theeedude
Lifer
- Feb 5, 2006
- 35,787
- 6,197
- 126
Russia is almost done paying off USSR foreign debt, and USSR spent a lot larger portion of it's GDP on weapons than US ever did. You can't just say that it's because of defeating the USSR. We spent a lot of money in 50's, 60's, and 70's on that purpose as well, and we didn't have these out of control deficits. It's because of Reaganomics. The problem is that the US government likes to spend money, but does not like collecting taxes. And China and Japan are very happy to lend it money because that keeps the dollar strong and sends our jobs over there.
Are you saying we have reached the point in automation that there are an equal number of engineers as there are operators?
Engineer
Elite Member
- Oct 9, 1999
- 39,230
- 701
- 126
Absolutely not. I'm saying that offshoring is destroying ALL jobs of the plants that they are replacing and that automation is killing far less jobs (see a few MORE engineers created along with plant managers, quality personel, etc. that are still employeed). Offshoring is killing off more than just operators and it's killing off far more than automation.
Edit: the sum/gain I spoke of above was just for engineers (more engineering jobs), not OVERALL jobs. Sorry for the confusion.
However you must realize even the loss of manufacturing jobs is not just in the US, it is worldwide even in china. Manufacturing will only require a few percent of the population to produce the goods we desire. The path that manufacturing is taking is much like that of farming 100 years ago.
Actually private accumulated wealth is pretty low in the US compared to other developed countries. And even in the ones that have high accumulated wealth, it is seen as a bad sign. Finance is not Economics, if you get me...
So why bother citing Bush/GOP tripe which includes the SS surplus? The GOP was highly critical of the this practice during the Clinton years. I know b/c I was still a Republican in the mid90s . . . young Republican.
By law, the SS surplus is off-budget but that doesn't mean its just another pot of money to be wasted by the Stevens and Byrds of the Congress.
The GOP hasn't changed FICA b/c they know it CYA. One of the original tax cut proposals was to cut FICA, but neither Democrats nor Republicans really bought in. The Democrats are afraid its a camel's nose approach to ending FICA . . . hmm . . . probably true but we should end it if we cannot mend it. The Republicans like the budget cover. Bush has spent well over $1T in SS surplus with very little to show for it.
Originally posted by: BaliBabyDoc
So why bother citing Bush/GOP tripe which includes the SS surplus? The GOP was highly critical of the this practice during the Clinton years. I know b/c I was still a Republican in the mid90s . . . young Republican.
By law, the SS surplus is off-budget but that doesn't mean its just another pot of money to be wasted by the Stevens and Byrds of the Congress.
The GOP hasn't changed FICA b/c they know it CYA. One of the original tax cut proposals was to cut FICA, but neither Democrats nor Republicans really bought in. The Democrats are afraid its a camel's nose approach to ending FICA . . . hmm . . . probably true but we should end it if we cannot mend it. The Republicans like the budget cover. Bush has spent well over $1T in SS surplus with very little to show for it.
I dont disagree with most of what you said. SS is broke and spending is out of control(has been for some time). We can debate about what we have to show for the money that has been and spent and would have been spent by whoever is in office.
I don't think we are having that debate . . . merit of spending.
I hear the GOP arguing for more budget busting tax cuts, while trimming around the edges of our spending indiscretions. I'm not a Democrat and I know enough history to find their screechings about "fiscal discipline" to ring a bit hollow. But . . . them dumb arse Dems got a point . . . and not just the ones from North Dakota.
If the GOP had ANY merit, they would have passed a one year moratorium on earmarks immediately after Dookie, DeLay, and Ney. For good measure, make it retroactive since we've got Katrina hotel bills pay :roll: and mobile home parks . . . without any people in them.
But the GOP is pretty much worthless b/c they're the big pig in Congress and their boy king is in the White House. Personally, I'm astonished they aren't ashamed at their behavior. Every time Gregg and Frist crow about restoring fiscal discipline I pinch myself b/c its hard to believe they can say such things and be elected to positions of responsibility. Then again . . . look who's President . . .
Then again . . . a large number of Americans (and overall) are spending more than they make. I guess we like our role models to keep it real.
I hear the GOP arguing for more budget busting tax cuts, while trimming around the edges of our spending indiscretions. I'm not a Democrat and I know enough history to find their screechings about "fiscal discipline" to ring a bit hollow. But . . . them dumb arse Dems got a point . . . and not just the ones from North Dakota.
If the GOP had ANY merit, they would have passed a one year moratorium on earmarks immediately after Dookie, DeLay, and Ney. For good measure, make it retroactive since we've got Katrina hotel bills pay :roll: and mobile home parks . . . without any people in them.
But the GOP is pretty much worthless b/c they're the big pig in Congress and their boy king is in the White House. Personally, I'm astonished they aren't ashamed at their behavior. Every time Gregg and Frist crow about restoring fiscal discipline I pinch myself b/c its hard to believe they can say such things and be elected to positions of responsibility. Then again . . . look who's President . . .
Then again . . . a large number of Americans (and overall) are spending more than they make. I guess we like our role models to keep it real.
A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.
Historically, taxing the subject state has been in various forms-usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.
For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods-the difference capturing the U.S. imperial tax. Here is how this happened.
Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.
Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world's gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960's was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax-the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.
When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of "severing the link between the dollar and gold", in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond- the world was taxed and it could not do anything about it.
From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.
In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.
The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren't strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind.
The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. Bush's Shock-and-Awe in Iraq was not about Saddam's nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished.
Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can't explain why Bush would want to seize those fields-he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq.
History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have gone into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished-he had successfully defended the U.S. dollar, and thus the American Empire.
II. Iranian Oil Bourse
The Iranian government has finally developed the ultimate "nuclear" weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this euro oil system:
The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans.
The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves.
The Russians have inherent economic interest in adopting the Euro - the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed.
The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy.
Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the U.S. forever, but have also had their natural pull from Europe. So far, they have had many reasons to stick with the winner. However, when they see their century-old partner falling, will they firmly stand behind him or will they deliver the coup de grace? Still, we should not forget that currently the two leading oil exchanges are the New York's NYMEX and the London's International Petroleum Exchange (IPE), even though both of them are effectively owned by the Americans. It seems more likely that the British will have to go down with the sinking ship, for otherwise they will be shooting themselves in the foot by hurting their own London IPE interests. It is here noteworthy that for all the rhetoric about the reasons for the surviving British Pound, the British most likely did not adopt the Euro namely because the Americans must have pressured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.
At any rate, no matter what the British decide, should the Iranian Oil Bourse accelerate, the interests that matter-those of Europeans, Chinese, Japanese, Russians, and Arabs-will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation's exchange:
Sabotaging the Exchange-this could be a computer virus, network, communications, or server attack, various server security breaches, or a 9-11-type attack on main and backup facilities.
Coup d'état-this is by far the best long-term strategy available to the Americans.
Negotiating Acceptable Terms & Limitations-this is another excellent solution to the Americans. Of course, a government coup is clearly the preferred strategy, for it will ensure that the exchange does not operate at all and does not threaten American interests. However, if an attempted sabotage or coup d'etat fails, then negotiation is clearly the second-best available option.
Joint U.N. War Resolution-this will be, no doubt, hard to secure given the interests of all other member-states of the Security Council. Feverish rhetoric about Iranians developing nuclear weapons undoubtedly serves to prepare this course of action.
Unilateral Nuclear Strike-this is a terrible strategic choice for all the reasons associated with the next strategy, the Unilateral Total War. The Americans will likely use Israel to do their dirty nuclear job.
Unilateral Total War-this is obviously the worst strategic choice. First, the U.S. military resources have been already depleted with two wars. Secondly, the Americans will further alienate other powerful nations. Third, major dollar-holding countries may decide to quietly retaliate by dumping their own mountains of dollars, thus preventing the U.S. from further financing its militant ambitions. Finally, Iran has strategic alliances with other powerful nations that may trigger their involvement in war; Iran reputedly has such alliance with China, India, and Russia, known as the Shanghai Cooperative Group, a.k.a. Shanghai Coop and a separate pact with Syria.
Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates. At this point, the Fed will find itself between Scylla and Charybdis-between deflation and hyperinflation-it will be forced fast either to take its "classical medicine" by deflating, whereby it raises interest rates, thus inducing a major economic depression, a collapse in real estate, and an implosion in bond, stock, and derivative markets, with a total financial collapse, or alternatively, to take the Weimar way out by inflating, whereby it pegs the long-bond yield, raises the Helicopters and drowns the financial system in liquidity, bailing out numerous LTCMs and hyperinflating the economy.
The Austrian theory of money, credit, and business cycles teaches us that there is no in-between Scylla and Charybdis. Sooner or later, the monetary system must swing one way or the other, forcing the Fed to make its choice. No doubt, Commander-in-Chief Ben Bernanke, a renowned scholar of the Great Depression and an adept Black Hawk pilot, will choose inflation. Helicopter Ben, oblivious to Rothbard's America's Great Depression, has nonetheless mastered the lessons of the Great Depression and the annihilating power of deflations. The Maestro has taught him the panacea of every single financial problem-to inflate, come hell or high water. He has even taught the Japanese his own ingenious unconventional ways to battle the deflationary liquidity trap. Like his mentor, he has dreamed of battling a Kondratieff Winter. To avoid deflation, he will resort to the printing presses; he will recall all helicopters from the 800 overseas U.S. military bases; and, if necessary, he will monetize everything in sight. His ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world-that barbarous relic called gold.
Historically, taxing the subject state has been in various forms-usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.
For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods-the difference capturing the U.S. imperial tax. Here is how this happened.
Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.
Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world's gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960's was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax-the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.
When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of "severing the link between the dollar and gold", in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond- the world was taxed and it could not do anything about it.
From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.
In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.
The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren't strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind.
The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. Bush's Shock-and-Awe in Iraq was not about Saddam's nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished.
Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can't explain why Bush would want to seize those fields-he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq.
History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have gone into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished-he had successfully defended the U.S. dollar, and thus the American Empire.
II. Iranian Oil Bourse
The Iranian government has finally developed the ultimate "nuclear" weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this euro oil system:
The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans.
The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves.
The Russians have inherent economic interest in adopting the Euro - the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed.
The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy.
Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the U.S. forever, but have also had their natural pull from Europe. So far, they have had many reasons to stick with the winner. However, when they see their century-old partner falling, will they firmly stand behind him or will they deliver the coup de grace? Still, we should not forget that currently the two leading oil exchanges are the New York's NYMEX and the London's International Petroleum Exchange (IPE), even though both of them are effectively owned by the Americans. It seems more likely that the British will have to go down with the sinking ship, for otherwise they will be shooting themselves in the foot by hurting their own London IPE interests. It is here noteworthy that for all the rhetoric about the reasons for the surviving British Pound, the British most likely did not adopt the Euro namely because the Americans must have pressured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.
At any rate, no matter what the British decide, should the Iranian Oil Bourse accelerate, the interests that matter-those of Europeans, Chinese, Japanese, Russians, and Arabs-will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation's exchange:
Sabotaging the Exchange-this could be a computer virus, network, communications, or server attack, various server security breaches, or a 9-11-type attack on main and backup facilities.
Coup d'état-this is by far the best long-term strategy available to the Americans.
Negotiating Acceptable Terms & Limitations-this is another excellent solution to the Americans. Of course, a government coup is clearly the preferred strategy, for it will ensure that the exchange does not operate at all and does not threaten American interests. However, if an attempted sabotage or coup d'etat fails, then negotiation is clearly the second-best available option.
Joint U.N. War Resolution-this will be, no doubt, hard to secure given the interests of all other member-states of the Security Council. Feverish rhetoric about Iranians developing nuclear weapons undoubtedly serves to prepare this course of action.
Unilateral Nuclear Strike-this is a terrible strategic choice for all the reasons associated with the next strategy, the Unilateral Total War. The Americans will likely use Israel to do their dirty nuclear job.
Unilateral Total War-this is obviously the worst strategic choice. First, the U.S. military resources have been already depleted with two wars. Secondly, the Americans will further alienate other powerful nations. Third, major dollar-holding countries may decide to quietly retaliate by dumping their own mountains of dollars, thus preventing the U.S. from further financing its militant ambitions. Finally, Iran has strategic alliances with other powerful nations that may trigger their involvement in war; Iran reputedly has such alliance with China, India, and Russia, known as the Shanghai Cooperative Group, a.k.a. Shanghai Coop and a separate pact with Syria.
Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates. At this point, the Fed will find itself between Scylla and Charybdis-between deflation and hyperinflation-it will be forced fast either to take its "classical medicine" by deflating, whereby it raises interest rates, thus inducing a major economic depression, a collapse in real estate, and an implosion in bond, stock, and derivative markets, with a total financial collapse, or alternatively, to take the Weimar way out by inflating, whereby it pegs the long-bond yield, raises the Helicopters and drowns the financial system in liquidity, bailing out numerous LTCMs and hyperinflating the economy.
The Austrian theory of money, credit, and business cycles teaches us that there is no in-between Scylla and Charybdis. Sooner or later, the monetary system must swing one way or the other, forcing the Fed to make its choice. No doubt, Commander-in-Chief Ben Bernanke, a renowned scholar of the Great Depression and an adept Black Hawk pilot, will choose inflation. Helicopter Ben, oblivious to Rothbard's America's Great Depression, has nonetheless mastered the lessons of the Great Depression and the annihilating power of deflations. The Maestro has taught him the panacea of every single financial problem-to inflate, come hell or high water. He has even taught the Japanese his own ingenious unconventional ways to battle the deflationary liquidity trap. Like his mentor, he has dreamed of battling a Kondratieff Winter. To avoid deflation, he will resort to the printing presses; he will recall all helicopters from the 800 overseas U.S. military bases; and, if necessary, he will monetize everything in sight. His ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world-that barbarous relic called gold.
Great post. I agree on 99% of what you say, but it would still be a great post even if I didn't. I also think that "Rise and Fall of the great Powers" is a gret book in capturing the transition of empires from their Zenit to a decline. That's exactly the reason why in my opinion an American military intervention in Iran would actually be the first, long step towards a real decline of the US hegemony.
Still, it's not today, not even tomorrow. The US dollar still is one side of 95% of the transactions on the Forex market. This would certainly change if the Euro was adopted by a considerable amount of players in the oil market as a currency of choice. The last one that tried to do so got his country invaded. The next one is likely to follow the same path. Point is to see how much military spending the US can sustain in the long period, the price in terms of long term debt and devaluation pressures to reduce CA deficit.
China is growing fast, still a far cry to superpower status, but definitely on the right track. And has one big advantage: nobody else has effective counter-strategies. A serious banking and capital markets reform, and the world financial axis will begin to move.
A country cannot be a superpower without a high tech economy, and America's high tech economy is eroding as I write.
The erosion began when US corporations outsourced manufacturing. Today many US companies are little more than a brand name selling goods made in Asia.
Corporate outsourcers and their apologists presented the loss of manufacturing capability as a positive development. Manufacturing, they said, was the "old economy," whose loss to Asia ensured Americans lower consumer prices and greater shareholder returns. The American future was in the "new economy" of high tech knowledge jobs.
This assertion became an article of faith. Few considered how a country could maintain a technological lead when it did not manufacture.
So far in the 21st century there is scant sign of the American "new economy." The promised knowledge-based jobs have not appeared. To the contrary, the Bureau of Labor Statistics reports a net loss of 221,000 jobs in six major engineering job classifications.
Today many computer, electrical and electronics engineers, who were well paid at the end of the 20th century, are unemployed and cannot find work. A country that doesn't manufacture doesn't need as many engineers, and much of the work that remains is being outsourced or filled with cheaper foreigners brought into the country on H-lb and L-1 work visas.
Confronted with inconvenient facts, outsourcing's apologists moved to the next level of fantasy. Many technical and engineering jobs, they said, have become "commodity jobs," routine work that can be performed cheaper offshore. America will stay in the lead, they promised, because it will keep the research and development work and be responsible for design and innovation.
Alas, now it is design and innovation that are being outsourced. Business Week reports ("Outsourcing Innovation," March 21) that the pledge of First World corporations to keep research and development in-house "is now passé."
Corporations such as Dell, Motorola, and Philips, which are regarded as manufacturers based in proprietary design and core intellectual property originating in R&D departments, now put their brand names on complete products that are designed, engineered, and manufactured in Asia by "original-design manufacturers" (ODM).
Business Week reports that practically overnight large percentages of cell phones, notebook PCs, digital cameras, MP3 players, and personal digital assistants are produced by original-design manufacturers. Business Week quotes an executive of a Taiwanese ODM: "Customers used to participate in design two or three years back. But starting last year, many just take our product."
Another offshore ODM executive says: "What has changed is that more customers need us to design the whole product. It's now difficult to get good ideas from our customers. We have to innovate ourselves." Another says: "We know this kind of product category a lot better than our customers do. We have the capability to integrate all the latest technologies." The customers are America's premier high tech names.
The design and engineering teams of Asian ODMs are expanding rapidly, while those of major US corporations are shrinking. Business Week reports that R&D budgets at such technology companies as Hewlett Packard, Cisco, Motorola, Lucent Technologies, Ericsson, and Nokia are being scaled back.
Outsourcing is rapidly converting US corporations into a brand name with a sales force selling foreign designed, engineered, and manufactured goods. Whether or not they realize it, US corporations have written off the US consumer market. People who do not participate in the innovation, design, engineering and manufacture of the products that they consume lack the incomes to support the sales infrastructure of the job diverse "old economy."
"Free market" economists and US politicians are blind to the rapid transformation of America into a third world economy, but college bound American students and heads of engineering schools are acutely aware of declining career opportunities and enrollments. While "free trade" economists and corporate publicists prattle on about America's glorious future, heads of prestigious engineering schools ponder the future of engineering education in America.
Once US firms complete their loss of proprietary architecture, how much intrinsic value resides in a brand name? What is to keep the all-powerful ODMs from undercutting the American brand names?
The outsourcing of manufacturing, design and innovation has dire consequences for US higher education. The advantages of a college degree are erased when the only source of employment is domestic nontradable services.
According to the Los Angeles Times (March 11), the percentage of college graduates among the long-term chronically unemployed has risen sharply in the 21st century. The US Department of Labor reported in March that 373,000 discouraged college graduates dropped out of the labor force in February--a far higher number than the number of new jobs created.
The disappearing US economy can also be seen in the exploding trade deficit. As more employment is shifted offshore, goods and services formerly produced domestically become imports. Nothink economists and Bush administration officials claim that America's increasing dependence on imported goods and services is evidence of the strength of the US economy and its role as engine of global growth.
This claim ignores that the US is paying for its outsourced goods and services by transferring its wealth and future income streams to foreigners. Foreigners have acquired $3.6 trillion of US assets since 1990 as a result of US trade deficits.
Foreigners have a surfeit of dollar assets. For the past three years their increasing unwillingness to acquire more dollars has resulted in a marked decline in the dollar's value in relation to gold and tradable currencies.
Recently the Japanese, Chinese, and Koreans have expressed their concerns. According to Bloomberg (March 10), Japan's unrealized losses on its dollar reserve holdings have reached $109.6 billion.
The Asia Times reported (March 12) that Asian central banks have been reducing their dollar holdings in favor of regional currencies for the past three years. A study by the Bank of International Settlements concluded that the ratio of dollar reserves held in Asia declined from 81% in the third quarter of 2001 to 67% in September 2004. India reduced its dollar holdings from 68% of total reserves to 43%. China reduced its dollar holdings from 83% to 68%.
The US dollar will not be able to maintain its role as world reserve currency when it is being abandoned by that area of the world that is rapidly becoming the manufacturing, engineering and innovation powerhouse.
Misled by propagandistic "free trade" claims, Americans will be at a loss to understand the increasing career frustrations of the college educated. Falling pay and rising prices of foreign made goods will squeeze US living standards as the declining dollar heralds America's descent into a has-been economy.
Meanwhile the Grand Old Party has passed a bankruptcy "reform" that is certain to turn unemployed Americans living on debt and beset with unpayable medical bills into the indentured servants of credit card companies. The steely-faced Bush administration is making certain that Americans will experience to the full their counry's fall.
The erosion began when US corporations outsourced manufacturing. Today many US companies are little more than a brand name selling goods made in Asia.
Corporate outsourcers and their apologists presented the loss of manufacturing capability as a positive development. Manufacturing, they said, was the "old economy," whose loss to Asia ensured Americans lower consumer prices and greater shareholder returns. The American future was in the "new economy" of high tech knowledge jobs.
This assertion became an article of faith. Few considered how a country could maintain a technological lead when it did not manufacture.
So far in the 21st century there is scant sign of the American "new economy." The promised knowledge-based jobs have not appeared. To the contrary, the Bureau of Labor Statistics reports a net loss of 221,000 jobs in six major engineering job classifications.
Today many computer, electrical and electronics engineers, who were well paid at the end of the 20th century, are unemployed and cannot find work. A country that doesn't manufacture doesn't need as many engineers, and much of the work that remains is being outsourced or filled with cheaper foreigners brought into the country on H-lb and L-1 work visas.
Confronted with inconvenient facts, outsourcing's apologists moved to the next level of fantasy. Many technical and engineering jobs, they said, have become "commodity jobs," routine work that can be performed cheaper offshore. America will stay in the lead, they promised, because it will keep the research and development work and be responsible for design and innovation.
Alas, now it is design and innovation that are being outsourced. Business Week reports ("Outsourcing Innovation," March 21) that the pledge of First World corporations to keep research and development in-house "is now passé."
Corporations such as Dell, Motorola, and Philips, which are regarded as manufacturers based in proprietary design and core intellectual property originating in R&D departments, now put their brand names on complete products that are designed, engineered, and manufactured in Asia by "original-design manufacturers" (ODM).
Business Week reports that practically overnight large percentages of cell phones, notebook PCs, digital cameras, MP3 players, and personal digital assistants are produced by original-design manufacturers. Business Week quotes an executive of a Taiwanese ODM: "Customers used to participate in design two or three years back. But starting last year, many just take our product."
Another offshore ODM executive says: "What has changed is that more customers need us to design the whole product. It's now difficult to get good ideas from our customers. We have to innovate ourselves." Another says: "We know this kind of product category a lot better than our customers do. We have the capability to integrate all the latest technologies." The customers are America's premier high tech names.
The design and engineering teams of Asian ODMs are expanding rapidly, while those of major US corporations are shrinking. Business Week reports that R&D budgets at such technology companies as Hewlett Packard, Cisco, Motorola, Lucent Technologies, Ericsson, and Nokia are being scaled back.
Outsourcing is rapidly converting US corporations into a brand name with a sales force selling foreign designed, engineered, and manufactured goods. Whether or not they realize it, US corporations have written off the US consumer market. People who do not participate in the innovation, design, engineering and manufacture of the products that they consume lack the incomes to support the sales infrastructure of the job diverse "old economy."
"Free market" economists and US politicians are blind to the rapid transformation of America into a third world economy, but college bound American students and heads of engineering schools are acutely aware of declining career opportunities and enrollments. While "free trade" economists and corporate publicists prattle on about America's glorious future, heads of prestigious engineering schools ponder the future of engineering education in America.
Once US firms complete their loss of proprietary architecture, how much intrinsic value resides in a brand name? What is to keep the all-powerful ODMs from undercutting the American brand names?
The outsourcing of manufacturing, design and innovation has dire consequences for US higher education. The advantages of a college degree are erased when the only source of employment is domestic nontradable services.
According to the Los Angeles Times (March 11), the percentage of college graduates among the long-term chronically unemployed has risen sharply in the 21st century. The US Department of Labor reported in March that 373,000 discouraged college graduates dropped out of the labor force in February--a far higher number than the number of new jobs created.
The disappearing US economy can also be seen in the exploding trade deficit. As more employment is shifted offshore, goods and services formerly produced domestically become imports. Nothink economists and Bush administration officials claim that America's increasing dependence on imported goods and services is evidence of the strength of the US economy and its role as engine of global growth.
This claim ignores that the US is paying for its outsourced goods and services by transferring its wealth and future income streams to foreigners. Foreigners have acquired $3.6 trillion of US assets since 1990 as a result of US trade deficits.
Foreigners have a surfeit of dollar assets. For the past three years their increasing unwillingness to acquire more dollars has resulted in a marked decline in the dollar's value in relation to gold and tradable currencies.
Recently the Japanese, Chinese, and Koreans have expressed their concerns. According to Bloomberg (March 10), Japan's unrealized losses on its dollar reserve holdings have reached $109.6 billion.
The Asia Times reported (March 12) that Asian central banks have been reducing their dollar holdings in favor of regional currencies for the past three years. A study by the Bank of International Settlements concluded that the ratio of dollar reserves held in Asia declined from 81% in the third quarter of 2001 to 67% in September 2004. India reduced its dollar holdings from 68% of total reserves to 43%. China reduced its dollar holdings from 83% to 68%.
The US dollar will not be able to maintain its role as world reserve currency when it is being abandoned by that area of the world that is rapidly becoming the manufacturing, engineering and innovation powerhouse.
Misled by propagandistic "free trade" claims, Americans will be at a loss to understand the increasing career frustrations of the college educated. Falling pay and rising prices of foreign made goods will squeeze US living standards as the declining dollar heralds America's descent into a has-been economy.
Meanwhile the Grand Old Party has passed a bankruptcy "reform" that is certain to turn unemployed Americans living on debt and beset with unpayable medical bills into the indentured servants of credit card companies. The steely-faced Bush administration is making certain that Americans will experience to the full their counry's fall.
What is it I show everyday?
Folks like above posting exactly what I posted years ago and it fell on brainwashed deaf ears.
Many folks on here are just now starting to echo what I wrote everyday a long long time ago.
Just like I spent time behind false bars for a technology I was way ahead on while little weak minds have be drilled over and over again to catch up on the technology and still didn't get it.
Someday I have hope that even you will get many of the things you do not get now.
I can only hope it is not too late for America and even Canada.
Amongst the growing plethora of warnings, some erudite some emotional, Mr. Paul Volcker's commentary in the Washington Post entitled, "The Economy on Thin Ice", of April 10th, has to be taken very seriously, given the former's position as Chairman of the Fed from 1979 to 1987, when he was succeeded by Alan Greenspan. Volcker was forced into making very tough economic decisions in 1980, which he did by raising interest rates sharply to cool a vastly overheated market. Volcker acted as the Fed Chairman should, responsibly, and, therefore, like few other market commentators has immense "gravitas" when he flags up major economic issues as he has done. However, the magnitude of the present Fed Chairman's problems are on a hitherto unimaginable scale. No country, or central bank, has ever attempted an exercise in FIAT money creation of such truly breathtaking proportions before. Moreover, no exercise in FIAT money creation has ever successfully worked over the long-term in any nation where it has been attempted. Before the post WW2 acceptance of the US dollar as a proxy global currency, no country has had the unique opportunity to try such an exercise out on a global scale. Dr Greenspan knows this. So, you may well ask, what on earth is he up to?.... and, equally importantly, why is it being done?
It is easy to caste Dr Greenspan as the befuddled "Mr McGoo" leading America to economic and financial ruin. However, such a denigration of this man's abilities is entirely misleading and dangerously erroneous. The Fed has some of the finest financial and economic brains on the planet. Therefore, the more acceptable answer as to why the (digital) US$ money base has been exploded on an astronomic scale has to centre on it being a part of a globally based economic and political strategy. The fact that this strategy has not been spelled out to "the world at large" implies a hidden agenda, and, furthermore, a conspiracy. Whilst "the conspiracy theory of history" is mocked by the media as the realm of scaremongers, the ignorant and the naïve, anyone who has merely studied the history of Britain's Kings and Queens, over the last 1,000 years, will readily see that conspiracies were very much part of court life, national government and Britain's international policy. Nothing has changed. Indeed, with the advent of widespread literacy, modern media and information technology, the obfuscation of, and power to corrupt facts has been raised to a new and more sophisticated plane.
"Baking the news cake" for palatable reception and consumption is an art form perfected for specific markets, based on the cultural and educational profile of the local, national or even international consumer. CNN, CNBC , NBC and Fox News are little more than propaganda organisations serving up a daily "McNews" for the generally poorly read and travelled, culturally naïve, and generally poorly educated US consumer, on the basis that those who eat junk, drink junk, read junk, watch junk and listen to junk deserve, well? just more junk? Mr. Hitler and Dr Goebbels would have been heartily jealous of such a malleable and docile, if not to say almost bovine populace, who could readily absorb such shallow rubbish and believe it all! Unfortunately, the insidious US style media is polluting the planet in the global attempt to produce a "dumbed down", ignorant, poorly educated and malleable global serfdom, hooked on trashy TV and video entertainments and other such puerile nonsense, and moreover, up to their necks in debt and easy credit. Again, one is led to ask why? Aren't we living in the enlightened 21st Century?..... or, are we regressing to type, as demonstrated over thousands of years of human suffering at the hands of our own dubious species?
Over the past four years, since the great stock market bubble topped out at over 11,000 on the DOW, innumerable commentators have been expecting the inevitable crash. However, time and again the Fed has wrong footed the bears, making apparent fools of many experienced and intelligent commentators, including lesser mortals like this writer. To a large extent, very few people are listening to the bears as a result of their dismal track record. Complacency is currently rife, as the markets defy financial and economic logic, and its economic paradigms and models are apparently refuted by the "new economics" of never ending FIAT expansion, akin to medieval alchemy. However, even at the physical scale of stars and galaxies, periods of great expansion are followed by sudden and very rapid implosion, as gravitational forces overcome spent nuclear reaction. In this writers' view, the end of the great global FIAT experiment, based on the United States Dollar, will end, not as most people think and hope for, as a well orchestrated gentle descent, but suddenly and very brutally like a collapsing red giant reduced to a white dwarf or X-ray star. Furthermore, an event, or a multiplicity of major events, such as a continuing rise in the price of energy and oil and/or sudden economically forced global rebalancing will be the trigger for a collapse of the entire financial "house of cards". This will destroy all the paper currencies, without any exception, as they are all interlinked within the global markets, and none are backed by gold or anything else of finite defined value. In this circumstance, Richard Russell's views on gold and silver rise to the fore, and he is to be much commended for "sticking to his guns". In this writers view he is 100% right.
For the average person in the US, Canada, Britain, Japan, Australia and New Zealand, not to mention much of the European Community, the quality of life is steadily declining amidst the illusion of paper wealth represented by assets such as houses, bonds and stocks. Since 1982, the money supply has been progressively pumped up at an ever expanding rate, whilst real earnings have been in steady decline, under steady erosion through real inflation as opposed to the statistically incorrect CPI as corrupted by manipulative "jiggery pokery" by successive governments.
The prime instrument in this global economic game has been one fundamental to the lives of everyone; i.e., the house you live in. Unless the householder is rich enough to afford to own two or more houses, which most are not, then the paper gain in the steadily, but rapidly rising, price of his home can only be realized if he sells his home and move into a lesser house in the same area, or, one of similar quality and size in a less attractive or sought after location. Most people do not like moving home for obvious reasons. Therefore, the only benefit one gains from ever rising house prices, and property prices in general, is if one can use some of the increased equity in ones home to finance other consumption needs, such as: education; cars; consumer durables; holidays; home improvements and non-essential luxuries such as speed boats and jet skis. As many writers have pointed out, a home is a source of finance amidst falling real earnings, a veritable private bank ATM to be tapped into as deemed necessary. This happy little arrangement has been facilitated and expanded by an increasingly lax and accommodative banking environment, which seems almost disinterested in whether one can ever repay ones debts in the face of unemployment or illness. Again, it is necessary to ask why this is being allowed to happen? And, furthermore, why does it fly in the face of prudent money lending, as deemed sensible practice, since the creation of the banking system. Why have supposedly responsible governments allowed it to happen without imposing regulations to protect the consumer from himself and for himself?
In the event of a collapse in the heretofore ever rising housing market, often at a factor of 3 to 5 times the increase in average earnings over a sustained period of nearly 20 years, one's house becomes a "financial lobster pot". Given the low equity in most new home purchases, in a collapsing market the mortgagee is little more than a tenant, albeit with a thumping great paper debt to pay off over the rest of his or her miserable life. In other words, modern society has reverted to one of Baronial serfdom reminiscent of 11th Century Europe at its impersonal worst. Genuine democracy and freedom has vanished in that other great illusion - so called Democracy. The biggest fear a family man will hold is losing his job. What a pernicious instrument of societal control the home has become. It's a corporate shareholders dream come true. Like a dead albatross slung around the neck of "the ancient mariner", as he thinks: "how I wish I had never bought this house!", and, how I wished that I had saved for what I have purchased and that it really did belong to me. The deep evil of credit, whose use appeals to man's darkest and bleakest being, as an instrument of acquisition, exploitation and control, will be brought home to the unthinking US, UK, Australian, and Canadian consumer like his very worst nightmares. As Yoda says to Luke Skywalker in the "Empire Strikes Back", "you're not scared? ?..You soon will be! Oh yes! You soon will be!"
The downside of the exploding property market is immense and highly insidious. The vast inflation of property prices has served to bring about the following:
Distort the cost structure of the entire economy through increased "on costs" of mortgages, rentals and leases, which are recovered through higher charges on all goods and services;
Inflated house prices push homes into higher tax thresholds including: sales tax, stamp duties, council or local authority taxes and capital gains tax resulting in increased costs of living;
The increased purchase price, and lower equity downpayment in homes for most buyers, requires them to take out ARM's (adjustable rate mortgages) rather than fixed rate mortgages. This increases the lender's exposure to financial risks in an environment of rising interest rates, when unemployment and job loss risks increase. Furthermore, most mortgages issued in ARM contracts are junk status loans, backed by derivatives, with little or no financial due diligence performed by the lender on the debtor;
Further distortions due to high and rising house prices mean that vital labour mobility is restricted throughout the economy as lower wage earners, in important sectors of the economy, cannot afford to take out a loan or move from a location of low house prices to one of high prices. Such key labour includes: teachers, medical staff, police, firemen, and drivers of public transport vehicles;
Large mortgages, or home loans, come with a deep psychological load on the mind of the mortgagee or borrower. The thought that you have a mountainous debt overhanging your daily life effectively dominates your life whether you like to admit it or not. The fear of losing ones job, becoming ill, or having an accident, where you cannot pay your monthly bill, resulting in your family being made homeless is a socially destructive and degenerative influence, colouring a person's outlook on life and their entire social behaviour. The net result is greater mental stress and physical illness, increased crime, drug and drinking offences. In some, and by no means rare, cases, suicide results.
Now the great game plan starts to make some sense. Higher home loans and the greater indebtedness of society are well on their way to creating a modern version of serfdom, in which people will work for a nominal income from the cradle to the grave, merely giving birth to a new generation of serfs, as they live their constrained lives earning nominal wages, never being able to somehow get ahead as their income is whittled away by taxes, debt servicing charges and interest payments, and everyday (and ever rising) living expenses. Lives for most will comprise a few small pleasures and, mostly, endless drudgery in making the elite few richer and able to enjoy what most people can never have or even dream about having.
Modern Industrial-Corporate Dynastic families owe their origins to the age of technological expansion and industrial development in the 19th Century. The prime interest of these families is to insure their dynastic inheritance of power and wealth. The mentality of the rich and powerful is absolutely no different to what it is was in the age of Pharoah's, Kings and more obvious and recent megalomaniacs like Hitler with his 1,000 year Reich. Wealth and power corrupts and distorts the entire mental philosophy of those who wield such power. The main effect is to numb the senses to the feelings and wellbeing of all people and the enormous social responsibility that comes with wealth. Evidence of the preoccupation of the rich and powerful with grandiose, conspicuous consumption is evident in the French Chateaux, colossal British Estate Homes, Aztec and Egyptian monolithic structures and huge Roman villas etc. Time and again, throughout history, from Chinese Emperors, European Kings, Indian Moguls, and modern era Dictators, man has quested for dynastic power over his fellow human beings, murdering countless millions of ordinary people in the process, oblivious and indifferent to their suffering. Man's lack of wisdom and responsibility to his fellow beings has not changed, only his technology and knowledge base have, which he largely uses, unwisely, to further his personal ends. The current financial game plan is just another variant of an age-old desire to control people, this time not with brutal, and highly obvious and alarming, armies of jackbooted asphalt soldiers, but with pinstripe-suited, educated, suave bankers offering easy credit and good times, like the fox to Pinocchio in Walt Disney's classic film. How easily are the people gulled into economic slavery! Their hedonistic greed for easy and immediate acquisition of goods and comforts to fulfil a perceived need, that they cannot afford to pay for, is being used to enslave them; as in Judo, the Japanese art of self defence, a person's body and normal behavioural reactions are used to bring them down.
Hand in hand with the strategy of enslaving people with credit is a much wider-ranging, multi-pronged attack against the entire fabric of society's cohesion. The facilitating of divorce laws, abortion, gay rights, and a raft of more insidious measures such as the progressive downgrading of the education system, except of course for the elite schools like Yale, Harvard, Stanford, Browne, MIT, Cornell, Oxford, Cambridge, Imperial College, UMIST, Durham, or ANU and Melbourne in Australia, etc, where the offspring of the elite get their university training. Furthermore, in most countries students have to pay for their education by taking out bank loans, financially enslaving them before they have commenced their working lives! At the 1st grade universities, academic requirements remain high to generally exclude those who have not had a good private education. Furthermore, these universities are usually located in more exclusive and more expensive towns, such as Oxford and Cambridge, further discouraging the poor from shouldering the extra costs of attending these schools.
In the scheme of the world to come, society is utterly atomised and totally malleable. Every aspect of normal home and social life is now under attack, and people are so preoccupied with debt repayment and just keeping their heads above water, that they are not able to focus on, let alone comprehend, the society they will bequeath to their own children. To keep the ordinary citizens happy, they are plied with constant mindless entertainments, similar to those staged by the Roman Emperors with their endless Games held in grand stadiums such as the Coliseum in Rome. These distract the minds of the masses from the reality of their pathetic existence. An ample supply of cheap food is also available through a sophisticated mass distribution and integrated farming system, provided by the powerful and omnipresent supermarket chains such as Wal Mart, Sears, Tesco's, Sainsbury's, Safeway, K Mart, ASDA, Coles, etc. The availability of cheap and plentiful food helps keep the mass of society placid and content. Furthermore, the availability of fast, hyper-processed, junk food is a godsend for planners as it is resulting is widespread obesity on a global scale. Obese people lack the impetus to protest and are typically inactive and sedentary.
The present concern over the massive US twin deficits does not worry the Fed for the simple reason that they fully understand what they are doing. Everything is pretty much going perfectly to plan. They know that one day the system will collapse, but only when they want it to, and have all their plans in place ready for that day. Since the creation of the Fed in 1913, the US has steadily but increasingly pursued a strategy of flooding the world with US dollars. Following WW2, which saw the destruction of the old power Europe, the US dollar was the only currency, with its solid backing of 22,000 tonnes of gold, and a strong and debt free US economy, backed by a strong resource base and pre-eminent military power, which could serve as financial collateral for international trade and settlements. However, first the militarily drawn out Korean War of 1950 and 1952, and then the enormously costly Vietnam War debacle, from 1962 to 1975, progressively sapped US economic power and undermined the dollar. In 1968, the post war Bretton Woods Agreement in which the gold price was fixed at US$35 per fine ounce was rescinded, and the US dollar was largely taken off the gold standard. The final vestige of gold backing for the US dollar was removed by President Nixon in 1971. This single act opened the credit floodgates and gold rapidly rose to US$ 120 per ounce by 1976. Thereafter, under Paul Volcker's tenure as Fed Chairman, FIAT expansion accelerated as the dollar was no longer tied to anything. By 1979, the inflation of the money supply was literally going out of control. Gold soared to US$ 850 an ounce and silver rocketed to US$50. Volcker had to act, and did so decisively, by using the only effective tool in his armoury, interest rates, raising them rapidly to 22%. This induced a severe financial recession which the incoming Chairman Alan Greenspan relieved by once again opening the liquidity spigot, financing Ronald Reagan's huge expansion of the US military in the 1980's, and a huge accumulation of US national debt. The economic brakes were applied to a vastly overheated economy in 1989 by raising rates into the teens again. However, from 1992 to 2000, the US has seen the liquidity spigot opened to an unimaginable level. The injection of so much cash into any economy is bound to cause major distortions and excess, and it did. The rest is history and is well known to readers. However, the colossal equity bubble has spilled over into an even larger bond market and now real estate bubble. US mega debts are collectively something of the order of US$ 45 trillion, comprising US$ 8 trillion of federal debts. The trade deficit is motoring along at US$ 600 billion + per annum, and the US needs to import US$ 2.6 billion a day to finance its debt. Furthermore, the war in Iraq, planned action in Iran, and maintenance of 700 + US military bases worldwide is accelerating military expenditure.
A serious attempt at resolution of the gigantic US economic imbalances is considered unlikely in the near future as the liquidity spigot is still pretty much wide open. Real interest rates are still negative or approximate to zero.
As is well known by most readers, the entire monetary system relies on the symbiotic relationship between the US consumer, financed by his vastly asset inflated house, bonds and equities, and provision of cheap labour in China, Taiwan, Thailand, Malaysia and India where much manufacturing has been outsourced by global companies. The US citizen will, over time, be reduced to earn the same wages as his Chinese and Filipino counterparts. He hasn't realized it yet, but he is being progressively reduced to sweatshop labour by being reduced to accepting a job at MacDonald's or Wal-Mart on US$ 7 per hour. Now manufacturing has been largely outsourced or relocated to China or other Asian nations. However, the time will come, maybe by 2015 or 2020, when his wages will be reduced sufficiently to make relocating manufacturing in Ohio an attractive proposition. Welcome to globalization and the New World Order. This is all wonderful of course if you are one of the owners of the means of production and the capital base. You can play one nation off against another, arbitrage wage rates and maximize profits, and reduce your labour force to compliant and malleable serfs. All this comes with the added benefit of "the Sword of Damocles" hanging over each employee's head in the form of a debt mountain. What a brilliant scheme this all is!
Far from being idiotic and improvident, Mr Greenspan's Fed has been a main control box for what is a brilliant global plan, awe inspiring in its breadth, depth and vision, and staggering in its extremely cynical execution. This is surely mankind at his most devious and is corruption of power taken to an ultimate level.
Using his incredible advantage of having a global currency, in which all commodities are traded, and all international loans and settlements made, the Fed has not only created an internal US Dictatorship via credit, but has gulled China, Japan and SE Asia into a brilliant trap. The highly imbalanced trading relationship between China, Japan and the US is well known, and has been frequently described in some detail by Morgan Stanley's Chief Economist, Mr. Stephen Roach. In this relationship, the US buys the majority of Chinese and Japanese goods with digital dollars (real money simply no longer exists) running up huge accounting surpluses with which they buy heaps of meaningless paper in the form of US Treasury Bonds and Equities, enabling the "economic merry go round" to happily continue. In this highly distorted and imbalanced market, no one dare flinch. It is the ultimate "Prisoner's Dilemma Game", and how Mr. Greenspan, a brilliant Harvard academic, must love every minute of it. The cost of anyone throwing in the towel and jettisoning the dollar is quite simply awesome. No one has the courage to dare try. Like it or not, Asia is America's hostage politically and economically and can be crippled at a moments notice. China has no internal market to replace the US consumer, and Japan, Taiwan and Korea are relatively saturated markets. However, Greenspan knows that this "circus" cannot be sustained forever. The dollar is under heavy pressure in the open market as nerves are jangling at the sheer size of the imbalances and awareness of the eventual correction. Europe has to a large degree borne the cost of this great experiment, with a 25% appreciation of the Euro, over three years, impacting seriously on their economies. Should the dollar drop significantly in coming weeks/months the Europeans will be screaming for Greenspan to raise rates into real positive territory before they are left no option but to short the dollar and precipitate a market crisis.
To add to the above, commodities, not least oil, are on an ever-upwards trajectory precipitated by sustained and increasing Asian demand. Eventually, the inherent inflationary costs, global trade and financial distortions will conspire collectively to force a resolution of current imbalances. The longer this situation is sustained, the greater will be the correction required. A soft, low trajectory, landing is considered highly unlikely. The system will implode when it finally goes. The US dollar's value is only a perceived value. Its real value is nothing. When the realisation dawns that there is going to be no nicely "stage managed" end to this situation, the normal human reaction will be to "hit the exits". The history of the markets is not one based on simple mathematical logic. Man is first and foremost driven by his primeval instincts; i.e., greed and fear. The latter is the more powerful of these instincts. When this market goes, it will do so across almost all sectors and go very fast. Greenspan knows this. This is the grand denouement of his global scheme, as any other end was never possible as it would fly in the face of simple mathematical and economic logic. We will then have his Brave New World, and the US will have Patriot Acts 1 and 2, and the Ministry of Homeland Security to sweep up the mess, as the citizenry finally wake up to their awful predicament.
It is easy to caste Dr Greenspan as the befuddled "Mr McGoo" leading America to economic and financial ruin. However, such a denigration of this man's abilities is entirely misleading and dangerously erroneous. The Fed has some of the finest financial and economic brains on the planet. Therefore, the more acceptable answer as to why the (digital) US$ money base has been exploded on an astronomic scale has to centre on it being a part of a globally based economic and political strategy. The fact that this strategy has not been spelled out to "the world at large" implies a hidden agenda, and, furthermore, a conspiracy. Whilst "the conspiracy theory of history" is mocked by the media as the realm of scaremongers, the ignorant and the naïve, anyone who has merely studied the history of Britain's Kings and Queens, over the last 1,000 years, will readily see that conspiracies were very much part of court life, national government and Britain's international policy. Nothing has changed. Indeed, with the advent of widespread literacy, modern media and information technology, the obfuscation of, and power to corrupt facts has been raised to a new and more sophisticated plane.
"Baking the news cake" for palatable reception and consumption is an art form perfected for specific markets, based on the cultural and educational profile of the local, national or even international consumer. CNN, CNBC , NBC and Fox News are little more than propaganda organisations serving up a daily "McNews" for the generally poorly read and travelled, culturally naïve, and generally poorly educated US consumer, on the basis that those who eat junk, drink junk, read junk, watch junk and listen to junk deserve, well? just more junk? Mr. Hitler and Dr Goebbels would have been heartily jealous of such a malleable and docile, if not to say almost bovine populace, who could readily absorb such shallow rubbish and believe it all! Unfortunately, the insidious US style media is polluting the planet in the global attempt to produce a "dumbed down", ignorant, poorly educated and malleable global serfdom, hooked on trashy TV and video entertainments and other such puerile nonsense, and moreover, up to their necks in debt and easy credit. Again, one is led to ask why? Aren't we living in the enlightened 21st Century?..... or, are we regressing to type, as demonstrated over thousands of years of human suffering at the hands of our own dubious species?
Over the past four years, since the great stock market bubble topped out at over 11,000 on the DOW, innumerable commentators have been expecting the inevitable crash. However, time and again the Fed has wrong footed the bears, making apparent fools of many experienced and intelligent commentators, including lesser mortals like this writer. To a large extent, very few people are listening to the bears as a result of their dismal track record. Complacency is currently rife, as the markets defy financial and economic logic, and its economic paradigms and models are apparently refuted by the "new economics" of never ending FIAT expansion, akin to medieval alchemy. However, even at the physical scale of stars and galaxies, periods of great expansion are followed by sudden and very rapid implosion, as gravitational forces overcome spent nuclear reaction. In this writers' view, the end of the great global FIAT experiment, based on the United States Dollar, will end, not as most people think and hope for, as a well orchestrated gentle descent, but suddenly and very brutally like a collapsing red giant reduced to a white dwarf or X-ray star. Furthermore, an event, or a multiplicity of major events, such as a continuing rise in the price of energy and oil and/or sudden economically forced global rebalancing will be the trigger for a collapse of the entire financial "house of cards". This will destroy all the paper currencies, without any exception, as they are all interlinked within the global markets, and none are backed by gold or anything else of finite defined value. In this circumstance, Richard Russell's views on gold and silver rise to the fore, and he is to be much commended for "sticking to his guns". In this writers view he is 100% right.
For the average person in the US, Canada, Britain, Japan, Australia and New Zealand, not to mention much of the European Community, the quality of life is steadily declining amidst the illusion of paper wealth represented by assets such as houses, bonds and stocks. Since 1982, the money supply has been progressively pumped up at an ever expanding rate, whilst real earnings have been in steady decline, under steady erosion through real inflation as opposed to the statistically incorrect CPI as corrupted by manipulative "jiggery pokery" by successive governments.
The prime instrument in this global economic game has been one fundamental to the lives of everyone; i.e., the house you live in. Unless the householder is rich enough to afford to own two or more houses, which most are not, then the paper gain in the steadily, but rapidly rising, price of his home can only be realized if he sells his home and move into a lesser house in the same area, or, one of similar quality and size in a less attractive or sought after location. Most people do not like moving home for obvious reasons. Therefore, the only benefit one gains from ever rising house prices, and property prices in general, is if one can use some of the increased equity in ones home to finance other consumption needs, such as: education; cars; consumer durables; holidays; home improvements and non-essential luxuries such as speed boats and jet skis. As many writers have pointed out, a home is a source of finance amidst falling real earnings, a veritable private bank ATM to be tapped into as deemed necessary. This happy little arrangement has been facilitated and expanded by an increasingly lax and accommodative banking environment, which seems almost disinterested in whether one can ever repay ones debts in the face of unemployment or illness. Again, it is necessary to ask why this is being allowed to happen? And, furthermore, why does it fly in the face of prudent money lending, as deemed sensible practice, since the creation of the banking system. Why have supposedly responsible governments allowed it to happen without imposing regulations to protect the consumer from himself and for himself?
In the event of a collapse in the heretofore ever rising housing market, often at a factor of 3 to 5 times the increase in average earnings over a sustained period of nearly 20 years, one's house becomes a "financial lobster pot". Given the low equity in most new home purchases, in a collapsing market the mortgagee is little more than a tenant, albeit with a thumping great paper debt to pay off over the rest of his or her miserable life. In other words, modern society has reverted to one of Baronial serfdom reminiscent of 11th Century Europe at its impersonal worst. Genuine democracy and freedom has vanished in that other great illusion - so called Democracy. The biggest fear a family man will hold is losing his job. What a pernicious instrument of societal control the home has become. It's a corporate shareholders dream come true. Like a dead albatross slung around the neck of "the ancient mariner", as he thinks: "how I wish I had never bought this house!", and, how I wished that I had saved for what I have purchased and that it really did belong to me. The deep evil of credit, whose use appeals to man's darkest and bleakest being, as an instrument of acquisition, exploitation and control, will be brought home to the unthinking US, UK, Australian, and Canadian consumer like his very worst nightmares. As Yoda says to Luke Skywalker in the "Empire Strikes Back", "you're not scared? ?..You soon will be! Oh yes! You soon will be!"
The downside of the exploding property market is immense and highly insidious. The vast inflation of property prices has served to bring about the following:
Distort the cost structure of the entire economy through increased "on costs" of mortgages, rentals and leases, which are recovered through higher charges on all goods and services;
Inflated house prices push homes into higher tax thresholds including: sales tax, stamp duties, council or local authority taxes and capital gains tax resulting in increased costs of living;
The increased purchase price, and lower equity downpayment in homes for most buyers, requires them to take out ARM's (adjustable rate mortgages) rather than fixed rate mortgages. This increases the lender's exposure to financial risks in an environment of rising interest rates, when unemployment and job loss risks increase. Furthermore, most mortgages issued in ARM contracts are junk status loans, backed by derivatives, with little or no financial due diligence performed by the lender on the debtor;
Further distortions due to high and rising house prices mean that vital labour mobility is restricted throughout the economy as lower wage earners, in important sectors of the economy, cannot afford to take out a loan or move from a location of low house prices to one of high prices. Such key labour includes: teachers, medical staff, police, firemen, and drivers of public transport vehicles;
Large mortgages, or home loans, come with a deep psychological load on the mind of the mortgagee or borrower. The thought that you have a mountainous debt overhanging your daily life effectively dominates your life whether you like to admit it or not. The fear of losing ones job, becoming ill, or having an accident, where you cannot pay your monthly bill, resulting in your family being made homeless is a socially destructive and degenerative influence, colouring a person's outlook on life and their entire social behaviour. The net result is greater mental stress and physical illness, increased crime, drug and drinking offences. In some, and by no means rare, cases, suicide results.
Now the great game plan starts to make some sense. Higher home loans and the greater indebtedness of society are well on their way to creating a modern version of serfdom, in which people will work for a nominal income from the cradle to the grave, merely giving birth to a new generation of serfs, as they live their constrained lives earning nominal wages, never being able to somehow get ahead as their income is whittled away by taxes, debt servicing charges and interest payments, and everyday (and ever rising) living expenses. Lives for most will comprise a few small pleasures and, mostly, endless drudgery in making the elite few richer and able to enjoy what most people can never have or even dream about having.
Modern Industrial-Corporate Dynastic families owe their origins to the age of technological expansion and industrial development in the 19th Century. The prime interest of these families is to insure their dynastic inheritance of power and wealth. The mentality of the rich and powerful is absolutely no different to what it is was in the age of Pharoah's, Kings and more obvious and recent megalomaniacs like Hitler with his 1,000 year Reich. Wealth and power corrupts and distorts the entire mental philosophy of those who wield such power. The main effect is to numb the senses to the feelings and wellbeing of all people and the enormous social responsibility that comes with wealth. Evidence of the preoccupation of the rich and powerful with grandiose, conspicuous consumption is evident in the French Chateaux, colossal British Estate Homes, Aztec and Egyptian monolithic structures and huge Roman villas etc. Time and again, throughout history, from Chinese Emperors, European Kings, Indian Moguls, and modern era Dictators, man has quested for dynastic power over his fellow human beings, murdering countless millions of ordinary people in the process, oblivious and indifferent to their suffering. Man's lack of wisdom and responsibility to his fellow beings has not changed, only his technology and knowledge base have, which he largely uses, unwisely, to further his personal ends. The current financial game plan is just another variant of an age-old desire to control people, this time not with brutal, and highly obvious and alarming, armies of jackbooted asphalt soldiers, but with pinstripe-suited, educated, suave bankers offering easy credit and good times, like the fox to Pinocchio in Walt Disney's classic film. How easily are the people gulled into economic slavery! Their hedonistic greed for easy and immediate acquisition of goods and comforts to fulfil a perceived need, that they cannot afford to pay for, is being used to enslave them; as in Judo, the Japanese art of self defence, a person's body and normal behavioural reactions are used to bring them down.
Hand in hand with the strategy of enslaving people with credit is a much wider-ranging, multi-pronged attack against the entire fabric of society's cohesion. The facilitating of divorce laws, abortion, gay rights, and a raft of more insidious measures such as the progressive downgrading of the education system, except of course for the elite schools like Yale, Harvard, Stanford, Browne, MIT, Cornell, Oxford, Cambridge, Imperial College, UMIST, Durham, or ANU and Melbourne in Australia, etc, where the offspring of the elite get their university training. Furthermore, in most countries students have to pay for their education by taking out bank loans, financially enslaving them before they have commenced their working lives! At the 1st grade universities, academic requirements remain high to generally exclude those who have not had a good private education. Furthermore, these universities are usually located in more exclusive and more expensive towns, such as Oxford and Cambridge, further discouraging the poor from shouldering the extra costs of attending these schools.
In the scheme of the world to come, society is utterly atomised and totally malleable. Every aspect of normal home and social life is now under attack, and people are so preoccupied with debt repayment and just keeping their heads above water, that they are not able to focus on, let alone comprehend, the society they will bequeath to their own children. To keep the ordinary citizens happy, they are plied with constant mindless entertainments, similar to those staged by the Roman Emperors with their endless Games held in grand stadiums such as the Coliseum in Rome. These distract the minds of the masses from the reality of their pathetic existence. An ample supply of cheap food is also available through a sophisticated mass distribution and integrated farming system, provided by the powerful and omnipresent supermarket chains such as Wal Mart, Sears, Tesco's, Sainsbury's, Safeway, K Mart, ASDA, Coles, etc. The availability of cheap and plentiful food helps keep the mass of society placid and content. Furthermore, the availability of fast, hyper-processed, junk food is a godsend for planners as it is resulting is widespread obesity on a global scale. Obese people lack the impetus to protest and are typically inactive and sedentary.
The present concern over the massive US twin deficits does not worry the Fed for the simple reason that they fully understand what they are doing. Everything is pretty much going perfectly to plan. They know that one day the system will collapse, but only when they want it to, and have all their plans in place ready for that day. Since the creation of the Fed in 1913, the US has steadily but increasingly pursued a strategy of flooding the world with US dollars. Following WW2, which saw the destruction of the old power Europe, the US dollar was the only currency, with its solid backing of 22,000 tonnes of gold, and a strong and debt free US economy, backed by a strong resource base and pre-eminent military power, which could serve as financial collateral for international trade and settlements. However, first the militarily drawn out Korean War of 1950 and 1952, and then the enormously costly Vietnam War debacle, from 1962 to 1975, progressively sapped US economic power and undermined the dollar. In 1968, the post war Bretton Woods Agreement in which the gold price was fixed at US$35 per fine ounce was rescinded, and the US dollar was largely taken off the gold standard. The final vestige of gold backing for the US dollar was removed by President Nixon in 1971. This single act opened the credit floodgates and gold rapidly rose to US$ 120 per ounce by 1976. Thereafter, under Paul Volcker's tenure as Fed Chairman, FIAT expansion accelerated as the dollar was no longer tied to anything. By 1979, the inflation of the money supply was literally going out of control. Gold soared to US$ 850 an ounce and silver rocketed to US$50. Volcker had to act, and did so decisively, by using the only effective tool in his armoury, interest rates, raising them rapidly to 22%. This induced a severe financial recession which the incoming Chairman Alan Greenspan relieved by once again opening the liquidity spigot, financing Ronald Reagan's huge expansion of the US military in the 1980's, and a huge accumulation of US national debt. The economic brakes were applied to a vastly overheated economy in 1989 by raising rates into the teens again. However, from 1992 to 2000, the US has seen the liquidity spigot opened to an unimaginable level. The injection of so much cash into any economy is bound to cause major distortions and excess, and it did. The rest is history and is well known to readers. However, the colossal equity bubble has spilled over into an even larger bond market and now real estate bubble. US mega debts are collectively something of the order of US$ 45 trillion, comprising US$ 8 trillion of federal debts. The trade deficit is motoring along at US$ 600 billion + per annum, and the US needs to import US$ 2.6 billion a day to finance its debt. Furthermore, the war in Iraq, planned action in Iran, and maintenance of 700 + US military bases worldwide is accelerating military expenditure.
A serious attempt at resolution of the gigantic US economic imbalances is considered unlikely in the near future as the liquidity spigot is still pretty much wide open. Real interest rates are still negative or approximate to zero.
As is well known by most readers, the entire monetary system relies on the symbiotic relationship between the US consumer, financed by his vastly asset inflated house, bonds and equities, and provision of cheap labour in China, Taiwan, Thailand, Malaysia and India where much manufacturing has been outsourced by global companies. The US citizen will, over time, be reduced to earn the same wages as his Chinese and Filipino counterparts. He hasn't realized it yet, but he is being progressively reduced to sweatshop labour by being reduced to accepting a job at MacDonald's or Wal-Mart on US$ 7 per hour. Now manufacturing has been largely outsourced or relocated to China or other Asian nations. However, the time will come, maybe by 2015 or 2020, when his wages will be reduced sufficiently to make relocating manufacturing in Ohio an attractive proposition. Welcome to globalization and the New World Order. This is all wonderful of course if you are one of the owners of the means of production and the capital base. You can play one nation off against another, arbitrage wage rates and maximize profits, and reduce your labour force to compliant and malleable serfs. All this comes with the added benefit of "the Sword of Damocles" hanging over each employee's head in the form of a debt mountain. What a brilliant scheme this all is!
Far from being idiotic and improvident, Mr Greenspan's Fed has been a main control box for what is a brilliant global plan, awe inspiring in its breadth, depth and vision, and staggering in its extremely cynical execution. This is surely mankind at his most devious and is corruption of power taken to an ultimate level.
Using his incredible advantage of having a global currency, in which all commodities are traded, and all international loans and settlements made, the Fed has not only created an internal US Dictatorship via credit, but has gulled China, Japan and SE Asia into a brilliant trap. The highly imbalanced trading relationship between China, Japan and the US is well known, and has been frequently described in some detail by Morgan Stanley's Chief Economist, Mr. Stephen Roach. In this relationship, the US buys the majority of Chinese and Japanese goods with digital dollars (real money simply no longer exists) running up huge accounting surpluses with which they buy heaps of meaningless paper in the form of US Treasury Bonds and Equities, enabling the "economic merry go round" to happily continue. In this highly distorted and imbalanced market, no one dare flinch. It is the ultimate "Prisoner's Dilemma Game", and how Mr. Greenspan, a brilliant Harvard academic, must love every minute of it. The cost of anyone throwing in the towel and jettisoning the dollar is quite simply awesome. No one has the courage to dare try. Like it or not, Asia is America's hostage politically and economically and can be crippled at a moments notice. China has no internal market to replace the US consumer, and Japan, Taiwan and Korea are relatively saturated markets. However, Greenspan knows that this "circus" cannot be sustained forever. The dollar is under heavy pressure in the open market as nerves are jangling at the sheer size of the imbalances and awareness of the eventual correction. Europe has to a large degree borne the cost of this great experiment, with a 25% appreciation of the Euro, over three years, impacting seriously on their economies. Should the dollar drop significantly in coming weeks/months the Europeans will be screaming for Greenspan to raise rates into real positive territory before they are left no option but to short the dollar and precipitate a market crisis.
To add to the above, commodities, not least oil, are on an ever-upwards trajectory precipitated by sustained and increasing Asian demand. Eventually, the inherent inflationary costs, global trade and financial distortions will conspire collectively to force a resolution of current imbalances. The longer this situation is sustained, the greater will be the correction required. A soft, low trajectory, landing is considered highly unlikely. The system will implode when it finally goes. The US dollar's value is only a perceived value. Its real value is nothing. When the realisation dawns that there is going to be no nicely "stage managed" end to this situation, the normal human reaction will be to "hit the exits". The history of the markets is not one based on simple mathematical logic. Man is first and foremost driven by his primeval instincts; i.e., greed and fear. The latter is the more powerful of these instincts. When this market goes, it will do so across almost all sectors and go very fast. Greenspan knows this. This is the grand denouement of his global scheme, as any other end was never possible as it would fly in the face of simple mathematical and economic logic. We will then have his Brave New World, and the US will have Patriot Acts 1 and 2, and the Ministry of Homeland Security to sweep up the mess, as the citizenry finally wake up to their awful predicament.
Before 1660, in England, there was no paper money. All transactions were completed in specie?meaning gold and silver coinage and bars. It wasn't necessarily honest money, because the king had the same problem as did FDR and most politicians forever. He always wanted to spend more than he had. He would take the coins, and clip off a bit of gold or silver, and make new, smaller ones, declaring the new to be as valuable as the old. The king often would combine copper or brass with the gold to lessen the gold content, thereby debasing the coins, but declaring they had the same value. The value wasn't what the coins had in them, but what value the king said they had. These rulings by the king's courts came to be known as "legal tender rulings."
One of the first and biggest of legal tender frauds, was one William Paterson. Paterson got some friends together, raised 72,000 pounds in gold and silver, started a bank and printed up paper receipts for the gold and silver. The King was broke and needed money. Patterson's bank loaned the paper receipts to the king to fight his war. However, the king needed far more than 72,000 pounds. Patterson then printed up 1,200,000 in pound notes and loaned them to the king. The king had borrowed them, so he had to declare them valuable and "legal tender." Paterson's initial 72,000 pound investment, printed up to 16 2/3 times his investment, and charging 8 1/3% interest, meant his interest payments alone were 100,000 pounds per year, or an actual interest rate, based on his initial 72,000 pound investment, of 140% per year. Ain't "legal tender" grand? Thus began the Bank of England.
Thomas Jefferson and Alexander Hamilton were at odds about economics. Jefferson wanted no part of a central bank, and Hamilton was all in favor of one. A central bank, such as Paterson's Bank of England, or the current Federal Reserve, creates money out of nothing, and lends it to the government today, just as Paterson loaned to the king 350 years ago. The King had to pay interest to Paterson's bank, even though the pounds were created out of virtual thin air. The current Federal Government has to pay interest to the Federal Reserve, and those who bought its notes, which created the legal tender, or fiat money, out of thin air also. The Federal Government's income is far less than it spends, as witness the latest omnibus spending bill. It must get the Federal Reserve to issue more legal tender or bookkeeping entries, to pay its bills and interest, which obligates the government to pay even more interest on money created out of thin air, by a privately owned central bank. Does that make the matter clear? I hope so, because it is one of the great frauds of all time.
At the federal level, more than 100% of taxes collected, are paid to the privately owned Federal Reserve central bank and those who bought its notes, as interest on money created by it?from nothing. Furthermore, since the interest alone, is more than the collections, and since more fiat legal tender must be created each week, the government's indebtedness to the central bank and those who bought its notes, continues to grow. This is not all. Since foreign nations also buy our debt, which was created out of nothing; they are paid interest on it by our government. When they bought our debt, they bought it with money they created out of nothing also, so they can receive interest on their legal tender fiat money, which interest also was created out of nothing. The whole shebang is one great big, gigantic, fraud. "Well, since it was all created out of nothing, don't we owe it to ourselves? Can't we just eradicate the fiat money, legal tender, debts, notes, and all the complex stuff, and return to the original non-legal tender form? I wish we could, but we can't, because those who loaned or borrowed, have their capital tied up in this fraud. Their capital, net worth, wealth, and operating funds, are all tied up in this fraud, so if it were all suddenly dissolved, chaos would result. Chaos, rather than slow disintegration, as is now happening. Would you rather die of a lingering disease, or be hit by a dump truck, and end it all suddenly? That's not quite it, but it may be close.
The entire money system, is based on debt owed to a central bank, now-a-days called the Federal Reserve. If there were no central bank or legal tender, the system would be mostly honest. If the legal tender laws hadn't been passed, government couldn't have grown to the preposterous size we now see, and politicians couldn't be re-elected by promising to bring home the bacon, as in the latest omnibus spending bill. The politicos love the word "omnibus," because no one will read it, vote against it, or examine it. If they did, and it was published before the vote, the thing would die from sheer outrage by the public. Then there would be no "free" bacon to bring home, and they would not be re-elected. They couldn't allow that to happen! We then, are all being held hostage by our Representatives and Senators, who are supposed to represent us. They use the word "represent," differently than do I. They think "represent," means print more money, issue more legal tender, tons of fiat paper, and a billion dollars of it a day, to finance their pet projects. These pet projects, are the bacon they bring home.
This type of "representation," is in fact, a wholesale theft of their constituents' life blood. That new fire station or city park, is built with legal tender created out of nothing, and for which interest must be paid to the privately owned bank, which issues the legal tender. Since more and more legal tender must be created to pay the interest on the already created legal tender, the amount of legal tender in circulation, escalates almost exponentially. The more that is printed, the less it is worth, so that new fire engine or city park was no "gift " at all, but just another debt. That debt, has then resulted in the fiat legal tender in the constituents wallet or bank account, decreasing in purchasing power or "value." In other words, thanks to the omnibus spending bill, plus of course Iraq, welfare, and numerous bureaucracies, the legal tender loses value and purchasing power. A gigantic theft has resulted, which certainly has exceeded that new highway or city park in value.
There is no greater theft, which has been practiced throughout the centuries, by 100% of all governments that have ever existed, than legal tender. "Tender," as was discussed , means you can pay someone, or "tender payment." When the word "legal" is added, the phrase has a fishy taste in one's mouth. When something is "legal" or "illegal," to me, it means that the descriptive adjective is indicative of something, which maybe should not exist. One should be able to "tender" payment in a method one chooses to do, rather than tendering payment in a compulsory device, such as a "legal" one.
This brings us to "barter." "Barter," which carries the dictionary definition of, "Trade, by exchanging goods or services, without the use of money," is a method of avoiding the use of legal tender. Barter has several advantages. One of them is the ability to exchange goods or services while avoiding various taxes. Examples might be exchanging a few hours work for various farm or other products. Income, Social Security, and state taxes on the wages are avoided, as are the local sales taxes. If someone hires a laborer and pays them in either out of pocket legal tender or goods, the laborer has in reality been given a 40% raise, and it has cost the employee 40% less. A casual one day laborer, who is paid $10 per hour in legal tender, with no taxes deducted, in reality would have to be paid about $18 per hour, if he or she were "on the payroll," to end up with the $10.
This is merely one of the evils of the legal tender system. Figure it out for yourself. If there were no legal tender laws, and all were on the up and up economically and monetarily, there would be no debts to a central bank to pay, and no deficits in various budgets. There then would be no income tax or Social Security taxes in existence, and the gold coins and silver coins would be in circulation, with bills and labor costs being paid in them. The $10 per hour labor might be actually paid about 25 honest cents per hour, because the dollars would not have been debased. Social Security would have never been passed by the originator of it, (FDR and his Democrat Congress), because people would have looked out for themselves (and would have ample money in the bank) in a stable monetary system.
One of the first and biggest of legal tender frauds, was one William Paterson. Paterson got some friends together, raised 72,000 pounds in gold and silver, started a bank and printed up paper receipts for the gold and silver. The King was broke and needed money. Patterson's bank loaned the paper receipts to the king to fight his war. However, the king needed far more than 72,000 pounds. Patterson then printed up 1,200,000 in pound notes and loaned them to the king. The king had borrowed them, so he had to declare them valuable and "legal tender." Paterson's initial 72,000 pound investment, printed up to 16 2/3 times his investment, and charging 8 1/3% interest, meant his interest payments alone were 100,000 pounds per year, or an actual interest rate, based on his initial 72,000 pound investment, of 140% per year. Ain't "legal tender" grand? Thus began the Bank of England.
Thomas Jefferson and Alexander Hamilton were at odds about economics. Jefferson wanted no part of a central bank, and Hamilton was all in favor of one. A central bank, such as Paterson's Bank of England, or the current Federal Reserve, creates money out of nothing, and lends it to the government today, just as Paterson loaned to the king 350 years ago. The King had to pay interest to Paterson's bank, even though the pounds were created out of virtual thin air. The current Federal Government has to pay interest to the Federal Reserve, and those who bought its notes, which created the legal tender, or fiat money, out of thin air also. The Federal Government's income is far less than it spends, as witness the latest omnibus spending bill. It must get the Federal Reserve to issue more legal tender or bookkeeping entries, to pay its bills and interest, which obligates the government to pay even more interest on money created out of thin air, by a privately owned central bank. Does that make the matter clear? I hope so, because it is one of the great frauds of all time.
At the federal level, more than 100% of taxes collected, are paid to the privately owned Federal Reserve central bank and those who bought its notes, as interest on money created by it?from nothing. Furthermore, since the interest alone, is more than the collections, and since more fiat legal tender must be created each week, the government's indebtedness to the central bank and those who bought its notes, continues to grow. This is not all. Since foreign nations also buy our debt, which was created out of nothing; they are paid interest on it by our government. When they bought our debt, they bought it with money they created out of nothing also, so they can receive interest on their legal tender fiat money, which interest also was created out of nothing. The whole shebang is one great big, gigantic, fraud. "Well, since it was all created out of nothing, don't we owe it to ourselves? Can't we just eradicate the fiat money, legal tender, debts, notes, and all the complex stuff, and return to the original non-legal tender form? I wish we could, but we can't, because those who loaned or borrowed, have their capital tied up in this fraud. Their capital, net worth, wealth, and operating funds, are all tied up in this fraud, so if it were all suddenly dissolved, chaos would result. Chaos, rather than slow disintegration, as is now happening. Would you rather die of a lingering disease, or be hit by a dump truck, and end it all suddenly? That's not quite it, but it may be close.
The entire money system, is based on debt owed to a central bank, now-a-days called the Federal Reserve. If there were no central bank or legal tender, the system would be mostly honest. If the legal tender laws hadn't been passed, government couldn't have grown to the preposterous size we now see, and politicians couldn't be re-elected by promising to bring home the bacon, as in the latest omnibus spending bill. The politicos love the word "omnibus," because no one will read it, vote against it, or examine it. If they did, and it was published before the vote, the thing would die from sheer outrage by the public. Then there would be no "free" bacon to bring home, and they would not be re-elected. They couldn't allow that to happen! We then, are all being held hostage by our Representatives and Senators, who are supposed to represent us. They use the word "represent," differently than do I. They think "represent," means print more money, issue more legal tender, tons of fiat paper, and a billion dollars of it a day, to finance their pet projects. These pet projects, are the bacon they bring home.
This type of "representation," is in fact, a wholesale theft of their constituents' life blood. That new fire station or city park, is built with legal tender created out of nothing, and for which interest must be paid to the privately owned bank, which issues the legal tender. Since more and more legal tender must be created to pay the interest on the already created legal tender, the amount of legal tender in circulation, escalates almost exponentially. The more that is printed, the less it is worth, so that new fire engine or city park was no "gift " at all, but just another debt. That debt, has then resulted in the fiat legal tender in the constituents wallet or bank account, decreasing in purchasing power or "value." In other words, thanks to the omnibus spending bill, plus of course Iraq, welfare, and numerous bureaucracies, the legal tender loses value and purchasing power. A gigantic theft has resulted, which certainly has exceeded that new highway or city park in value.
There is no greater theft, which has been practiced throughout the centuries, by 100% of all governments that have ever existed, than legal tender. "Tender," as was discussed , means you can pay someone, or "tender payment." When the word "legal" is added, the phrase has a fishy taste in one's mouth. When something is "legal" or "illegal," to me, it means that the descriptive adjective is indicative of something, which maybe should not exist. One should be able to "tender" payment in a method one chooses to do, rather than tendering payment in a compulsory device, such as a "legal" one.
This brings us to "barter." "Barter," which carries the dictionary definition of, "Trade, by exchanging goods or services, without the use of money," is a method of avoiding the use of legal tender. Barter has several advantages. One of them is the ability to exchange goods or services while avoiding various taxes. Examples might be exchanging a few hours work for various farm or other products. Income, Social Security, and state taxes on the wages are avoided, as are the local sales taxes. If someone hires a laborer and pays them in either out of pocket legal tender or goods, the laborer has in reality been given a 40% raise, and it has cost the employee 40% less. A casual one day laborer, who is paid $10 per hour in legal tender, with no taxes deducted, in reality would have to be paid about $18 per hour, if he or she were "on the payroll," to end up with the $10.
This is merely one of the evils of the legal tender system. Figure it out for yourself. If there were no legal tender laws, and all were on the up and up economically and monetarily, there would be no debts to a central bank to pay, and no deficits in various budgets. There then would be no income tax or Social Security taxes in existence, and the gold coins and silver coins would be in circulation, with bills and labor costs being paid in them. The $10 per hour labor might be actually paid about 25 honest cents per hour, because the dollars would not have been debased. Social Security would have never been passed by the originator of it, (FDR and his Democrat Congress), because people would have looked out for themselves (and would have ample money in the bank) in a stable monetary system.
one may wish to take careful note here of a german housewife in 1923 feeding wads of german marks into her fireplace, beacause they were cheaper to use than firewood itself.
Germany employed 1,728 currency printing presses running 24 hours a day, 7 day a week
3.25 million percent inflation per month at the end
http://en.wikipedia.org/wiki/Hyperinflation
The hyperinflation coming to America will be one thousand times worse, since the numbers involved are far greater. And America no longer has any way to produce itself back into solvency. This absolutely guarantees a fascist police state dictatorship.
In history, it always has.
That's the real reason they are passing all these laws negating the constitution.
Your lifestyle, as you now know it, is over. Its just a matter of time.
And theres nothing you can do about it.
Enjoy!!!
Germany employed 1,728 currency printing presses running 24 hours a day, 7 day a week
3.25 million percent inflation per month at the end
http://en.wikipedia.org/wiki/Hyperinflation
The hyperinflation coming to America will be one thousand times worse, since the numbers involved are far greater. And America no longer has any way to produce itself back into solvency. This absolutely guarantees a fascist police state dictatorship.
In history, it always has.
That's the real reason they are passing all these laws negating the constitution.
Your lifestyle, as you now know it, is over. Its just a matter of time.
And theres nothing you can do about it.
Enjoy!!!
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