If I have seen further it is by standing on the shoulders of giants.

Saturday, April 30, 2011

Three words to fix our monetary system: End. The. Fed.

Choppy week in the markets, wouldn’t you say? Gap down one day, gap up the next. That’s what you get when the tub is full of Fed-faked funny-money. Bigger waves…more tumult…less predictability. And a whole lotta motion sickness along the way.

Markets are always and forever in a process of price discovery, torn between demand for lower prices from buyers on one side, and the profit motive from sellers on the other. Somewhere in the middle, the two parties will come together to exchange their goods and services. In other words, they “discover” an agreeable price at which everyone finds value. This is what the free market does naturally. Low prices invite demand…driving prices higher. High prices invite competition (supply)…driving prices lower.

Obviously, therefore, you expect a bit of movement, a bit of price fluctuation as buyers and sellers jostle for position. What you don’t expect is multi-hundred point daily swings in the stock markets. You don’t expect gold to jump $20, $30 or more in a 24-hour period. (Remember, before FDR confiscated all the gold in the land back in 1933, an ounce of gold was only “worth” $20. More correctly, a dollar was worth 1/20th an ounce of gold. Then, in one fell swoop, the original New Dealer “revalued” the metal to $35 an ounce, thereby devaluing the dollar to 1/35th an ounce of gold.)

The point is, a $20 or $30 movement in the price of gold back then would have been unthinkable (but for political strong-arming). Today, with the dollar having been beaten, bludgeoned and fisticuffed down to less than 1/1,500th an ounce of gold, twenty bucks here or there is hardly worth mentioning, such is the woeful state of the world’s leading fiat money.

Of course, markets don’t demand fiat currencies. Free individuals don’t wake up one day and say to themselves, “Gee… Wouldn’t it be nice if we had an unquestionable, unaccountable, centrally controlled monopoly on counterfeiting to help debase our medium of exchange, saddle the populace with that most insidious of all taxes – inflation – and to sell our kiddies future down the drain? I know, let’s create a Federal Reserve!”

Such institutions don’t come about “naturally.” They require political pull and the gun-for-rent that is the government. They take cover behind rooking legalese, as is found in “The Federal Reserve Act of 1913,” and the absurd prevarications of its “dual mandate,” which is, at present, sold to the terminally credulous public under the noble-sounding, though entirely erroneous mission statement of “price stability and maximum employment.”

Anyone with a basic, non-Ivy League-approved understanding of economics knows this to be a ridiculous goal in the first place. For one, gold takes care of price stability itself. Has done for thousands of years. Price instability is the direct result of fiat monies and manipulation of the money supply by self-serving central banking cartels. From tulipmania to techmania, one can find, at the rotten heart of every inflationary crisis, a central banker with an equally rotten brain and/or heart.

As for the “fetish of full employment,” as Henry Hazlitt so eloquently explains in his classic, Economics in One Lesson:

“The progress of civilization has meant the reduction of employment, not its increase. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it [financially] unnecessary for millions of women to take jobs.

“The real question,” continued Hazlitt, writing in 1946, “is not how many millions of jobs there will be in America ten years from now, but how much shall we produce, and what, in consequence, will be our standard of living?”

Continue reading - Three words to fix our monetary system: End. The. Fed.

Thursday, April 28, 2011

Fight of the Century: Keynes vs. Hayek Round Two

"Fight of the Century" is the new economics hip-hop music video by John Papola and Russ Roberts at http://EconStories.tv.

According to the National Bureau of Economic Research, the Great Recession ended almost two years ago, in the summer of 2009. Yet we're all uneasy. Job growth has been disappointing. The recovery seems fragile. Where should we head from here? Is that question even meaningful? Can the government steer the economy or have past attempts helped create the mess we're still in?

In "Fight of the Century", Keynes and Hayek weigh in on these central questions. Do we need more government spending or less? What's the evidence that government spending promotes prosperity in troubled times? Can war or natural disasters paradoxically be good for an economy in a slump? Should more spending come from the top down or from the bottom up? What are the ultimate sources of prosperity?

Keynes and Hayek never agreed on the answers to these questions and they still don't. Let's listen to the greats. See Keynes and Hayek throwing down in "Fight of the Century"!

Fight of the Century: Keynes vs. Hayek Round Two

Asia’s rapid growth poses risk of overheating, IMF says

Asia-Pacific will see robust growth but some economies risk overheating, the International Monetary Fund (IMF) has warned.

The IMF said it expects the region to grow by close to 7% in the next two years.

However, it added the rapid rate of growth may further fuel inflation.

A number of countries across the region are struggling to control prices which are making life difficult for millions of people.

According to the IMF high food and fuel prices pushed the regional inflation rate to 4.5% in February.

It said that central banks in the region may need to tighten their monetary policy if prices continue to rise.

It added that more flexible currencies would help ease overheating risks.

It also said that it expected Japan's earthquake to have a "limited" impact on the rest of Asia but warned the situation was still uncertain.
'Pockets of overheating'

The report warned that some countries were at risk of overheating - when a prolonged period of rapid economic growth causes high levels of inflation and excess production that eventually hurt the economy and may cause a recession.

"Asia's rapid growth is accompanied by the emergence of pockets of overheating across the region in both goods and assets prices," the IMF said.

"In addition to higher policy rates, exchange rate flexibility is a key line of defense against overheating pressures," the report added.

However, the IMF said that despite rising food and housing costs, it was premature to say that China's economy was actually overheating.

China has raised interest rates four times since October and the country's leaders have said that clamping down on inflation, which is at its highest level in more than two-and-a-half years, is their most important task this year.

But while a stronger currency could help ease inflation by making imported goods such as oil cheaper, analysts say China is likely to let its tightly-controlled currency appreciate only gradually.

The IMF also warned that there was a risk of a property bubble developing in Hong Kong, although it noted that the government was taking steps to guard against this prospect.

Hong Kong property prices have risen almost 10% this year and now beyond their 1997 peak but the market is expected to slow as the government makes more land available and as mortgage rates increase.

Continue reading - BBC - Asia’s rapid growth poses risk of overheating, IMF says

Friday, April 22, 2011

Glenn Beck: You are being robbed by the FED!

Glenn Beck: You are being robbed by the FED!

MUST READ! Ron Paul: The Founding Father

He is a constant in a changing world, an emissary from an older America. A self-styled constitutional purist, he has for forty years been a voice in the wilderness. But now he has sparked a movement that has put him at the center of the struggle over what kind of country we want to be. But is America ready for his radical vision?

Now it's time to go backstage. Down the narrow space between the back wall and the high blue curtain, washed by the white noise of eleven thousand overcaffeinated believers waiting in a huge ballroom filled to standing room, plus two overflow ballrooms where the man's message will be received on giant screens. Here's the door to the small drab room where assorted politicians wait to audition to be the future of America. And here's Ron Paul, smiling and holding out his hand. "Nice to see ya," he says.

"You seem a little busy."

"Yeah, we're just about to get ready here."

On the other side of the cinder-block wall and high blue curtain, voices cry out one and two and then a sudden chorus, Ron Paul, Ron Paul, End the Fed, Ron Paul! Ron Paul! End the Fed! RON PAUL! RON PAUL! In another twenty minutes, he'll walk out into the wall of lights and the crowd at this Woodstock for conservatives will explode in cheers and applause and shouts of Ron Paul! and End the Fed!, another step in his amazing journey from eccentric regional oddball to the red-hot center of the American debate — after a lifetime of ridicule and obscurity, sweet vindication indeed.

Now he sits back down, pulling a padded office chair up to a round linoleum table. He's small and trim as a ten-year-old, with an unshakable air of small-town decency, and his expression seems to have just two settings: In repose, at seventy-five years old, with white hair and dark emphatic eyebrows and those deep bags slashed across his cheekbones, he's every inch the stern patriarch. But when he smiles, his features soften and suddenly he's Tom Sawyer cruising the neighborhood on his beloved Schwinn.

He smiles like that when he explains why he's never found it hard to be on the short end of a 1-to-434 vote. "Sometimes a bill will be maybe 51 percent good and 49 percent bad, and you just have to have your own rules about that. Generally speaking, if a bill has bad stuff in it, even though there's a lot of good stuff, I still think that's incrementalism."

See, it's not about him. Ron Paul doesn't think that way. It's about this neat idea, principles versus incrementalism. That's why he's taken more lonely stands than any other politician in American history: against the Iraq war even though he's a Republican, against the Defense of Marriage Act even though he's a conservative Christian, against farm subsidies even though he represents a rural district, against the Texas Medical Center even though he's from Texas — the list goes on and on. He refused to award congressional medals to Rosa Parks, Ronald Reagan, the Pope, and Mother Teresa. After Hurricane Katrina, he voted against sending federal help to Louisiana.

"Once you say, 'Well, you know, we live in the real world and sometimes you have to give in a little bit,' then you're never yourself, you're never your own person, and they'll badger you to death. So it's much easier for me to follow a set of principles than fussin' and fumin' on knowing exactly when you're supposed to throw in the towel."

Continue reading - Ron Paul: The Founding Father

CHINA REVOLT - Third day of Shanghai strike threatens China exports

Striking truck drivers protested for a third day on Friday in Shanghai's main harbor district amid heavy police presence and signs the action has already started to curb exports from the world's busiest container port.

The strike is a very public demonstration of anger over rising consumer prices and fuel price increases in China.

It comes as the government struggles to contain higher inflation, which hit 5.4 percent in March, fearful that rising prices could fuel protests like those that have rocked the Middle East.

A crowd of up to 600 people milled about outside an office of a logistics company near the Baoshan Port, one of the city's ports. Some threw rocks at trucks whose drivers had not joined in the strikes, breaking the windows of at least one truck.

The strikers, many of them independent contractors who carry goods to and from the port, stopped work on Wednesday demanding the government do something about high fuel costs and what some called high fees charged by logistics firms, said the drivers, who clashed with police on Thursday.

China is especially wary about threats to social stability following online calls for Middle East-inspired "Jasmine Revolution" protests and has detained dozens of dissidents, including renowned artist Ai Weiwei.

"We are continuing our strike," said a 38-year-old truck driver surnamed Liu. "There has been no response from the government or anybody else. There's nothing we can do."

Workers organized the strike using word of mouth, said a driver.

China's tightly controlled state media has made no mention of the unrest, and the city's government, which is working hard to turn glamorous Shanghai into a global financial hub to compete with Hong Kong and London, has denied knowledge of the strike.

Duncan Innes-Ker, China analyst at the Economist Intelligence Unit, said the strikes could inspire protests by workers in other transport sectors, given rising fuel prices.

"There are strikes in the taxi driver industry on a regular basis in numerous cities across China," he said. "These are happening and they will continue to happen, and if the oil price continues to rise they will get worse."

China said in early April it would lift retail gasoline and diesel prices by 5-5.5 percent to record highs.

Continue reading - Reuters - Third day of Shanghai strike threatens China exports

Shanghai Truck Drivers Protest High Fuel Costs

Shanghai Truck Drivers' Strike (Mandarin)

71% Chinese people felt depressed and unhappy (Mandarin)

Thursday, April 21, 2011

James Grant: Bernanke's Easy Money Party Will Leave A Hangover For Speculators

Financial Thought Leader James Grant explains why he believes the Federal Reserve's easy money policies will wreak havoc on the economy and markets.

James Grant: Bernanke's Easy Money Party Will Leave A Hangover For Speculators

Saturday, April 16, 2011

Introduction to Ron Paul's New Book, 'Liberty Defined'

America's history and political ethos are all about liberty. The Declaration of Independence declares that life, liberty, and the pursuit of happiness are unalienable rights, but notice how both life and the pursuit of happiness also depend on liberty as a fundamental bedrock of our country. We use the word almost as a cliche. But do we know what it means? Can we recognize it when we see it? More importantly, can we recognize the opposite of liberty when it is sold to us as a form of freedom?

Liberty means to exercise human rights in any manner a person chooses so long as it does not interfere with the exercise of the rights of others. This means, above all else, keeping government out of our lives. Only this path leads to the unleashing of human energies that build civilization, provide security, generate wealth, and protect the people from systematic rights violations. In this sense, only liberty can truly ward off tyranny, the great and eternal foe of mankind.

The definition of liberty I use is the same one that was accepted by Thomas Jefferson and his generation. It is the understanding derived from the great freedom tradition, for Jefferson himself took his understanding from John Locke (1632-1704). I use the term “liberal” without irony or contempt, for the liberal tradition in the true sense, dating from the late Middle Ages until the early part of the twentieth century, was devoted to freeing society from the shackles of the state. This is an agenda I embrace, and one that I believe all Americans should embrace.

To believe in liberty is not to believe in any particular social and economic outcome. It is to trust in the spontaneous order that emerges when the state does not intervene in human volition and human cooperation. It permits people to work out their problems for themselves, build lives for themselves, take risks and accept responsibility for the results, and make their own decisions.

Do our leaders in Washington believe in liberty? They sometimes say they do. I don't think they are telling the truth. The existence of the wealth- extracting leviathan state in Washington, DC, a cartoonishly massive machinery that no one can control and yet few ever seriously challenge, a monster that is a constant presence in every aspect of our lives, is proof enough that our leaders do not believe. Neither party is truly dedicated to the classical, fundamental ideals that gave rise to the American Revolution.

Of course, the costs of this leviathan are incalculably large. The twentieth century endured two world wars, a worldwide depression, and a forty- five- year "Cold War" with two superpowers facing off with tens of thousands of intercontinental missiles armed with nuclear warheads. And yet the threat of government today, all over the world, may well present a greater danger than anything that occurred in the twentieth century. We are policed everywhere we go: work, shopping, home, and church. Nothing is private anymore: not property, not family, not even our houses of worship. We are encouraged to spy on each other and to stand passively as government agents scan us, harass us, and put us in our place day after day. If you object, you are put on a hit list. If you fight to reveal the truth, as WikiLeaks or other websites have done, you are targeted and can be crushed. Sometimes it seems like we are living in a dystopian novel like 1984 or Brave New World, complete with ever less economic freedom. Some will say that this is hyperbole; others will understand exactly what I'm talking about.

What is at stake is the American dream itself, which in turn is wrapped up with our standard of living. Too often, we underestimate what the phrase "standard of living" really means. In my mind, it deals directly with all issues that affect our material well-being, and therefore affects our outlook on life itself: whether we are hopeful or despairing, whether we expect progression or regression, whether we think our children will be better off or worse off than we are. All of these considerations go to the heart of the idea of happiness. The phrase “standard of living” comprises nearly all we expect out of life on this earth. It is, simply, how we are able to define our lives.

Continue reading - Introduction to Ron Paul's New Book, 'Liberty Defined'

Friday, April 15, 2011

Marcin Jakubowski: Open-sourced blueprints for civilization

The Global Village Construction Set (GVCS) won our Green Project Contest at the beginning of 2011, garnering the most votes of all the eco-friendly projects submitted. Marcin Jakubowski founded Open Source Ecology, a network of farmers, engineers, and supporter, whose main project is GVCS, “an open source, low-cost, high performance technological platform that allows for the easy, DIY fabrication of the 50 different Industrial Machines that it takes to build a sustainable civilization with modern comforts.” GVCS is like a life-sized Lego set, and each of the machines uses interchangeable parts, motors, and power units. A few of their machines have been featured on the pages of MAKE. Jakubowski (pictured above at right alongside Lawrence Kincheloe and the open source plasma cutter) is immensely busy, to say the least, but he took the time to answer a few questions for us and give us further insight into OSE’s massive undertaking.

Continue reading - Open Source Ecology: Interview with Founder Marcin Jakubowski

Using wikis and digital fabrication tools, TED Fellow Marcin Jakubowski is open-sourcing the blueprints for 50 farm machines, allowing anyone to build their own tractor or harvester from scratch. And that's only the first step in a project to write an instruction set for an entire self-sustaining village (starting cost: $10,000).

Official Site - Open Source Ecology

Marcin Jakubowski: Open-sourced blueprints for civilization

GVCS - Global Village Construction Set

Food prices: World Bank warns millions face poverty

The World Bank has warned that rising food prices, driven partly by rising fuel costs, are pushing millions of people into extreme poverty.

World food prices are 36% above levels of a year ago, driven by problems in the Middle East and North Africa, and remain volatile, the bank said.

That has pushed 44 million people into poverty since last June.

A further 10% rise would push 10m more below the extreme poverty line of $1.25 (76p) a day, the bank said.

And it warned that a 30% cost hike in the price of staples could lead to 34 million more poor.

'Protect the poor'

The World Bank estimates there are about 1.2 billion people living on less than $1.25 a day.

"More poor people are suffering and more people could become poor because of high and volatile food prices," said World Bank president Robert Zoellick.

"We have to put food first and protect the poor and vulnerable, who spend most of their money on food."

Mr Zoellick was speaking before IMF and World Bank spring meetings later this week.

The gatherings will be attended by finance ministers and central bankers including Chancellor of the Exchequer George Osborne, and Governor of the Bank of England, Mervyn King.


The World Bank says prices of basic commodities remain close to their 2008 peak, with the prices of wheat, maize and soya all rocketing.

The only exception is rice, which has fallen slightly in price in the past year.

The bank suggests a number of measures to help alleviate the impact of high food prices on the poor.

They include encouraging food-producing countries to ease export controls, and to divert production away from biofuels production when food prices exceed certain limits..

Other recommendations include targeting social assistance and nutritional programmes to the poorest, better weather forecasting, more investments in agriculture, the adoption of new technologies - such as rice fortification to make it more nutritious, and efforts to address climate change.

It also said financial measures were needed to prevent poor countries being subject to food price volatility.

Continue reading - BBC - Food prices: World Bank warns millions face poverty

World Bank president: 'One shock away from crisis'

The president of the World Bank has warned that the world is "one shock away from a full-blown crisis".

Robert Zoellick cited rising food prices as the main threat to poor nations who risk "losing a generation".

He was speaking in Washington at the end of the spring meetings of the World Bank and International Monetary Fund.

Meanwhile, G20 finance chiefs, who also met in Washington, pledged financial support to help new governments in the Middle East and North Africa.

Mr Zoellick said such support was vital.

"The crisis in the Middle East and North Africa underscores how we need to put the conclusions from our latest world development report into practice. The report highlighted the importance of citizen security, justice and jobs," he said.

He also called for the World Bank to act quickly to support reforms in the region.

"Waiting for the situation to stabilise will mean lost opportunities. In revolutionary moments the status quo is not a winning hand."

Continue reading - BBC - World Bank president: 'One shock away from crisis'

Thursday, April 14, 2011

FRIDA 'concept' robot will solve all of Foxconn's problems by replacing its workers

Don't be fooled by the "concept" label that ABB has affixed to its new robot. There can be only one logical conclusion to this endeavor: FRIDA and its ilk will one day replace the millions of young Chinese workers assembling our gadgets. It's no coincidence that this uniquely agile, dual-arm robot is compact enough to "fit into spaces ergonomically designed for human workers" and can be carried around "easily" to begin work with a minimum of installation requirements. In fact, ABB admits that several prototypes are already being piloted. The obvious advantage for Foxconn and friends is that FRIDA doesn't require a swimming pool, cafeteria, housing, or professional counseling to keep out of the dormitory nets. Watch FRIDA obey the first law of robotics at the 44 second mark of the video posted after the break as assembly line workers everywhere lament their lack of a handle.

via Engadget

FRIDA Concept Robot

ABB technologies that changed the world

Introducing FRIDA - ABB Concept Robot

ABB Robotics - 10 good reasons to invest in robots

Goldman Sachs and Deutsche Bank Sold Shitty Craps To Investors

Goldman Sachs Group Inc. (GS) misled clients and Congress about the firm’s investments in securities tied to mortgages, the chairman of the Senate panel that investigated the causes of the financial crisis said.

Senator Carl Levin, releasing the findings of a two-year inquiry, said he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought the complex securities known as collateralized debt obligations without knowing the firm was betting they would fall in value.

The Michigan Democrat also said federal prosecutors should review whether to bring perjury charges against Goldman Sachs Chief Executive Officer Lloyd Blankfein and other current and former employees who testified in Congress last year. Levin said they denied under oath that the firm took a financial position against the mortgage market solely for its own profit, statements the senator said were untrue.

“In my judgment, Goldman clearly misled their clients and they misled the Congress,” Levin said at a press briefing today where he and Senator Tom Coburn, an Oklahoma Republican, discussed the 640-page report from the Permanent Subcommittee on Investigations.

Goldman and Deutsche

Much of the blame for the 2008 market collapse belongs to banks that earned billions of dollars in profits creating and selling financial products that imploded along with the housing market, according to the report. The Levin-Coburn panel levied its harshest criticism at investment banks, in particular accusing Goldman Sachs and Deutsche Bank AG (DB) of peddling collateralized debt obligations backed by risky loans that the banks’ own traders believed were likely to lose value.

In a statement, New York-based Goldman Sachs denied that it had misled anyone about its activities. “The testimony we gave was truthful and accurate and this is confirmed by the subcommittee’s own report,” Goldman Sachs spokesman Lucas van Praag said.

“The report references testimony from Goldman Sachs witnesses who repeatedly and consistently acknowledged that we were intermittently net short during 2007. We did not have a massive net short position because our short positions were largely offset by our long positions, and our financial results clearly demonstrate this point,” van Praag said.

Much of the blame for the 2008 market collapse belongs to banks that earned billions of dollars in profits creating and selling financial products that imploded along with the housing market, according to the report. The Levin-Coburn panel levied its harshest criticism at investment banks, in particular accusing Goldman Sachs and Deutsche Bank AG (DB) of peddling collateralized debt obligations backed by risky loans that the banks’ own traders believed were likely to lose value.

‘Divergent Views’

In a statement, Deutsche Bank spokeswoman Michele Allison said, “As the PSI report correctly states, there were divergent views within the bank about the U.S. housing market. Moreover, the bank’s views were fully communicated to the market through research reports, industry events, trading desk commentary and press coverage. Despite the bearish views held by some, Deutsche Bank was long the housing market and endured significant losses.”

The panel’s report also examined the role of credit-rating firms in the meltdown, lax oversight by Washington regulators and the drop in lending standards that fueled the mortgage bubble and ultimately caused hundreds of bank failures.

The subcommittee’s findings show “without a doubt the lack of ethics in some of our financial institutions who embraced known conflicts of interest to accomplish wealth for themselves, not caring about the outcome for their customers,” said Coburn. “When that happens, no country can survive and neither can their financial institutions.”

Continue reading -
Bloomberg - Senate Panel Says Goldman Misled Clients, Lawmakers on CDOs
Bloomberg - Deutsche Bank Sold ‘Pigs’ as Market Buckled, Lawmakers Say

Link: Full Senate Report

Senate Report GS

Bank Negara likely to raise SRR again by 1%

Economists say it will further tighten liquidity.

There is a strong possibility that Bank Negara will raise the statutory reserve requirement (SRR) of banks by another 1% at its monetary policy meeting next month to further tighten liquidity, acccording to economists.

Selective capital controls may also be introduced to stem the large amounts of liquidity in the system.

The move to increase the SRR is not surprising as Bank Negara is moving towards normalisation of 4%.

Last month, the central bank announced a 1% increase in the SRR to 2%, effective April. It last reviewed the SRR in 2009.

“To address the liquidity issue, increasing interest rates is not so effective. The higher interest rates will merely attract more funds, and this will eventually increase inflation. Raising the SRR would be a more appropriate measure,” said MIDF Research chief economist Anthony Dass.

“We do not rule out further normalisation move in the SRR ratio towards 4% by the end of the year. Therefore, we expect another adjustment of 1% in May, raising SRR to 3% - a pre-emptive measure to manage the risk of this build-up of liquidity from resulting in macroeconomic and financial imbalances,” said AmResearch senior economist Manokaran Mottain.

He expected a single OPR hike in the second half of this year, once the domestic economy achieved steady but strong growth.

On selective capital controls, Anthony said this could be taxes on inflow or outflow.

“It can be either quantity based or price based. This is something which is already done in China, Indonesia, Taiwan and South Korea,” said Dass.

He said since May 2010, liquidity has been growing by double digits every month.

The higher SRR would mop up between RM6bil and RM7bil from the banking system, which is currently flush with excess liquidity of RM250bil.

Increasing the SRR is a one-off move that will soak up some RM6bil from the banking system.

Continue reading - Bank Negara likely to raise SRR again by 1%

Wednesday, April 13, 2011

Ron Paul Speech at Dordt College in Sioux Center

Ron Paul Speech at Dordt College in Sioux Center, IA 4/11/11

The Real Housewives of Wall Street

Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?

America has two national budgets, one official, one unofficial. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we're broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year's retirees from the IRS, the SEC and the Department of Energy.

Most Americans know about that budget. What they don't know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the "official" budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.

Now, following an act of Congress that has forced the Fed to open its books from the bailout era, this unofficial budget is for the first time becoming at least partially a matter of public record. Staffers in the Senate and the House, whose queries about Fed spending have been rebuffed for nearly a century, are now poring over 21,000 transactions and discovering a host of outrages and lunacies in the "other" budget. It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. "Our jaws are literally dropping as we're reading this," says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. "Every one of these transactions is outrageous."

But if you want to get a true sense of what the "shadow budget" is all about, all you have to do is look closely at the taxpayer money handed over to a single company that goes by a seemingly innocuous name: Waterfall TALF Opportunity. At first glance, Waterfall's haul doesn't seem all that huge — just nine loans totaling some $220 million, made through a Fed bailout program. That doesn't seem like a whole lot, considering that Goldman Sachs alone received roughly $800 billion in loans from the Fed. But upon closer inspection, Waterfall TALF Opportunity boasts a couple of interesting names among its chief investors: Christy Mack and Susan Karches.

Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley's investment-banking division. Neither woman appears to have any serious history in business, apart from a few philanthropic experiences. Yet the Federal Reserve handed them both low-interest loans of nearly a quarter of a billion dollars through a complicated bailout program that virtually guaranteed them millions in risk-free income.

Continue reading - The Real Housewives of Wall Street

Tuesday, April 12, 2011

Bretton Woods Conference 2011: Simon Johnson on Too-Big-To-Fail

An excellent video. This is the heart of much of our economic catastrophe. Sovereign governments are sacrificing themselves for private banking institutions. Trillions upon trillions of taxpayer dollars, world-wide, are being transferred to banks that have destroyed themselves many times over with their Enron-style Ponzi schemes and ‘creative accounting.’ The question is, how long will people stand for it? Soon it will be too late.

Bretton Woods Conference 2011: Simon Johnson on Too-Big-To-Fail

Monday, April 11, 2011

3D Animations of a Venus Project city design

- 3D Animations of a Venus Project city design
- February 6th, 2011
- Shot in London, Bristol, Glasgow and Eindhoven
- Andrew Buxton, Jacque Fresco
- Andrew Buxton building 3D animated models for Jacque Fresco's city architectural designs.

3D Animations of a Venus Project city design

RT interview with Peter Joseph "Money breeds crime"

RT's EXCLUSIVE interview with the Zeitgeist ideologist, economic activist and film maker Peter Joseph.

Money breeds crime: 'Give people what they need'

Friday, April 8, 2011

Antal Fekete's Open Letter To Ron Paul: "Impeach Bernanke"


An open letter to Congressman Ron Paul of Texas
Antal E. Fekete
April 6, 2011

Dear Dr. Paul:

There are serious questions about the legality of Quantitative Easing. You are among the few who are well-qualified and well-placed to get to the bottom of it.

Most people believe, and the media confirm them in that belief, that the Fed can legally create dollars ‘out of the thin air’ in any quantity, and can do with them as it pleases. This may well be the pipe dream of Dr. Bernanke who is quoted as saying that the U.S. government has given the Fed a tool, the printing press, to stop deflation — but it hardly corresponds to the truth. The Fed can create new dollars only if some stringent legal conditions are satisfied, and then, it can only dispose of them in certain ways prescribed by law.

Contrary to a statement of Dr. Bernanke, made before he became the Chairman of the Board of Governors of the Fed, he could not drop freshly printed dollars from a helicopter, no matter how many reasons for such an action he may be able to cite. Another thing the Fed is not allowed to do legally is to purchase Treasury paper from the U.S. Treasury directly. It must be purchased indirectly through open market operations. If you don’t put the Treasury paper through the test of the open market before the Fed is allowed to buy it, the presumption is that the market would reject it as worthless, or would take it only at a deep discount. The law does not allow the F.R. banks to purchase Treasury paper directly from the Treasury because that would make money creation through the F.R. banks a charade, reserve requirements a farce, and the dollar a sham.

If that were the only problem with Quantitative Easing, it would be bad enough. But there is something else that is even more ominous. The fact is that the Federal Reserve banks can purchase Treasury paper only if they pay with F.R. credit that has been legally created.

F.R. credit (F.R. notes and F.R. deposits) is legally created if it has been issued in accordance with the law. The law says that F.R. credit must be backed by collateral security at the time of issuance, usually in the form of an equivalent amount of U.S. Treasury paper. The procedure is as follows.

The F.R. bank seeking to expand credit takes its Treasury paper, owned outright and free from encumbrances, and posts it as collateral with the Federal Reserve agent who will then authorize the issuing of credit. In other words, if the F.R. banks do not have the unencumbered Treasury paper in their possession, then they cannot create additional credit legally.

There is some evidence that the F.R. banks do not have F.R. credit available to make the kind of purchases Dr. Bernanke is talking about as part of his Quantitative Easing. Nor do they have unencumbered Treasury paper in sufficient quantity that they could post with the F.R. agent for authorizing the issue of additional F.R. credit.

The point is that the process of posting collateral first, and augmenting F.R. credit afterwards must under no circumstances be reversed. What the F.R. banks cannot legally do is to buy the Treasury paper first with unauthorized F.R. credit, post the paper as collateral, and justify the illegal issuance of credit retroactively. Nor can they borrow the bond from the Treasury, post it as collateral, and pay for the bond retroactively.

This is an important limitation separating the regime of market-based irredeemable currency from the regime of fiat money involving outright monetization of government debt — the graveyard where the Continental dollar, the assignat, the mandat, the Reichsmark, and the Zimbabwe dollar (among countless others) rest.

At any rate, retroactive authorization of F.R. credit, if that’s what the Fed is up to, would be a violation of both the letter and spirit of the F.R. Act. It would mean converting the dollar into outright fiat money through the back door, bypassing Congress. It would show absolute bad faith on the part of the Chairman of the Federal Reserve Board of Governors, Dr. Ben Bernanke, who certainly knows what the law is. Such a blatant violation of the law would make him totally unfit for the powerful office he occupies. It would call for his immediate and dishonorable discharge by the President, pending Congressional investigation of the matter.

The various violations of the law of which the Fed is accused point to a concerted effort to remove the shackles the law has put on the money spigots lest crooks help themselves to the public purse. These violations are not isolated incidents. They are aiming at the corruption of the monetary order of the nation and the world. Moreover, they would ultimately figure prominently among the causes of the financial instability the world has been suffering from since 1971 and, more recently, since 2008.

Without understanding this fundamental truth, all talk about stabilizing the monetary system and reining in the runaway budget deficit is an exercise in futility.

Yours very sincerely,

Antal E. Fekete
Professor (retired)
Memorial University of Newfoundland
Tel./Fax: +36-1-325-7996

via Antal Fekete's Open Letter To Ron Paul: "Impeach Bernanke"

Wednesday, April 6, 2011

Of the 1%, by the 1%, for the 1%

THE FAT AND THE FURIOUS The top 1 percent may have the best houses, educations, and lifestyles, says the author, but “their fate is bound up with how the other 99 percent live.”

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.

Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.

First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.

Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.

None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.

Continue reading - Joseph E. Stiglitz - Of the 1%, by the 1%, for the 1%

Monday, April 4, 2011

China must learn to float

The largest investor in US debt should have exited from US securities long ago to avoid serious financial backlash.

Despite shaky economic fundamentals, US government securities are usually regarded as a safe haven.

Whenever a crisis erupts, the value of US treasury bonds gets a boost. Indeed, US treasuries were among the few assets that did not decline during the global financial crisis in 2008-2009.

But the safe-haven status of US government securities is an illusion. They are safe only in the sense that no one can stop the Federal Reserve from operating its printing presses at full speed.

The market value of treasuries depends on a wide range of factors. Now it is essentially sustained by a Ponzi scheme, with the Fed's policy of "quantitative easing" keeping the price of treasuries artificially high.

But, at end of the day, no currency can defy the laws of economic gravity. The market price of treasuries eventually will fall to levels dictated by US economic fundamentals.

For decades, China has been investing its vast savings abroad, waiting for greater efficiency in domestic investment allocation before starting to dissave.

China usually holds US treasuries to maturity and re-invests the principal and proceeds. What matters is not variations in the book value of these reserves, but rather their real value in terms of purchasing power when China decides to cash in.

We do not know what the People's Bank of China (PBOC, the central bank) is doing at the moment in the bond market. What we do know is that China should have begun exiting gradually from US government securities long ago.

But, according to US treasury data, China's holdings of US government securities totalled $1.16 trillion at the end of 2010, accounting for roughly 60 per cent of the overall increase in foreign official holdings of US government debt.

China's holdings of US treasuries increased by $351 billion between June 2009 and June 2010 alone, the largest jump on record.

The accuracy of these data is debatable. But they seem to show that, despite sharper rhetoric in Sino-US relations, China has continued lending to the US in order to keep its export machine going and avoid booking large foreign-exchange losses.

Trade surplus drop

It may be too late to do anything about China's existing stock of US treasuries without causing a serious political and financial backlash. But China should at least stop increasing its holdings.

Since 2009, China's trade surplus has dropped significantly, which many in China hail as progress in re-balancing.

Yet China's 2010 trade surplus was still $183 billion; its current-account surplus soared 25 per cent from 2009, to $306.2 billion; and its balance-of-payments surplus last year totalled more than $470 billion – the bulk of which must have been invested in new holdings of foreign-exchange reserves.

Needless to say, these surpluses reflect a gross misallocation of resources. Above a certain limit, China's stockpiles of US treasury bonds imply welfare losses, not to mention the capital losses that the country almost certainly will suffer.

Is China destined to see the value of its savings evaporate? Given the trade and current-account surpluses, the PBOC must intervene in currency markets, buying the dollar and selling renminbi, to prevent – or moderate – the appreciation of the renminbi exchange rate. But such interventions inevitably translate into more holdings of US government securities.

To stop this accumulation of foreign-exchange reserves, and thus minimise China's welfare and capital losses, the simplest solution would be for the PBOC to call a halt to intervention.

Indeed, the increase in foreign-exchange reserves has been the single most important monetary source of inflation, as the PBOC has run into trouble sterilising the inflows. The end of intervention in currency markets would allow the PBOC to shrug off the burden of sterilisation and concentrate on fighting inflation.

Ending central-bank intervention in currency markets is a complex issue. The devil is in the details. But, under any circumstances, the economic and welfare costs of China's slow pace in adjusting the renminbi's exchange-rate are too high and will increase by the day.

It is time for China to seriously consider allowing the renminbi to float freely, while reserving the right to intervene when it must, and tighten the management of cross-border capital flows (permissible under last November's G20 agreements).

Yu Yongding, currently President of the China Society of World Economics, is a former member of the monetary policy committee of the Peoples' Bank of China and former Director of the Chinese Academy of Sciences Institute of World Economics and Politics.

Continue reading - China must learn to float

Friday, April 1, 2011

Congressman Paul discusses the documents the Fed released by court order today

Bloomberg TV interviewed C4L Honorary Chairman Ron Paul concerning the Fed's release Thursday of thousands of discount window documents.

Congressman Paul discusses the documents the Fed released by court order today