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The US accepts more legal immigrants than all other nations combined. We are now experiencing, due to the lack of low rung jobs, an epidemic of illegal immigrant crime. The recent wave of immigrants has major medical and social problems. Making matters worse the US and Mexican officials on July 3, 2004 signed an agreement that would allow millions of legal and illegal Mexicans who worked in the US to collect US Social Security benefits. If approved by Congress our President will sign it and hundreds of millions will come over our borders to take advantage of our benefits. There will be a welfare migration. Health care premiums will rocket and more hospitals will shut down due to unpaid bills by this horde from the south. The federal government mandates everyone who seeks care gets care, but they refuse to pay for the care throwing it on the states’ and counties. Across Arizona, New Mexico, Texas, California, Nevada and Colorado hospitals are already shutting their doors. In Los Angeles, due to Special Order 40, if a police officer were to arrest an illegal alien drug dealer for his immigration status he faces severe discipline. That allows illegal aliens to wantonly commit crimes in the assurance that their de facto immunity stands under law. The price for not defeating FTAA is simply unacceptable. If we may quote Henry Kissinger from the L. A. Times of 7/18/93 on NAFTA, which leads us directly into FTAA, "NAFTA will represent the most creative step toward a new world order taken by any group of countries since the end of the cold war, and the first step toward an even larger vision of a free-trade zone for the entire Western Hemisphere. NAFTA is not a conventional trade agreement, but the architecture of a new international system. A Western Hemisphere-wide-free-trade system-with NAFTA the first step – would give the Americas a commanding role no matter what happens."
If government tinkers with or alters Social Security after almost 70 years, it will be entering the emotional terrain between fear and destitution in old age and the desire for security and comfort. It was the desire of the designers that Social Security be an individual retirement plan and because of the way the legislation was written, politicians have looted the program all these years unconscionably leaving worthless paper in its place. Social Security was also envisioned as a disaster relief program whose goal was protecting Americans from the hazards and vicissitudes of old age. As you readers know, there is nothing more foreseeable than growing old, but growing old penniless without support is the most tragic of all hazards. The planners knew, being deeply enmeshed in a depression in 1934 that without warning there were events that could wipe out savings and leave the elderly unable to fend for themselves. During difficult times the children of retirees are less able to help their parents as they lose their jobs and struggle to keep their own families afloat. So it was that government believed it had an obligation, under these circumstances, to aid those overtaken by disaster when there was no one else able to help. A depression or very difficult economic times are no different from wars, famines, floods and droughts. Thus, Social Security was born with financial participation from government, employers and individuals.
The forced transition today by transnational elitist conglomerates from a manufacturing to a service–oriented economy, portends the same problems as the depressionary 1930s - whole industries as well as technological jobs are outsourced out of our country. Globalization, another force to further enrich the wealthy and bring about the decimation of America’s middle class, is another such disaster. Today, government lies about everything - in particular, actual employment and inflation. What savings Americans have are being consumed daily by stealth by inflation. Soon this reality will manifest itself in economic calamity as it did in the early 1930s. Today, even those who have saved and own stocks, bonds, mutual funds and a home could easily lose it all because of the machinations of the powers behind government and the manipulation of all of our markets. No one is immune. If the discount rate goes from 1% to 5%, the Dow from 10,300 to 4,500, and if housing drops in value 30-50%, all Americans are going to be in financial trouble except those in gold and silver assets. Thus, it can and will happen again. Few can protect themselves for that economic calamity. That is the essence of Social Security. Those without foresight are doomed to spend the last 15 years of their life in destitution if forces beyond their control alter Social Security. The system of social insurance has to be fixed and fixed quickly and privatization is not the answer. It exposes the investor to exactly the risk that Social Security seeks to avoid, the collapse of financial markets. This is why we have Social Security to avoid such events. Recent market history means nothing, markets are still totally unpredictable and if the elitists and Sir Alan Greenspan think they can change that they are sadly mistaken. In any economic environment, the benefits promised to beneficiaries of Social Security are sacrosanct. This is the largest source of income for retirees except for the 5%, the very rich. The protective device Social Security has shown us is the only method of protecting our elderly population in any kind of economic environment. Private investment accounts would be ravaged by another economic recession or depression and where pray tell are the funds going to come from to fund this alternative? From out of thin air of course. The budget impact would be staggering. Try bailing out such an investment scheme under the conditions just described, which are entirely realistic. All privatization would do is provide welfare and a bailout for Wall Street. You would be rescuing the thieves and scam artists. Social Security mitigates the potential for economic disaster. It has become the glue that keeps our society together when under economic duress. It provides secure retirement and it shields our elderly from the winds of economic change. It is not the total answer, but it is the foundation for protection. Americans paid for this protection and they deserve it, not some excuse or some investment scheme. Social Security provides a foundation for retirement, economic security, not dependent on the vicissitudes of the market. It is a plan needed by every American and it should be there for them when they need it most.
Illegal alien criminals fill 29% of America’s state and federal prisons. However, in dozens of cities where illegal aliens commit thousands of violent crimes, police cannot use the most obvious method for apprehending them by questioning their illegal immigration status. In Los Angeles, the 20,000 number "18th Street Gang" comprised of 60% illegal aliens, runs a crime network second to none in America. Criminals run free because governors, mayors and city councils have adopted "Special Order 40." In 1979, Los Angeles police chief Daryl Gates introduced the order. These illegal alien criminals move all over the country at will. Even if caught for a violation, one that could deport them, they cannot be detained for immigration violations. This is why terrorists stalk our streets. Illegal immigration is out of hand and there is no law enforcement to stop it. This is a country where we have two sets of rules, one for you and us and a set for illegal aliens. What are we to do when police chiefs, mayors and city councils defy the law and get away with it? Maine is an illegal alien sanctuary. These illegals flock to Maine to collect welfare, free schooling, free lunches, free medical care and jobs. Due to the legacy of Daryl Gates, we are destroying the effectiveness of the LAPD. Ninety-five percent of all outstanding warrants for homicide, some 1500, are issued against illegal aliens. Two-thirds of all fugitive felony warrants, 17,000 are for illegals. These bleeding-heart liberals all over the US have turned the US into a workshop for illegal alien criminals and a breeding ground. These events have us heading on a collision course with catastrophe. This is another strong reason not to register your weapons or turn them in if demanded by government. In fact, increase your possession of assault weapons. You are going to need them.
The British equivalent of the Council on Foreign Relations and the Trilateral Commission is the Royal Institute of International Affairs also known as Chatham House. It is a front for the British Royal Family, mouthpiece for Europe’s black nobility. The group has issued a report saying a major civil war that would destabilize the entire Middle East region is the most likely outcome for Iraq if current conditions continue. You might ask, how do they know this? The answer, of course, is that they planned all this from the very beginning. Kurdish separatism and Shia assertiveness work against a smooth transition to elections, while the Sunni Arab minority remains on the offensive and engaged in resistance. What we are now seeing is Iraqi backlash. Albeit in a fragmented manner that will probably presage civil war if the US were to cut and run. Even if the US forces try to hold out and prop up the central authority, it may still lose control. Thus, if the Shiite, Sunni and Kurd factions fail to adhere to the Iraqi interim government, Iraq could fragment or descend into civil war. On the other hand, if the transitional government, backed up by a supportive presence, can assert control, Iraq could hold together. Civil war is the most likely outcome. Shiite Arabs will not settle for a subservient position. Kurds will not relinquish the gains in internal self-government and policing during the 1990s and Sunnis will accept neither a Shiite-led central government, nor a Kurdish autonomy in the North. The people who planned this conflict are letting us know what the next step is. In the meantime, young Americans die every day while they play their games of power and wealth.
You cannot have an economic recovery or a job recovery when you are shipping millions of jobs to foreign countries. Since employment statistics began in 1939 never in history has it taken so long to regain jobs. Worse yet, the newly created jobs are at the lower end of the wage scale. Whether government and Wall Street like it or not, we are still in a recession even after injecting $8 trillion into the economy, which was created out of thin air. The only winner has been corporate America. Employment has not improved and consumer debt as a result is at record levels. At least one-third of that debt is unpayable. During this process the Fed and George and the neocons have created bubbles again in the stock market, in bonds, in real estate and in pensions, all of which unethically will prove fatal for the dollar. We have lost two million jobs since George W. Bush took office. This is the worst employment situation since the early 1930s. If you remember, four years ago we told you this is why we would have wars. Wars to cover up economic failure. Perpetual wars for perpetual peace and an ignorant demi-god to go along with it. Reelect George W. Bush and you will see what a modern day dictator really looks like. We are beset with declining real wages and a very marked deterioration in job quality. Between 2000 and 2003, median household income fell $1,500 dollars, a 3.4% decrease and that is supposed to be a recovery. Even more startling is that productivity supposedly grew 12%. We know that is a lie, as is everything that leaves Sir Alan Greenspan’s lips. Productivity increased by 2.5% not 12%. The American standard of living began deteriorating in 1973 and has gotten worse every year. Now both husband and wife have to work to achieve the same level of living standards that just the husband provided in 1973. Besides now, parents see little of their children and they become brainwashed and ill-educated by the state because parents do not have time to complain, they have to work two or three jobs to financially keep their heads above water. The struggle ahead will be far more difficult and many will financially fall to the side of the road unable to keep up. The reason for all of this is a fiat currency, free trade and globalization. Nothing will improve until America goes back on a gold standard and erects trade barriers and reinstitutes tariffs. It is as simple as that. America became a great nation doing just that.
There is no question Beslan wouldn’t have happened were it not for Russian arrogance and authoritarianism. Of course, the US has tried to complicate matters to keep Russia off balance. Then internally there is the Yeltsen crime family sniping at Mr. Putin with their benefactors the US and Carnegie Endowment for International Peace, whose sole purpose is to create wars. We still have a copy of their 1962 tome on invading South Africa, which they said doesn’t exist. Well it does, we have one. This is the same group that devastated the Russian economy and helped the oligarchs, Rothschild and Rockefeller loot the country. Many of the Putin detractors are all oligarchs who fled Russia with billions, such as Boris Berezovsky who escaped to London. It is the US that is the leading group pleading for the Chechen cause, which simply is an effort to cause Russia as much difficulty as possible within its own geopolitical sphere. Whatever chance the US had of enticing Russia to send 40,000 troops to Iraq or Afghanistan has now faded. The US, of course, has the old Iran-Contra gang still active and still doing their thing. The next step is the comparison with Bosnia and Kosovo and the demand for UN intervention. It’s all politics and money as usual. We have to believe the US is behind the Chechen insurrection simply to weaken Russia. Any prolonged conflict is in the US’s best interest. We did extensive work in counterintelligence in the Caucasus and understand why the US is doing what it is doing. During the Beslan tragedy, Mr. Putin insisted the terrorists were receiving orders from abroad. He contends the radical Muslim terrorists were taking orders from British Intelligence and he is probably correct. Just as bin Laden takes orders from Washington. It is a fact London serves as the nerve center for Chechen and other terrorist groups. It is an integral part of British strategy and foreign policy and always has been. Putin and his KGB group are nationalists and obviously don’t want to join 500 richest people on earth in a world government. He drove the Russian elitists out of the country after they looted all they could. Today, you have to view Russia in a different context if what we believe is true. Why also would the US be sponsoring an insurrection on Russian soil? Russian nationalists simply do not want to abandon their country and allow it to join an international slave state. They know full well the West financed and organized the revolution and brought the Soviet to power. They do not want to be enslaved again by the same gang of elitists. Unfortunately, they do not have immediate wealth to lean on so they use blunt military force. The elitists are undermining Russia. They and the British created the chaos in Bosnia, Kosovo and now Chechen. The US moved into the Soviet vacuum in Afghanistan, out flanking Russia in the southeast and extending their influence to other nearby new Republics. Russia is being picked apart piecemeal. London and New York are the elitist piggy banks where all this anti-Russian subversion is financed from. The end of the Cold War began the dismemberment of Russia so it could more easily be amalgamated into the New World Order. The same is being done in the US by the terrorist scam and Patriot Acts I & II. The American and British armed forces are the cannon fodder to expand their system of global surveillance with the intention of total world control. They want to break everyone’s will to resist and Russia is one of its victims. Our wars have nothing to do with patriotism or destroying evil and everything to do with corporate profits, looting and geographic control. The elitists want submission and the Russian leadership refuses as we refuse, so they and we must be silenced or snuffed out. Then there is the long line of assassinations over the years all over the world. In order to further their march toward world domination we will have a draft in the US next year, which will be followed by drafts from France, Germany, the UK and other countries. Not only can they conquer and control dissident countries, but also they can control the youth of each nation indoctrinating them into new world order thinking. NATO planes already landed in Estonia and AWACS patrol there and over Latvia and Lithuania. It’s no wonder Russia is concerned. Russia is being surrounded and prepared for liquidation. What America is doing now is what I did in their behalf against the Soviet Union 50 years ago. We know exactly what the elitists are doing. Georgia is another US client country as is Tajikistan where Russian military influence is being driven out. Just six months ago the Ukrainian government granted NATO forces the right of rapid deployment or Ukrainian territory. Under the Conventional Arms in Europe Agreement Russia cannot expand its military. Russia is being isolated from Europe. All the terrorist and Muslim organizations are being run by MI6 from London.
In Chechnya, Russia forces a situation similar to that of Afghanistan in the 1980s. Both groups are Muslim and tribal. The tribes consist of clans and if they were not fighting the Russians, they would be killing each other. Both regions do not want outside rule of any kind. The job now for the Russians is to defeat Chechen nationalists and uncompromising Muslims and warlords. Due to the political fragmentation, this has to be accomplished before any further negotiations can take place. This is an important goal because rebel movements have sprung up in Ingushetia and Dagestan. Russia has to control the Northern Caucasus region to break US-UK encirclement and to keep the US from dominating Caspian Sea oil. What Russia should do is withdraw, as the US should withdraw from Iraq, but neither will do so. This will have a long war of attrition.
Our Pentagon continues to suppress the truth about toxic weapons. Radioactive uranium weapons violate The Hague and Geneva Conventions as well as the Conventional Weapons Convention of 1980. Our Defense Department is well aware of the toxic affects of DU weapons. Inhalation exposure affects the lungs and thoracic lymph nodes, which leads to cancer. The end result after combat is contaminated soil, which leaches DU into local water and food supplies. DU kills long after hostilities end. Those who die from the affects may first create children with horrible birth defects. DU weapons as well destroy the natural environment. There is no cure and there is no way as yet known to significantly change the chemical and radiological toxicity of DU.
We are sure our brief comments on DU weapons will bring further wrath down upon is by our government, but the public must know and understand what a threat to humanity these weapons are. Like with Agent Orange, our government denies there are any adverse affects, in order to avoid liability for the willful and illegal dispersal of a known radioactive, toxic material. They are even refusing prompt and effective care for all exposed victims. They even refuse to clean up the contamination, so people will go on dying for many years to come. Our country is led and controlled by very evil people and the use of these weapons is a crime against humanity and they must be stopped.
Our census bureau tells us that illegal aliens cost us $10 billion more than they paid in taxes. They found that if illegal aliens are granted amnesty the federal fiscal deficit would increase by $29 billion a year. The largest federal costs presently for these illegals are $2.5 billion for Medicaid; for treating the uninsured $2.2 billion; food assistance programs $1.9 billion; federal prison and court system $1.6 billion and aid to schools, $1.4 billion. Two-thirds lack a high-school diploma, which mean lower tax receipts from the group and an even higher crime rate. The solution is simple. We ship them and their families back from where they came from or we assume the staggering financial burden. Bush and Kerry want amnesty but do not know how they will pay for it. Our government refuses to abide by our laws and that makes our federal government lawless lawbreakers. You do that and you go to jail. We wonder how long Americans will tolerate this double standard. Unions want new members, Democrats want more votes and business wants slave labor, thus government does not fulfill its sworn duty. On November 2, three million illegal aliens will vote illegally in our country because states such as Alabama, Colorado, Florida, North Carolina, Tennessee, Texas and Virginia allow foreign felons to acquire driver licenses. We might add that we have not even talked about the cost to the states for illegal aliens, which runs into the billions of dollars. You should let your elected representatives know how you feel about this.
The trade deficit continues to spin out of control at over $50 billion monthly. Every day we are losing more of our wealth and adding to the debt that will destroy our nation. It is of great interest to us that neither presidential candidate nor either major party has touched on the subject. We can understand why the Republicans and Bush will not broach the subject because it is happening on their watch. Kerry and Democrats will not talk about it because Kerry is part of the Illuminist program and 90% of Democrats who are not part of the elitist structure have been paid off. Those that are not involved either cannot be heard of they are cowards. The general media absolutely refuses to report anything on third party candidates. We are losing 1% of our wealth a year mainly to Asia. Via free trade, globalization, WTO, NAFTA and possibly CAFTA we give away our assets, jobs and competitive position in manufacturing and new services. This, of course, is all part of the elitist plan to bring America financially and economically to its knees. We have borrowed so much money that we are now financial captives to foreign governments. Our Fed exacerbates the problem by keeping interest rates abnormally low and flooding the US economy with over a trillion dollars a year. At the same time Iraq and Afghanistan is costing us $200 billion and the government makes cut after cut in Veterans health care and social benefits in our economy. Although we do not have all the details yet we were told on one of the talk radio programs we were on last week that the government is forcing our Veterans being treated by the VA to join and pay into Medicare plan B. They should not have to pay for care relating to a service connected disability. This is the kind of government the Bush Administration is running. They haul our men and women off to the Middle East, get them shot up or poisoned by depleted uranium and then want them to pay for their hospital and care costs. This is criminal as is our government. Consumer spending is falling as purchasing power falls. Most homes have two mortgages and credit cards are maxed out. We certain will not invest in the stock market and as the public has less and less money, the economy will fall into recession and take stocks, bonds and real estate lower. At least 50% of Americans know and understand what we are talking about. Those that are gifted and understand should have the courage to come forward and expose the evil controlling our government; if for no other reason than to show compassion for his fellow man. The kindness will help him or her as well as fellow Americans. Stop complaining about it and try to expose our problems. Reinvent yourself and leave a personal legacy behind. Leave this world knowing you did something positive for mankind and helped expose evil. We have a government that has committed us to $51 trillion in debt. It allows us to go $2 billion further into debt every day. Our economy is going to be purged and this time 50% of Americans may not survive the debacle because they would not pay attention. You must have the courage to protect yourselves, family and friends. Get out of the market during this rally. Get out of debt and buy gold and silver coins and stocks. They will be your only financial salvation and they may save your life.
We were tinkering with numbers and came up with some interesting findings. After government revisions to the national account going back over three years, we find there was substantially lower savings than previously stated and also that corporate profits were lower then stated. We were not surprised that consumer spending had recently fallen to a 1% growth rate. What was of particular interest within that number was that in the second quarter, non-residential fixed investment rose by $108 billion or about 10%. The quality of the gain is what is concerning. The biggest contribution was from computer investment, thanks to hedonic pricing. That means the figures were somewhat bogus. The real shocker was the investment in industrial equipment, the key component for industrial production, which was stagnant thus far this year. This is surprising because the accelerated depreciation ends this year and you would think business would want to take advantage of it. As you can see they are not, so that leads us to believe that they will see fair to poor business prospects in the immediate future. Profits from low-to-high over the past four years increased by 77%, yet in 2000, those profits were equivalent to 4.4% of GDP, and today they are 3.6%. In 1998 manufacturing earned $157 billion and retail $66.4 billion. This year's first quarter manufacturing profits were $81.5 billion and retail profits were $80 billion. In the 1980s manufacturing profits were four times those of retailers. That tells us a great source of earnings and jobs in America are faltering badly and, on its present course, manufacturing will cease to exist in America. That is part of what outsourcing and moving companies and industries out of the US is all about. It is about crippling the US economy so we will be forced to accept world government.
In 1931, President Herbert Hoover authorized the Mexican Repatriation, in which two million Mexican illegal aliens were picked up and shipped back to Mexico in order to free up jobs in the US economy mired in the US depression. It was carried out with the cooperation of local authorities. Many of those who were deported were American citizens who were born here of illegal parents, but were American citizens under jus soli (being born on US soil.) Thus, now over 70 years later they want to sue the US government. It was highly impractical to ship illegal parents out and leave the children behind. Who would care for them in the midst of a depression? Of course, these children of illegals are now in their 60s and 70s and now tell us they were betrayed. We say if their parents had come here legally, they would not have had that problem. Now they want compensation. This foolishness and stupidity just does not end – or is it greed? What will they say a few years from now when we ship 15 million of them back in a depression that will be worse than the 1930s?
Sir Alan Greenspan has told us the US cannot tolerate a current account deficit of over 5% of GDP. That means the dollar will be allowed to fall after the election, which also means gold will move higher. This is obvious to all you readers but Wall Street fancifully believes the lies of our US Treasury so it was a shock to hear Fed San Francisco President Janet Yellen tell the world things are about to change in a big way.
In this time of little inflation, if you believe the government, the California Public Utilities Commission says they will have to raise telephone rates by 20%-54%. Of course, phone rates like food and energy really do not count.
Over the past four years and $8 trillion plus of cash and credit infusion, corporate America has been able to keep profits rising and the consumer has saved next to nothing. Due to outsourcing and the exporting of industries and services to the third world, there has been an extraordinary shortfall in wage income generation since the inception of the current recovery. During the first 32 months of the upturn, real wage and salary disbursements have recorded a cumulative increase of just 2.2%. During the six previous business cycles, real wage income recorded a 10.6% average increase. That means that average American consumers lost an additional $339 billion to foreigners in third world countries as well as to their employers in corporate America. That purchasing power was replaced by Fed aggregate creation and the removal of equity from appreciating real estate. That $339 billion is equivalent to 4.3% of total real disposable income. What the elitists have done is replace the stolen wages with debt and payback is just around the corner. Non-farm payrolls are up only 0.3% over the first 33 months of expansion. By way of contrast, at similar junctures of the past six cycles, the increase averaged 7.8%. That also presents a composite profile of these earlier recoveries that works out to an employment shortfall of 8.2 million workers in the private economy. The pattern also shows up in real wages, comparisons in the current cycle are running an astonishing 0.3% below year earlier levels and that is if you believe the CPI-deflated average hourly earnings, which are bogus. The bottom line is the expansion remains woefully deficient and American workers are getting royally screwed by corporate America via free trade, globalization and outsourcing.
There is no soft spot, the recovery is dying. Consumption in June and July was up only 0.2% a shade below an already subdued pace in the first five months of 2004. Back to school sales were fair to poor and motor vehicle sales continued soft as rebates and incentives soared. Total inventory build was 0.9% in July after a 1% increase in June for the sharpest back-to-back monthly gross since before the recession. Detroit is buried in cars, SUVs and trucks and they are partially shutting down assembly lines. That will cut at least 0.5% off GDP growth. Traction is a figment of Sir Alan’s imagination. The employment figures are bad and bogus simultaneously. We have lost jobs not gained them and total unemployment is 13.5%. Income has improved over the last 12 months to July, up 2.8%, but that is the result of rising wage inflation, due to inflation, which is 9.5%.
Corporate stock buybacks at $38.7 billion in July is the strongest in 20 years and fully four times the average monthly pace of the past year. As we said last week, it is purely political in nature. No matter what the cost business and elitists want George and the neocons back in office.
The bottom line is we do not believe there will be reacceleration of economic growth and in order to keep from falling into deflation, the Fed will juice the monetary aggregates, keep interest rates low as long as possible and let the dollar slowly slide. As this happens, interest rates will slowly rise over next year as the market, bonds and real estate slide. The winners will be gold and silver related assets.
The statistical lies continue. The August PPI was supposedly off 0.2% due to a 5% drop in gasoline prices, yet future prices traded from 109.25 to 133.10. The BLS only sampled prices on the lowest days of the month. Heaven forbid they use a volume-weighted average for a true figure. What more can you expect from an ongoing criminal enterprise.
TIME tells us we can expect three million illegal aliens to enter the US this year putting the figure at 15 million. See the article, "Who left the Door Open?" on newsstands Monday, September 13. That is 4,000 a day as Fatherland Security protects us against evil terrorists. Some protection, we will stick with our 45s and ARs. They have phony IDs and bogus Social Security numbers to conceal their true identities and mask their unlawful presence. As we have, the article takes a look at the damage, dangers and the reasons America fails to protect itself as millions pour over our border. This shows you without a doubt what a scam the terrorist threat really is.
The Bush Administration will move to limit imports of Chinese clothing, which they legally can under the 2001 WTO agreement. They can limit annual growth in volume to 7.5% for three years, ending in 2008. American manufacturers have accused China of dumping, employing unfair practices, such as manipulating the value of its currency and subsidizing in achieving a $124 billion trade surplus. If China is allowed to enter further into our market, at the end of the year Americans will lose the remaining 650,000 textile jobs we have left. On the other hand, Wal-Mart and JC Penny are pushing to eliminate those US jobs. That is a very good reason not to shop in either store. Quotas for baby clothes and robes were lifted in 2002 and China’s share of US imports of these items jumped from 11% to 55%. The Chinese now make up 70% of clothing imports in Japan and Australia that do not have any quotas and that is what we can expect here. Free trade, globalization and outsourcing are destroying our country.
Crime is at the lowest level since 1973. Violent crimes are off 55% and property crime 49%, yet our jails are filled to capacity. There was a 1% increase in murders. There is nothing confounding about the drop in crime. It is pure demographics. Far less crime-age felons on the streets over the past four years.
Rep. Anthony Weiner (D-NY) has introduced HR 5035 to require Fatherland Security to ensure screening of all passengers and property on each flight of every passenger aircraft in the US, including general aviation aircraft of every type. It would prohibit private airline aircraft from flying within 1500 of any structure or building and from flying over any city with a population of one million or more. This is just more political insanity. Even the TSA says this is not necessary. General aviation businesses still have seen no financial reparations for looses due to the airspace shutdown, though $100 million was authorized for general aviation through legislation. That, of course, is being held up by George and the neocons. Airlines received $5 billion in federal grants to compensate for being grounded.
White House paranoia continues, as people allowed access to events are required to sign "oaths of support." If you are negative in any way to Bush his bouncers remove you and the Secret Service Agents arrest or detain you. This is unheard of in political campaigning.
Today, 80% of Americans believe the use of force can achieve a just end and 60% believe that military force is the best possible way to insure peace. The European response is 40% and 20% respectively. The Democrats in the US reflect the same numbers as the Europeans. The most anti-Bush nation is Germany where freely 80% oppose him, followed by France, Mexico, China and Canada. It does not bode well for NAFTA when your two trading partners vehemently oppose you in such an important foreign policy issue.
After reading the Gartman Report on Tuesday, 9/14/04, we are further convinced that he is acting in behalf of the elitists to denigrate the Sprott Asset Management Report, which professionally lays out in detail central bank’s operating procedure of manipulating the gold market. Thus, it is our opinion that readers should boycott the Gartman Report and show Gartman we know exactly who he works for and why he is doing what he is doing.
Citigroup, because of an investigation by the Financial Services Authority, was found on 8/2/04 to have dumped $13.5 billion of euro-denominated government debt into a matter of minutes, which dramatically manipulated the securities substantially lower. They then, a short time later, bought the bonds back at a $36 million profit. Of course, the FSA has done nothing to Citigroup. They will probably hit them with a minor fine and the will be off to do it again.
In order to close America’s $51 trillion accrued fiscal debt, taxes would immediately have to be increased 78%. These figures are correct not imaginary. Today’s children and tomorrow’s elderly will have to pay those bills; the children with higher taxes and the elderly with reduced or terminated Social Security and Medicare. The debts, of course, will continue to increase, especially if we add 200,000 young men and women to our armed forces and continue invading countries that do not do exactly as we instruct. George W. Bush is the most fiscally irresponsible president in history. After 2008, the debt service will be devastating. It will devastate the middle class and the poor and bring our nation financially to its knees. Our figure of $51 trillion is right on and it will soon jump another trillion when the cash debt barrier is raised right after the election from $7.3 to 8.2 trillion. The Government Accountability Office says the commitment is $40 trillion and the Social Security Board of Trustees sees it at $72 trillion. The IMF says it is $47 trillion and the Brookings Institution says it is $60 trillion. There will be no economic boom to bail us out. The economy is headed lower and in 2008 "baby boomers" hit 62 years old and retirement. Even ex-Treasury Secretary O’Neil estimated a $44 trillion gap. He said double the payroll tax immediately and forever; cut Social Security and Medicare benefits by 45% immediately and forever, or eliminate forever all discretionary spending, which includes military, Homeland Security, highways, courts, national parks and extra transfer payments to the elderly.
If we wait until 2008, we can increase payroll taxes to 33.5%. Medicare, so the government report says, will grow to $62 trillion and Social Security to $10 trillion, a total of $72 trillion. Social Security is a problem, but Medicare is the real mega-problem. Oh, we forgot to throw in the new drug benefit for $12 trillion or $84 trillion and these are Treasury Department numbers. Our country is absolutely broke and in 2005, we will be singing let the financial slaughter begin because we do not care, we have gold and silver assets. You may not want to hear it but this is reality. This is the truth. If you do not believe us, that is fine. Just do not come whimpering around looking for a handout because it will not be there.
The current account deficit widened to a record $166.2 billion in the second quarter from $147.2 billion in the first quarter. That is 5.7% of GDP, which is absolutely outrageous. Net capital flows into the US increased to $146.8 billion in the second quarter from $138.6 billion in the first quarter. Foreign capital inflows slowed to $265.2 billion from $445.3 billion in the first quarter. US acquisitions of foreign assets slowed even more, sinking to $118.5 billion from $306.7 billion. Foreign purchases of US equities fell to $2 billion from $4.2 billion. Purchases of US Treasuries dropped to $35.6 billion from $65.4 billion, while purchases of agency bonds rose to $35.1 billion from $6.7 billion. Foreign assets held by central banks increased $73.9 billion versus an increase to $127.9 billion in the first quarter. Foreign direct investment in the US rose to $32.7 billion from $10.2 billion.
Weekly NYSE volume is down 5.8% and small cap volume has fallen 73.9%. The Fed and the administration have effectively run many investors out of the market with their criminal activities.
A group of 25 former government counterintelligence and counter terrorism specialists from the FBI, CIA, FAA, Customs and the Defense Intelligence Agency at a press conference lambasted both the 9/11 commission and the Bush neocons for failing to hold government officials accountable for failures leading up to 9/11. They repeatedly sought to warn superiors of mismanagement and the dangers of terrorism, but to no avail. There is no question this commission’s findings are a massive cover-up.
The Pension Benefit Guaranty Corp is about $12 billion in debt and it has been recommended that a $14 billion bailout be arranged early next year. It currently pays benefits to some one million Americans and insures private pensions for 43 million more. The PBGC is already insolvent.
The profits of foreign subsidiaries of US corporations in 18 tax havens swelled from $88 billion in 1999 to $149 billion in 2002. Total profits of US multinationals’ foreign subsidiaries were $255 billion in 2002. These 18 tax havens hold 58% of the foreign profits of multinationals. Subsidiaries of US corporations now generate profits mainly in tax havens rather than where they conduct their business, but Americans are not allowed to do this. As you can see the elitists make laws to protect their wealth tax-free, but you cannot.
Sallie Mae started life in 1973 as the Student Loan Marketing Association and is now known as SLM Corp. Sallie is turning to securitisation, which allows it to bundle together its loans into packages and sell them to investors. Sallie securitized $30 billion of student loans in 16 transactions in 2003, up from $13.7 billion in 2002. It expects securitisations to comprise about 70% of its total managed debt by 2008, compared to 58% at the end of last year. Private loans that do not have a government guarantee made up 43% of loan originations in 2002. Sallie, like Fannie Mae and Freddie Mac, could be skating on thin ice.
Enron, instead of putting $200 million into its pension program, will put in $321 million and all pensioners will get paid in full. The PBGC pressured them into doing so. That is excellent considering the bankruptcy.
The stock market has not done much this year, but the Harvard endowment is up 21.1% due to the benefit of inside information. The $22.6 billion fund is an elitist piggybank. Their main gains came from commodities and bonds. The group’s six money managers earned $107.5 million. The 25 largest university endowments were able to make 17.1%, but they are also connected. The Harvard fund has gained 12% over the past decade. It’s nice to be inside.
On Wednesday, the Fed brought the repo pool to $60.564 billion. Every time the DOW gets weak or bonds weaken, the number gets higher. They increase as well when gold, silver and oil get stronger. The Fed has their hands full. Even at $60 billion, the DOW is stumbling.
Just to show you the scope and depth of corporate commitment to pensions and how a cut in pension payout or a collapse will affect Americans, is personified by GM. Their projected cost of providing health care benefits alone to future retirees is $63 billion. That is health care for 1.1 million Americans or one-half of one percent of the population. Toyota employs 31,000 Americans and then there is Ford and Daimler Chrysler. Toyota is not tied down to contracts made when the Big 3 dominated the car world and because employees pick up a good part of their retirement cost. Toyota makes much more money than the Big 3.
Quest will pay a fine of $250 million to the SEC for defrauding the public and as usual, no one goes to jail.
The California Employment Development Department (EDD) says there was a modest decline in the unemployment roles in California with an increase of 3,100 jobs in August putting unemployment at eight percent. However manufacturing was one of five industry categories that reported job declines, with 3,400 jobs lost. California manufacturing has lost 348,400 jobs since 12/00, which is devastating. Manufacturing plants are being moved to the third world and the cost of doing business continues to be too high, especially for smaller manufacturers. That segment produces 14% of the state’s GDP and employs 13% of the state’s private sector employees.
America saw 403,300 hi-tech jobs disappear between April 2001 and April 2004. Most were lost after the recession was officially over. San Francisco and San Jose, CA were the worst hit. The fall represents 18.8% of America’s total technology jobs. The best of our country is being ripped out by outsourcing. When are Americans going to wake up?
The rate of home appreciation continued to cool in August posting its smallest gain in more than a year. The Los Angeles County median price for all houses and condominiums sold for more, half for less – was $407,000 in August. That was up 20.4% from a year earlier, but only 0.2% above July’s $406,000 and 1.6% below June’s record of $414,000. August’s year-over-year rise was the smallest since June 2003. The 30-year fixed rate mortgage was 5.83%. But, like prices, the sales rate also is on the wane. August’s total was 9.8% below the same month a year earlier, and 97.3% below July’s 11,549.
New applications for home loans fell last week while refinancing demand rose as 30-year mortgage rates declined to 5.68%, which we predicted last week. That is down 0.11% from the previous week. The index for new financing applications rose a second week by 1.2% to 1,972.5 from 1,948.9. Mortgage activity for the week-ended 9/10 fell to 678.2 from 692.0. New loan requests for purchases fell 4.3% to 455.7 from 476.0.
Charles Schwab will pay a $350,000 fine for defrauding clients. As usual, no one goes to jail. All the government wants is the money.
The government ran a $41.14 billion deficit between receipts, taxes and other fees, and spending in August. The year-to-date shortfall is $436.91 billion with one month to go in the budget year.
The division between the "rich and the poor" in the US continues to widen says Richard Russell. While an accelerating number of Americans are losing their jobs to outsourcing, the luxury trade appears to be doing well, if not very well. The word "bling" is seen everywhere, bling referring to high-priced jewelry and accessories. America is headed for financial oblivion and it is not far off.
Russia continues to get Washington’s attention. They know George and the neocons are behind the insurgency in Chechnya, so Russia says they have the right to carry out pre-emptive strikes on militant bases abroad.
Finally, establishment economists are telling us that China could have a hard landing, which we are positive they will. That oil could go to $60-$70.00 a barrel over the next year. That the current account deficit could lead to a crash in the dollar. That the federal budget deficit is out of control. We face extended war in the Middle East and the ongoing threat of terrorism. These risks are self-enforcing and they are not going to disappear soon. Another 28% drop in the dollar’s value would definitely push oil prices higher and may cause oil to be sold in other currencies such as the euro. The bigger the budget deficits the bigger the trade deficits. That will lead to protectionism and further downward pressure on the dollar. The biggest problem is the current account deficit now at 5.7% of GDP or accumulating at $600 billion plus a year. We then have the problem of no employment growth due to free trade, globalization and outsourcing. Interest rates are rising and we are already $2.5 trillion in the red, which means interest payments on that debt are going to rise. This event guarantees a fall in the value of the dollar, which means higher gold and silver prices. If the Fed continues to delay the dollars inevitable fall, that fall will be much larger, must faster and much deeper than it would otherwise be. A dollar fall will push up inflation and interest rates could hit double digits as they did in 1970-1980 as gold prices soared to $850 an ounce and silver hit $50.00 an ounce. Only this time the problems such as debt are ten times worse. All those people with adjustable mortgage loans and large credit card debt could go bankrupt. Even Paul Volcker, Chief of the Fed in the 1980s says there is a 75% probability of a sharp fall in the dollar. Over the next 10 years the fiscal imbalance will be $5 trillion.
America is in for a very hard landing as is China. A deflation and depression that will last for a number of years. China’s problems would reinforce their dampening affects on world growth. Oil prices are headed much higher at present demand, lack of capacity and inventory, shortages of refining capacity, continued purchases by the US and China for Strategic Petroleum Reserves and world conflicts and terrorism. Never has a commodity ever had such forces working against it. The rise in oil from $35 to $45 a barrel costing $300 billion just cut 1% off of world GDP. Never has the world situation been more dire with the exception of world wars. Yes, our President can cut fiscal costs but the problem is it is too late. It is too late for the Fed policy changes. It is too late for oil producers to try to suppress prices. The irreparable damage has been done and the system has to be purged.
Any attempt to fix the problem will end up in depression. That is just the way it is. The point of no return was passed four years ago. Even if America and China stopped accumulating SPR’s and began to sell oil, it would only bring a temporary relief. We hear these Keynesians talk of jobs programs and cutting fiscal costs simultaneously, it can never happen, one is the antithesis of the other. If they said stop the wars, then the damage to the world economy would be much less, but they are not about to do that. There is too much profit involved. The Chinese renminbi (yuan) needs to be revalued upward by 25 to 50%. That is all well and good, but that means Chinese exports to the US will rise at least 25% and that is very inflationary. It would also, at the very least, throw the Chinese economy into recession. World monetary authorities are in a box. They created this monster in order to bring about world government and they are going to have to play their hand until the bitter end. There is no way back. That is why we see repeated higher inflation, higher interest rates, recession, depression, rising unemployment, more conflict throughout the world, a lower dollar, finally protectionism and higher gold and silver prices. All these problems add up to the best opportunity to buy gold and silver assets in history. If you are not in the game, you cannot survive financially and be a winner.
The Pentagon has notified Congress of an Israeli request for the construction of two infantry training bases and a storage and logistics base for a reserve armored division for Israel troops withdrawing from the West Bank. The cost is $350 million. This is part of the Wye River accords of 10/23/98.
Rathergate marches on. The most renowned forgery expert, Frank Abagnale, Jr., has weighed in on the memos of Rathergate. Abagnale, the subject of the Steven Spielberg movie "Catch Me If You Can," sent an e-mail to Neil Cavuto of Fox News that states, "If my forgeries had looked as bad as the CBS documents, the movie would have been entitled "Catch Me In Two Days."
California Rep Dana Rohrabacher (R-CA) has proposed that anyone who has been a citizen 20 years should be able to run for the office of president. Senator Orrin Hatch, (R-UT) has introduced similar legislation in the Senate, so that former Austrian Arnold Schwarzenegger can become president.
We predict that suppression of American citizens will become a growth industry. Homeland (Fatherland) Security will become the biggest government employer over the next 10 years. Many institutions of higher learning are already offering courses, degrees and certificates in emergency preparedness, counter terrorism and security. The best and brightest rather than studying computer technology, applied sciences and engineering, will be taught how to suppress their fellow countrymen, much the same as the Nazi Gestapo.
Our youth are led to believe that they are protecting their country. If that is so, why are our borders like sieves for massive illegal immigration and terrorists who flow into our country unchallenged? Instead of addressing the problem, the 9/11 commission wants to give us cradle-to-grave biometric material I.D. cards. They want the federal government to set standards for the issuance of birth certificates and drivers licenses making them secure by using biometric identifiers that measure unique physical characteristics, such as facial features, fingerprints, or iris scans in digital, numerical statements called algorithms. They also recommended the federalization of law enforcement. The report also called for more foreign aid and greater international entanglements, based on the premise that the homeland is the entire planet. If this doesn’t terrify you, it should.
The next six months to a year will be negatively affected by our two recent hurricanes, which is something few are talking about. There are insured and uninsured losses of at least $40 billion.
Teresa Heinz Kerry is concerned that supplies for hurricane victims in the Caribbean are too focused on clothing, whereas she felt water and electric generators were more important. She said, "Clothing is wonderful, but let them go naked for a while, at least the kids." It sounds like another would-be queen, Marie Antoinette, who said, let them eat cake. This is a sure way to lose your head.
As we predicted, the US military is running out of National Guard and reserve troops for the war on terrorism because of the existing limits on involuntary mobilizations. George and the neocons now want to make the 1.2 million guard and reserve subject to repeated involuntary mobilization as long as no single mobilization exceeds 24 months. 47,600 are now in Iraq, which is 1/3 of the 140,000 regular military on duty in the war zone. There are 66,000 in Afghanistan.
There is only 2.7% inflation says Washington, yet in recent weeks butter prices have tripled, fresh berries have quadrupled and rice is up 37%. Turkey, beef and a range of produce are up 15%. Red leaf lettuce is up 60%. Washington, are you listening?
The San Diego County median house price just hit $483,000 despite fewer sales, an $11,000 increase from July and a 24.2% increase from a year earlier. New house prices jumped $36,000 to a $511,000 median. One exception was the downtown condominium market, where the median price of new units fell 30% year-over-year. Sales were off a little from July and 6% from a year ago. Los Angeles sales were off 9.8% and their prices rose 20.4%, the lowest year-over-year increase in 16 months.
We are told Stanley Hilton, who was Bob Dole’s former Chief of Staff has launched a Federal lawsuit against top members of the Bush Administration in a case alleging that George W. Bush personally ordered 9/11 to take place. It was an operation that had been planned for over 35 years to gain political advantage and to push the neocons’ agenda. This is a taxpayer Class Action Civil lawsuit representing 400 members of the families of the many victims of the attacks as plaintiffs to claim the Bush Administration violated the Constitutional Rights of the victims of 9/11. The suit will be launched under the Fraudulent Claims Act and the Rico Statute for being a corrupt entity. Hilton claims the 19 hijackers were actually FBI/CIA double agents who had originally been brought into the US to spy on Arab groups. He also said al Qaeda was created by the CIA. We have contended both ever since the 9/11 event. He has proof fully documented. Hilton believes, as we have contended, the Patriot Acts I and II were designed to prevent the kind of political dissent over the government’s complicity in these events that the very lawsuit Hilton represents. There will be no dissent as you just saw when our government just pulled anyone off the street and put them in holding pens and jails, and the local police went right along with the program. We believe the neocons plans, as we explained in delaying or canceling of the November 2 election in case George W. Bush was close or behind, are to continue to launch more terrorist events or attacks as needed in order to further their plans and to obscure what they had already done. If these people are not stopped, exposed, and punished, God help our country.
Following is an interview by the very famous Alex Jones with Stanley Hilton in regards to this subject. Interview of Stanley Hilton, attorney for 9/11 taxpayers‚ lawsuit Alex Jones Radio Show www.prisonplanet.com <http://www.prisonplanet.com> www.infowars.com <http://www.infowars.com>
September 10, 2004
Transcription by 'RatCat'
The week seemed to confirm the resiliency of "global reflation," with prices of things real and financial biased upward (inflating). As for U.S. equities, the Dow dipped slightly, while the S&P500 gained less than 0.5%. The Transports added 1%, increasing y-t-d gains to 8.3%. The Utilities added 0.4%, with 2004 gains of 8.5%. The Morgan Stanley Cyclical index was about unchanged, while the Morgan Stanley Consumer index declined 1%. The broader market remains resilient, with the small cap Russell 2000 and S&P400 Mid-cap indices up about 0.5% (y-t-d about 3%). The NASDAQ100 gained 1%, while the Morgan Stanley High Tech index rose 1.3%. The Street.com Internet index gained 2%, increasing y-t-d gains to 9.3%. The NASDAQ Telecommunications index declined 1.7% for the week. The Biotechs surged 5%, increasing 2004 gains to 9.5%. The financial stocks were mixed, with the Broker/Dealers down 1% and the Banks slightly positive. With bullion up $2.90 to $405.65, the HUI gold index gained 1%.
Despite today’s setback, the Treasury market ("squeeze") rally continued this week. For the week, 2-year Treasury yields were about unchanged at 2.48%. Five-year Treasury yields were down 5 basis points to 3.45%. Ten-year yields dropped 6 basis points to 4.13% to the lowest yields since early April. Long-bond yields ended the week at below 5% at 4.92%, down 6 basis points on the week. Benchmark Fannie Mae MBS yields dipped 4 basis points, underperforming Treasuries. The spread (to 10-year Treasuries) on Fannie’s 4 3/8% 2013 note narrowed 1.5 to 27.5, and the spread on Freddie’s 4 ½ 2013 note narrowed 2.5 to 25.5. The 10-year dollar swap spread declined 1.75 to 43.5, the narrowest level in almost 5 months. Corporate bonds remain impressive, especially in the face of this week’s huge issuance. The implied yield on 3-month December Eurodollars added 0.5 basis points to 2.215%.
Corporate debt issuance surged to $21.7 billion this week, the strongest sales since March. Investment grade issuers included GE Capital $2 billion, Berkshire Hathaway $1.1 billion, Prudential $1 billion, Washington Mutual $1 billion, First Data $1 billion, RBS Capital Trust $1 billion, KFW $1 billion, Home Depot $1 billion, Vanguard Health $790 million, Clear Channel $750 million, Allstate $550 million, TM Global $500 million, JPMorgan $375 million, Southwest Air $350 million, Connecticut Light & Power $280 million, and DR Horton $250 million.
Junk bond funds reported inflows of $258 million for the week (from AMG), with four-week inflows at an impressive $919 million. Issuers included Ainsworth Lumber $450 million, Oil Casualty $200 million, CNS Islands (special-purpose vehicle) $200 million, and Fisher Communication $150 million.
Convert issuance included Sepracor $500 million and Vitesse Semiconductor $90 million.
Foreign dollar debt issuers included Republic of Korea $1 billion, Republic of Colombia $500 million, El Salvador Republic $285 million, and Banco Do Brazil $300 million.
Japanese 10-year JGB yields dipped less than one basis point to 1.504%. It was generally a quite impressive week for "emerging" bonds. Brazilian benchmark bond yields sank 45 basis points to 8.79%. Mexican govt. yields ended the week at 5.25, down 14 basis points. Russian 10-year Eurobond yields declined 2 basis points to 6.20%.
Freddie Mac posted 30-year fixed mortgage rates dropped 8 basis points this week to 5.75%, the lowest rates since the first week of April. Fifteen-year fixed mortgage rates declined 9 basis points to 5.13%, with rates now down 49 basis points in 11 weeks. One-year adjustable-rate mortgages could be had at 4.03%, down 3 basis points. The Mortgage Bankers Association Purchase application index dipped 4.3% last week. The holiday week again this week distorts year-over-year comparisons. Refi applications added 1.2%. The average Purchase mortgage was for $218,300, and the average ARM was at $298,200.ARMs accounted for 33.0% of total applications last week.
Broad money supply (M3) declined $7.9 billion (week of September 6). Year-to-date (36 weeks), broad money is up $458.5 billion, or 7.5% annualized. For the week, Currency added $2.1 billion. Demand & Checkable Deposits sank $31.3 billion. Savings Deposits surged $37.2 billion. Saving Deposits have expanded $287.4 billion so far this year (13.1% annualized). Small Denominated Deposits added $1.2 billion. Retail Money Fund deposits declined $4.7 billion, while Institutional Money Fund deposits dipped $0.9 billion. Large Denominated Deposits declined $2.4 billion (up 26.5% annualized y-t-d). Repurchase Agreements dropped $11.2 billion, while Eurodollar deposits added $2.1 billion.
Major currencies remain choppy and range-bound (for now). The dollar index posted a gain of about 0.5%. The "emerging" currencies (at the "periphery") continue to perform very well. The Indonesian rupiah gained 2.6% this week, the Uruguay peso 2%, Brazilian real 1.3%, Mexican peso 1.2%, and Chilean peso 1.1%. On the losing end, the Turkish lira declined 1.6% and the Norwegian krone 1.4%.
For the week, the CRB index rose 1.0% (y-t-d gains of 7.5%). October crude was up $2.78 to $45.59, a near four-week high. The Goldman Sachs Commodities index jumped 4.6% this week, increasing y-t-d gains to 20.5%.
Los Angeles Times quoted: "Los Angeles County housing prices continued their more than yearlong run of double-digit increases last month, with the median price paid for all homes rising 20.4% to $407,000 from a year ago. To be sure, the pace of appreciation has slowed from the peak reached earlier this year… August also saw 10,710 sales of new and existing houses and condominiums. That made August the sixth straight month that more than 10,000 transactions occurred…"
San Francisco Chronicle quoted: "The Bay Area housing market re-entered the record books in August as the median price jumped to $520,000 and sales for the month hit their highest level in at least 16 years… Defying long-held expectations that demand would taper off, the boom continues apace, reigniting debate about whether the Bay Area housing market is reaching unstable heights… The median price for a single-family home, as opposed to the overall median, was $549,000…"
Dow Jones reported, "A new report finds U.S. multinational corporations socked away profits of $149 billion in 18 tax havens in 2002, nearly double the level three years earlier. Tax Notes, an industry magazine, said in a report Monday the money is being funneled to Bermuda, Ireland, Luxembourg and Singapore instead of the U.S. Treasury. ‘That means those 18 tax havens were home to 58% of the foreign profits of those multinationals - a figure that far exceeds the share of economic activity that multinationals conduct in those low-tax countries," according to the report by Tax Notes correspondent Martin Sullivan. ‘Subsidiaries of U.S. corporations now generate profits mainly in tax havens rather than in the locations in which they conduct most of their business,’ the report said."
AP reported: "Fraud is running rampant in the nation’s mortgage industry, with nearly three times as many reports of suspicious activity so far this year compared with 2001, a top FBI official said Friday. ‘It has the potential to be an epidemic,’ said Chris Swecker, FBI assistant director for criminal investigations. Through the first nine months of 2004, mortgage companies and banks have reported more than 12,100 instances of suspicious activity compared with only 4,220 in 2001… Law enforcement officials say the lending and refinancing boom that accompanied record low interest rates in the past few years is a key reason for the increased fraud. The FBI has identified several ‘hot spots’ around the country where fraud is especially prevalent, including Florida, California, Nevada, Michigan, Missouri and Illinois. ‘You can find this anywhere in the country,’ Swecker told reporters. One common mortgage fraud scheme is ‘property flipping,’ in which property is purchased, appraised fraudulently at a much higher price and then quickly sold."
California ARM lender Golden West Financial enjoyed another record month of originations ($4.87bn) during August. Loans expanded at a 37% rate during the month to $94.5 billion, with loans growing at a 33% pace during the past five months. On the liability side, Deposits were up $3.48 billion over the past five months (17.6% ann.) to $50.9 billion and borrowings from the FHLB were up $7.0 billion (67% ann.) to $31.78 billion. Over the past year, Loans have expanded 34%, financed by 11% deposit growth and a 66% increase in FHLB advances.
The Fed yesterday released the second quarter Z.1 "Flow of Funds" report. Total Credit Market Borrowings (non-financial and financial) increased at a $2.59 Trillion seasonally-adjusted annualized rate (22% of GDP) to $35.18 Trillion. First-half total net additional borrowings were at a $2.67 Trillion annual pace, compared to the nineties yearly average of $1.28 Trillion. While second quarter borrowings were down slightly from the first quarter, they compare to total borrowings of $1.70 Trillion during 2000, $1.97 Trillion during 2001, $2.16 Trillion during 2002, and $2.64 Trillion during 2003. After beginning 1998 at 250%, Total Credit Market borrowings have increased to 302% of GDP.
Total Non-financial Credit expanded at a 7.7% annualized rate during the second quarter, down from the first quarter’s 9.1% rate. Still, one has to go all the way back to 1988 for a year of stronger non-financial Credit expansion (9.1%). And it is worth noting that non-financial growth averaged 5.4% during the last decade. The Federal Government expanded debt at a 10.7% (seasonally-adjusted) pace during the quarter, with first-half borrowings expanding at an 11.5% rate. We must go back to the deficits from the early-nineties (recession and S&L bailout) to find anything comparable. Federal debt has expanded 22% over the past 24 months to $4.27 Trillion. State & Local governments borrowed at a 7.2% rate during the first-half (4.6% during the 2nd quarter).
The Household sector expanded borrowings at a 9.5% annual rate during the quarter to $9.74 Trillion, with debt expanding at a 10.5% pace during the first-half. Total Household Borrowings are up an eye-opening 22% (matching federal debt growth) over the past 24 months. Meantime, Total Corporate borrowings expanded at a 4.4% rate during the quarter (4.6% first-half pace), with non-financial Corporate debt expanding at a 2.9% rate.
It is worth noting that Federal and Household borrowings have over the past two years increased a combined $2.50 Trillion, while non-financial Corporate debt has risen $287 billion. During the decade of the nineties, Federal and Household debt growth combined for an average annual increase of $454 billion (debt growth that took more than 5 yrs during the nineties now takes 2 yrs). There is, then, no mystery surrounding the fountainhead for robust corporate cash flows and profits. But I would warn against extrapolating the effects of historic federal and household sector debt booms too far into the future.
The Great Mortgage Finance Bubble certainly runs unabated. Total Mortgage Debt expanded by $283.4 billion during the quarter ($1.076TN seasonally-adjusted, annualized) to $9.85 Trillion. Total annual Mortgage debt growth averaged $276 billion during the nineties (what used to take a year now is done in a quarter). The first quarter’s expansion was second only to last year’s second quarter, with a growth rate of 11.8%. Total Mortgage Credit was up $1.03 Trillion over the past year (12.0%), $1.92 Trillion over two years (24%), and $4.82 Trillion over seven years (97%). Household Mortgage borrowings expanded at an 11.9% rate during the quarter to $7.57 Trillion (up 12.3% from a year ago). Home Equity borrowings (a component of Household mortgage debt) expanded by $53.6 billion, or 30% annualized, during the quarter to $766.2 billion (up 23% y-o-y). Commercial Mortgage Borrowing increased at an 11.8% rate to $1.61 Trillion. Total Mortgage Debt has inflated from 64% of GDP at the start of 1998 to 86% by the end of this year's second quarter.
The U.S. financial sector increased borrowings at a 7.9% rate during the first quarter to $11.47 Trillion. Financial sector debt has now doubled in size since the beginning of 1998. It is fascinating to follow the evolution of the financing mechanisms fueling the Credit Bubble. Years of asset inflation (securities and real estate) was fueled in large part by spectacular GSE and money market fund expansion. Yet, today, these liquidity sources have been supplanted by aggressive Bank Credit expansion (real estate and securities), ballooning foreign central bank holdings, and the mushrooming "repo" (securities financing) market. Asset inflation begets myriad institutions and individuals that aggressively seek their share of easy financial "profits."
Commercial Bank Total Assets expanded at a 7.8% rate during the quarter to $8.2 Trillion. Bank Assets were up 8.2% from a year earlier. Bank Loans expanded at a blistering 10.9% rate during the quarter, with Loans growing at an 8.9% rate during the first-half to $4.6 Trillion. For comparison, Bank Loans expanded by 5.6% annually during 2002 and 2003. Of course, mortgage lending is leading the way. Total Bank Mortgage assets expanded at a notable 18.3% rate during the quarter to $2.44 Trillion, with mortgage loans increasing at a 16% pace during the first-half. Total Bank Credit expanded at a 10.7% rate during the first half to $6.53 Trillion, with Government Securities holdings expanding at a 21% rate to $1.25 Trillion.
Examining Bank liabilities, total deposits (checkable, savings and time) expanded at an 11.4% rate during the quarter to $4.8 Trillion. Total deposits were up 8.3% y-o-y and 17% over two years. Fed Funds & Repurchase Agreements (net) expanded at a 16% rate during the quarter to $1.01 Trillion, with two-year growth of 32%. With cheap deposit and repo finance abundant, Bank Credit Market Borrowing slowed sharply to a 4% growth rate during the quarter to $710 billion, with y-o-y gains of 11.1% (up 23.6% in 2-yrs).
There continue to be interesting developments throughout "Structured Finance." And keep in mind that, with buoyant bank lending and deposit growth, there is today somewhat less reliance on the (non-ABS) securitization marketplace. GSE assets expanded at a 6.4% rate during the quarter to $2.83 Trillion, following two quarters of uncharacteristically slow growth (about 2%). GSE assets were up 6.9% y-o-y and were up 158% since the beginning of 1998. FHLB "Other Loans and Advances" expanded at an extraordinary 32% rate during the quarter to $558.1 billion. Issuance of GSE mortgage-backeds remained slow during the quarter (1.5%), with y-o-y growth of 7% to $3.52 Trillion. GSE MBS is, however, up 93% since the beginning of 1998.
The hot game has become "non-conforming" (higher-yielding) mortgages securitized in the ABS (asset-backed securities) marketplace. Non-GSE mortgage ABS expanded at an unprecedented seasonally-adjusted and annualized pace of $326.2 billion (more than Total Mortgage borrowings increased during any year prior to 1998). For comparison, mortgage loans comprised $80.8 billion of ABS issues during 1999, $68.7 billion during 2000, $116.8 billion during 2001, $90.1 billion during 2002, and $184.5 billion last year. In total, outstanding ABS expanded at a 12.8% rate during the quarter to $2.49 Trillion, up sharply from the first-quarter’s 3.9% growth. Total ABS was up 8.1% y-o-y and a stunning 152% since the beginning of 1998.
Other financial sector developments are worth noting. Federal Reserve assets expanded at a 10% rate during the quarter to $807.8 billion, increasing 12-month gains to 5.0%. Savings Institutions (ARM lenders) expanded assets at a 9.3% rate during the quarter to $1.55 Trillion, with assets up 11% over one year. REIT assets expanded at a 30% annualized rate during the quarter to $143 billion, with y-o-y gains of 42%. Credit Unions expanded assets at a 5.4% rate during the quarter to $643 billion (up 5.5% y-o-y). Finance Company assets declined at a 4.1% rate to $1.386 Trillion, although assets were up 11% during the past 12 months.
The disintermediation from Money Market Funds (MMF) continues. MMF assets declined at a 12% rate during the quarter to $1.912 Trillion, and were down $208.5 billion during the past year. But keep in mind that many institutions have decided to invest in money market instruments (short-term Treasuries, CP, ABS, agency debt, and "repos") directly rather than through a fund. And while the nature of the intermediation of this Credit expansion/inflation would tend to reduce the growth rate of the monetary aggregates, it would not at all impinge marketplace liquidity.
The Broker/Dealer sector balance sheet remains quite "fluid." After the first-quarter’s $115.8 billion surge to $1.676 Trillion (29% annualized growth), Broker/Dealer assets declined $53.3 billion during the second quarter (as interest rates spiked). This drop was almost completely explained by Treasury security sales. The Liability side saw an $87 billion reduction in Security RP (repo) to $408.3 billion, while Due to Affiliates increased by $46.1 billion (30% annualized) to $651.7 billion. Over the past year, Broker/Dealer assets have increased $163.4 billion, or 10.8%.
Funding Corp assets expanded at a 9% rate during the quarter to $1.242 Trillion, with y-o-y gains of 8.6%. Funding Corp. "Investment in Brokers and Dealers" rose $37.5 billion (38% annualized) to $428.3 billion. After two big quarters, total Federal Funds and Security Repurchase Agreements declined at an 11% rate to $1.585 Trillion. This reduced the 12-month increase to $144.3 billion, or 10.0%.
Rest of World (ROW) – the foreign sector – remains a fascinating and challenging area for analysis. Our foreign Creditors’ "Net Acquisition of Financial Assets" dipped slightly to a seasonally-adjusted annualized $956.4 billion during the quarter. Holdings have expanded at a 16% pace over the previous three quarters and were up $994.2 billion, or 12.7%, over the past year. "Official" holdings of Treasuries and Agencies expanded at a 21% rate during the quarter to $1.33 Trillion (ROW Treasury holdings increased more than Treasury issuance). "Official" holdings were up $361.6 billion, or 37%, over the past year. Holdings of "Security Repo" expanded at a 16% pace during the quarter to $552 billion, an increase of 51% from one year ago and up from $91 billion at the end of 2000. Foreign holdings of U.S. corporate debt (including ABS) expanded at a 13.7% rate during the quarter to $1.61 Trillion, with a y-o-y gain of 16%. Foreign Direct Investment increased $34.5 billion during the quarter, or 8.9% annualized, to $1.60 Trillion (up 3.3% over one year).
Confusing the issue, there were some major revisions to ROW U.S. liabilities (foreign borrowings in the U.S.). For example, last quarter’s Z.1. report had ROW Total Liabilities of $3.255 Trillion that one could net against the $8.427 Trillion of Total U.S. Financial Assets held, with net U.S. holdings of $5.17 Trillion. Yesterday’s release revised Q1 Total Liabilities a mere $905 billion higher to $4.160 Trillion. And while Foreign Assets were also revised somewhat higher, last quarter’s net foreign holdings has been revised down to $4.49 Trillion. Second quarter net foreign holdings, then, were up $658 billion, or 17%, from one year ago to $4.55 Trillion.
The Household Sector (including non-profits) remains a fruitful venue for Credit Bubble analytical insight. Household Asset holdings increased at a 6.5% rate during the quarter, while Household Liabilities expanded at a 10.8% rate. Imminent trouble? Well, it is critical to appreciate that asset values continue to inflate by nominal amounts significantly above surging liabilities – demonstrating the powerful self-reinforcing nature of Credit and asset inflations.
During the second quarter, the value of Household asset holdings increased by $900.4 billion to a record $55.97 Trillion. Meanwhile, Liabilities increased by less than one third of this amount at $263.4 billion, to end the quarter at $10.16 Trillion. Over the past year, Household assets increased $5.50 Trillion, or 10.8%, while Liabilities expanded $857 billion, or 9.3%. So despite record borrowings, Household Net Worth increased $637 billion during the quarter to a record $45.91 Trillion. Net Worth was up $4.59 Trillion over the past year, or 11.1%. Household Financial Asset holdings were up $369 billion (4.2% ann.) to $35.2 Trillion during the quarter, with 12-month gains of $3.48 Trillion (11%). Household Real Estate holdings increased by $467 billion during the quarter, or 11.2%, to $17.14 Trillion and were up $1.77 Trillion, or 11.5% over the past year. Since the beginning of 1998, Household real estate holdings have increased 76%, as inflating nominal market values more than doubled the increase in mortgage debt.
But the bottom line is that Household debt has increased more than 60% since the beginning of 1999, and this historic borrowing surge has actually accelerated of late. And while there continues to be a debate as to whether the consumer is "tapped out," it is my view that this line of analysis misses the point. During this fateful Mortgage Finance Bubble "blow-off" period, extraordinary gains in both asset values and liquidity lend great support to consumer spending. I continue to expect consumer retrenchment to follow some type of negative financial development, rather than precipitating one.
How long with the Rest of World accumulate U.S. financial instruments at a nearly $1 Trillion annual pace? And while they are acquiring the vast majority of Treasuries issued, what types of financial and economic distortions are nurtured by artificially low yields and rampant global liquidity excesses? Does the U.S. economy’s vulnerability to inflated Household Sector New Worth become only more precarious by the year? Are market participants fooling themselves with notions that tame U.S. and global inflation lies behind the recent decline in yields? Is the Treasury market in the midst of a major "short-squeeze" and hedging/derivatives dislocation that now leaves the marketplace and the highly-leveraged U.S. financial sector acutely vulnerable to an abrupt reversal? Well, the "flow of funds" reports quite effectively illuminate the ongoing Credit inflation and financial sector leveraging that have fostered unparalleled financial fragility and specific interest-rate and currency market vulnerability.
By Theodore Butler
Wednesday, September 15, 2004
The market structure, as defined this week by the COTs, continues to explain the short-term movements in gold and silver. As usual, the recent decline in prices has been caused by technical hedge fund liquidation. This should be obvious to everyone, including the silver miners. The 80-cent selloff in silver was telegraphed and orchestrated by the dealers and tech funds, yet the miners continue to look the other way as the manipulation plays out.
The good news is that the tech fund liquidation may have run its course in silver. If true, the risk is low once again. Dimes to the downside, dollars to the upside.
The big money in silver will accrue on a long-term basis, and that should be the main focus for just about everyone. The long term is the easiest way for the average investor to participate.
How many people have you known who can consistently day-trade any market successfully? How many people do you know that have become rich with short-term trading? Not many.
How many people do you know of that became wealthy over a long period by successfully sitting on a stock or piece of real estate? I know many. Look at any list of the ultra-rich and those who made it as a result of investments are invariably long-term investors. Long-term is the key.
But deciding that your chances for success are better with a long-term approach is only the start. That's when the hard work begins. You are required to look years ahead, and that's no easy task in a rapidly changing world.
Most people gravitate toward common stocks or real estate for long-term growth. Over the past couple of decades, stocks and real estate have been good places to be. But what matters is not what happened in the past 10 years but what happens in the next 10.
I don't know if stocks and real estate will be good long-term investments. Maybe they will be, but my sense is they won't. The best time to have invested in stocks and real estate is after they have just come out a depressed market. That's when you get the most bang for your buck. Buying after a long period of underperformance runs counter to popular opinion, which has everyone looking for what's hot.
The problem is that by the time the masses have identified the winners, it may be too late, because they're already overvalued.
Logic and analysis differ from popular opinion. Logic suggests that under-valuation and great future prospects are most important. Such a combination is rare, obviously. An asset with great future prospects and still priced cheaply doesn't come along everyday. That is what makes silver the premier investment opportunity of the next decade. It's an asset that's coming off a long period of poor price performance that has failed to accurately reflect the future.
Nothwithstanding the price action of the past year, the price performance of silver for the past 20 years has been terrible. It's not so much that it went down consistently; it's just that it never went up. It seemed to hug the $5 mark for years. Because of this dismal price action, most people tend to avoid silver. Many don't recognize the potential of silver because active forces have kept the price suppressed. But contrary to popular opinion, this poor price performance creates the undervalued component necessary for a great long-term opportunity.
There is an angle to this poor price history that is so unusual that it enhances the overall story. I'm referring to the continuous allegations I have made that the price of silver has been manipulated, principally via leasing and naked short selling on the COMEX. While it is up to the reader to decide if my allegations are legitimate, at least my claims provide a plausible explanation for how silver could stay so low so long.
What about silver's prospects?
The case could not be clearer. When there is more demand than supply, prices must rise. Whenever the production of a commodity can't satisfy consumption, forcing above-ground inventories to be consumed, prices must rise. Because the silver price has been defying the law of supply and demand for such a long time does not invalidate the law. Nothing can invalidate this primal law of the physical world.
What has happened is that the law of supply and demand has been overridden by leasing. But eventually lease supplies will be exhausted and the law of supply and demand will reassert itself with a vengeance.
Look at the public record. Every measure of reported silver inventories shows dramatic long-term depletion. Every measure of world demand for silver indicates strong and growing demand for as far as the eye can see. Almost every day we read of important new applications for silver. When confronted with specific allegations of manipulation, some of the perpetrators (AIG) bowed out of the market. Others, (CFTC and the COMEX) offer flimsy responses. These weak responses are not the necessary preconditions in which to expect further price suppression. These are the conditions that suggest a price explosion.
Silver has it all -- a super-depressed price and a rock-solid future. Maybe common stocks and real estate will do well in the future, but no one can call them cheap. Silver is the same price it was 22 years ago and down almost 90 percent from its historic highs. Stocks and real estate are many times their prices back then and much closer to historic highs than lows. Stocks and real estate rank high in popular opinion due to their past relative performance, while silver does not. That's good only if you value popular opinion over logic.
A good comparison can be made by thinking of silver as a common stock. If I could show you a common stock that sold for around $7 a share that I could guarantee could never go bankrupt or become valueless and not only was likely to hold its current value but potentially increase many times, wouldn't you want to hold that stock in a long-term portfolio?
If I could point out an available acre of raw land for around $7000 (1,000 silver ounces) where similar land to buy was disappearing (inventories being consumed), wouldn't you rush to buy it? Wouldn't you look to put such a stock or acre away for the long term and continue to acquire as much as you could?
It's my firm conviction that real silver will be the very best investment for the long term. There will be some silver mining stocks that will undoubtedly outperform real silver, at least in the early stages of the silver bull market. But at some point, I'm convinced, as the price of silver climbs to very high levels, the silver mining stocks won't keep up. They will discount the high price of silver and start to anticipate lower prices. The price of real silver can't possibly discount itself, and, in fact, I believe a very large premium will develop in real silver compared to the futures price.
Conditions can and do change at mining companies with regard to share dilution, hedging, and management behavior. These stocks can fall for reasons unrelated to the silver market. A foreign government recently told some gold miners to cease operations and these stocks plummeted. A lawsuit over a mining claim hurt the share price of another silver company.
The main reason I confine my public recommendation to real silver, on a fully paid basis, is because I know it can't really hurt anyone. It is the form of silver most compatible with long-term investment. Compared to mining stocks or paper contracts, there can be no nasty surprises with real silver.
Owning the real thing will carry you through the extreme and emotional price violence in the years ahead. Physical silver will carry you to the long-term finish line. With real silver you will avoid experiencing unexpected or unpleasant surprises. It's real silver that you can never have too much of. Real silver is the ideal asset to grow in value over the long term. That's how fortunes are made.
Hewett and Associates found that average pay increased for Boston’s salaried employees remained low at 3.4% in 2004, and their annual pay will increase 0.4% to 3.8% in 2005. Nationally, the average pay increase in 2004 was 3.4%. These figures are general throughout the nation. The wage gains hardly compensate for 4% official inflation never mind the real inflation rate of 9.5%. It is no wonder workers are living off credit cards. For the week ended 9/8/04, funds took in $1.5 billion adding to inflows the previous week. International funds took in $200 million versus outflows of $100 million the previous week. Bond funds had outflows of $700 million to add to the $500 million in outflows the previous week. Nationwide the average price of regular unleaded gasoline rose $.02 last week to $1.89 a gallon.
Retail gasoline hit a four-month low of $1.85 a gallon as oil prices again rose to $45.00 a barrel. There is no conceivable way gasoline prices can normally be so low with such high oil prices. Refiners have to be deliberately holding prices down going into the election.
If the Fed raises interest rates again next week, it is a certainty it is for reasons they will not discuss with the public. Retail sales in August fell 0.3%, the third decline in five months and a reason to leave rates unchanged or lower them. Lower them where, to zero? July sales were up 0.8%. August oil to sales fell 1.9% and they are buried in inventory. Excluding autos, sales rose 0.2%.
The supply of homes for sale between Los Angeles and San Diego has doubled to a 23-week’s supply at the end of August compared with a nine-week's supply in 2003. Sales at major retailers increased 3% on a year-to-year basis with discount stores strongest. This is about the same as the previous weeks 2.9%. Net sales though are only up 1%.
July inventories were up 0.9%. The current account gap widened to a record $166.18 billion. The gap in the first quarter of the year was revised upward to $149.16 billion from $144.88 billion. Sooner or later, some central bank is going to cut and run. The minute they stop buying, never mind selling, the bottom will fall out. August industrial production was up 0.1%. Capacity utilization was virtually unchanged at 77.3%, up from 77.1%. Manufacturing in New York State in August rose to 28.3 from 13.2 in July, the biggest rise since June 2003. Forty-three percent of the New York manufacturers reported an increase in orders up from 34% in August. The index of unfilled orders rose to 12.5 from minus 4.6 the previous month. The index of expected prices paid six months from now increased to 61.5 from 53.2 in August. Inventories improved to minus 0.8 this month from minus 1.6 in August. The index of shipments, or sales, rose to 33.4 this month from 12.5 in August. BankOne eliminated 100 jobs this past week at its downtown Milwaukee office. Senate panel has voted to reverse rules on Bush’s cuts in overtime pay. The August CPI was up 0.1%. The government expects us to believe that inflation is only up 2.7% over the past year. The NYC Council will equip 1,200school buildings with cameras. Last year they had 1,365 major crimes, such as grand larcenies, assaults and rape, plus graffiti and vandalism was up 11%. The cameras will cost $105 million, or $87,000 per school.
Cooper Tools Division of Cooper Industries will lay off 130 of 265 employees from its Dayton, Ohio operations.
New claims for unemployment benefits rose 16,000 to 333,000. Initial claims in Florida rose 5,800.
It looks like we will have a record 11 billion bushels of corn. That means you should not be long corn futures.
We are receiving some unbelievable soybean yields. The USDA’s average national yield reads 38.5 bushel an acre. We believe it is higher. Do not stay long beans.
China may soon begin filling a strategic petroleum reserve as demand at home surges and concerns mount over global supply disruptions. The initial goal is a 20-day supply before expanding the SPR. The facility is in the process of being built presently.
The UN Security Council is debating an embargo on Sudan’s oil exports. The US made the draft resolution. China and India are against it as Sudan supplies them while Sudan commits massive genocide.
Gasoline stocks were down 1.6M/B last week and crude stocks were down 1.7 million barrels.
OPEC will raise production 1 million barrels a day – what a joke and it’s all heavy oil.
Chile’s state-owned Codelco says ore grades are falling dramatically, which means the company will have to use biotechnology to stay alive. Even with current technology, the material needs a copper content of 0.3% to make it worthwhile to process.
September 10 crude oil stocks fell 7.1 M/B to 278.6 M/B. Gasoline inventories fell 1.6 M/B to 202.5 million and distillate inventories, which include heating oil, rose by 1.7 M/B to 128.3 million, so says the DOE.
GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS
If we could all be so lucky. A man walking his dog found an Anglo-Saxon gold penny worth $270,000. The coin was struck during the reign of King Coenwulf between 796 and 821 on the banks of the river Lvel in Bedfordshire. This is the first coin of this type found with King Coenwulf’s portrait. The moral of the story is walk your dog during the day and keep your eyes peeled.
As we predicted the Bank of Italy says it has no plans to sell its gold reserves.
Last week we reported on the aspirations of the Chinese to get the average Chinese into gold in order to dump dollars and to bring some sanity to its mega-overheated economy and mega-inflation. The Chinese government could very well have been accumulating gold over the past several months, getting rid of dollars in the process, for the eventuality of being a major player in the gold market. Our sources say they have been very big buyers in the New York market, especially on openings when the cartel tries to drive the gold price down almost every day. The Asian markets are too thin to buy in size, so they have to buy in New York. We will call them the Shanghai Gold Buyers.
The Swiss are about finished with their long-term gold sales. There is a 1500 to 1800 ton shortfall of production to demand every year and that will grow larger as production falters and investment buying surges in the years ahead. The Dutch sale of 100 tons is a pittance. Where will the 1500 to 1800 tons in shortfall come from in the future? It looks like those in the Washington Agreement cannot even muster 500 tons for sale annually. They may not have the gold or they may not want to lose any more. If the gold suppression conspiracy collapses, which we believe it will, they might end up getting hung or worse for what they have done. They have squandered their citizens’ birthrights. There is not one central bank, and those banks have sold or leased at least 22,000 of 32,000 official tons, which can cover their short, sold or lease position without an everyman for himself episode. Wait until the new BIS gold derivatives positions are released. They will be a shocker and they will make the Sprott Asset Management Report look very good. They will verify what we have been saying for years. The lack of honesty in reporting what is really going on in the gold markets by the World Gold Council, Gold Fields Minerals Services and Mineweb have done a terrible disservice to the gold shareholders and owners of bullion and coins and they all should be run out of business and at the least, discredited. All of them and the US government have tried to shut us up, but they have been unsuccessful and they will continue to be unsuccessful in hiding the truth from investors as fronts for the central banks.
Gold producer Cambior expects its gold production will decrease over the next four years and that it will cut 130 jobs in Quebec.
The morons at GFMS tell us that gold prices in the second half of the year will average $407. More disinformation to suppress gold prices. They also said mine production fell 84 tons or 7% in the first half of the year. Cash costs rose 13% to $246.00 an ounce. They attribute it to lower output. We attribute it to earlier high grading by hedgers and others. Official sector sales fell 30% to just over 200 tons, but they fail to address leasing and derivatives. They say old gold scrap fell 14% to 424 tons. Jewelry sales rose 6% to over 1,300 tons in spite of higher prices. Hedgers supposedly de-hedged over 200 tons. Bar hoarding rose 66% to 133 tons, most of which took place in Asia. Coin fabrication stayed at 55 tons and was down from 588 tons recorded for the second half of 2003. That comparison is idiotic inasmuch as we have three months to go yet this year. You can take all of this with a grain of salt because we do not believe their figures.
Russia has put off a tender for rights to tap a huge Siberian gold deposit until 2005 and alarmed western firms by threatening to limit foreign participation in such tenders. President Putin is forcing foreign interests to take on Russian partners or they won’t get in.
Rumor has it that China took delivery of 1,000 tons of gold last week.
After rioting and bloodshed at Newmont’s Minera Yamacocha, the company has begun to scale back operations. The protestors want drilling on the Cerro Quilish gold deposit stopped because they believe both operations are polluting their water. Cerro Quilish contains 3.7 million ounces of proven gold reserves. Local residents say the mountain is sacred and supplies life giving water. They want the exploration permit annulled. We believe the situation will eventually be worked out.
Since the ANC took over South Africa ten years ago, the mining sector has seen serious under-investment in infrastructure. Capital investment in rails is off 75% and in ports 65%. As long as black empowerment and the forced inclusion of black investors are pushed, the mining industry will continue its slide into oblivion.
In 2040, there will be as many retirees as workers in Spain and Italy, Europe’s fastest aging countries. This translates into sharply rising costs for pay-as-you-go retirement programs, which is simply un-fundable and un-payable. Benefits for the elderly will reach an average of 25% of GDP, double today’s level. In France, they will reach 29% and in Italy and Spain over 30%. Obviously there is no sustainability in any of the world’s retirement systems. In 2040, 35% of developed country inhabitants will be of retirement age. Currently the EU spends 15% of GDP on benefits to the elderly. That will be 30% in 2040. That means France will spend 62% of GDP and the rest of Europe about 50%. Taxes for those working would have to be 80 to 90%. In the US, the percentage would be 44%. The retirement situation is simply untenable because politicians have squandered all the taxes collected for retirement. We believe all governments should begin by moving retirement age to 72 years old for those who are not disabled. Children and grandchildren will have to assist the elderly as they have done for thousands of years. If they do not they will have to be assisted by charity.
If anything, President Vladimir Putin is not dumb. He is using the British and US inspired, supplied and financial Chechen insurrection to call for measures limiting the role of smaller opposition parties, barring independent politicians from running for the national governors who are now elected. The changes are likely to be approved before the end of the year by Kremlin loyalists who control Russia’s parliament. The changes will do little to stop terrorism and a great deal to reshape the political system and give the central government dramatically increased powers, just as Homeland Security and Patriot Acts I and II did for George and the neocons in the US. As in the US, Mr. Putin’s changes are unconstitutional but neither he nor Mr. Bush care about that. They do as they please. Putin also wants the State Duma, the lower house of parliament to be elected solely on a proportional party-list basis. Only parties with more than 7% of the vote would get into the parliament. Germany has a similar law of 5%. This limits competition to two or three parties usually, not undemocratic, but it is limiting. What Putin is doing will not strengthen the political system. It will limit dissent. In the US it has already been accomplished and with the control of the media the elitists just shut out the opposition. Putin also wants to have parties nominate regional governors and elect them by popular vote, which would make a real bicameral legislature. We had a similar law up into the 1840s in the US and it was changed to popular vote. Appointments create rubber stamps. Regional governors in Moscow are appointed. The Kremlin wants all the power and that is not democracy but then again Russia has never had democracy. They prefer their own brand of corruption. Putin talks of creating a Public Forum but groups critical of the Kremlin would not be allowed to join the forum. Putin was reelected with 70% of the vote and with the Chechen situation is using the terror excuse, just like Bush, to set up a fascist government.
Alitalia will fire 2,500 workers in order to avoid bankruptcy.
House prices rose 2.1% in July with the average home hitting $318,000. Annual house inflation is 14.3% up from 13.9 % in June. Wales rose to 30.4% from 26.1% in June and Scotland slipped to 23.8% from 22.3%. In England, annual inflation rose from 13.1% to 13.4% with dwellings in the North East, North West and Yorkshire all averaging rises of more than 25%. London and the South East, which had led the nation for so long lagged the country with annual inflation of 9%. House prices slowed dramatically in August. This has prompted the Bank of England to leave interest rates unchanged at their latest meeting.
In the UK, the July CPI fell to 1.3% from 1.4% in June, the second successive monthly fall.
British unemployment fell to 1.41 million between May and July, the lowest since records began in 1984. Unemployment fell to 4.7% from 4.8%. Average earnings increased 3.8% in the year to July, down 0.5% from the previous month.
In a headline in the London Financial Times it says, "Time to Consider Iraq Withdrawal" as thousand lose their lives.
George W. Bush and the neocons in Washington have not given up on attempting the overthrow of the government of Venezuela. Last week Mr. Bush ordered a partial cut in US assistance to Venezuela because of its alleged role in the international trafficking of women and children for sexual exploitation. Now the US will not support $250 million in Venezuelan loan requests for the coming fiscal year. Those loans still could be approved with backing from other governments. Only a moron would be unable to see what George W. Bush is up too.
Russia and Chile area bout to sign an inter-governmental agreement on military-technical cooperation says Russian Defense Minister Sergu Lavrov.
Global bureaucratic officialdom has turned down Argentina’s attempt to pay $.25 on the dollar on $100 billion of international bonds. The US Circuit Court of Appeals has also refused to allow payment at that level. The battle is financial but even more obvious is that it’s a political battle geared to destroy the Argentine economy. The US, EU ad the IMF are all lined up versus Argentina and at the same time Argentina has told the IMF that the fund cannot "even in its dreams" ask for an increase in the country’s primary budget surplus, that is before debt service, beyond the 3% of GDP. We expect that debtors will soon begin seizing Argentine assets in the US and Europe. It looks like Argentine purchase of 42 tons of gold has really enraged the elitists.
Residents of the ancient city of Teotihuscan in Mexico City are protesting the opening of a Wal-Mart store on the edge of an ancient archeological site. The residents’ complaint is that Wal-Mart is destroying Mexico’s deepest roots for lower prices. They believe this is conquest by global interest and the symbol of the destruction of their culture. They have filed a criminal complaint, charging authorities with acting illegally in approving the project. Mexico is one of the few places in the world where the seeds of culture and religion remain.
Anwar Ibrahim, the former Malaysian deputy prime minister, is out of jail, the conviction against him having been overturned. He will join the opposition party. Malaysia has been a success because of former Prime Minister Dr. Mahathir and his financial policies. In 1997-1998 during the beginning of the financial crises, Ibrahim’s reaction was wrong and he was bounced from his cabinet position as Deputy Prime Minister for Finance. He advocates IMF policies, which were a disaster. PM Mahathir’s response was exchange controls, such as Chavez did in Venezuela later, which was a 180-degree reversal away from the policies of austerity advocated by the IMF. The point is they worked. The IMF in 1997-1998 was out to destroy the economies of Malaysia, South Korea, Thailand and Indonesia. All were left scared and broken except Malaysia, which told the IMF to get lost.
The Chinese stock market is off 25% over the last four months. This has created a problem for Chinese business because it is more difficult to raise money through equity financing and state banks are not making many loans. In fact, the China Securities Regulatory Commission has halted IPO’s. That is sending Chinese borrowers overseas. What China is really doing is preparing for world recession and depression. What effect that will have on China remains to be seen, but we presume they will be as negatively impacted, as everyone else will. Once the depression has run its course, we would expect China would boom, but for the next several years, it will be difficult.
Inflation held at a seven-year high of 5.3% last month on rising food costs. July and August had the highest inflation since 2/97. The PPI was up 6.8% from a year earlier, the largest increase in eight years. M2 money supply expanded at its slowest pace in two years in August and fixed-asset growth eased. Grain prices were up 32%, meat 24% and eggs 30%. Consumer goods were up 6.3%, services 2% and housing prices 6%. The economy is still too hot. The November 2010 government bond closed at 4.89%, the highest since May 14. M2 is up 13.69% from a year earlier, as inflation rises we predict a massive move out of yuan into gold, which will keep the physical market off-take at high levels for some time to come.
The trade surplus for August was $4.49 billion, a record for the year. They expect a $10 billion surplus for the year. This is down from a surplus of $25.5 billion in 2003. Trade was in deficit by $950 billion for the first eight months of the year. Exports rose 35.8% to $360.6, while imports surged 40.8% to $361.5 billion. August exports rose 37.5% to $51.4 billion; a 35.6% rise in imports totaling $46.9 billion. Crude oil imports surged 39.3% to 80 million tons.
The government executed four employees of state-owned banks, for defrauding the banks of $15 million. In America, you pay a fine. The guilty in China are usually shot in the back of the head.
Foreign investment in China in the first eight months of the year was up 18.8%.
AUSTRALIA AND NEW ZEALAND
New Zealand is enjoying its most protracted period of sustained growth and health since 1840. The economy has grown steadily for a decade and it is accelerating. GDP grew 2.1% in the first quarter and 0.7% is expected in the second quarter, lifting annual growth to 5.1%. Unemployment is at a 17 year low of 4% and it is headed lower. We expect the party to be over next year, a gradual decline in 2005 and then further declines for several years as the entire world economy suffers.
New Zealand shoppers are spending like made with sales rising more than 8% in the past year. July was up 1.2% over June. Unfortunately, some store’s profits were off substantially.
New Zealand’s troops are pulling out of Iraq under a cloak of secrecy as security deteriorates. There is a 60-man Kiwi military engineering contingent there. Their troops went in a non-combat role, but what is happening now is that everyone’s a combatant whether they want to be or not. There are also many Kiwi mercenaries in Iraq working on contract.
Kodak will close its Australian factory and 600 will lose their jobs.
Zimbabwe’s Marxist President Robert Mugabe will soon demand half the shares in all the country’s privately owned mines. We predicted this would happen and so it has. Next is South Africa. If you have shares in companies that have Zimbabwean or South African holdings, sell now while you still can. All the Europeans in both countries should get out now while they still can.
President Mugabe has commissioned the construction of a multi-level security radar at his rural home in Zvemba. Acquired from China it will be lined to other security gadgets being installed at Mugabe’s mansion in Harare in the upscale suburb of Borrowdale-Greystone Park, where we lived at one time. The radar is in place not only to protect Mugabe, but SAM’s he has guarding his home.
By Hugo Salinas Price
For The Daily Reckoning
Tuesday, September 14, 2004; http://www.dailyreckoning.com/
The last Mexican economic debacle of 1994-1995 prompted my search for monetary stability.
Intuitively, I first thought of gold, but I reached the conclusion that the enmity of the United States and of the IMF toward the monetization of gold would make that avenue a dead end. Therefore, I took the alternate route, a plan to monetize silver, a metal of which Mexico is the world's No. 1 producer.
Mexico's history is inextricably linked to silver money, since silver minted in Mexico was the world's most important money for centuries. I should point out that the U.S. silver dollar, as defined in the Constitution, is based precisely on the characteristics of the "Ocho Reales" coin minted in Mexico.
The memory of our silver coinage is still with us. It was a popular coinage for everyday use, unlike the gold coin that was reserved for more important transactions. The gold coin disappeared anyway, after U.S. pressure following the Spanish-American War forced Mexico into the monometallic use of gold.
The Mexican audiences that I have addressed in the last nine years have enthusiastically received my idea regarding the introduction of silver into circulation. It is too early to say whether or not my plan will come to fruition, but there are hopeful signs.
I believe that the only road to a monetary system that permits the survival of industrial civilization is one that retraces the steps that carried us to our present state.
Paper money was introduced after real money already existed. For a time, paper, gold and silver money circulated together, side by side. Overextending and mismatching credit finally resulted in the creation of such large amounts of paper money that real money became an obstacle to further creation of paper money.
I believe that we must go back the way we came, by reintroducing real money to circulate in parallel with paper money.
I cannot imagine any country in the world -- or any group of countries -- reforming paper money and the banking systems as we know them and reinstituting gold or silver coinage and bills redeemable for metal at sight.
I do not believe that the world's monetary and financial system can be reformed; any attempt at reform would decimate the world's economic activity instantly. There is no alternative: We have to let the world's monetary and financial system proceed to its own destruction; we cannot "go back to gold."
What we must therefore strive for, as much as possible, is the reintroduction of silver or gold -- or even both -- into parallel circulation with the fiat paper money we use everywhere. Eventually, the world fiat money system will destroy itself through its inherent defects.
Humanity has selected gold and silver as money. No other metals or objects have served humanity so well. Precious metals will never be supplanted by fiat money. The era of fiat money in which we find ourselves living is an aberration in human history and will soon pass.
Once silver and gold are in circulation with paper money, a number of positive changes will begin to emerge. These results will further enhance the attraction of precious metals as money, reinforcing the movement.
Slowly, the world should begin to regain its monetary and financial composure, after the paper orgy of the past hundred years, with paper issue tamed and civilized by the presence of gold or silver circulating in parallel with it.
Is there a political will to implement my plan anywhere in the world? That I do not know.
However, I do have the conviction that the plan I propose will work, and that silver in Mexico, or gold in the United States or Europe or anywhere else, can be brought into circulation in parallel with paper money.
I believe my plan offers a viable way to "get there from here." It does not address the reform of the present worldwide system of fiduciary money. It outflanks the problem by resorting to the introduction into circulation of real money, in parallel with fiduciary media.
It is my fond hope that other minds interested in the vital subject of sound money may find some inspiration in what I present, and that better minds than mine may wish to focus their political efforts and monetary research along the lines I am sketching.
Precious metals are painted as "antiquated" and have been superseded by technology and modern finance. Those of us who insist on gold currency are derisively labeled "goldbugs"; however, as soon as we are able to put silver or gold into circulation with paper, all those arguments crash. As with all things that are to work naturally and automatically among millions of human beings, simplicity is essential.
The plan I propose is quite simple.
1. The 1-ounce troy pure silver Libertad coin minted by the Mexican Mint will be selected as the coin to circulate in parallel with paper (fiduciary) pesos. This coin will have no nominal value engraved upon it. This is an essential characteristic of any coin that is to circulate in parallel with paper money.
2. The Mexican central bank will issue a daily quote on the full legal tender value of the 1-ounce Libertad coin, expressed in fiduciary pesos. At its quoted legal tender value, the coin is good for all types of payments, without discount of any sort.
3. The Mexican central bank will not reduce any quoted value of the Libertad ounce in fiduciary pesos, in any future quote. Successive quotes may stipulate a higher value in fiduciary pesos or may remain unchanged for a period of time, but quotes will never be lower.
Such is my plan for the introduction of silver into circulation in Mexico.
Hugo Salinas Price is president of the Mexican Civic Association Pro Silver. Since the peso crisis of 1995, Salinas Price and other outspoken peers have dedicated themselves to spreading the word about real money. For 35 years, Salinas Price was CEO of Elektra. Under his leadership, Elektra grew from being a small electronics store into a publicly traded behemoth with over 600 stores nationwide. His work is represented in both English and Spanish here: