By Max Rugemer
| Saturday, November 6th, 2010 at 6:44 am
The Democrats are trying the Weimar Republic approach of the 1930s to solve their destruction of the US economy. The Federal Reserve announced plans to buy $600 billion in United States treasuries this week. This strategy, under the current buzzwords of quantitative easing, is risky:
…. starting in 2009, the Fed embarked on what it called quantitative easing — a fancy term for creating money out of thin air. Over a little more than a year, it bought more than $1.7 trillion in assets, mainly U.S. Treasury and agency debt.
Today, U.S. bank reserves are close to $1 trillion — an enormous amount compared with the normal $4 billion to $8 billion.
On Tuesday, with the economy struggling and many Fed officials still worried about the specter of deflation, the Fed embarked on a second round of quantitative easing, dubbed QE2. The plan is to spend $600 billion to buy even more government debt….
Another term for the shell game that the Fed is playing with our collective worth is monetizing the debt:
The shell game that the Fed is currently playing does not change the basic equation: Money is being printed out of thin air so that it can be used to buy US government debt.
The idiocy of what the Federal Reserve is doing isn’t receiving enough media coverage. Germans are qualifed better than anyone else to comment because they made this mistake during the Weimar Republic & suffered horribly for it.
Finance Minister Schaeuble sharply criticizes US Federal Reserve move
….The US plan, called quantitative easing, aims to put more money into the pockets of companies, consumers and homeowners but some financial analysts have expressed fears that it could lead to excessive inflation and an intensification of currency imbalances.
Schaeuble said he would not let Germany’s opposition to the Fed’s action get pushed to the back burner and that the issue would be addressed during the G20 summit in South Korea next week.
“I wish the Americans every success in dealing with their big problems effectively and swiftly,” he said. “But if they look at the successes that Germany has had they will see that more and more deficits is not the way to do it.”
Europe’s largest economy, Germany is enjoying a strong recovery from the global economic crisis and has resisted calls for scaling back its austerity measures and lowering taxes….
Wikipedia — Inflation in the Weimar Republic
Reuters — U.S. dollar printing is huge risk:
Unbridled printing of dollars is the biggest risk to the global economy, an adviser to the Chinese central bank said in comments published on Thursday, a day after the Federal Reserve unveiled a new round of monetary easing.
China must set up a firewall via currency policy and capital controls to cushion itself from external shocks, Xia Bin said in a commentary piece in the Financial News, a Chinese-language newspaper managed by the central bank.
“As long as the world exercises no restraint in issuing global currencies such as the dollar — and this is not easy — then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament,” he said….
The Federal Reserve launched a fresh effort on Wednesday to support the struggling U.S. economy, committing to buy $600 billion in government bonds despite concerns the programme could do more harm than good….
By Max Rugemer
| Monday, July 26th, 2010 at 3:47 pm
The US economy has been devastated by misguided federal policy, while Germany’s industrial power has grown. Germans have not forgotten how “Made in Germany” has been a constant path to wealth for their economy & have reisted the Marxist destroyers who want the successful to support the world’s 3rd world FAILURES. Americans are seeing their country’s economy pillaged to give industry to Red China, chaotic Mexico & the 3rd World in general. You can’t employ a huge population without substantial manufacturing.
The cruel resulting impact on our unemployed citizens who want to work is one negative result, but the impact on national security is also critical. You can’t maintain an effective defense force if you can’t manufacture your own weapons. Think about WW II where 1 German Tiger tank had to face 20 US Shermans because of America’s industrial might. Today, a replay would have as many Tigers as Shermans which would mean a huge number of dead Americans.
The Malaysian business journal MYsinchew reports:
As German beast awakens, so will the grumbling
Germany’s economy is fast returning to health, but thanks mainly to exports, leaving Chancellor Angela Merkel open to a fresh barrage of criticism from other countries, economists say.
On Friday the closely watched Ifo survey of around 2,500 companies showed sentiment in Europe’s biggest economy surging at its strongest rate since the reunification of East and West Germany in 1990….
But the surprisingly robust rebound is thanks in large part to Germany’s export prowess, something that has been a bone of contention between Berlin and its international partners, not least the United States and neighbour France….
German Chancellor Angela Merckel strengthened their economy with 80 billion euros (103 billion dollars) in government spending cuts. Meanwhile, the Obama administration continues to spend as if money grew on trees, a sure path to driving investment capital from our shores and increasing unemployment.
By Keith Kappel
| Saturday, July 24th, 2010 at 9:35 pm
Steve Wynn is a multi-billionaire, hotelier and real estate investor in Las Vegas (he owns the Wynn Hotel and Encore Hotel), Asia and Macau. He’s been a guest from time to time on all the network financial news programs.
This is an interview that he did in May for CNBC. Because of the erratic and fiscally irresponsible behavior of the current administration, he is turning his investment focus to Asia, where he views the governments of China and Macau as more stable.
Deficit spending and reckless legislation will drive investors away from the United States, defeating chances for an economic recovery, according to Wynn. His remarks are brief and to the point, well worth taking the time to watch.
Steve Wynn Takes on Washington
By Betty Plummer
| Tuesday, July 20th, 2010 at 11:46 am
The high unemployment problem is well known. Less apparent in raw figures is the loss of buying power by the employed. Writing for the Christian Science Monitor, Robert Reich reports:
Missing from almost all discussion of America’s dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. …June’s decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent. In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.
This is not partisan criticism of the Obama regime. Robert Reich was Labor Secretary under Bill Clinton.
One group is still thriving at the expense of the middle class, the monied interests. Reich notes:
Meanwhile, a much smaller group of Americans’ earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives….
We’re back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground.
And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.
Reich is not optimistic about Obama’s efforts to manage the problem. He describes the attempt at “financial reform” — The New Finance Bill: A Mountain of Legislative Paper, a Molehill of Reform.
Could his commentary be a harbinger of a Hillary Clinton challenge to Obama in 2012? Or a ploy to get Obama to forestall that by naming her as his vice-presidential running mate in 2012?
By Keith Kappel
| Friday, July 2nd, 2010 at 2:00 am
By Ross Wolf
| Monday, June 21st, 2010 at 1:03 pm
Is Obama’s refusal to secure our U.S./Mexican border from millions of invading illegal immigrants — by design?
Despite strong evidence that heavily armed Mexican drug cartels continuously cross Arizona’s border smuggling drugs, attack Arizona police and commit crimes that threaten all Americans, Obama has vehemently refused to protect Arizona’s border with sufficient troops. Despite millions of unemployed Americans having to compete with 12 million illegal immigrants for jobs, Obama won’t lift a finger to stop the gushing flow of Mexicans that 24/7 illegally enter the United States via Arizona.
Increasingly states are moving toward bankruptcy, and can’t afford the costs of illegal immigrant medical services, education and incarceration of illegal immigrants that commit crimes. Before addressing why Obama refused to sufficiently help Arizona protect its state/U.S. border, one might ask why Obama, in the midst of a financial crisis, wants to burden U.S. taxpayers by making Puerto Rico a state, often referred to as “Welfare Island.”
Most Americans find it unbelievable that the Obama administration is filing a suit to stop Arizona’s illegal immigration bill SB 1070. But it is believable when you consider that Obama’s socialist/Marxist constituency intends to use millions of illegal immigrants to force their agenda. They will impose unaffordable public services on states and U.S. Government that will financially overwhelm and cripple government infrastructures, problematically destroying the United States.
America won’t die immediately. In the interim Congress will have to hugely raise citizens’ taxes to forestall an economic collapse. Ironically that will feed leftist mandates that citizens’ share their wealth with the masses. Increasingly it appears Obama intends to force a form of Marxist socialism on Americans — even if that means destroying the U.S. economy. The longer Obama can keep the Mexican border open, millions more illegal immigrants will come to America to financially bleed U.S. taxpayers and governments dry, politically changing the direction of America toward socialism. If leftists succeed in spending America into bankruptcy, it is foreseeable millions of desperate Americans might accept, even welcome, a hybrid form of Marxist socialism.
Recently the Obama administration took legal steps to prevent an Arizona illegal immigration law taking effect that would criminally charge employers who knowingly hired illegal immigrants; leftists consider it collateral damage of their cause that illegal immigrants take American jobs. America’s greatest threat is not from foreign enemies, but from the Marxist malignancy that is spreading — in U.S. Government.
Consider what Obama has already accomplished. During the worst recession since the Great Depression Obama has forced (unaffordable) health insurance, new taxes and regulatory costs on U.S. citizens and businesses that will inhibit investment and hiring of new employees for years. Obama has forced heath insurance costs on Americans that will prevent millions of self-employed middle class home buyers from qualifying for home mortgages; yet qualified home buyers are desperately needed in this recession to support and stabilize home values that secure trillions in bank-held mortgages so banks don’t fail. Assuming Obama’s intention is to help the U.S. economy, it appears he is doing most everything one would do to destroy it.
By Phillip Randall
| Saturday, June 19th, 2010 at 11:48 am
A recent grand jury report advised the city of San Diego to consider bankruptcy.
San Diego represents the fifth major city this year to arouse bankruptcy talk by the count of Bloomberg columnist Joe Mysak. San Diego’s neighbor Los Angeles is one of the others.
San Diego’s situation is unsustainable, the report points out.
“The city leadership should acknowledge the financial crisis the city is facing and make fundamental changes in how our government operates in order to avoid future crises,” it says.
Maybe if they didn’t spend so much money on ball parks, political favors, teachers’ unions, or illegal immigrants…
Sets a bad precedent, but will probably please a bad president!
By Budd Schroeder
| Thursday, March 25th, 2010 at 8:00 pm
Social Security will begin operating at a deficit this year, a milestone which the Congressional Budget Office had pegged for six years hence. From the New York Times — Social Security to See Payout Exceed Pay-In This Year:
The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.
This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.
Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.
The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax.
Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency….
Now, add the cost of Obamacare. Bad, bad decision!
By Budd Schroeder
| Tuesday, March 23rd, 2010 at 12:56 pm
Our country faces economic disaster, but our mainstream media don’t seem to have a clue. For the specifics, you have to read the foreign press. In this case, the facts and figures are all spelled out in a lesser known Italian publication covering Asian news. Asians have stopped investing in the United States, and this article explains the reason:
This year, US public debt could reach end game
by Maurizio d’Orlando
….now even US Federal Reserve Chairman Ben S Bernanke is warning the US Congress about the danger. In a statement before the House Financial Services Committee… he said that the US public debt might no longer be sustainable very soon…. Bernanke says the United States is likely to face a debt crisis like the one in Greece sooner than later, “not something that is 10 years away”.
In 2008, the size of the debt was such that it was quite clear that it was not sustainable. Now we have a timeframe to measure the likelihood of insolvency for the US public debt, and it is this year….
By the end of 2010, the US Treasury will have to refinance US$ 2 trillion in short-term debt, plus additional deficit spending for this year, estimated to be around US$ 1.5 trillion (US$ 1.6 trillion today two months after the original article was published). Together, the US Treasury will need to borrow US$ 3.5 trillion (US$ 3.6 according to this writer) in just one year.
In 1999, two well-known economists—Alan Greenspan and Pablo Guidotti—published a formula in an academic paper. Kept secret for a long time, it is designed to predict with precision when a country’s public debt will lead it to be insolvent. Called the Greenspan-Guidotti rule, it says that to avoid a default, countries should maintain hard currency reserves equal to at least 100 per cent of their short-term foreign debt maturities.
According to the author, the United States holds 8,133.5 metric tonnes of gold (the world’s largest holder). At November 2009 dollar values, that is about U$ 300 billion. The US strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that is roughly US$ 58 billion worth of oil. According to the IMF, the US has US$ 136 billion in foreign currency reserves. Altogether, that is some US$ 500 billion in reserves (US$ 455.5 billion according to AsiaNews).
Foreigners hold 44 per cent of US$ two trillion short-term US debt; that is US$ 880 billion. Total domestic savings in the United States are only around US$ 600 billion annually. If the United States needs to sell US$ 3.5 trillion (or US$ 3.6 trillion) in Treasury bills, and all domestic savings combined are put into US Treasury debt, the United States will still fall short by nearly US$ 3 trillion. Where is the rest of the money going to come from?
Not China, nor India or any other Asian countries….
The article goes on to provide details of the redirection of Asian investing. Finally:
Whenever US insolvency becomes self-evident, no one dare say they did not know. The Greenspan who came up with the aforementioned formula is the same Alan Greenspan who chaired the Federal Reserve for 18 years and allowed speculative. i.e. “structured” finance to expand (based on poorly tested mathematical algorithms).
This is the same Greenspan who in 1977 wrote a prophetic PhD dissertation (which was removed from his university at his request in 1987, when he became Fed chairman) on how financial bubbles develop in real estate and then burst. Not only was Greenspan aware of it, but so were US top financial circles. In other periods of history, this could lead to accusations of “treason”, but today our sense of personal and collective responsibility is more faded and faint than before….
To put this in an easy-to-understand visual, here’s a graph of gold versus US treasuries from Daily Wealth — The Most Important Chart in the World Right Now:
Note that Congress knew, based on Bernanke’s testimony, that our country faced bankruptcy before they passed the expensive health care bill. And the complicit media kept this information from the public, so as not to diminish the chances for passing the so-called “health care reform.”
Note also that having exhausted the traditional sources of revenue, Congress will most likely consider confiscating the citizenry’s retirement plans, IRAs, and 401Ks next.
The Daily Crux — The bankruptcy of the United States is now certain
The Daily Crux — This chart is the easiest way to track the coming U.S. bankruptcy
By Larry Braden
| Friday, March 19th, 2010 at 1:45 pm
Here’s your chance to grade the President — A. B. C, D, or F — just like a professor! How well do you think he has handled ten major policy areas during his first year in office?
Take the poll yourself and when you submit your grading of how he is handling the top issues, a second page will come up showing you the current results of how America is voting. Right now, he has mostly failing grades.
This is very telling, because this in NOT a Fox News poll. It is being conducted by CBS and most of the respondents are CBS viewers or readers!
First, it’s hard to believe that CBS is actually doing this. Second, they’re brave, and honest enough to actualy show the ongoing polling results.
Here is your chance. Everyone should get a shot at this. The poll takes all of fifteen seconds and only that long if you take time to look at his current stats.
Grade Obama’s First Year in Office
Note: The poll has been running since January 19, and who knows when it may get pulled, so we’ll archive the current tallies here:
Threat of Terrorism
Energy and the Environment
Obama’s Overall Job as President
And lest you think that CBS has lost its pro-Obama bias, here’s the news story headline just below the poll — Poll: Obama Ends First Year with 50% Approval Rating