURITIES (RMBS) AND OMO-ELIGIBLE (YOU FIGURE THIS OUT!) COLLATERAL.

Not only have they gone on down to schedule 2 or “Observable value” stuff, if our assumption is correct, (which, since it ain’t been trading, could be demoted by a careful observer to schedule 3, “Unobservable values”), they have snuck in the whole next crisis in COMMERCIAL REAL ESTATE GARBAGE YET TO COME! - Edmund M. McCarthy: President and CEO of Financial Risk Management Advisors Company

Mr. McCarthy goes on to explain that in essence what is happening is that the Fed has become the 'Dumpster of Last Resort'. All of the crappy financial instruments that no one wants are being dumped on the Federal Reserve and by extension, the US taxpayer, who will eventually foot the bill for this gargantuan bailout. This is a frightening turn of events and shows that any idea of moral hazard for the major Wall Street firms has been thrown out the window. Not only will we see more money in the form of 'Treasuries' go to Wall Street, but these (bad and nonperforming) loans will eventually make their way to the Fannie and Freddie . The entire system is being undermined by Bernanke and Company because they refuse to let the big banks fail, step in and reorganize the entire system thus saving the general economy¹. Instead what is happening is that they are throwing away the credibility of the entire US financial system, the dollar and any and all dollar denominated instruments (including stocks and bonds) in an ultimately futile attempt to save Wall Street's cheap-credit addicts. This was all because of a flawed market ideology.

For the past 25 years or so the financial authorities and institutions they regulate have been guided by market fundamentalism: the belief that markets tend towards equilibrium and that deviations from it occur in a random manner. All the innovations – risk management, trading techniques, the alphabet soup of derivatives and synthetic financial instruments – were based on that belief. The innovations remained unregulated because authorities believe markets are self-correcting.

Regulators ought to have known better because it was their intervention that prevented the financial system from unravelling on several occasions. Their success has reinforced the misconception that markets are self-correcting. That in turn allowed a bubble of excessive credit to develop, which extended through the entire financial system. When the subprime mortgage crisis erupted it revealed all the weak points. Authorities, caught unawares, responded to each new disruption only after it occurred. They lacked the ability to foresee them because they were in the thrall of the market fundamentalist fallacy. They need a new paradigm. - George Soros

Here is where things need to be understood, not in terms so much as balance sheets, and economic reports, but in the realm of politics. You see, the Dollar is still the reserve currency of the world and so far, the second major crack² in the dollar empire has not appeared yet, that crack being the de-leveraging OPEC and the Gulf Kingdoms.

While there has been enormous political pressure bough to bear on these kingdoms by the US not to de-peg their currencies, it would not be all together true to say that there are not other considerations that has thus far led them to stay on the dollar peg. They know that depegging their currencies from the dollar will cause the dollar to sink and sink fast. These kingdoms have substantial US dollar denominated investments and to depeg would see those investments tumble in value, probably quite significantly.

Gulf oil producers have resisted inflationary pressure to end a long-standing link between their currencies and the US dollar as they fear this could inflict heavy losses on their coffers, analysts said yesterday.

Unpegging or appreciating their currencies against the dollar could partly ease the inflation problem but they could end up paying a much heavier price in terms of sharp declines in their overseas assets and oil revenues, they said.

Gulf Co-operation Council (GCC)Gulf Co-operation Council (GCC) countries, which pump a-fifth of the world's oil supplies, are already reaping the windfall of high oil prices but are also believed to be reeling under a loss of more than $400 billion (Dh1,469bn) from the US sub-prime crisis.

"We estimate the loss of Gulf sovereign wealth funds (SWFs) from that crisis at more than $400bn but it remains a phase or a paper loss as these funds had made massive profits in previous years," said Henry Azzam, Chief Executive Officer of the Deutsche Bank in the Middle East and Africa. - Zawya

Many economists in the Blogoshpere are doing a good (some a truly excellent) job telling it like it is. This is very big crisis that has the very real potential to bring down the entire US economic system. They use charts and graphs and inside information to show us all what is happening. Most of the really good ones come from Market insiders who Blog for free. There are others out their looking to turn a buck but they should all be viewed with some healthy suspicion. Yet very few are able to really meld not just the economic aspects of this crisis with the equally important political dimension. It is the shadowy world where governments, economics and unpunished crime meet that gets little real play anywhere on the net. There are some that make some great surmises and guesses, but none (with a couple of 'hit and miss' exceptions) that have any real inside track in this realm.

The GCC is one of the more important regions because of its oil producing capabilities. Also it is very wealthy. It is also a place where much is not as it appears to be. Because so much wealth is in play here, criminal organizations, intelligence services and those who work in and for both are extremely active. Some of these groups are extremely violent and influential. Recently, just before a major deal here in the US where the Gulf financial sector was involved, one of these criminal organizations actually kidnapped the child of one of the principle bankers and the banker was told to let this criminal organization 'in' on the deal or they would start sending his child to him in little pieces. The deal went through and the crooks were 'in' on it. I bring this to light to show you that there are some things going on in the world of economics and finance that can be ascertained from charts and graphs and a great many others that can't. Sadly too many writers feel that anything that cannot be explained in an excel spreadsheet should be labeled 'conspiracy theory', as though crime does not exist in their antiseptic world of charts, flat-panel monitors and polite conversation.

Sadly, explaining this aspect of our world to those who have never dealt with it is like trying to explain the third dimension to a two-dimensional being. They simply have no frame of reference. It would be a vast overstatement to say that these types of events drive our modern economy, but do they often significantly influence it at times and in ways you will never hear about. The pervasive influence of criminal organizations, private/corporate intelligence services (often hooked in deeply with national services) is real in largely unstated in the blogosphere, policy analyst papers and even government reports. Their activities are more prevalent and important than most know or want to admit. A perfect example is the fact at that there are some people in DC no one wants to tangle with, on any level, at any time, in any way whatsoever. There are very powerful people who can and have destroyed many a political career and put powerful politico's in jail. Their names are never, ever mentioned in connection with these things. Scandal, prison or death is the result of mention their names or even giving too much information as to who they are. I say this in all solemnity, a person could really get killed if he is a nobody. It would be labeled a suicide, or illness or perhaps the persons house will burn down while he is sleeping or perhaps a 'random' act of criminal violence. No one is immune to this network in any corner of the globe. It is very, very real and believe me it is a conspiracy, bit it is no theory.

The next administration is going to have its hands full. When these Kingdoms form their own monetary union the dollar may play a role in its value, but only if some semblance of fiscal sanity returns to US economic policy.

OPEC on Wednesday accused the U.S. of economic "mismanagement" that it said is pushing oil prices to new record highs and rebuffed calls to boost output, laying the blame on the Bush administration.

Oil prices surged for the first time past $104 a barrel after the OPEC announcement and the release of a U.S. government report showing a surprise drop in crude oil stockpiles.

The 13-nation Organization of Petroleum Exporting Countries said it would maintain current production levels because crude supplies are plentiful and demand is expected to weaken in the second quarter. - AP

This economic mismanagement is not a small issue and is sending clear signals to the rest of the world that a new economic order is needed. This order is a foregone conclusion. Washington is far too corrupt and irresponsible to deal forcefully and honestly with the current crisis and is adding to the problems of an already overburdened dollar with each and every multi-billion dollar bailout and shady Fed lending facility. The Fed is doing its best to resuscitate the US economy using yet more credit as a tool. What policy makers do not want to see is that it was the addiction to cheap and easy credit that created this mess in the first place. Greenspan's very irresponsible monetary policies created an environment where money was loaned to corporations, institutions and individuals who were simply not credit worthy. The risk of default was shuffled off to others with the use of synthetic financial instruments (derivatives), which he praised and encouraged. Now the bills are coming due, people can't pay and the house of cards is imploding. What is Bernanke's desire at this time? To create more lending to Wall Street. This lending is having an effect on our deficits. It is raising them significantly. This along with declining tax base from corporate receipts is making the hole in the US budget even larger.

"The Treasury Department reported Thursday that receipts from corporate income taxes fell 16% to $129 billion in the first half of fiscal 2008, which began Oct. 1. The federal deficit during the period hit an all-time high of $311 billion, and was up 20% from a year earlier." - WSJ

What does this mean? Simple. Soon foreigners are simply going to abandon the dollar. We have already defaulted on about 40% of our massive fiscal deficits. Defaulted, you say, 'I didn't hear about that!' you may exclaim, 'he must be nuts, sayin' stuff like that!' I really do mean defaulted, but it is not the kind of default you hear about in your financial publications. What I mean is this. The dollar has plummeted by about 40% in value. That makes everything denominated in dollars worth 40% less, including US Treasury paper.

This is one way the US is currently defaulting on its debt obligations and why the G7 and other Central bankers are concerned about the slide of the dollar and the US economy. In short, they are getting shafted by Uncle Sam.

Today the situation is as bad as ever, despite the recent rallies in the US markets. Today what we are witnessing is a very high degree of coordinated 'perception' management, using major bankers, corporate titans, financial newspapers all acting in unison to convince the ordinary American that all is well and that they should continue to spend and borrow as though noting is wrong. This perception is reinforced with the current 'irrational exuberance' of the US financial markets and its extremely suspicious rises on days when the exceptionally bad news economic news hits the front pages (UBS's massive writedown is just one example) of the daily newspapers. This shows perceptive market watchers that the Presidents Working Group of Financial Markets is coordinating these rallies when they know news will send the market considerably lower. Once again, perception management and remaking market sentiment are the keys. They are willing to go to just about any length to manage both this crisis and the perception of its depth, and breadth and the ways they plan on solving it.

Several moths ago I explained some of the National Security concerns that allowing Sovereign Wealth Funds brought and how continuing to sell large chunks of the US financial system to entities that are by there very nature controlled by foreign governments. This has led to the US government, via the committee of Foreign Investment in the US (CFIUS) which came out of the Exon-Florio Act, to become recently amended. Until very recently, a foreign ownership threshold of at least 10% was needed before any meaningful review was required to take place. This has changed. CFIUS has issued new regulation that some hope will clear up what would and would not constitute a threat to national security. The last time this little known agency was in the spotlight was during the Dubai Ports World debacle a few years ago. If you don't remember here is a snippet from Wikipeida.

P&O operated major U.S. port facilities in New York, New Jersey, Philadelphia, Baltimore, New Orleans, and Miami. After the deal was secured, the arrangement was reviewed by the Committee on Foreign Investment in the United States headed by the U.S. Treasury Department and including the Departments of State, Commerce, and Homeland Security. It was given the green light, but soon after, both Democratic and Republican members of Congress expressed concern over the potential negative impact the deal would have on port security. They cited the 9/11 Commission report, which stated that two of the 9/11 hijackers were United Arab Emirates nationals, and reports that the UAE was a major financial base for the al Qaeda terror network. The country did not fund al Qaeda but money was transferred through UAE's banks without the government knowing what the money was for (because of privacy concerns). Republican leaders Dennis Hastert and Bill Frist, usually working in close synchronization with the office of the President, came out to publicly question the deal. Frist said in a statement, "If the administration cannot delay the process, I plan on introducing legislation to ensure that the deal is placed on hold until this decision gets a more thorough review." [1] Representative Sue Myrick (R-NC) sent a one-sentence letter to the president that read, "Dear Mr. President: In regard to selling American ports to the United Arab Emirates, not just NO — but HELL NO!" [2]

On February 22, 2006, President George W. Bush threatened to veto any legislation passed by Congress to block the deal, which would be the first time in his presidency he would exercise the privilege. In a statement to reporters, Bush claimed, "It would send a terrible signal to friends and allies not to let this transaction go through." [3] Supporters of the deal claimed that the UAE were friendly to America, as the emirates allow U.S. warships in the Gulf to dock in their ports and re-supply their ships with oil, food and other goods for free. Crew members are allowed shore leave in the country and entertain themselves free in malls and movie theaters. - Wikipedia

Of course there is much more to this story than meets the eye and those who want a look at the people involved and their personal financial interests in this deal can start here. Too often these deals are more about personal fortunes (corruption) than about any concerns about National Security. The Dubai Ports World deal showed clearly a flawed system that was obsessed with Secrecy and whose lax concern about the National Security implications of the deals it was to oversee were only brought to light at the last minute by Congressional intervention. But these new regulations should helps sort out legitimate National Security concerns when large Sovereign Wealth Funds buy up large chunks of US financial infrastructure. This is no idle question. It is one of the utmost importance as the Fed, Treasury and Wall Street seek ways to bailout its ailing financial institutions. The new regulations are now in place to take into consideration such things as Critical Infrastructure (yet to be clearly defined) and a nations record on non-proliferation and counter terrorism. In addition, CFIUS is now required to perform a 45 day investigation of each government deal, thus closing a loophole in the old legislation. It also forces greater transparency and compels CFIUS to notify Congress within 5 days of approval.

As I write this on 9 April, 2008 Citigroup has just sealed a deal with Private equity groups to sell $12 billion of itself. This could have been a foreign group of Sovereign Wealth Funds and with it those pesky National Security concerns. This is going to be the trend for some banks and large financial institutions for many months to come. The bailouts are designed specifically to prevent the negative fallout from bad financial decisions. Real losses, real bankruptcies and real liquidations on Wall Street, rather than just main street. It is here that we must look at how economic policy and political realities meet to shape our markets and how the rich and powerful are able to compel policy decisions that are to their personal interests over the interests of the national economy. It is the 'me first' economic paradigm it is driving these multibillion dollar bailouts and Mr. and Mrs. America out of their homes.

It is Washington's inability to deal with root causes of this crisis that is leading us into this disaster. I maintain that with a real desire to solve the crisis and real solutions designed to fix not just the symptoms but the underlying causes of this current crisis, we could salvage the US economy and its present global predominance. Sadly no such solutions or 'out of the box' thinking is going to be heard in Washington until masses of Americans begin massive strikes and marches to compel them. This will not happen until the economic pain is unbearable and perhaps, not even then. Thus, the US economy will collapse under the weight of its own incompetence, woeful management and systemic corruption. Let us just take a look at one item for a moment, the War. It is by far the most expensive item the US is dealing with. But dishonesty requires that its costs be shifted off budget.

Before the 2006 election campaign, I asked a veteran congressional aide how Republicans would explain to voters the ruinous continuing costs of the war in Iraq.

"They'll just tell 'em the good news," he said. "There's money. Money to build new roads, bridges and tunnels; money for new hospitals and schools; money to pay teachers and policemen."

Indeed. When you add the military costs of war and occupation to the money being spent on reconstruction, Iraq is, by one estimate, currently costing US taxpayers US$12 billion a month. That's nearly US$400 million a day, or US$17 million dollars an hour. - ISN

The war in Iraq is, frankly speaking, fiscal suicide and you cannot separate the costs of this war from what is happening in the markets today. The Multi-billion dollar bailouts are also weighing heavily on our gargantuan fiscal deficits which have been further exacerbated by Bush's tax cuts for the rich. Indeed our Congress has also shown a deep dishonesty when not vetting, clearly in the light of day, the costs of this war in open debate but instead chooses to fund it 'off budget' as I said in 'Supplemental' spending. Such spending at its current levels is without any historical precedent. The Amounts are staggering and the accountability for the money, non-existent. I say unprecedented because that is what I mean. Now before any of you say I am just repeating what someone else said, lets take a look at the last undeclared war America was involved in, Vietnam and how much of it was funded with supplemental budgeting.

I have stated on numerous occasions that a new economic depression is not only likely but almost a foregone conclusion given today's current economic and political leadership. This sad state of affairs is not only unlikely to change but as real calls for real change become louder as they will, the greater the recalcitrance of those institutions who are benefiting greatly and undeservedly from the Fed's excessive largess. It is impossible to discuss economic policy without taking into account the element the influence of economic behemoths (Wall Street's Banking lobby)have on Washington's Political class. The same type of struggle was seen during the Great Depression when many of Wall Streets biggest firms were doing what they could maintain a status quo that was no longer working. Every attempt is now being made to prop up and bailout 'modernized' investment vehicles that no longer pass economic muster today. Now, as mentioned above, the Fed is taking in this modern day economic 'Charmin' (in the form of MBC/SIV's and all the other alphabet soup paper) and in exchange giving Banks what is still perceived to be a good asset, namely US securities. This is the equivalent of saying to the Fed and the Congress, don't fix this system too much until you bail us out and we can retire rich. Thus, any action to really solve the underlying problems will be put off until Americans are poor and feel poor, every single day. Wall Street is at the very heart of the cause of this crisis. It is the system of money creation that has no 'wealth creation' to complement it. Wall Street's actions have systematically destroyed the wealth creation ability of the American economy. Let us look at how one commentator from the economically disadvantaged part of the US economy has put the it.

It is now proposed that the "excess" housing stock of the United States be knocked down, bulldozed until a renewed shortage of shelter will render the housing that survives worth something close to the prices advertised before the bubble burst.

It has come to this: The U.S. economy can only heal itself by destroying those few products it can still manage to create. This is what happens when pure capitalists rule society, the people with no connection to actual production of goods and services, but only to the uses of money, or the recently coined phrase "moneyness" - stuff that can be made to act for a while as if it were money. Like the $516 trillion in "derivatives" that big banks have to hold on to because nobody knows what's in these strange "instruments" - which were just as good as money as long as financial institutions pretended they really were money-like. - Black Agenda Report

It is the very destructive nature of this system that is brining disaster on us all. Wall Street, The Fed, the Congress and the rest cannot see themselves outside of the box that Wall Street and 'easy money' created for them. This is why I am so very pessimistic about America's chances for economic survival. The people in charge are dangerously incompetent and are utterly without vision. They bailout out Wall Street because that is all they know how to do. This is why I have written in the past to keep your eyes on the State Houses. There is seething anger in some over the outright theft and corruption going on in DC and when things get ugly and they will, some states will make real concrete moves to get away from Washington and succession is well within the realm of possibility, especially states that border the ocean or Canada. I know many of you think I am overstating the problem. I am not. Real moves have already been made that you will never ever hear about. If you want a hint as to how real the threat is viewed, look at what happened in NY with Gov. Spitzer and in Alabama with Siegelman³. The State Houses are increasingly viewed as a threat to those in Washington. Anything that threatens the rampant criminality in Washington is now deemed a 'National Security Threat'.

Yet the actions of the Fed and the government beg some very important questions, First as the lender of last resort, who bails out the Fed? Who repairs the inevitable damage to our dollar as more of our Treasury paper is sent out to Banks who continually make bad investments? What this all means is that one way or another risk, real risk is one way or another going to make its way into the markets not just for the little guy, who has to pay his bills, but for Wall Street as well. Yes, the Wall Street who make bad investments and not only do not have to pay for them, but whose titans still get multi-million dollar paydays as a reward for creating economic disaster. No my dear readers, these bailouts and paydays are going to cost someone. Who?

The answer is short and not at all sweet. The US taxpayer and consumer. The taxpayer in the form of higher taxes (done surreptitiously by doing things like lowering the AMT, or cutting out tax breaks for everything from donations to home improvement), the consumer in the form of higher prices (inflation) in just about everything he or she needs. This will only be exacerbated by factors which have less to do with monetary policy but with geology as well as ecology.

No economist worth his or her weight in salt should ignore the effects of the upsurge in global demand for Oil and the relative flat-line in oil production and not see an ominous trend. Not should they ignore the sudden collapse of Global food supplies and the rising cost of it abroad and its unmistakable rise here in the US. The hope is that that the US can and will be able to contain these two factors. How they intend on doing it is has not been made clear but if this administration attacks Iran, oil prices will rise significantly wrecking havoc with the US economy. Politically speaking it would be wise to look at such an attack as likely though not inevitable. Looking down the road it seems likely that those elements in this administration who are heavily invested in oil will profit handsomely from any price spike and the effect on the US consumer at the pump will take several weeks, if not months to materialize, thus, pushing much of the 'blame' on the next, incoming administration. Indeed we would already be at war if it were not for some very courageous military officers who will never be thanked by Americans for the courage they have shown in the face of the most violent, corrupt and incompetent administrations in US history whose polices are well on their way to destroying US economic and military power.

For those of us who know Christ. We need to take stock of what is happening both from a practical and prophetic perspective. No one wants to believe Bible prophecy these days, least of all most Christians. So many have gone badly astray while in Mammon's loyal service. They no longer listens to or can discern spiritual truth. This is a very dangerous position to be in and I fear, most of Americans Christians are there with an immovable determination. Not many know who the major prophetic players are and that most have already taken the stage. They do not know the major, very major prophetic events that are now on the horizon. They do not see nor do they want to see. Mammon and the search for greater wealth and comfort are potent blinders. The prince of this world uses them often, almost as much as he uses hate, bitterness and blasphemy. I have seen anti-semitism take root in many a Church and Christian heart, completely ignoring God's opinion and purpose in these very last days with Israel⁴. They have in essence become enemies of the LORD, telling God that he is wrong and they are right. Rebellion is at the heart of the Antichrist system and Israel is at the heart of the battle of Armageddon. Brothers and sisters, it is very much later than you think and satan has already subverted and taken over many a denomination and Church. Denominations that were once so strong in the faith with a rich and vibrant spiritual history just a hundred years ago now have the smoke of satan rising from its steeples, sodomites in the pulpit, child molesters on the board, theives as treasurers and adulterers as elders. This is not an entity that is holy, a holiness that is a requirement if one is to see the Lord.

Follow peace with all men, and holiness, without which no man shall see the Lord: Looking diligently lest any man fail of the grace of God; lest any root of bitterness springing up trouble you, and thereby many be defiled; Lest there be any fornicator, or profane person, as Esau, who for one morsel of meat sold his birthright. For ye know how that afterward, when he would have inherited the blessing, he was rejected: for he found no place of repentance, though he sought it carefully with tears.

What we are witnessing is the end of the global system of Mammon as it has been constructed in these last days. The center of that system must be destroyed and a new order must arise for a short space. I cannot stress this enough, clearly things are much worse than we are hearing from the mainstream media. I think it entirely possible that real plans are being made to shut down the US economy (a banking holiday) in order to reorganize it. I am certain that these current bailouts and piecemeal stimulus measures, however significant they may seem to the average Joe, will not work and make problems considerably worse. I think that upcoming G7/G8 meetings will increasingly focus on ways to solve the crisis but those new methods when are implemented, will leave the US in a very weakened position. I do not think that our current establishment, as bent on military and economic conquest as it is and facing all manner of War Crimes allegations, will fade away quietly. Thus war will, in my estimation be more and not less likely as the US leaders will be unwilling to relinquish its global dominance.

It is on this note that I want to digress. Things are very, very tense right now in Washington. We may very well be on the verge of a major upswing in political tension, but not with Iran. As regular readers of Watson's Web know, I like to give my readers the inside scoop on things... but just enough without getting myself into real 'six-feet-under' kind of trouble so here is a good one. America and China are much closer to a major row than most know. Recent Naval incidents in US waters and the concomitant arrest of Chinese operatives here in the US have raised some very high level eyebrows. Clearly what has been revealed is that China has very real plans to subvert and then go to war with the US and they have been set in motion. What has been happening the past few days inside the beltway has changed the perception of a lot of folks who have been sound asleep on the issue of China and her intelligence/Special Operation and military capabilities as well as her intentions. These are some very dangerous times and all the decisions and plans our elite are making are based on some dangerous assumptions. First is that China will not wage a more concerted and coordinated economic war on the US. The US is very dependent on China for its consumer goods and needs to keep China holding its massive dollar reserves. Many analysts have stated correctly that any attempt by China to dump its dollar denominated assets would hurt China as much as it would America. This is largely true as far as it goes. But when dealing with China what seems to be never really is. China may very well be in a position to wage economic war on America and win. That does not mean that China will not sustain damage to such war. Few engage in war without counting the cost. The real question is, do they think they can wage such a war and win. This is not about what I think, you think or those in DC think, but Chinese perceptions of any prospects for the success in a war that must be accounted for. Indeed it has also been revealed that some Chinese fronts here in the US are behind a significant amount of mortgage fraud here in the US. The goal? Cash and economic subversion.

But the desire is growing around the world to disengage from the US dollar and economy and this will eventually bring in a new order. Prophetically this new order will be very different from the US led one. Very different indeed. But troubles in the world must increase. America will not be immune. Today in America violence is increasing. I like to check out the activities of criminal gangs in the LA area where a very large, criminally inclined⁵ population dwells and demands more and more from the US. I firmly believe that some are here for the express purpose of taking America down. Many of these gangs are involved in drug trafficking, weapons smuggling and human trafficking. These are textbook organized crime and terrorist activities, yet in our desire to be 'politically correct' no one wants to deal with these issues as they are. Even foreign corporations are getting in on the 'Break Up America' band wagon. Absolut Vodka has this picture (right) on the label in Mexico. Look carefully and this is the map I showed my readers early last year in my Race Wars section of the PESR. I am of the strong belief that foreign nations are actively working to subvert and ultimately take down the US. I believe that these efforts are very far advanced and that we have thousands of sleepers and hundreds sleeper cells in this nation right now that are highly organized to wage economic, political and even sabotage, assassination and other types of violent subversion right here in the US. Sadly, when I ask my sources about this they can only tell me that this administration is still obsessed with the 'Global War for Racial Profiling', better known as the War on Terror. No one is looking at this with any real zeal. Those that do and sound the alarm bell get fired, especiually when one talks about the serious potential for subversion by Latino Crime/Drug/Smuggling gangs. This happened to one US attorney in a major US city. When pointing out the ugly underbelly of the upward spiral of racial violence, the attorney was removed. Folks there is a very dark, and very evil presence in our government that will not allow the US and its agencies to effectively deal with these issues, these are real people with real faces. Most of our resources are being misdirected and real the real threats have not only not been identified, but woe be unto you if you have the courage to point them out.

I know most of you have not quite figured out what this all means prophetically so I will tell you.

America is going to be taken down, in one single hour by a confederation of ten 'kings' who will not be kings (actually rule) when they destroy New York with Fire and America with various plagues. But this will not happen until the final form of the Seven Headed Beast makes its appearance on the Global Stage. It is at this time a new entity comes onto the stage, the False prophet. I have written extensively on this and will not recount it all here. Thus according to the Bible, America's demise will not be the slow waning away of an empire but a sudden, quick and violent removal, by God himself.

And he saith unto me, The waters which thou sawest, where the whore sitteth, are peoples, and multitudes, and nations, and tongues. And the ten horns which thou sawest upon the beast, these shall hate the whore, and shall make her desolate and naked, and shall eat her flesh, and burn her with fire. For God hath put in their hearts to fulfil his will, and to agree, and give their kingdom unto the beast, until the words of God shall be fulfilled. And the woman which thou sawest is that great city, which reigneth over the kings of the earth.

I am of the strong opinion that this new system when it arises will see Russia (the eighth member of the G7) and Islam (emphasis on the Median/Persian side of it) as new equally powerful players on the global stage as the old G7/IMF/World Bank/Bretton Woods⁶ monetary order. This will probably occur after a major Global economic reorganization, which I think is just in the horizon. I need only look at who has money (hard currency, gold, platinum and other important commodities) and then look at those who have debt to surmise how this system will reorganize itself. I could be wrong. Many others seem to disagree, pointing to long dead empires as somehow relevant to end-time Bible prophecy. When I see a global power with seven heads, now eight making critical decisions in our world, I would be a fool to dismiss such an organization, I think that is the case for other students who refuse to even look closely at this entity and what it has done, is doing and probably will do in light of this current global economic crisis. I say this in all humility. Pay attention to the G7, Russia and what is going on in Iran and Iraq as well as the Sunni and Shi'ite branches of Islam. For those of us who dwell in the west these entities will be very, very important. But I think this as well, the final form of none of these entities has come into being yet. WE MUST WAIT AND SEE, I still think there is a key here that will not be fully revealed until after this current crisis is dealt with forcefully by the leaders of the west. and the G7. I do not claim to be a prophet nor do I claim to have any exclusivity to Biblical truth. These matters are things that only time and God's grace will reveal to us. So those of you who write and attack me, stop... pause catch your breath and DO YOUR OWN RESARCH before you start burnin' up your keyboards and the servers at your ISP with those fiery nasty-grams.

I have long believed that before the US goes down, a period of severe trial and turmoil followed by a police state will ensue. I cannot say for sure that this is so, but all the things I read in the news, the money flowing to contractors to build a new police state would lead any truly reasonable person to that sad conclusion. The American Republic is coming under a very strong attack from corners of the globe that most Americans are not even remotely aware of and sooner or later the Government is not going to be able to hide the fact that not only is our Empire in serious decline but that others have very real designs to destroy us and our increasingly reprobate and profligate way of life. Americans still do not believe that calamity can happen to them. They really think that what happened to the US in the 1930's can't really happen again... and worse. “No Way” says Polly Anna, “We are immune to tragedy, the government will save us”. Polly then dutifully waves her red, white and blue magic talisman as if to ward away evil spirits.

The reality is that government 'salvation' is not meant for you, but for the rich and powerful and those who brought us this disaster. Their plans do not include helping you out in any substantive way. False hope is the occupation of a fool and its wages are bitter disappointment. I ask all of you to understand the game being played an Washington and prepare accordingly and do not put any faith in the promises of our leaders.

It is better to trust in the LORD than to put confidence in man. It is better to trust in the LORD than to put confidence in princes. (Psa 118:8-9)

Put not your trust in princes, nor in the son of man, in whom there is no help. (Psa 146:3)

1This is what needs to happen and sooner or later it is going to happen, despite what the Fed does. Until 'moral hazard' (the potential for real losses and bankruptcy) returns to our markets there will be no recognizable US economy. I do not think I am over dramatizing the real state of affairs. Either we let these guys fail or the entire US economy will fail and never really get up again. What the US has created is a system of billion dollar payouts and bailouts; tax breaks and incentives to criminals, thieves and incompetents at the expense of these who build and create real wealth in the US. A system that rewards those that undermine it and undermines those that build it cannot stand. Our financial institutions, as critical a function they provide to a modern economy, has sucked out too much money from the entire US economic system with exorbitant interest rates and fees and laws that give them far too much power over the poor and middle class.

2The first major crack was Iran's shift to other than dollar purchases of its oil. In reality it was not the first. The first was Saddam Hussein. Each immediately became targets of America's war machine shortly after the shift.

5Many are here illegally. This is a crime. I would never attempt to enter another nation illegally and I don't think many of my readers would either. Yet in the LA area millions of those who dwell there are there and have no intention of returning. Thus my characterization 'criminally inclined'.