Freedom of the individual has been quashed in the West, replaced by large moneyed structures.
In the west, the mass media is owned, funded by and operated largely by pro-war interests, as John Pilger eloquently illustrates in the below speech:
http://video.google.com/videoplay?docid=-4258131083758254736&hl=en
In the west, our fraudulent counterfeit fiat-based, privately-owned, untaxed and unaudited money system is on it's last legs. The unraveling is designed to leave power in the hands of the people who set this unravelling into motion. They can be easily identified by watching who is giving themselves the most money from the treasury and then blaming relatively small AIG CEOs for being greedy with drop in the bucket bonuses.
Synthetic graphic of US collective sentiment (in blue: sense
of impending doom; in green:
purchasing power sentiment; in pink: job
concerns) - Source : Chart of Doom, 02/2009
My friends, this is more than a "soft patch" as Greenspan called it, more than a "recession" as the mass media calls it, and more than even the "Greatest Depression" as Celente calls it.
A notable example of what is happening here --> Man goes from 750,000/year hedge fund manager to minimum wage pizza delivery guy... yes, this is the sign of our times unfolding now with increasing momentum! And yes, it was predictable because all of the primary indicators told us that this would be greater than the Great Depression.
A few notable examples of the unprecedented-ness of our situation
- Debt-to-GDP ratio is now two times greater than the Great Depression
- USA was the world's #1 creditor nation / is now the worlds' #1 debtor nation
- Last 50-years of economic growth was on the back of continuously increasing petroleum output. Now we are peaked, and totally petroleum-dependent for all that we have, eat and do. Recently we were jolted to 150/barrel just prior to this (temporary) deflationary collapse... Petroleum prices will return again with higher highs soon and I predict global inflation will be the only possible answer that our current system can provide.
- Ecological catastrophes are evident in unprecedented species dieoffs. I don't personally believe that carbon dioxide has much to do with this, but habitat destruction, pollution, gender-bending plastics, over-harvesting, depletion of soils, monocropping, clearcutting, carpet bombing whole civilizations... these are set to increase as petroleum fails to feed us. Like AIG bonuses compared to the Banker Takeover Bill, likewise, the global carbon tax is a distraction against little people to the real issues of ecological degradation by big corporations and privatized militaries.
- Over the last 100-years, the world's currencies went from a mostly gold and silver asset base to no gold asset base. Now that everything under the sun is denominated in fiat paper, what will prevent the owners of these private central banks from printing to pay debts? Nothing of course. Hyper-inflation is guaranteed.
All of these trends and many more all pointing us into a direction of a massive shift unlike any other in human history... and it is happening right now. Exciting isn't it? Yet all is not doom and gloom. There are a few opportunities here.
What opportunities?
In a nutshell, as I have said many times in the past, the great opportunity here is...
- Shift devaluing paper into booming precious metals
- Move from big-city suburbia to small community farmland (hopefully with water, arable land, long growing season, etc...)
- Get back together with extended family, (as we all were for millions of years prior to this temporary experiment gone wrong)
- Postion into a lifestyle close to nature, family, producing of some fun commodity (my choices might include either wine, beer, vodka)
- There are other better solutions out there, I'm sure. And you can find your own soul-ution that suits you.
Upside down economics doesn't have to be all doom and gloom!
The point is that doom news doesn't have to equate with a gloom life. Rather doom facts can be your personal boom if you act differently than the herds of sheeple around you. (They will need you later.) Dire facts can inspire us to act and our actions now at this unique fulcrum will affect generations down the road.
And with that, we shift our focus to the Privateer, one of the best alternative geopolitical and geoeconomic newsletters out there.
Cheers, Tate
(First part of Privateer below... subscription info at the bottom)
===================
GLOBAL REPORT
THE GREATEST "HOIST" IN HISTORY
The Obama administration will soon be trying one of history's biggest efforts, the aim being to re-liquify its own financial system and with that, the global financial system. Its method will be a new tidal wave of US Dollars. This is a desperate attempt to stop the US and global deflation in its tracks and turn it around.
The US Reflation Design:
The Treasury will supply $US 1 TRILLION to remove toxic mortgage assets from the balance sheets of American banks. The Fed will start the first phase of its $US 1 TRILLION program to revive the markets for securities backed by consumer and business loans. Add to these two initiatives the $US 787 Billion fiscal stimulus and the size of US monetary and fiscal actions becomes clear. Congress approved a $787 Billion bank bailout package back in October. This week, President Obama's administration suggested that it may need an additional $US 750 Billion.
Money - Versus - Wealth:
Wealth is unconsumed economic goods. Money, as such, acts as an intermediary between economic goods of all different kinds, expressing their relative value to each other in terms of the different money prices.
The Other Side Of The Economic Fulcrum:
One can, in simple terms, look upon an economy as a seesaw with money at one end, with all other real economic goods at the other and with a fulcrum somewhere in the middle. What the Obama administration is now trying to do is to pile money at one end in the hope that if the pile gets big enough, it will lift the other end by increasing valuations and prices.
Borrow - Print - Spend - So We'll All Get Rich Again:
What is haunting the US and the global economy is the enormous fall in valuations across the world. Falls in the value of financial assets worldwide might now have reached more than $US 50,000 Billion, equivalent to a year's global economic output, the Asian Development Bank warned on March 9.
Official figures from the US record that American households got poorer by an average of 18 percent last year in the housing crash while falling stock prices wiped $US 11.2 TRILLION off their net worth. This is what the Obama administration is trying to overcome with its attempt at a massive reflation. A key measure of net foreign capital investment in the US, the "TIC flows", came in at a record MINUS $US 148.9 Billion in January. That was after an inflow of $US 86.2 Billion in December.
The Enormous Scale Of Present World Events:
One of the hardest things to do these days is to describe in any detail the gigantic scale of current events. As already stated, the Asian Development Bank (ADB) makes a very good effort here by identifying the financial losses in the great global deflation as having already reached the enormous sum of $US 50,000 Billion, or $US 50 TRILLION. The Privateer, in recent past issues, has added the equally huge losses in global real estate valuations, taking total losses close to $US 100 TRILLION.
Understanding Valuations - Markets - And Prices:
An often inadvertently overlooked factor in all economic and market situations is that not ALL economic goods in existence are on offer in the market all the time. In fact, most economic goods rarely enter the market at all. They stand on the sidelines. Consider the marketplace where things are bought and sold as if it were an expanding or contracting circle. To participate, the economic goods in question have to be brought inside and then offered for sale. All the other economic goods of similar kind stand outside the market circle not participating. But, though these similar economic goods might not be "on the market" that day, they are affected by the events in the marketplace that day. What happens is that their valuations change as a consequence of the price changes in the market. If prices go up, valuations will follow. That can often have effects which surprise a lot of people unfamiliar with the real market.
Often, after prices have climbed perhaps only 10-15 percent, the climbing prices stop rising and might even fall back. What has happened here is that the holders of the similar economic goods, seeing the prices rise, have brought their economic goods inside the market circle. This expands the circle while also causing the volume of supply of such economic goods to increase. Once the new supply of these economic goods has been exhausted, the price of the economic goods restarts its ascent again. When the price exceeds the preceding high, other players inside the market really start to pay attention. People outside the market circle who own similar economic goods, watching this, have two choices. They can swing their economic goods inside the market circle, offer them for sale and leave with a financial gain, having sold at prices higher than they originally paid. Or they can stay outside and play with valuation.
Playing The Valuation Game:
Playing the valuation game means standing outside the market circle but using the climbing economic value as collateral for loans. These loans are then used for other purposes while the valuation players still own the economic good in question. If interest rates are low, or VERY low, then loans are easy to carry, especially with the climbing value of the collateral underpinning them. But when the market circle stops expanding because all those who wanted to sell have done so, those still wanting to buy are looking blankly at record high prices inside the market which dissuades them from buying. As this potential demand dwindles, prices break downwards inside the market circle which contracts at increasing speed as a lot of the players inside the market step outside the contracting circle. Valuations follow market prices down with a time lag. Eventually, somebody somewhere gets an ugly letter in the mail to the effect that the collateral value underpinning their loan has fallen below the lender's criteria for safe loans. If it is not too much trouble, could they either pay down a large part of their loan or put up more collateral?
When The Collateral Foundation Crashes:
If prices keep falling, the economic good put up as collateral for the loan is taken over by the lender and the borrower's credit rating is torn to shreds. Credit card companies cut their credit limits back drastically, often below the amount already borrowed on the card, rendering them useless. Suddenly, many people are all thrown back upon their weekly or monthly earnings. Monetary savings are minimal, amounting to some loose coins on a counter and some more in a jar in the kitchen. Then, the borrower loses their job and a mortgage is foreclosed. The cars have already been repossessed. Finally, a stunned family is living in a tent and surviving on "food stamps". They played the valuation game - and lost.
The Valuation Game From The Lenders' Side:
One of the intellectually astounding aspects of the US mortgage debacle was the fact that while the US real estate bubble was being blown up, there were next to no comments which pointed out that the more the US lenders lent for real estate purchases, the better their collateral underpinnings became under all the loans previously made. Trouble was clearly on the horizon when millions of Americans discovered that they could use the climbing values of their houses for other loans from other lenders so they started to use their houses as if they were ATMs. The collateral was eaten up from behind by these loans. When the bubble burst, the falling prices in the US real estate market and the falling valuations of the houses not offered for sale fell right through the collateral, leaving $US Billions of loans with no support.
The Great Write-down:
$US 11.2 TRILLION was wiped off the net worth of Americans last year. Even worse, in the fourth quarter of last year, total US household assets dropped a record $US 5.419 TRILLION, that's a 31 percent annualised rate. This data comes from the US "flow of funds" report. This massive historic fall in the net worth of Americans is panicking the powers that be in Washington and New York since that same net worth is the real underpinnings of the loans which have been made by the US banking and financial system. Now, there is insufficient collateral inside the US to support all these loans. As a consequence, almost the entire US banking and financial system is insolvent. This is the situation which is on the other end of the "seesaw" which has already been discussed. The US banking and financial system has not one- tenth of the capital necessary to meet this huge shortfall in collateral under their loans.
That is why the Obama administration and the Fed are shovelling TRILLIONS of new US Dollars at the monetary end of the seesaw. They hope that if they place enough TRILLIONS there, they will lift all prices as well as valuations, in the process rebuilding the collateral foundation under the financial system.
When The US Seesaw Breaks:
The growing danger here is that instead of levering US valuations and prices upwards again, the US Treasury will break its own international credit standing and the US Fed will break the US Dollar.
If that happens, and the danger is VERY real, the seesaw breaks at the fulcrum. The monetary end crashes and ends up in the same predicament as the collateral foundation of the US real economy. With both of the ends of the US economic seesaw on the ground, the financial and monetary system crashes.
The Intensifying Danger Signal - US Credit Default Swaps:
The spreads on credit default swaps for US Treasury debt hit 97 basis points last week. That means that it takes $US 97,000 to buy insurance on $US 10 million of Treasury debt . That is seven times higher than the level of a year ago and 60 percent higher than at the end of 2008. This is a HUGE danger signal.
Tic - TIC - T-I-C Goes The US Foreign Debt Bomb:
A key measure of the net foreign capital outflows that are arriving in the US is the monthly "TIC flows".
"TIC" stands for Treasury International Capital. As already mentioned, this Treasury data showed an OUTFLOW of $US 148.9 Billion in January after an inflow of $US 86.2 Billion in December. For all of 2008, the rest of the world's holdings of US financial assets increased by $US 857 Billion.
That sounds like a lot, but in 2007 the inflow was $US 2.081 TRILLION. In 2008, that flow decreased by almost 59 percent. The US needs an ongoing inflow of foreign money to fund its combined trade and current account deficits. The US Treasury needs it so that it can fund its budget deficits.
Demonstrable US Absurdity In Action:
This one is even too far fetched for Ripley's "Believe It Or Not". Last month, Bloomberg put the total cost of the many US bailouts so far at $US 9.7 TRILLION. That's enough to hand each US household a check for around $US 92,000, or to pay off 90 percent of home mortgages in the country! Since then, the tally of US bailouts has climbed to $US 11.9 TRILLION! This is complete fiscal and monetary madness.
The Global THREE "D"s:
The first one is DE-flation. This one is enormous. It has no precedent in history in either scale or dimension. And it is still going on. Worldwide, the combined losses on shares and real estate now come close to $US 100 TRILLION. Prices and valuations have to follow downwards to re-start industries, production and trade. The ongoing attempts to hold prices up or to stimulate the world's economies with bailouts, exploding budget deficits, rampant credit creation or waves of paper money printing will simply prolong the agony and ensure a prolonged global depression.
The second of the global "D"s is - DE-leveraging. This one still going on too, at very high speed. It has however now gained a steady rhythm as businesses, families and individuals across the world begin to repay the debts they owe. That gives the deflation another push because a commercial bank loan repaid contracts the total volume of bank loans outstanding. Deleveraging is in this sense feeding deflation.
The third of the global "D's is - DE-globalisation. This can clearly be observed by noting the fantastic fall in ocean traffic which has been reported in several recent Privateers. The global result of that is that fewer foreign economic goods are arriving on foreign shores and the flow will contract further in the months and years ahead. This will cause more national, regional and even localised economies to spring up as people try to supply themselves - and to produce and sell closer to where they presently live. These more "local" zones will be the new hubs of production, enterprise, business and trade as were the Renaissance cities. Back then, in northern Italy, these cities appeared to the Italians to have sprung right out of the ground. Make a very special note of this historical economic fact. When the merchants of Genoa began to issue a coin with a fixed content of Gold, it became the economic powerhouse of the early Renaissance and kept the advantage until all the other Italian City states issued their own Gold coin.
A New World Is Dawning - A Global Re-Localisation:
From here on, as the old system of credit and fiat money tears itself apart, think forward to the new Renaissance which can happen almost anywhere. Keep it clearly in mind that the early Renaissance was one of the most creative periods in history in the sciences, in the arts, in painting, in sculpture and in architecture. To this day, people in their many millions fly to northern Italy simply to see the wonders of that time and to sometimes wonder why we don't have the like in our time.
The answer to that question is two-fold. Modern nations have become too big and have come under the control of huge centralised bureaucracies. They did not have that problem in northern Italy during the early Renaissance because the reach of any small city government barely extended for fifty miles. That meant that if one small local government went off the rails, people in their hundreds simply left for a local government close by where political or economic circumstances were better. Seven small Republics on the mudflats around the estuary of the Rhine formed themselves into a form of Confederacy which later became known as Holland. Inside less than a hundred years, they made themselves into one of history's greatest mercantile powers. They too had a flowering of sciences and the arts which millions of people come from all over the world to see. And they too went for a hard Gold coinage.
Then the Renaissance and its ideas travelled to England which had its Elizabethan Renaissance. To this day, the works of Shakespeare form the English-speaking mind. John Locke followed with his Second Treatise, as did Blackstone with his Commentaries and Adam Smith with his Wealth Of Nations.
More On Global Re-Localisation:
The English-speaking world spread itself far and wide. On the east coast of North America were Englishmen brought up in these ideas. Not having representation in the British Parliament in London, they saw themselves as being taxed without representation. On July 4, 1776, Jefferson's immortal "Declaration Of Independence" was endorsed by men who pledged their "Lives, Liberty and Sacred Honour". Liberty had a new place to stand. These new small Republics too had a hard money, originally Silver earned from the Spanish and also minted by themselves to the same weight and content. Later, the new United States joined the then global Classical Gold Standard after the end of the Civil War and the US surged ahead to such an extent that its own output equalled Europe's around the year 1900.
The Descent of the US:
After the end of the First World War, which the US entered in April 1917, the US, together with Britain emerged as the victors in the monetary design to establish the post war world. In 1922, at a conference which took place at Genoa in Italy, all the other participants had to accept a "Gold Exchange Standard". This new standard made the US Dollar and the British Pound both "as good as Gold" because they could be exchanged for real Gold should any other nation so desire. This "standard" was a fraud, and was known to be so. In practice, it meant that the US and Great Britain could place their own national debts into the hands of other nations and have it counted as if it was Gold which had arrived. Then, in 1931, Britain went off the Gold Standard. Two years later, President Roosevelt made it illegal for Americans to own Gold. The road was open to unlimited expropriation of the economic goods of private people in both nations. The "money" was printed paper which people had to accept because it was also legal tender.
The US - The Western Colossus:
At Bretton Woods in 1944, the West's post war monetary order was established with the US Dollar at the centre. All other Western nations had their national currencies anchored to the US Dollar at fixed rates. US Dollars could still be exchanged for Gold at the rate of $US 35.00 per ounce but only by governments and their central banks. The US had made itself a printing press which printed paper as Gold.
The temptation was too much. As the "creator" of the West's sole reserve currency, the US could acquire all the economic goods in the world by the simple means of printing more US paper Dollars. It printed too many. The US defaulted on its international Gold obligations on August 15, 1971. After spending the greatest hoard of Gold in history - 21,775 tons between 1949 and 1971 - the US had 7,000-8,000 tons of Gold left and owed over 38,000 tons to other nations. The "solution" was to repudiate Gold.
The Final Word - By Ludwig Von Mises:
Ludwig von Mises - The Theory of Money and Credit - originally published in German in 1912:
"It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the nonobservance of old customs by kings. The postulate of sound money was first brought up as a response to the princely practice of debasing the coinage. It was later carefully elaborated and perfected in the age which, through the experience of the American continental currency, the paper money of the French Revolution and the British restriction period, had learned what a government can do to a nation's currency system."
Americans and the world are now to experience what happens when a government tries to "hoist" itself and the nation's economy back up by new massive borrowing and money printing.
Permission to quote short exerpts is given, proficed that full attribution is
included - as follows: ©2009 - The Privateer http://www.the-privateer.com
capt@the-privateer.com (reproduced with permission)
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1 comment:
Don't forget start a local currency program to have cash circulating for jobs, merchants etc. Community currency is extremely helpful in slow times.
Mark
editor@ccmag.net
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