This is the chart they don’t want you to see: the purchasing power of the dollar over the past 76 years has declined by 94%. And based on current monetary and fiscal policy, we have at least another 94% to go. The only question is whether this will be achieved in 76 months this time.

Analysis of Treasury Data Paints Starker Picture Than Official Government Snapshots.

The Wall St. Journal

April 20, 2009

Lending at the biggest U.S. banks has fallen more sharply than realized, despite government efforts to pump billions of dollars into the financial sector.

Most bailed out Banks have reduced lending since getting funds. Unfortunately, one must subscribe to the Newspaper to get the full story. At least this is being reported in the Mainstream Media (MSM)

JGrace

Max Keiser on France 24’s Face Off talking about Bankers Bonuses.

The discussion concludes with agreement that there should be a return to gold standard to avoid a repeat of counterfeiting operations of Central Banks.

Wage deflation is setting in. Let’s look at some anecdotal evidence.

by Mike Adams

The America as we know it, at least. This repeated creation of trillions of dollars in new money by the Federal Reserve is the last great looting of the U.S. economy by the wealthy elite. The Titanic is sinking, and high officials have monopolized the life rafts, leaving everyone else to drown with the ship. And while they’re rowing away from the doomed vessel that’s taking on water, they shout back to the low-income workers clinging to the rails, “Don’t worry! The ship isn’t really sinking. It’s just ‘correcting!’”

http://www.counterthink.com/025688.html

http://www.marketskeptics.com/2009/03/fed-is-planning-15-fold-increase-in-us.html

by Eric deCarbonnel

The fed is planning moves that would more than double its balance-sheet assets by September to $4.5 trillion from $1.9 trillion. Whether expressing approval or concern over the fed’s intentions, most commentators fail to understand the real magnitude of the projected expansion of the US monetary base because they don’t take into account the amount of dollars circulating abroad.

At least 70 percent of all US currency is held outside the country, and this means the US monetary base is considerably smaller than the fed’s overall balance sheet. Take, for example, the true US domestic money supply at the beginning of September 2008, before the fed started its quantitative easing. From the Federal Reserve’s website, we know that currency in circulation was 833 Billion. This translates as 583 Billion dollars circulating abroad (70 percent), and 250 Billion dollars circulating domestically (30 percent). Since the bank reserve balances held with Federal Reserve Banks were 12 billion, that gives us a 262 Billion domestic monetary base as of September 2008. Now compare that to the projected US domestic monetary base for September 2009 which is 3,818 billion (4,500 billion – 583 billion (dollars circulating abroad) – 99 billion (other fed liabilities not part of the money supply)). The fed’s planned balance sheet expansion results in a 15-fold increase in the base money supply.

262 Billion = US monetary base as of September 2008 (minus dollars held abroad)

3,818 Billion = projected US monetary base in September 2009 (minus dollars held abroad)

3,818 Billion / 262 Billion = 15-Fold Increase in US monetary base

This is a staggering devaluation of the US currency! It means that for every dollar in America in September 2008, the fed is going to create fourteen more of them! Below is a rough sketch of what this increase in US monetary base would look like:

This 15-Fold Increase will be impossible to reverse

Next September, when the fed realizes it has gone too far and tries to reverse its balance sheet expansion, it will be unable to do so. The realities which will hinder the fed’s control of the money supply are:

1) The toxic assets filling its balance sheet

Expanding the money supply is easy. All the fed has to do is print dollars and then use them to buy assets. There is no effective limit to how much the fed can print and spend.

Shrinking the money is much trickier. To shrink the base money supply, the fed sell assets and takes the dollars it receives for them out of circulation. The amount the fed can shrink the money supply is therefore effectively limited by the market value of assets on its balance sheets. Since the fed is in the process of loading up on toxic securities while trying to restore health to the financial sector, it is now sitting billions of unrealized losses. These unrealized losses means the fed has little ammunition available to bring the money supply under control.

Once September rolls around, If the fed wants to reverse the expansion of its balance sheet and shrink the monetary base back down from 3,818 billion to 262 billion, then it will need to sell 3,556 billion worth of assets. However, the market value of its assets will only be worth a fraction of that.

2) Political constrains on fed’s actions

Even if the fed does try to shrink the money, it is likely to run into political constrains on its actions:

A) Selling toxic assets at a loss could become a crippling source of major embarrassment for the fed, undermining its authority. For example, last year when the fed took 29 billion toxic assets to help JPMorgan’s takeover of Bear Stearns, it assured Americans that by holding those securities till maturity, the cost to taxpayers would be minimal. If the fed sells those toxic Bearn Stearns assets at a catastrophic loss, it would cause fury and outrage from voters and lawmakers.

B) Selling assets at below book value will quickly cause the fed’s equity to turn negative. The Federal Reserve would then need to be recapitalized by new debt from the treasury, which would increase the national debt.

3) The benefits from of its balance sheet expansion would be lost if the fed starts selling assets

The fed is accumulating toxic mortgage backed securities, long term treasuries, and other assets to unfreeze the credit markets and spur economic growth. Turning around and selling those assets would result in the collapse of the credit markets and the financial system, which the fed has been desperately trying to prevent.

Upwards pressure on interest rates

On top of all the issues above, the fed’s woes are going to be compounded by upwards pressure on the yields of treasuries and other US debt. This upwards pressure will likely force the fed to monetize far more treasuries than the planned $300 billion purchases it has already announced, and will greatly complicate any efforts by the fed to control the money supply.

Below are the nine factors which will cause yields to move higher.

Who are the deciders of world affairs, politics, and social catastrophies?

By Douglas Hamilton

.Feb 16, 09

The slump that has swept through developed nations like the UK, the eurozone and the United States is hitting the world’s emerging economies with a speed and ferocity that has shocked even the most pessimistic analysts.

Until recently, many investors and economists thought such countries could provide a bulwark against the collapse in growth elsewhere. Instead, the latest data suggests that emerging economies as a group actually contracted late last year, and will likely shrink further in 2009.

The pace of the turnaround has caught policymakers and investors off guard. In a matter of months, key gauges of growth in trade and industrial production in a number of countries went from acceptable to alarming – even domestic demand is suffering.

http://www.theherald.co.uk

by John Paul Mitchell

There is a high chance a majority of the States within the United States of America could file for Chapter 9 bankruptcy. There are currently 46 states with high budget deficits, Arizona being one of them.

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BOOMERS – YOUR CRISIS HAS ARRIVED
by James Quinn
February 10, 2009

The generation that won World War II passed the ultimate test and proceeded to produce the next generation, the Baby Boom Generation. Their rendezvous with destiny is underway. Will it be a rendezvous with history that results in World War III, the collapse of the Great American Republic, dictatorship, or a return to the original Constitutional principles upon which this country was founded?

http://www.financialsense.com/editorials/quinn/2009/0210.html

Includes predictions such as

The stimulus package and TARP 6 plan will be implemented. The economy will not improve. By the Fall, Obama and the Democratic led Congress will push through trillions more in spending. The dollar will continue to fall versus gold. As the deficits grow and foreigners buy less and less of our debt, interest rates will rise. Oil will gradually rise as long as no external event causes it to spike. Protectionism will increase, leading to declining world trade. When we have not pulled out of this downturn in 2010, people will realize we are in a Depression and politicians have lied to them again. Social unrest will grow. Riots are likely to break out in poor urban areas. Governments always react to internal strife by seeking an external threat.

Trends Researcher Gerald Celente on Russia Today discussing the coming economic collapse and the probability of a revolution in the form of a tax revolt.

What Wall Street Wants By MICHAEL HUDSON

Tuesday’s announcement of the Obama-Geithner recovery plan is basically an extension of the Bush-Paulson plan – yet more giveaways to financial insiders, with a view to concentrating the U.S. banking system into a cartel of just a few large banks. This is not altogether bad news for the still relatively healthy part of the banking system (healthy in the sense of still avoiding negative equity). Smaller, less troubled banks will be bought out by the large “troubled” ones, to the personal financial benefit of their stockholders. This cannot solve today’s financial problem: the fact that the debt overhead far exceeds the economy’s ability to pay. In fact, it will spread the distortions that the large banks have introduced, until the entire system presumably looks like Citibank, Bank of America, JP Morgan Chase and Wells Fargo.

But this clearly is only Stage One of a two-stage plan that has not yet been announced, although the Wall Street Journal’s op-ed page has provided enough hints trickling out for the past three months to tip the hand of Wall Street’s “dream recovery plan.”

It is not exactly what most people are hoping for. In fact, it threatens to be a nightmare scenario for the economy at large. Watch for the magic phrase: “equity kicker,” first heard in the S&L mortgage crisis of the 1980s.

The first question to ask about the Recovery Program is, “recovery for whom?” The answer is, for the people who design the Recovery Program and their constituency, the bank lobby. The second question is, what is it they want to recover? The answer is, another Bubble economy, having seen the Greenspan Bubble make them so rich with his particular kind of “wealth creation”: wealth in the form of indebtedness of the “real” economy at large to the banking system, and unprecedented capital gains to be made by riding the wave of asset-price inflation.

For the financial elites, the problem is that it is not possible to inflate another bubble from today’s debt levels, widespread negative equity, and still-high level of real estate, stock and bond prices. No amount of new credit or capital for the banking system will induce banks to provide credit to real estate that already is over-mortgaged, or to individuals and corporations already over-indebted. All professional observers have forecast property prices to keep on plunging for at least the next year, which is as far as the eye can see in unstable conditions such as we are experiencing today.

While the Obama administration’s financial planners wring their hands in public and say “We feel your pain” to debtors at large, they also recognize that the past ten years have been a golden age for the banking system and Wall Street. The wealthiest 1 per cent of the population has raised its share of the returns to wealth – dividends, interest, rent and capital gains – from 37 per cent of the total ten years ago to 57 per cent five years ago, and an estimated 70 per cent today. Over two-thirds of the returns to wealth now go to the wealthiest 1 per cent of the population. This is the highest on record. We are approaching Russian kleptocratic levels.

Yet the financial Hard Right of the political spectrum – the lobbyists now in control of the Treasury, the Federal Reserve and the Justice Departments for starters – repeats the new Big Lie: that it is the poor who have brought the system down, “exploiting” the rich by trying to ape their betters and live beyond their means. Subprime families have taken out subprime loans, the lying poor have signed documents to obtain “liars’ loans,” as Alt-A, no-documentation loans are called in the financial junk-paper trade.

I learned the reality a few years ago in London, talking to a commercial bank strategist there. “We’ve had an intellectual breakthrough,” he said. “It’s changed our credit philosophy.”

“What is it?” I asked, imagining that he was about to come out with yet a new junk mathematics formula?

“The poor are honest,” he said, accompanying his words with his jaw dropping open as if to say, “Who could have guessed?”

The meaning was clear enough. The poor pay their debts as a matter of honor, even at great personal expense. Unlike Donald Trump, the poor are less likely to walk away from their homes when market prices sink below the mortgage level. In today’s neoliberal Chicago School language, the poor behave “uneconomically.” That is, they make choices that do not make economic sense, but rather reflect a group morality. This sociological gullibility is what made them rich pickings for predatory lenders such as Countrywide, Wachovia and Citibank.

As I said above, it was a golden age. The financial and real estate bubble is the world that America’s financial power elite would love to recover. The problem for them is how to start a new bubble and make yet another fortune. The alternative would be to keep what they have taken and run – not so bad, but a scenario that perhaps they can improve on.

Discussions about emergency bailouts have focused on putting in place enough new lending capacity by the banking system to start inflating prices on credit once again. But a new bubble can’t be started from today’s asset-price levels. This week’s $2 trillion or so in new bailout money for the banks (“capital,” and specifically finance capital, not to be confused with industrial capital) will only be lent out once prices fall by another 30 to 50 percent. So this can represent only Stage 1.

The question for Stage 2 is, how can the $10 to $20 trillion capital-gain run-up of the Greenspan years been repeated in an economy that is “all loaned up”?

One thing Wall Street knows is that to make money, you not only need asset prices to rise, they have to go down again – and up again, and down again. Without going down, after all, how can they rise up? The more frenetic the price fibulation, the easier it is for computerized buy-and-sell programs to make money on options and derivatives. What is being planned today looks like a similar up-and-down movement in real estate.

The first trick is to preserve the wealth of the creditor class – Wall Street, the banks and the other financial vehicles that enrich the wealthiest 1 per cent and indeed, the richest 10 per cent of the population. Stage One involves buying out their bad loans at a price that saves them from taking a loss. This is done by shifting the loss onto the “taxpayers” – labor, onto whose shoulders the tax burden has been shifted steadily, step by step since 1980, with the Greenspan Commission imposing an onerous Social Security tax on the middle class and using the proceeds to slash taxes on the higher brackets. Next comes an “aggregator” bank (sounds like “alligator,” from the swamps of toxic waste) to buy the bad debts and put them in a public agency. The government calls this the “bad” bank. But it does good for Wall Street – by buying loans that have gone bad – or perhaps nearer the truth, loans that never were good in the first place.

The harder part is to revive opportunities for creditors to make a new killing. (And it’s the economy that’s being killed.) Here’s how I imagine the plan might work.

Suppose a recent buyer has purchased a home for $500,000, with a $500,000 adjustable-rate mortgage scheduled to reset at 8 per cent. Suppose too that the current market price has fallen to $250,000 – a loss of 50 per cent by the end of 2009. After all, there needs to be enough time for prices to decline. Otherwise, there would be no economy to “rescue.” Mr. Geithner and Summers need to “feel your pain” to come out with the package that I’m describing. The government will swap “cash for trash,” printing new Treasury bonds (interest to be paid by “the taxpayer) in exchange for the $500,000 mortgage that is going bad, heading toward only a $250,000 market price.

The “Bad” bank that the Obama plan decided was not quite ready to be created this week will take the form of a public/private partnership (PPP), of the sort that Tony Blair made so notorious in Britain. It will be financed with private funds – in fact, with the funds now being given to re-capitalize America’s banks (headed by the Wall St. banks that have done so poorly). Banks will use the money they receive from the Treasury for selling their junk mortgages at par – along with other bailout funding – to buy shares in a new $5 trillion institution. Something like Fanny Mae or Freddie Mac will be created and its bonds guaranteed (that’s the “public” part – “socializing” the risk). The PPP institution will start with, say, $3 trillion in funds, and will have the power to buy and renegotiate the mortgages that have passed into the hands of the government and other holders. This “Middle Class Homeowner Recovery Trust” will use its private funding for the “socially responsible” purpose of “saving the taxpayer” and homeowners by renegotiating the mortgage down from its original $500,000 to the new $250,000 price.

Here’s the patter talk you can expect, with the usual Orwellian euphemisms. The “rescue the homeowners” PPP, a veritable Savior Bank, will go to a family strapped by its home mortgage debt and feeling more and more desperate as the price of its major asset plummets deep into Negative Equity territory. An offer will be made: “We’ve got a deal to save you. We’ll renegotiate your mortgage down to $250,000, the current market price, and we’ll also lower your interest rate to just 5.50 per cent. This will cut your monthly debt charges by nearly two thirds. You will escape from negative equity, and you can afford to stay in your home.”

The family probably will say, “Great.”

But they will have to make a concession. That’s where the new public/private partnership makes its killing. Its Savior Bank, funded with private money that is to take the “risk” (and also the rewards) will say to the family that agrees to renegotiate its mortgage: “Now that the government has taken a loss while we’ve let you stay in your home, we need to recover the money that’s been lost. So when the time comes for you to sell, or to renegotiate your mortgage, our Savior Bank will receive the capital gain up to the original amount written off. If we’ve made you whole, we want to be made whole too.”

In other words, if the homeowner sells the property for $400,000, the Savior Bank will get $150,000 of the capital gain. If the property sells for $500,000, the bank will get $250,000. And if it sells for more, thanks to some new clone of Alan Greenspan acting as bubblemeister, the capital gain will be split in some way. If the split is 50/50, then if the home sells for $600,000, the owner at that time will split the $100,000 further capital gain with the Savior Bank. The Savior Bank will thus make much more through its share of capital gains than it extracts in interest!

This plan will be even better for Wall Street than the Greenspan bubble was! Last time around, it was the middle class that got the gains. To be sure, it really was the bank that got the gains, because mortgage interest charges absorbed the entire rental value. But at least homeowners had a chance at the free ride, if they didn’t squander their money in refinancing their mortgages. And many did use their homes “like a piggy bank” to support their living standards.

But this time around, Wall Street is not obliged to make its money by making middle class homeowners rich. Debt-strapped homeowners are willing to settle merely for a plan that leaves them in their homes! It can get for itself the capital gains that have been the driving force of U.S. “wealth creation,” Alan Greenspan bubble-style.

The irony is that the only kind of policies that are politically correct these days are those that make the situation worse: yet more government money in the hope that banks will create yet more credit/debt to raise house prices and make them even more unaffordable; to inflate a new bubble; to give what really should be called the “bad banks” – the Big Four or Five where the junk mortgages, junk CDOs and junk derivatives resulting from junk mathematics are concentrated – yet more money to buy out smaller banks that have not yet been infected with reckless financial opportunism.

And by the same token, lobbyists for these bad banks are screaming at the top of their voices that all solutions to the problem are politically incorrect: debt writedowns to bring the debt burden within the ability to pay. That is what the market is supposed to do – by bankruptcy in an anarchic collapse, if not by reasoned government policy. The bad banks, after demanding “free markets” all these years, have stopped the free market when it comes anywhere near them and their bonuses. For them, markets are free of regulation against predatory lending; free of taxing the wealthy so as to shift the burden onto labor; free for the financial sector to wrap itself around the “real” economy like a parasitic vine around a tree and extract the entire surplus in the form of financial engineering.

This is a travesty of freedom. But worst of all is the “freedom” of today’s economic discussion from the wisdom of classical political economy and from the experience of economic history regarding how societies have coped with the debt overhead through the ages.

An alternative policy to save the economy from being “rescued” by Wall Street

There is an alternative to ward all this off. A debt writedown, followed by a land tax so that the “free lunch” (what John Stuart Mill called the “unearned increment” of rising land prices, a gain that landlords made “in their sleep”) would serve as the tax base rather than labor and industry being burdened with an income tax.

One move would be to prevent banks from lending against the land’s value. They could lend against buildings, but not land. This would cut the maximum permissible loan to 50 to 60 per cent of the total property price – unless the government did what classical economists advocated and tax the land’s market price (its rental value) as the tax base, shifting the tax back off of labor. This would achieve the kind of free markets that Adam Smith, John Stuart Mill and Alfred Marshall described, and which the Progressive Era aimed to achieve with America’s first income tax in 1913.

A land tax would prevent housing prices from rising again. This would save homeowners from taking on so much debt in order to obtain housing. And it would save the economy from seeing “wealth creation” take the form of the “unearned increment” being capitalized into higher bank loans with their associated carrying charges (interest and amortization). The key to real estate bubbles is to inflate site valuations.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

Thursday, February 12, 2009 by: Mike Adams, the Health Ranger, NaturalNews Editor

(NaturalNews) While the Obama administration is attempting to pass the American Recovery and Reinvestment Act of 2009 in a hurry, NaturalNews readers have begun actually reading the bill, and they’re finding some worrying language that should raise concern among people interested in preserving health freedom and protecting the health of all Americans.

Specifically, one section of the economic stimulus bill designates nearly a billion dollars for new vaccinations of children. This was discovered by Elisha Celeste, a NaturalNews reader. As stated in the bill:

The Economic Stimulus bill about to be passed by the U.S. Senate is about much more than simply stimulating the economy: It contains sweeping health care changes buried deep in 800 pages of practically unreadable text. Some of the more frightening items include:

* A requirement that the full health care records of all Americans be tracked in government databases by 2014.

* $954,000,000 in new spending on vaccines. (Almost a billion dollars in vaccinations!)

* Over half a billion dollars of spending to “carry out chronic disease” and run “genomics programs” ( http://www.naturalnews.com/025608.html).

* Big Government control over the actions of doctors, who will be required to “harmonize” their medical care to meet new government guidelines.

What does any of this have to do with an “economic stimulus?” It sounds more like a Big Pharma stimulus…

This isn’t about right vs. left, Republican vs. Democrat or Big Government vs. small government. This is about the insanity of suddenly unleashing a whole new layer of government bureaucracy regarding health care without any public debate! Such huge changes to any nation should never be passed under the guise of an emergency economic stimulus bill when, in reality, it’s hiding 140+ pages of sweeping health care changes that nobody has yet had time to even read (much less actually debate…)

Read my article on this frightening assault to Democracy here: http://www.naturalnews.com/025597.html

Byron Richards explains yet more about the insanity of this bill as currently written: http://www.naturalnews.com/025607.html

By the way, the FDA has effectively banned a form of Vitamin B6. And as promised, here’s the true story of this bewildering development: http://www.naturalnews.com/025606.html

The world gets stranger by the day, huh?

I just want to point out, by the way, that I am on the record being against BOTH the Bush bailout bill and the Obama bailout bill. My position has remained consistent: The creation of trillions of dollars in new money will ultimately rob Americans of the value of their hard-earned dollars, causing far more economic harm than help.

And yet I’ve noticed a lot of people are strangely inconsistent on these bailouts. They were against the Bush bailout, but not they’re suddenly in favor of the Obama bailout (or vice-versa). Folks, these two bailouts are essentially the same con packaged behind two different faces (and political parties). This isn’t about Republicans vs. Democrats, people, it’s about the rich vs. the working class. Both of these bailout bills are essentially about rich people being bailed out by poor people, just so they can keep their million-dollar bonuses.

Don’t believe me? Check this out: Last year, as Merrill Lynch was losing $27 billion to be covered by taxpayers, it paid out an astonishing 700 million-dollar bonuses to its executives. Read it at the New York Times: http://www.nytimes.com/2009/02/12/business/12merrill.html?bl&ex=1234674000&en=f107eb5fc4dad553&ei=5087

Or search Google News and see all the other stories about this: http://news.google.com/news?hl=en&ned=us&nolr=1&q=Merrill+Lynch+bonuses&btnG=Search

This is the truth about what’s happening in America today, friends: The rich are getting richer on the backs of the working poor. Presidents may change, but class warfare always is always the same: It’s about stealing from the poor and giving to the rich.

Now, it is up to YOU to help stop this economic stimulus bill until we can all get our heads on straight and take a closer look at what it really says. America deserves a reasonable debate on this, after all. What kind of bill is so bad that it has to be passed on a fly-by-night basis anyway?

If you live in the U.S., call your U.S. Senator and urge them to stop the economic stimulus bill as currently written, or to at least amend it and remove the massive health care provisions that have barely been read by anyone (including the Senators voting on the bill):

Capital Switchboard – (202) 224-3121
Or go to www.senate.gov to get your Senator’s contact information.

In Debt We Trust (Full Version)

IN DEBT WE TRUST is a important milestone. It is, a record of the current US debt situation, and an explanation of the ramifications corporate marketing. IN DEBT WE TRUST highlights the problems with created wants, overpriced needs and corporate control over both the means of production and the means of consumption.

U.S. Companies Cut 519,895 Jobs Since Election

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Dr Doom and The Black Swan on CNBC Feb. 9, 2009