Lets Take A Moment To Dissect Bernake's Latest Zero Interest Rate Policy

by: Bruce Krasting / ZeroHedge.com

I had this to say last week:

The Fed could easily attempt to buy some market peace by issuing a statement that the policy of zero interest rates would be extended for a minimum period of one year. I consider this to be a “high probability" to happen in the next 30 days.

I got it right, but I got it completely wrong. I feared that the Fed could extend the ZIRP language for as long as a year. Not in my wildest dream did I think they could take the extremely risky move of guaranteeing that interest rates will remain at zero for another 24 months.

Having been shocked, my thoughts.


*This action is indefensible on economic merits. This move is not motivated by sound monetary policy. It’s motivated by politics. This is a payback to Obama. Shame on the Fed for mixing politics with money.

*We will not go two years with this monetary policy without inflation (measured by core) exceeding the previously stated commitment by Bernanke that policy would not be allowed to rise above 2%. Bernanke and the dove members that signed onto this policy have lied to the American people. Bernanke has done it on 60 Minutes. He has done it to Congress. Shame on all of them.

*The Fed has taken away its ability to react to a situation that would require them to tighten. We are now on a one-way street. There is no way to turn around anymore. I believe the Fed has abdicated its responsibilities under the dual mandate. The have no ability to react if inflation should pop up in a year from now. Even worse, they have no policy options should there be a run on the dollar. The possibility of a run on the buck has gone up exponentially as a result. Should that happen, the Fed will have left us economically defenseless. Shame on the Fed for making us more vulnerable to a speculative attack.

*The stock market run up this afternoon is the Bernanke Put at work. Lets be clear on the consequences of Perpetual ZIRP. From this day onward every buy and hold investor who acquires Treasury debt with maturities of less than five-years is GUARANTEED TO LOSE MONEY. So if you accept that, then stocks have to look better. Shame on the Fed for debasing money and punishing savers.
*We have only one monetary policy. Juice stock multiples. This is the farthest thing from “Progressive” economics as you can get. We have a policy in place that is designed to make wealthy people wealthier. At some point there will be a social cost to this. The fires and riots in London were triggered by a shooting. Underneath is a rage between haves and have nots. Shame on the Fed for rigging the outcome for fat cats. Double shame on them for when our streets are filled with rage.

*Zero interest rates also means Zero risk. I think the change in Fed language will exacerbate recent short-term funding liquidity. I think we will see this appear (again) sooner versus later. I think Zero interest rates discourages leveraged investing. This policy will dry up liquidity in the asset backed market (Shadow banking system). I'm looking for evidence of this in the Euro Dollar funding markets. I am also looking for it to occur in the Term Commercial Paper market. Shame on the Fed for setting us up for this systemic risk.

*Brazil, Argentina, Korea, Indonesia are going to scream bloody murder over perpetual ZIRP. Russia is likely to get downright ugly with their rhetoric. I wouldn’t be surprised if they took this opportunity to vote with their feet and just abandon the dollar as a reserve holding. China will also make noise. They will make more calls for a new international currency to replace the dollar. The Central bankers in Japan and Switzerland are puking in the trashcan over this. Bernanke is exporting US deflation to them. Shame on the Fed for pursuing Beggar my neighbor policies. They deserve all the global criticism they are about to get.

*Bernanke bills himself as a student of the Depression. He has said over and over that he would not make the mistakes that the Fed made in 1937 when a tightening of monetary policy triggered another wave of deflation. I think the history books will look at the Fed and August of 2011 and draw a similar conclusion. At a critical time in history the Fed has taken action. The mistake of 72 years ago DID cause a recession that lasted a few years. The mistakes of 2011 will mark a point in history where America turned a corner downward. One that will take a few decades to recover from. The history books will shame Ben.

Black Monday? - Economic Collapse A Mathematical Certainty, The Top 5 Places Where Not To Be When It Happens!

The dollar collapse will be the single largest event in human history. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth,our work,our food,our government,even our relationships are affected by money.

No money in human history has had as much reach in both breadth and depth as the dollar. It is the de facto world currency. All other currency collapses will pale in comparison to this big one. All other currency crises have been regional and there were other currencies for people to grasp on to.

This collapse will be global and it will bring down not only the dollar but all other fiat currencies,as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets. The repercussions to this will have incredible results worldwide.

Full transcript----

 "There is no greater disaster that to underestimate danger. Underestimation can be fatal.

The Dollar Collapse will be the single largest event in human history. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth, our work, our food, our government even our relationships are affected by money.

No money in human history has had as much reach, in both breadth and depth as the dollar. It is the defacto world currency. All other currency collapses will pale in comparison to this "big one." All other currency crises have been regional and there have always been other currencies for people to grasp onto. This collapse will be global and it will bring down not only the dollar but all other fiat currencies as they are fundamentally; no different.

The collapse of currencies will lead to the collapse of all paper assets. The repercussions to this will have incredible results worldwide. The dollar is the world's currency. It supports the global economy in setting foreign trade; most importantly the petro-dollar trade. This fuels our corporate vampires and acquires and harvests' the wealth of the world.

The corporate powers suppress real assets like natural resources and labor to provide themselves with massive profits. The fascist statists, collectivist's model provides the money to the economy to fun an ever-increasing federal government. That government then grows larger and larger, enriching its minions, with jobs to control their fellow citizens. Finally to come full circle; the government then controls other nations through the military-industrial complex.

This cycle will be cut when the mathematical and inevitable collapse of the dollar occurs. In order for our debt-based money to function we must increase the DEBT every year in excess of the debt and interest accrued the year before, or we will enter a deflationary death spiral. When Debt is created, money is created. When the debt is paid-off money is destroyed. There is never enough to pay off the debt because there would be not one dollar in existence,

We are at a point where we either default on the debt, willingly or unwillingly or create more money or debt: To keep the cycle moving. The problem is if you understand anything about compounding interest is that we are reaching the hockey-stick-moment (on the graph that is the moment when everything goes vertical); where the more debt that is incurred the more debt that is incurred the less effective it is: And this leads us to hyper-inflation. There are only two actors needed for this hyper-inflation: The lender of last resort, or the FED, and the spender of last resort the government. These two can and will blow up the system.

I believe they will wait until the next crises and the whiff of deflationary depression before they fire up the printing presses. That crisis is coming very soon, at the end of the summer or fall. The money and emergency measures are worn-out. The fact that none of the underlying problems that caused the 2008 crises have been resolved: The only thing that has happened is that instead of corporate problems we now have national problems.

In this movie Greece will play the role of Leman Brothers and the United States will play the role of AIG. The problem is there is no where (left) to kick the can down the road: And there is no world-government to absorb the DEBT- yet. So this leads me to the top five places NOT to be when the dollar collapses.

Number 1, Israel. This Anglo-American beachhead in the Middle-East was first conceived by the most powerful family in the world; the Rothschilds in 1917. The Balfour Declaration said that there will be a Zionist Israel , years before WWII, and the eventual establishment of Israel. Israel has not been a very good neighbor to the Muslim nations: And has always had the world's two biggest bullies on the block at its back. When the dollar collapses the United States will have much too much on its plate, both domestically and internationally to worry about such a non-strategic piece of land. This will leave Israel very weak at a time when tensions will be high. This very thin strip of desert land will not be able to withstand the economic realities of needing to import its food and fuel or the political reality of being surrounded by Muslims.

Number 2, Southern California, the land of fruits and nuts turns into Battlefield Los Angeles . Twenty-million people packed into an area that has no water and thus food is not good to say the least. Throw on top of the huge wealth disparities, and the proximity to a narco-state and this does not bode well. We have seen riots from Rodney King. What will happen when the dollar is destroyed and food and fuel stop coming into this area? People will get desperate and do crazy things especially when a huge proportion of its citizens are on anti-depressants. If food and fuel cannot get in, what about Prozac? At a time when people's worlds are falling apart they lack the ability to deal with this new paradigm. If people come off these drugs too fast they will suffer psychotic breaks and you will thousands of shootings or suicides.

Number 3, England the land of the former Big Brother and the Empire of the worldwide slave and drug trade; will suffer heavily.

The "Stiff upper lip" that the British Elite ingrained in to the sheeple will not work anymore, as the British population explodes. The humans character will sacrifice for a foreign enemy, but not if the enemy has always been the elite. The Anglo-American Empire may pull off another false flag to distract its population but I feel this collapse will happen before they pull it off. This will make all eyes point at the British Elite as being solely responsible for this catastrophe. We have seen massive riots for soccer-matches with Hooligans. What will happen when this island with very little food and fuel gets cut off?

Number 4, New York City ; another large urban area living too high on the dollar-hog. There is little doubt that all of the wealth in New York City , New Jersey , and Connecticut is derived off of Wall Street Wealth. The savings and investments of the whole nation and much of the world flows through this financial capital. As the world wakes up to the massive financial fraud; this will lead to the destruction of capital like we have never seen before (the picture is of NYC in ruins just as Berlin looked after the West bombed it into Oblivion at the end of WWII).This will have tremendous effects upon the regional economy, as people driving in Mercedes suddenly wonder where their next meal is coming from.

Number 5, Washington D.C. The political collapse of the Federal Government will reek havoc on the hugely inflated local economy as more and more states find it necessary to assert their natural control the federal government will suddenly lose power and importance, as the whole world suffers from a global Hurricane Katrina (the city in flames).

The money that they create and spend will become worthless and government minion's pensions will evaporate. Millions that once relied upon the ability to force others to send their money to them, will learn that the real power has always been at the most local level. Massive decentralization will be the answer to 'Globalization Gone Mad. ' Local families and communities will forego spending money and power out of their communities as they will care about their next meal and keeping warm. As Ayn Rand once said: "You can ignore reality, but you cannot ignore the consequences of ignoring reality."

To sum those areas that have lived highest on the hog on the dollar-paradigm will most-likely be the worst places to live, when the dollar collapses. Many of you will see this video with passing interest; but rest
assured this dollar collapse is coming!

It is a mathematical inevitability. We will not be as fortunate to muddle through this collapse, like we did in 2008, when it was a corporate problem." This time around it is a national and a global problem. The global Ponzi-Scheme has run out of gas: As the demographics decline; as cheap abundant oil declines, as hegemonic power declines: This comes at a time when we reach the exponential or collapse-phase of our money.

The irresistible force paradox says; "what happens when an unstoppable force meets an immovable object: We are about to find out, when infinite money hits a very-finite world!

"Stealth QE3" Comes to Fruition – Soaring Inflation is Next

By David Zeiler
Associate Editor, Money Morning

U.S. Federal Reserve Chairman Ben Bernanke did what most everyone expected Wednesday at the culmination of the Federal Open Market Committee's (FOMC) two-day meeting - he left average Americans vulnerable to the pangs of higher prices and soaring inflation.

Indeed, as yet another FOMC meeting drew to a close without any significant policy changes, the central bank, as many predicted, kept interest rates at 0% to 0.25%, where they've been since December 2008.

And citing weaker than expected economic growth, the FOMC vowed to remain in an "accommodative stance" by retaining its huge $2.832 trillion portfolio of securities and loans.

The Fed will do this by using the money from maturing bonds and principal payments from its securities holdings to buy more bonds "according to a distribution that is nearly identical to that executed under the Treasury purchase program," according to the New York Fed statement - an extension of the quantitative easing (QE2) program in all but name.

Money Morning Chief Investment Strategist Keith Fitz-Gerald saw this "stealth mode" QE3 coming.

"Instead of printing more money, the Fed is likely to start reinvesting the proceeds of maturing debt," Fitz-Gerald said. "Ultimately, that won't reduce our government's bloated, toxic balance sheet. But it will change the makeup of that balance sheet - and not for the better."

By keeping interest rates at historic lows and continuing to reinvest in maturing debt, rather than retiring it, the U.S. Federal Reserve runs the risk of feeding an inflation rate that in recent months has risen to uncomfortable levels.

But that's something Bernanke has sought to acknowledge without taking responsibility.

"Inflation has moved up recently, but the [Fed] anticipates that inflation will subside... as the effects of past energy and other commodity price increases dissipate," the FOMC said in its statement.

When judging inflation, the Fed uses the core consumer price index (CPI), which excludes food and energy. In May the core CPI rose 1.5%, the most since January 2010 but below the Fed's informal target of 2%.

In his remarks yesterday, Bernanke said he favors the Fed setting an official inflation target, but the FOMC has set no timetable to do so.

Meanwhile, the full CPI increased 3.6% in May, the most since October 2008. Although the Fed likes the core CPI because it avoids volatility, many - including some within the Fed itself - believe the full CPI more accurately reflects the real-world experience of the U.S. consumer.

"One immediate benefit of dropping the emphasis on core inflation would be to reconnect the Fed with households and businesses who know price changes when they see them," James Bullard, president of the Fed Bank ofSt. Louis, said last month.

Fitz-Gerald was more blunt.

"Companies are, in fact, passing along costs as fast as they can," he observed in May. "McDonald's Corp. (NYSE: MCD), Nestle SA, and Wal-Mart Stores Inc. (NYSE: WMT) are just a few of the companies that have spoken out about the specific impact that higher component and ingredient costs have had on their earnings. Many have adjusted their guidance."

Making inflation even harder on average Americans is an unemployment rate of 9.1% and slumping wages. Average hourly earnings fell 1.6% in May.

Of course, using the core CPI number allows the Fed to sweep inflation rate concerns under the rug to pursue policies it believes will stimulate a stubbornly sluggish U.S. economy.

Yet those policies could ultimately prove ruinous to the U.S. economy.

"Be warned: There is every chance that the Fed will lose control, inflation will spiral - and not just to the ruinous levels we saw in the 1970s, but well beyond them, too," Money Morning Contributing Editor Martin Hutchinson said recently. "Inflation may become much more acute - reaching the excruciating/ruinous 20% to 50% level - rather than reaching and then holding steady at the uncomfortable-but-bearable 10% level.

"Even after that occurs, Bernanke will refuse to launch any sort of significant counterattack, or combat it," Hutchinson continued.

Ultimately, the Fed's buying binge could cause a runaway inflation rate that would create a crisis for the U.S. dollar.

"With the U.S. market straining under the burden of rising inflation and some ill-advised monetary and fiscal moves, the death of the dollar is looming as a worst-case -- but still possible - scenario," Hutchinson said.

Inflation Is Already Here

by Brad Schaeffer

The recent correction in the commodities markets may be providing Bernake, Geithner and their easy money acolytes with a sense of relief given the relentless run up in prices of raw materials since the announcement of QE back in 2008, but they should not sleep tight just yet.  As anyone in the markets will tell you, when any underlying commodity has a price move so vertical in its trajectory it’s bound to face a correction as the smart money, having gotten in for fundamental reasons much earlier along the trend line now wait for the panic buyers or the Johnny-come-lately’s to give the rally that last unsustainable spike to unload their longs and leave the suckers holding $40.00 silver in their purses.

 So one must step back and take a long view.  Although it would appear that those of us who warn that inflation is not just a threat but very much a fact of life now were knee-jerk pontificators jumping on the commodities rally trend for political (read: Fed/Obama bashing) reasons, the analysis is quite sound.  Most important, it is methodical not emotional as price surges tend to make investors and analysts from time to time.

Here are some facts: even with the inevitable correction in commodities, as of this writing crude oil is 35% more expensive than it was a year ago…advancing with ups and downs along the way from as low as $17.50/bbl in November of 2001 to its current level of over $100/bbl or around a 19% annual appreciation in a decade since the Fed started giving away dollars.  In that same year silver is still up 93%   Wheat 84%. Cotton 100%  Coffee 55%. Cattle 10%, etc.  In that same decade the USD index against all currencies shed 40% of its value.  Gold is up 22% for the year.  More revealing, the most precious metal and most stable of exchange mechanisms is up an astonishing 450% since 2001. Put another way, whereas the dollar was worth 1/250^th of an ounce of gold in 2001, it is now only worth 1/1500^th.  Money can be printed with much more ease and speed than gold can be mined.

To understand why the Bernake’s and Geithner’s of the world view CPI through rose-tinted glasses we must remember who they are.  They are wonks who have spent their entire careers lecturing and/or fidgeting with economies without actively participating in them.  They are awash in data and are hardwired to extrapolate patterns from the past to predict the future.  But we have only had a non-gold fiat monetary system in place since 1971 which is hardly enough time to get a handle on repeating macro-economic cycles in such an ever changing and dynamic landscape.  And I want to offer something else.  From the late 1940s to the mid-1980s the United States was the dominant manufacturer in the world.  The reason?  Of our three main foreign competitors today, China, Japan and Germany, one was mired for much of the third quarter of the 20^th Century in a disastrous experiment with Maoist communism while the latter two’s urban centers had been reduced to utter wasteland as their reward for launching the most devastating war in human history.  Indeed, all of Europe was digging out of the wreckage of their mass-fratricide, including a bankrupted Great Britain…once the supreme power of the world.


Into that void poured American made cars, radios, appliances, garments, food, you name it.  By the mid-1950s the US was producing almost half of the world’s manufacturing output.  Now we produce less than 20%.  So when Bernake considers whether or not rising prices will result from printing trillions of dollars he looks back to, say 1987 when the dollar index halved yet CPI was only up 4.4% in that same year.  Ergo: a falling dollar does not cause inflation.  Hence QE I and II should move forward without fear.

But he is wrong on two levels.  First of all, a weak dollar is usually a catalyst to prompt more exports as US goods become cheaper.  And indeed that has happened as the manufacturing sector has been recovering nicely.  But, those US manufacturers that once dominated the landscape are few and far between as we have surrendered our assembly lines to the forces of cheap labor overseas in favor of a service oriented economy.  So now when imported goods are more expensive due to their relative strength (or less weakness) against the dollar, unlike in the past when we could shift our purchases to cheaper US-made goods, we instead are compelled to accept higher prices as we have no choice but to buy foreign-made goods.  Ask Wall-Mart.  (One’s house would be an almost vacant four walls if we invaded it and took away any items that don’t say “Made In USA” on them!) China, for example in 1987 produced less than 5% of the world’s goods.  Now it almost a 20%.  A four-fold increase.

Secondly, the definition of inflation that most people use, including the Fed, seems to be a measure of the CPI as if the two are interchangeable.  Hence, people believe, if the CPI remains steady, so too does inflation.  But, what is inflation exactly?  Is it really price increases per se?  Or are rising prices just one symptom of a larger event?  “Inflation” is what the word implies: an inflation in the supply of a currency and thus a decrease in its value and eventually its purchasing power.  Consumer prices are not always the best measure for a variety of reasons.  Just to give one example, they tend to be ‘sticky’ in that vendors are hard-pressed to jack them up to account for lost dollar values.  So they may try other approaches to mitigate the inflated currency’s impact on the bottom line such as keeping prices the same but reducing the package size.  Care for some potato chips with your bag of air?  How about a 1.5 pint of ice cream that for the same price (hence no measurable impact on CPI) that used to be 1.75 pints?  There are many ways short of raising prices to compensate for the effects of an ever expanding supply of dollars.  But real costs rise just the same.

The fact is that inflation in its traditional definition is rampant across the globe and it can in large part be attributed to the policy of almost zero interest rates in the form of a greatly expanding balance sheet of the Federal Reserve.  Take China for example.  They are the largest exporter to the United States and as such have a vested interest in preventing their products from becoming too expensive (although they have less to fear from competitively cheap US goods as they once did).  They do this by artificially pegging the yuan to the dollar at a fixed rate.  When the Fed prints more dollars, in order to prevent their currency from appreciating as it can now buy more dollars for the same price, the Chinese must expand their own balance sheet to print the money used to buy up the excess dollars in the system and maintain their target exchange rate to keep their exports flowing.

As such, China’s M2 is up 15.3% in April alone in part due to this phenomenon. This is an inflationary policy.  There are more yuan than there used to be.  So they too are worth less, although not as less as the even more in supply US dollar.  And as you would expect, since they have real inflation, prices in China are on the rise.  Their CPI, in fact, shows a 5.3% inflation rate.  How come their CPI shows a much higher level than ours when our dollar is depreciating faster than their yuan?  It all depends on how you measure it.  The answer is that their CPI reflects real changes in commodities prices and ours discounts their impact in favor of finished goods.  So to put it simply, where their CPI places a larger import on the price of raw materials and food ours places more emphasis products like the price of a cell phone.  Considering the first Motorola cell phone retailed for $3,995 in 1983, the price has clearly gone down.

Regardless of CPI though, why would raw materials be impacted by the Fed’s relentless easing?  Well, commodities are traded in US dollars which is the world’s reserve currency so a refiner in, say Japan, who has to purchase crude oil for distillation must first take its yen and buy dollars with it before going into the market to buy crude oil.  The seller of crude knows that the yen bought its counterparty more dollars and thus will it charge more dollars for its oil, lest the next time he visits Tokyo and converts his less valuable dollars back into fewer yen he may be forced to stay in a Holiday Inn as opposed to a Ritz this visit.

To be sure, demand spurned by economic growth in the developing world is still the prime driver of raw materials price action.  Complex systems like global markets are an expression of many factors.  But if the supply/demand dynamic is what got dealers into the commodities market from the long-side, the Fed’s policies injected steroids into the rally and has now printed its way into a corner.  It cannot initiate more easing as inflation is here.  (As companies add more to their payrolls too, though good for the country as a whole, this will put ever more upward pressure on prices.)  But should it start tightening by raising interest rates as I think is inevitable, making it more expensive for businesses to borrow, it could threaten the anemic recovery that is already showing signs of slowing if the Q1 numbers are any indication.

Meanwhile the average American is being squeezed ever more by rising prices and diminishing real value of their savings.  The Fed and their enablers in the Federal City will have much to answer for in the years ahead.  “What’s happening in Washington now is destroying the class of people who save an invest,” said investment guru Jim Rogers.  “All the people who did the right thing are earning that much money right now. That’s not how the system is supposed to work.”

But that is how the overrated minds running the Fed and the Treasury, neither of whom has ever run a private business feel how the system should work.  They seem utterly incapable of understanding that the past predicts the future…until it doesn’t.   By the time we realize the world has changed and the old school approach is just that, it may be too late.

Forbes Predicts U.S. Gold Standard Within 5 Years

A return to the gold standard by the United States within the next five years now seems likely, because that move would help the nation solve a variety of economic, fiscal, and monetary ills, Steve Forbes predicted during an exclusive interview this week with HUMAN EVENTS.

“What seems astonishing today could become conventional wisdom in a short period of time,” Forbes said.


Such a move would help to stabilize the value of the dollar, restore confidence among foreign investors in U.S. government bonds, and discourage reckless federal spending, the media mogul and former presidential candidate said.  The United States used gold as the basis for valuing the U.S. dollar successfully for roughly 180 years before President Richard Nixon embarked upon an experiment to end the practice in the 1970s that has contributed to a number of woes that the country is suffering from now, Forbes added.

If the gold standard had been in place in recent years, the value of the U.S. dollar would not have weakened as it has and excessive federal spending would have been curbed, Forbes told HUMAN EVENTS.  The constantly changing value of the U.S. dollar leads to marketplace uncertainty and consequently spurs speculation in commodity investing as a hedge against inflation.

The only probable 2012 U.S. presidential candidate who has championed a return to the gold standard so far is Rep. Ron Paul (R.-Tex.).  But the idea “makes too much sense” not to gain popularity as the U.S. economy struggles to create jobs, recover from a housing bubble induced by the Federal Reserve’s easy-money policies, stop rising gasoline prices, and restore fiscal responsibility to U.S. government’s budget, Forbes insisted.

With a stable currency, it is “much harder” for governments to borrow excessively, Forbes said.  Without lax Federal Reserve System monetary policies that led to the printing of too much money, the housing bubble would not have been nearly as severe, he added.

“When it comes to exchange rates and monetary policy, people often don’t grasp” what is at stake for the economy, Forbes said.  By restoring the gold standard, the United States would shift away from “less responsible policies” and toward a stronger dollar and a stronger America, he said.  “If the dollar was as good as gold, other countries would want to buy it.”

An encouraging sign for Forbes is that key lawmakers besides Rep. Paul are recognizing that the Fed is straying well beyond its intended role of promoting stable prices and full employment with its monetary policies.

Forbes cited Rep. Paul Ryan (R.-Wis.), who, he believes, understands monetary policy better than most lawmakers and has shown a willingness to ask tough but necessary questions.  For example, when Federal Reserve Chairman Ben Bernanke appeared before the House Budget Committee in February, Ryan, who chairs the panel, asked Bernanke bluntly how many jobs the Fed’s quantitative-easing program had helped to create.

Politicians need to “get over” the notion that the Fed can guide the economy with monetary policy.  The Fed is like a “bull in a China shop," Forbes said.  “It can’t help but knock things down.”

“People know that something is wrong with the dollar," Forbes concluded.  "You cannot trash your money without repercussions.”

http://www.humanevents.com/article.php?id=43439

The Global Dollar Dump Is Already in Progress

The following quotes signal the beginning of the End Game for the US Dollar:

“We hope the U.S. government will take responsible policies and measures to safeguard investors’ interests,” [China’s ministry] said in a statement.

“Foreign-exchange reserves have exceeded the reasonable levels that we actually need,” [China’s central bank governor] said. “The rapid increase in reserves may have led to excessive liquidity and has exerted significant sterilization pressure. If the government doesn’t strike the right balance with its policies, the build-up could cause big risks,” he said, without elaborating.

These two statements, in plain terms, are China saying it’s sick of the US Dollar.

Remember, the US Dollar and Dollar-denominated assets (Treasuries etc) are China’s single largest holding.  So the reference to “foreign-exchange reserves,” is synonymous with “US Dollar denominated assets.”

On the surface, it will be easy to chalk all of this up to politician speak. After all, China has been issuing warnings to the US regarding the latter’s financial condition since 2009.

However, a few key developments have occurred that make it clear this latest round of statements are the real deal.

First and foremost, China and Russia agreed late last year to begin trading with one another in their own currencies, NOT the US Dollar. In that step alone, two of the largest emerging markets (and economies) in the world moved away from the US Dollar. Add to this the fact that China just agreed to expedite trade relations with Brazil and you’ve got the beginnings of a flight from the US Dollar and the end of the Dollar’s reserve currency status.

Indeed, not three months after China signed this deal with Russia, China’s president visited Washington and delivered a speech in which he stated that, “the current international currency system is the product of the past” (edits mine).

Consider the “past” comment in relation to China’s decision shutting the US Dollar out of its trade with Russia (and other items I’m about to detail). In this sense, the “past” is the US Dollar as the world’s reserve currency.

Indeed, China has been actively moving to distance its reliance on the US as a trade partner.



As you can see, in just four years, the US has gone from accounting for nearly a third of China’s exports to less than a quarter. That is a MASSIVE shift in less than a decade (at this pace the US will be down to just 15% of China’s exports by 2015).

China is literally putting its money where its mouth is. And its mouth is now openly telling the world that it’s no longer interested in US Dollars or Dollar denominated assets.

In plain terms a US Dollar collapse is on the way. What follows will be a hyperinflationary disaster that will shred savings and paper assets to nothing.

we are now seeing various other nations preparing for the end of the US Dollar as reserve currency.

Consider that Saudi Arabia becoming so fed up with the US that it is sending trade representatives to China and Russia to strengthen trade ties.

Saudi Arabia is the single largest oil producing country in the world. Saudi Arabia IS oil in some regard.

Whatever currency Saudi Arabia chooses to denominate its oil exports in will be the world’s reserve currency.

So Saudi Arabia’s decision to send trade representatives to China and Russia should be seen as Saudia Arabia seeing the writing on the wall, (death of the US Dollar) and starting the process of moving away from the greenback.

Saudi Arabia is not the only one. Singapore announced today that it will begin trading Yuan. The significance of this is enormous. Singapore is one of the four largest financial hubs in the world (the others are New York, London, and Tokyo). It’s also the second largest private banking center behind Switzerland. With its English-speaking population, first-world accounting standards, and close proximity to China, Singapore is literally a “gateway to the east” through which world capital flows into Asia.

In simple terms, the world is beginning to shift away from the US Dollar as a reserve currency. This is not idle conjecture. This is fact. The writing is clearly on the wall for those who can read between the lines of the media’s US-centric focus.

Indeed, officials from China, India, Brazil, Russia, and South Africa (the latest addition to the BRIC acronym, now to be called BRICS) recently met in southern China to discuss expanding the use of their own currencies in foreign trade (yet another move away from the US Dollar).

To recap:

• China and Russia have removed the US Dollar from their trade
• China is rushing its trade agreement with Brazil
• China, Russia, Brazil, India, and now South Africa are moving to trade more in their own currencies (not the US Dollar)
• Saudi Arabia is moving to formalize trade with China and Russia
• Singapore is moving to trade yuan

The trend here is obvious. The US Dollar’s reign as the world’s reserve currency is ending. The process will take time to unfold. But the Dollar will be finished as reserve currency within the next five years.

The process will not be linear in fashion: the Greenback will not simply collapse in one go. Moreover, it will not be obvious at first. Remember, the US Dollar is currently priced against a basket of currencies primarily comprised of garbage paper currencies backed by insolvent nations or broken unions (the Japanese Yen and the Euro).

However, ultimately the US Dollar will be losing some 50% of its value in the future. The US Dollar chart is already forecasting this.


article from: http://gainspainscapital.com/?p=327

Americans Gone Wild

Gerald Celente is known to love to make the following statement: "When people lose everything and have nothing left to lose - they lose it."  Sadly, Celente is exactly right about this. 

As the U.S. economy continues to collapse, Americans are going to becoming increasingly frustrated, and this frustration will inevitably boil over into rioting and violence.  Could we be starting to see the start of this already?  The number of Americans that have "gone wild" seems to be escalating.  Years ago, losing a job was not that big of a deal.  Now a job loss is enough to cause some Americans to snap and go over the edge.  We are seeing restaurant brawls and open violence in the streets that would have been unthinkable 50 years ago.  All over the nation people are losing it and are literally going crazy.  The news stories and the videos posted below of "Americans gone wild" are very graphic and very shocking.  There is a reason for this.  These examples are meant to show you that the very fabric of our civilized society is falling apart.  It won't matter who ends up leading us politically if this is the kind of people we become.


Sadly, it appears that we are not the same kind of people that we used to be.  Something has changed in America.  Something is different.  We have forgotten many of the things that made us great as a nation.  We no longer live by the same principles. We no longer value the same truths.

There are examples of "Americans gone wild" all over the nation.  The things  you are about to read about below are not just isolated incidents.  The truth is that I could have easily included dozens more examples.
As the economy continues to crumble this trend is going to get even worse.  The following are just a few examples of how Americans have been freaking out and losing it recently....

*One elementary school teacher in the town of Monroe, Georgia was arrested recently for something very unusual.  One day he made the decision to walk around the halls of his school completely naked.  So why was he naked?  Well, it turns out that he learned that he was going to be fired and so he snapped.

*As I have written about previously, McDonald's recently held a "National Hiring Day" and about a million Americans showed up to apply for jobs at McDonald's restaurants all around the nation.  Well, in Cleveland a horrible fight broke out between some girls and it ended up with three people being run over by a car.  Do not watch this video if you are sensitive to graphic violence....



*In Sioux City, Iowa a 41 year old man recently walked into the office where his boss worked and beat the living daylights out of him.  The boss suffered four chipped teeth and needed surgery to repair his nose.  Apparently the boss was planning to fire the man.

*At a McDonald's restaurant in the Baltimore, Maryland area two young girls recently beat and kicked another young girl so brutally that she started having seizures.  The following video is very graphic and has some very strong language....



*Recently, one gold thief was so desperate to get into a jewelry store that he rammed his truck backwards through a wall of the store at very high speed.  The thief got away with a bunch of gold and jewelry and the owner is scared to death that he is going to come back and do it again.

*In the following video from a Denny's restaurant, young women are actually throwing plates and furniture at each other....



*In Brooklyn, New York a security camera recently captured chilling footage of a cold-blooded execution right in the middle of the street.  One resident has named that particular street "body-a-week avenue".

*In Atlanta, two dozen teens violently assaulted two Delta flight attendants on a train recently for no apparent reason.  The following is how a local Atlanta newspaper described the attacks....

Their "Clockwork Orange" style blitz was over soon after it began. The teens boarded the train, headed to Hartsfield-Jackson International Airport, at the Garnett station a little after midnight seemingly intent on instilling fear. They succeeded.
“There was blood everywhere, people were hollering and screaming,” a witness told Channel 2 Action News. “We were intimidated. People were terrified. People were trying to run. But there was nowhere to run.”

Sadly, there are hundreds more examples like these.  There are so many restaurant brawl videos up on YouTube that it would take an entire weekend to watch them all.

You don't think America has changed?

What does it say about America when the murder rate in Flint, Michigan is worse than the murder rate in Baghdad?

There are some areas of the country where people simply do not go out of their homes at night.
We refused to discipline our young people and demand the best out of them so now we are reaping a bitter harvest.

According to one recent report, approximately half of all the people that live in the city of Detroit are illiterate.

Can you imagine that?

Half of the people that live in a major American city can't even read?

Can that possibly be true?

What does that say about the way that we are educating our children?

Sadly, due to harsh economic conditions up in Detroit, about half of the schools in the city are being closed down for good.

That certainly isn't going to make anything better.

But this is where we are at as a nation.

We borrowed and borrowed and borrowed and we never thought that we were going to pay the price.

Now the "credit card bills" are coming due, and state and local governments from coast to coast are completely broke.

There are signs of economic decline all over the United States. 

More than 33 percent of our men do not have a  job. 

Over 44 million of our fellow citizens are on food stamps. 

Our country is literally falling apart.

So is there any hope for our nation or are we going to see even more "random acts of violence" as frustration comes to a boiling point for tens of millions of Americans?

http://theeconomiccollapseblog.com/archives/americans-gone-wild

$2 Trillion Mile Marker on Road to Perdition

This week, Treasury Secretary Tim Geithner proposed raising the debt ceiling by $2 trillion.  I thought, this should be big news!  After all, a trillion is a thousand billion.  This adds up to 2 thousand billion over the next 2 years!! 

The mainstream media greeted this story with a great big yawn. I do not get that because the Republicans and Democrats fought for weeks to only cut the budget a measly $38 billion.  The press was non-stop, and Congress was only an hour away from shutting down the government.  Even the $38 billion cut was a big fat lie according to CBS News.  The story said in mid-April, “Well, thanks to the Congressional Budget Office and some great reporting by the Washington Post, it turns out the government won’t be cutting $38 billion in one year after all. No, the real cuts will be more like $352 million!  You heard me right, $352 million, NOT $38 billion.  The rest? Mostly smoke, mirrors and accounting gimmicks.” (Click here for the entire CBS News story.)

Both parties want to cut roughly $4 trillion out of the budget over the next 10 to 12 years.  Can someone please explain how that is accomplished by tacking on another $2 trillion to the national tab?  I do not get the math and neither does Bill Gross, the head of the biggest bond fund in the world.   He said in early January, “We have a deficit in the $1 trillion plus arena, which means we must borrow at least a trillion dollars additional a year in order to fund the deficit.  And, so, the debt ceiling currently at $14.3 trillion, which is 95% of GDP, has to go up by another trillion or so every 12 months.” (Click here to read my original post on the debt ceiling.) Not long after Gross made this statement, he sold most, if not all, of his U.S Treasuries.   What do you know?  He was right on the money.  The proposal from the Treasury is a $2 trillion increase in the debt ceiling to cover most of the next 2 years.

You see, it’s not just the Treasuries he’s worried about, but the currency he will be paid back in.  A Treasury bond pays interest.  Investors buy them, if they think they can get paid back enough dollars to offset inflation and make a profit.  Mr. Gross is betting the dollars he would get paid back would actually be worth less when the bond matures, and thus he holds very little U.S. government debt.  In a recent article, he said, “I spoke last month to the reality of investors being “skunked” and having their pockets picked simply by receiving yields less than inflation, and suggested that as a major reason why the PIMCO ship was carrying a limited supply of Treasuries on board.” (Click here to read the latest post from Bill Gross.)

The debt ceiling currently stands at $14.3 trillion and word is we will exceed that amount by August (although some say we have already exceeded it).  Reuters reported this week, “Geithner said he could avoid default until August 2, but repeated his warning that a failure to raise the borrowing cap would have a “catastrophic” impact on the economy. . . .If the debt ceiling is not raised, investors may fear that the United States could not repay its loans and so would sell U.S. government bonds. That would drive down bond prices and force the United States to offer higher interest rates to make its debt more attractive to lenders — a move that would lead to a dangerous spike in interest rates throughout the economy.” (Click here for the complete Reuters story.)

But, Mr. Geithner may have another reason for the big debt limit increase.  It is continued back-door bank bailouts!  Earlier this year, Geithner forgave Bank of America $127 billion in possible buy-backs of toxic mortgage debt packed into government owned mortgage giant Freddie Mac.  (Click here to read more on this story.)  What do you bet the other big banks want the same deal?  What they should be getting is investigated and indicted for ripping off the American taxpayer.  Not a single financial elite has gone to jail for causing the $12 trillion meltdown of the economy and causing millions to be foreclosed upon.  The U.S. Justice Department cannot find a single crime in the entire financial debacle, but Wall Street banker bonuses keep getting bigger.

Raising the debt cap by $2 trillion will be granted to Mr. Geithner.  That’s about all that will get done because if Congress can’t even cut $38 billion, how can it cut $4 trillion?  (That’s 4 thousand billion.)  It can’t—the cuts will never materialize.  America will just get more and more inflation as the dollar is printed out of thin air to cover the cost.

 There is no way this ends well.

http://usawatchdog.com/raising-the-debt-ceiling/

A Dollar Collapse? No Way – The U.S. Dollar Rocks! (Propaganda)

Are we on the verge of a dollar collapse?  Don't believe the skeptics.  The truth is that there is no currency in the world that is stronger than the old greenback.  The U.S. dollar is the reserve currency of the world.  Virtually all of the nations on the face of the earth use it for trading and they always will.  Why?  Because the U.S. dollar is awesome.  No currency on earth can compete with our awesomeness.  So what that the dollar hit a new all-time record low against the Swiss franc today?  Do you really want to move over with the Swissies and eat chocolate and make watches?  No, you want to live in the land of American Idol, the NFL and apple pie - the good old USA.  Who cares if it takes about a dollar and a half to buy a single euro now?  Do you really want to go live with the Frenchies and eat a bunch of French bread while you wear a beret every day?  Of course not.  There isn't going to be a dollar collapse.  As long as the USA is still number one the rest of the world is still going to need U.S. dollars.  So quit your worrying.


The other day all of the "doom and gloomers" were crying that the sky was falling because the U.S. dollar had fallen for 8 trading days in a row.  They were proclaiming that the "end of the dollar" was near because the dollar index was approaching a new record low.

The following is how an article from yesterday in the Washington Post described the recent slide of the dollar....

The dollar has fallen against a basket of six major currencies -- the euro, Japanese yen, British pound, Canadian dollar, Swiss franc and Swedish krona -- for the past eight trading days. That measure struck its lowest point since July 2008 on Monday, at 72.72. It hit bottom in April 2008 at 71.33. Its highest point since the euro’s creation was 120.92 in July 2001.

Well guess what?

The dollar index moved back up today.

That is what happens - currencies go up and currencies go down.

There is no need to get your pants in a twist over it.

When the U.S. dollar goes down, it makes our products more affordable overseas.  When other nations buy more of our stuff that helps our businesses.

So when the dollar declines a little bit that is nothing to be alarmed about.

So far in 2011, the U.S. dollar has only lost about 6.5 percent of its value.

Should we be freaking out about a measly 6.5 percent?

I don't think so.

Do you want an even "scarier" number?

The dollar has fallen by 17 percent compared to other major national currencies since 2009.

Oooooooooohhhhhhhhhhhh - are you frightened out of your mind yet?

You better run outside Chicken Little - the sky might be falling.

The problem is that there are so many tinfoil hat wearing conspiracy theorists running around declaring that the U.S. dollar is dying that some people are actually starting to believe it.

Do you want proof that the U.S. dollar is going to be just fine?

Here you go....

Just check out what U.S. Treasury Secretary Timothy Geithner recently told the Council on Foreign Relations....

"Our policy has been and will always be, as long as I will be in office, that a strong dollar is in the interest of the country."

Bam!

You have the very words of the U.S. Treasury Secretary right there.

He has promised the we "will always" have a strong dollar policy.

Geithner has said it and that settles it.

Any questions?

Who are you going to believe?  Are you going to believe the U.S. Treasury Secretary or are you going to believe a bunch of crazy Internet bloggers with blogs with titles such as "Economic Disaster" and "The American Dream Has Been Flushed Down The Toilet"?

Let's get real.

The U.S. dollar is just fine and there is not going to be some mythical "dollar collapse".

But isn't the price of gasoline going up?

Sure it is.

But that isn't the fault of the Federal Reserve.  They don't set prices for gasoline.

The reality is that prices for different things go up and down.  That is what a free market economy looks like.
Right now the price of gasoline is actually lower than it was back in 2008....

So shouldn't we actually be talking about falling gasoline prices?

I don't know about you, but I sure am glad to be paying less for gasoline than I was back in mid-2008.

But the tinfoil hat crowd will "cherry pick" statistics to make it seem like things are worse than they really are.  They will break out scary sounding statistics such as the fact that over the past 12 months the average price of gasoline in the United States has gone up by about 30%.

LOL - cry me a river.  Life is tough.  People will cry over just about anything these days.

Who really cares that the average American driver will spend somewhere around $750 more for gasoline in 2011?

That is just a sign that the economic recovery is in full swing.

Do you know how much all of that money is going to help our oil companies?

They are going to be swimming in cash, and all of that wealth will "trickle down" and help out the folks on main street.

You would think that the half-crazed economic bloggers out there would be thrilled by all of this, but no - they just keep trotting out the "inflation boogeyman" over and over and over.

Well, you know what?

According to no less of an authority than Federal Reserve Chairman Ben Bernanke, we basically have close to zero inflation in the United State right now.

You believe the Federal Reserve, don't you?

If not, there is probably something wrong with you.

Unfortunately, we have got a whole bunch of these self-proclaimed "experts" (who are really just legends in their own minds) running around proclaiming that inflation is not calculated the same way that it used to be.

Well, you know what?  They are right.  But it isn't some great conspiracy.  The truth is that we have "improved" the way that inflation is calculated 24 times since 1978.

The government is always trying to become more accurate.

What is wrong with that?

But today we have a bunch of amateurs running around trying to tell us what the "real" rate of inflation actually is.

For example, a New York post analysis claims that the rate of inflation in New York City has been about 14 percent over the past year.

So how many prices did they measure?

A dozen?

Two dozen?

Who are you going to trust more - the Federal Reserve or the New York Post?

Perhaps the New York Post should just stick to reporting on the latest Elvis sighting and leave economics to the big boys.

If hack reporting by publications like the New York Post wasn't bad enough, we've also got numbskulls like John Williams from a website called "Shadow Government Statistics" running around proclaiming that the sky is going to fall because of U.S. government debt.

The following is a sampling of the smelly stuff that Williams is spreading around....

S&P is noting the U.S. government's long-range fiscal problems. Generally, you'll find that the accounting for unfunded liabilities for Social Security, Medicare and other programs on a net-present-value (NPV) basis indicates total federal debt and obligations of about $75 trillion. That's 15 times the gross domestic product (GDP). The debt and obligations are increasing at a pace of about $5 trillion a year, which is neither sustainable nor containable. If the U.S. was a corporation on a parallel basis, it would be headed into bankruptcy rather quickly.

Does anyone actually believe any of that nonsense?

How long has Williams been predicting that U.S. government finances are going to collapse?

Yes, he has been doing it for a very, very long time.

Has the sky fallen yet?

Are we living in an economic wasteland?

Has there been a U.S. dollar collapse?

No.

Look around you - everything is just fine.

Every time the U.S. economy has had a recession in the past, what has happened?

The economy has recovered and has gotten larger than ever.

And that is exactly what is happening again.

But sadly, there are more Americans than ever that actually believe that we are headed for economic disaster.  In fact, there are some websites where they actually debate what the best place to live in the United States will be when the "economic collapse" happens.

Can you believe that?

People need to grow up.

Yes, the U.S. government is in debt.  That should be no surprise.  U.S. government debt is normal.  The truth is that our financial system is designed to have U.S. government debt constantly expand and for there to always be a little bit of inflation in the system.

When the U.S. government goes into more debt, more money is created.  If there was no debt in our society there would be no money.

So all of these bozos that claim that they want to get rid of all government debt don't know what they are talking about.

We need to trust that the experts over at the Federal Reserve know what they are doing.  The prudent moves by Ben Bernanke have helped the economy to recover after the horrible financial crisis of 2008.

Instead of being criticized, he should be commended.  There is a reason why he was named "Person of the Year" by Time Magazine in 2009.

The Federal Reserve is watching inflation.  If it starts spiking up a little bit they will stomp it out.  They know what they are doing.

This is 2011 - the people running things were produced by some of the greatest academic institutions on the planet.  Nothing is going to catch them by surprise.  They know exactly what our problems are and how to solve them.

So quit listening to the tinfoil hat crowd.  Yes, the U.S. dollar will fluctuate a little bit relative to other major currencies.  That is nothing to be alarmed about.

There is not going to be a dollar collapse so stop waiting for one.  The U.S. dollar is always going to be the greatest currency on earth.  Why?  Because the United States is the greatest nation on earth.

After all, what other nation on earth could produce Justin Bieber, Jim Carrey, Simon Cowell, Pamela Anderson, Catherine Middleton, Michael J. Fox, Seth Rogen, Brendan Fraser, Jason Priestly, Tom Green, Ryan Reynolds, Mike Myers, Kiefer Sutherland, Howie Mandel, Keanu Reeves and William Shatner?
--------------------
Hopefully by now you have figured out that this is a satirical piece demonstrating how ridiculous much of the propaganda in the mainstream media really is.  Thank you for taking the time to read my twisted attempt at humor.

read this article and more at: theeconomiccollapseblog.com

Fed Up with the Fed?

by: Thomas Sowell

When people in Washington start creating fancy new phrases, instead of using plain English, you know they are doing something they don't want us to understand.

It was an act of war when we started bombing Libya. But the administration chose to call it "kinetic military action." When the Federal Reserve System started creating hundreds of billions of dollars out of thin air, they called it "quantitative easing" of the money supply.

When that didn't work, they created more money and called it "quantitative easing 2" or "QE2," instead of saying: "We are going to print more dollars-- and hope it works this time." But there is already plenty of money sitting around idle in banks and businesses.


The policies of this administration make it risky to lend money, with Washington politicians coming up with one reason after another why borrowers shouldn't have to pay it back when it is due, or perhaps not pay it all back at all. That's called "loan modification" or various other fancy names for welching on debts. Is it surprising that lenders have become reluctant to lend?

Private businesses have amassed record amounts of cash, which they could use to hire more people-- if this administration were not generating vast amounts of uncertainty about what the costs are going to be for ObamaCare, among other unpredictable employer costs, from a government heedless or hostile toward business.

As a result, it is often cheaper or less risky for employers to work the existing employees overtime, or to hire temporary workers, who are not eligible for employee benefits. But lack of money is not the problem.
Those who are true believers in the old-time Keynesian economic religion will always say that the only reason creating more money hasn't worked is because there has not yet been enough money created. To them, if QE2 hasn't worked, then we need QE3. And if that doesn't work, then we will need QE4, etc.
Like most of the mistakes being made in Washington today, this dogmatic faith in government spending is something that has been tried before-- and failed before.

Henry Morgenthau, Secretary of the Treasury under President Franklin D. Roosevelt, said confidentially to fellow Democrats in 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work."

As for the Federal Reserve today, a headline in the Wall Street Journal of April 25th said, "Fed Searches for Next Step."

That is a big part of the problem. It is not politically possible for either the Federal Reserve or the Obama administration to leave the economy alone and let it recover on its own.

Both are under pressure to "do something." If one thing doesn't work, then they have to try something else. And if that doesn't work, they have to come up with yet another gimmick.

All this constant experimentation by the government makes it more risky for investors to invest or employers to employ, when neither of them knows when the government's rules of the game are going to change again. Whatever the merits or demerits of particular government policies, the uncertainty that such ever- changing policies generate can paralyze an economy today, just as it did back in the days of FDR.

The idea that the federal government has to step in whenever there is a downturn in the economy is an economic dogma that ignores much of the history of the United States.

During the first hundred years of the United States, there was no Federal Reserve. During the first one hundred and fifty years, the federal government did not engage in massive intervention when the economy turned down.

No economic downturn in all those years ever lasted as long as the Great Depression of the 1930s, when both the Federal Reserve and the administrations of Hoover and of FDR intervened.

The myth that has come down to us says that the government had to intervene when there was mass unemployment in the 1930s. But the hard data show that there was no mass unemployment until after the federal government intervened. Yet, once having intervened, it was politically impossible to stop and let the economy recover on its own. That was the fundamental problem then-- and now.

No Buyers For Treasuries aka "Toxic Waste"

by: Bob Chapman

We believe there will be something similar to a QE3 by another name and the Fed will probably have to create some $2.5 trillion to buy Treasuries, Agencies, and toxic waste and perhaps inject funds into the economy. Japan certainly won’t be a buyer and probably will be a seller. China has indicated that they won’t be purchasers in the future either. The question also arises concerning the continued purchase of these securities by countries in the oil producing Gulf States, which are in turmoil. The three countries make up 45% of Treasury purchases. As we pointed out in previous issues the second half of 2011 should be monstrous. Even if the fed buys all the Treasury and Agency bonds they’ll still have to deal with a lower dollar and high inflation. Then there is high unemployment and raging gold and silver prices. There is also the question of US debt, federal, state and municipal debt, along with wars in the Middle East and North Africa. How many US Treasuries will Japan have to sell and how deeply will its slowdown effect American industry?

As you can see America has much to contemplate.

The creation of monetary inflation will last at least two more years. Its end will only come when the Fed takes its foot off of the pedal. Like almost zero interest rates this policy cannot be allowed to stop. The system cannot function without it. The whole concept of throwing money at a problem simply doesn’t work and the elitists know this only too well.

Monetary and fiscal creations are not the only mistakes being made by the Fed and our Congress. US and world markets are being subjected to non-stop manipulation. This corruption has destroyed all free markets. Stock and bond markets are supported and gold, silver and commodities attacked. Fortunately markets now recognize what the elitists are up too and each time they interfere they lose a little more power. It points up that a criminal syndicate is running our country. These tactics are used to extend the looting period allowing further harvesting of elicit profits. The US and many other nations have been allowed to live beyond their means for many years and that condition is being brought to a conclusion. This, of course, is very true of the US due to the dollar being the world’s reserve currency. That is changing, as nations want this unfair advantage ended, especially in view of the fact that the American government and financial community have so abused their privilege.

The profits of the military industrial complex continue to flourish as we have war after war. We notice that both parties are willing to cut spending on Social Security and Medicare, but they refuse to cut military spending, the most expensive item on the budget at 26%. Our government has billions for Fannie Mae, Freddie Mac, Ginnie Mae, the FHA, the FICA and the worthless SEC and CFTC, but no cuts for the average American.

As zero interest rates rule one form or another of money and credit creation continues as it has for the past 11 years. The game is the same, it is just the name has changed. The process of wealth destruction is still in progress and only the select few get to keep their ill-begotten riches. The Fed’s balance sheet over the next 1-1/2 years should reach over $5 trillion.

On this process real interest rates will creep higher, toxic securitized mortgage bonds will fall lower, as the housing market sinks to new lows not able to break out of its death spiral.

We find it of great interest but not surprising that the $5 trillion mortgage bond fraud, after three years, has no prosecutions, or even a civil suit. This smacks of evidence that the Fed made some kind of sub-rosa deal with bond buyers, particularly in Europe, to cover their losses. In addition, we believe the Treasury and the SEC were in on the criminal fraud.

We see Warren Buffett doing the same thing that the Chinese are doing and that is dumping US dollars. He has been going to Asia and India to buy companies. This is how they both bet against the dollar. Buffett even says, “I would recommend against buying long-term fixed-dollar investments.” He says over the next 20 years the dollar will lose its value. This is also what we have been preaching over the past 11 years, and that the preferred investment should be gold and silver coins, bullion and shares. Professionals are concerned about the trade deficit and the balance of payment’s deficit, along with the continual creation of money and credit by the Fed. Then there is the horrible budget deficit and the rampant inflation the government continues to lie about.

Even PIMCO, as we all now know, has sold US Treasuries and even shorted them in anticipation of higher real interest rates. Bill Gross, CEO, calls the US a serial abuser of finance deficits with a ridiculous budget. He, like many others, has lost faith in the Fed and the government to run a proper government fiscal and monetary policy. Bill called it the new normal. We call it the road to fiscal and monetary perdition. Confidence is gone and well it should be. We lost confidence in 1960; it obviously takes others longer.

In our minds there is no question the dollar is going lower, perhaps 40% or 50% lower versus other currencies in general. In just the last 15 years it is 50% lower. In the last 40 years it is 98% lower. At this juncture it is our opinion that the Treasury and the Fed want the dollar lower in order to become more competitive. If they are going to do that they had best end their 60% plus reliance on foreign oil and start pumping America’s vast oil and gas reserves. They will also have to end free trade, globalization, offshoring and outsourcing in order to bring those 430,000 firms that have moved to foreign countries.

As the dollar falls against other currencies, all currencies continue to fall versus gold and silver. Over the past 11 years, annually, nine major currencies have fallen more than 20% on average versus gold and silver. If the dollar over the next several years were to lose its status a world reserve currency costs for foreign goods would rise exponentially. The only reason the dollar isn’t lower is that many other currencies have the same problems the dollar has in varying degrees. The dollar is very weak versus the euro at $1.46. Yet, the eurozone countries are exploding in debt and six of their members are candidates for insolvency. Japan, the UK, and parts of Europe have the same problems the US has - a hangover from using the Keynesian economic model. As a result of this misguided policy in ten years federal debt will be close to $20 trillion, up 75% from today. Is that anyway to fiscally run a country? The answer is obviously not. This is why the Fed has to buy 80% of Treasury and Agencies and it is why there is no end in sight to America’s fiscal and monetary problems. Just about everything is being done incorrectly, which tells us again this has been done deliberately in order to bring the US, UK and Europe to their knees economically in order to force the people in these countries to accept World Government. The experiment again is not going to work and chaos and war will again envelop the world. You had best be prepared.

How can investors be positive about dollar denominated investments, when S&P warns government that they had best get their financial house in order or they will lose their AAA rating. They placed the US outlook as negative. The US has to address medium and long-term budgetary problems over the next two years and if they don’t the rating will fall and the US will no longer be the world’s reserve currency.

Monetary policy cannot continue to augment, aid and abet such a profligate fiscal policy, which can easily be changed by cutting military spending by 50% to 13% of the budget. That is not easy to do with the military-industrial complex, Wall Street and banking running the country. Their greed knows no end.

We just saw over the past three years a credit crisis and a crisis of confidence for both the government and private debt sectors, which still hasn’t been permanently addressed. Many major financial firms are still insolvent and carrying two sets of books. If you did that you would end up in jail.

The Fed has become a liability in its quest to protect its owners, the banks, and not the overall economy. It is instrumental in destroying debt quality and continues to destabilize the monetary base. There is no effort to cut military spending only Social Security and Medicare, which retirees and future retirees paid for, but those funds were stolen over the years.

How does any Fed call allowing mortgage debt to expand by $8 trillion or by 115% over six years? They the banks and brokerage houses knew exactly what they were doing and what the consequences would be. Banks employed leverage of 70 to 1 when 9 to 1 was normal and it is still 40 to 1. Obviously the bankers have learned nothing from their failures. In addition, besides us, how could rating agencies and professionals not recognize a Ponzi scheme? That is because S&P, Moody’s and Fitch were part of the criminal enterprise. How could a credit system double debt, most of it was of very poor quality and expect that there would be no fall out? They knew the consequences and did it anyway. In the aftermath there has been no civil litigation and no criminal prosecutions. Why is this? It is because these criminals have bought most of Congress and the court system.

read more at: theinternationalforecaster.com

Where Were You On Super Bowl Weekend?

compliments of: tfmetalsreport.com


I was in Vegas with my friend, Sweetness. He and I gambled too much. Drank too much gin and played a little golf.

Where were you? Did you watch the game? Perhaps you had a party? Maybe you're not an american football fan so you spent the weekend relaxing and catching up. Either way, like me, you had no way of knowing what was going on behind the scenes.

My next question is: Where was Ben Bernanke? Where was Tim Geithner? Where were the rest of the Fed governors and the heads of the TBTF banks? We may never know, though history one day may record their actions for posterity.


Why do I ask and why was February 4, 2011 so important? In hindsight, it is clear that 2/4/11 was the day that the Fed's hand was forced. A critical moment in time had come. The ruinous implications of the Fed's quantitative easing policy had been made clear. That weekend, both the dollar index and the long bond were moving toward critical, long-term support. Both could not be saved and a decision had to be made.

Sometime over Super Bowl weekend it was decided. Your monetary "officials" chose to preserve their own power at your expense. Why do I say this? Three months on, it's clear that the decision was made to support the long bond at all costs, to the detriment of the dollar. The global reserve currency was sacrificed on the altar of low interest rates and the maintenance of the Fed/TBTF/Govt ponzi. Because of this decision millions, even billions, of people will suffer. The inflation that is coming will spark food shortages and protest. This unrest may/will lead to war. All of this so that the Fed can maintain their power, the TBTF and primary dealer banks can remain afloat and the bankrupt U.S. government can continue printing and spending money, thereby allowing elected officials to escape the scrutiny that would come from actually leading. Neither history nor The Almighty will judge their selfish and cruel actions well.

Here are the charts that prove this out, beginning with the dollar or, as we call it here, the POSX.

As you can see, post 2/4 the dollar actually rallied for a week. It has since declined by almost 8%.

The critical chart on 2/4 was the U.S. Long Bond. The "long bond" is a futures contract on the 30-year U.S. treasury bond. This contract has been in an uptrend for nearly 29 years, from a bottom in 1982. The trendline lays somewhere around 114 to 115, depending upon how accurately you draw it. This was an important topic back in February. For example, here's a thread from 2/9/11:
http://tfmetalsreport.blogspot.com/2011/02/santas-pillars.html
With the decision made to let the dollar die in order to preserve The Ponzi, the long bond suddenly reversed and has since traded much higher.

 

Let's judge the practical, short-term impact of this decision by looking at our three favorite dollar-destruction hedges. First, here's crude:

 

Oh, that's right. The politicians want you to believe that its the oil companies and the evil, scawy specuwators that are driving oil higher. Anything to deflect the blame from themselves.

Now look at gold:

If you haven't yet protected yourself and purchased "wealth insurance" by buying gold, its OK. There's still time. But, if your normalcy bias and blind faith in the status quo keep you from buying some in the future in the face of all the evidence that the dollar is dying, you are the proverbial fool who deserves to be separated from his money.

Lastly, take a look at silver. As we know, silver is also being propelled by some, shall we say "enhanced", fundamentals. Regardless, this performance is stunning and reflects a grass roots, everyday-citizen demand for protection against fiat destruction. My advice is to get some, and take delivery, while you still can.

 

Finally, the intention here is not to say that the demise of the dollar is imminent. The death of the dollar is similar to that of a terminally-ill, cancer patient. There will be good days. There will be moments of hope. The dollar will bounce, probably from the area around 72. The long bond will peak and consolidate in the area around 124. The PMs will correct again soon giving you another buying opportunity. In the end, however, the fate of the dollar was sealed over the weekend of Super Bowl 45. The Packers won but we all lost. For the Steelers, there's always next year. For us, nothing but an uncertain and perilous future.

Read this article and more at tfmetalsreport.com