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Rising U.S. bond yields may spark Credit Crisis II

Reuters
May 30, 2009

The global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again.

Early warnings signs of this scenario include surging government bond yields, a slumping U.S. dollar, and the fading of the bear market rally in U.S. stocks.

Optimists hope that a fragile two-month rally in world stock markets, a rise in U.S. Treasury yields from record lows during the depths of the crisis in late 2008, and some less scary economic data all signal that a recovery is around the corner.

But gloomy analysts insist that thinking is delusional.

Once Credit Crisis Version 2.0 ramps up, foreign investors may punish the U.S. government for borrowing trillions of dollars too much by refusing to buy its debt until bond prices plunge to much cheaper levels.

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Economic crisis spurs spike in 'suburban survivalists'



ASSOCIATED PRESS
Tuesday, May 26, 2009

SAN DIEGO — Six months ago, Jim Wiseman didn't even have a spare nutrition bar in his kitchen cabinet.

Now, the 54-year-old businessman and father of five has a backup generator, a water filter, a grain mill and a 4-foot-tall pile of emergency food tucked in his home in the San Diego suburb of La Jolla.

Wiseman isn't alone. Emergency supply retailers and military surplus stores nationwide have seen business boom in the past few months as more Americans spooked by the economy rush to stock up on gear that was once the domain of hard-core survivalists.

These people snapping up everything from water purification tablets to thermal blankets shatter the survivalist stereotype: They are mostly urban professionals with mortgages, SUVs, solid jobs and a twinge of embarrassment about their newfound hobby.

From teachers to real estate agents, these budding emergency gurus say the dismal economy has made them prepare for financial collapse as if it were an oncoming Category 5 hurricane. They worry about rampant inflation, runs on banks, bare grocery shelves and power failures that could make taps run dry.

For Wiseman, a fire protection contractor, that's meant spending about $20,000 since September on survival gear.

The surge in interest in emergency stockpiling has been a bonanza for camping supply companies and military surplus vendors, some of whom report sales spikes of up to 50 percent. These companies usually cater to people preparing for earthquakes or hurricanes, but informal customer surveys now indicate the bump is from first-time shoppers who cite financial, not natural, disaster.

Top sellers include 55-gallon containers, freeze-dried foods, water filters, purification tablets, glow sticks, lamp oil, thermal blankets, dust masks and first-aid kits.

Online interest in survivalism has increased too. The niche Web site SurvivalBlog.com has seen its page views triple in the past 14 months to nearly 137,000 unique visitors a week. Jim Rawles, a self-described survivalist who runs the site, calls the newcomers "11th-hour believers." He charges $100 an hour for phone consulting on emergency preparedness and says that business also has tripled.

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IRS tax revenue falls along with taxpayers' income

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been."

For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.

"These are staggering numbers," Lynch says.

Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years.

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German debts set to blow 'like a grenade'

Germany's financial regulator BaFin has warned that the toxic debts of the country's banks will blow up "like a grenade" unless they take advantage of the government's bad bank plans to prepare for the next phase of the crisis.
Jochen Sanio, BaFin's president, said the danger is a series of "brutal" downgrades of mortgage securities by the rating agencies, which would eat into the depleted capital reserves of the banks and cause broader stress across the credit system. "We must make the banks immune against the changes in ratings," he said.

The markets will "kill" banks that try to go it alone without state protection, warning that banks have €200bn (£176bn) of bad debts on their books. "We are pretty sure that within a month or two our banks will feel the full force of the sharpest recession ever on their credit portfolios," he said, speaking after the release of BaFin's annual report last week.
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Crisis deals Germany worst blow in 40 years :
By Agence France Presse (AFP) Saturday, May 16, 2009 - Powered by FRANKFURT: The global recession has struck exporting giant Germany the biggest blow since records began 40 years ago, with data on Friday showing a first-quarter output slump of 3.8 percent. The quarter-on-quarter contraction in Europe's biggest economy, accounting for a third of eurozone output, was even steeper than the 2.2-percent fall recorded in the final three months of 2008, the statistics office said.
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DOLLAR IN DISTRE$$ BUCK PLUNGES ON GLOBAL CREDIT-RATING WORRIES


By PAUL THARP and MARK DeCAMBRE

The greenback tumbled to its lowest level of the year on global fears that Uncle Sam is borrowing too much with credit that's already stretched too thin.

Investors around the world dumped their hoards of dollars in favor of other currencies and under-priced stocks and corporate bonds, as they moved away from the belief that the dollar remained a haven for investors.
Traders pushed the euro and yen past the greenback after Standard & Poor's shocked the world by issuing a negative outlook on the UK's debt rating, which puts that country's AAA rating in jeopardy.

That such a threat now looms over Britain stoked fear among investors that the US could suffer a similar fate.

"We've been spared so far, but markets now are starting to show how worried they are," said Peter Schiff, president of Euro Pacific Capital.

Sources told The Post that part of the pressure on the dollar might be tied to the growing perception that the US can no longer be called upon as the world's rich uncle. Indeed, Uncle Sam's status in the world has suffered a number of knocks as a result of the credit crisis.

"The markets are beginning to anticipate the possibility" of a US credit rating cut, Bill Gross, co-chief investment officer of bond giant Pimco, told Bloomberg.

Yesterday, the euro closed up 0.8 percent to $1.3988 after breaking through the $1.40 threshold to reach $1.4051 yesterday morning. It was the weakest performance for the greenback since January.

Meanwhile, the British pound jumped to its highest level in six months, hitting $1.5933 before closing at $1.5933. The Japanese yen advanced to 94.78, vs. 94.31 a day earlier.
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Jesse Ventura at least Obama can read a teleprompter

Jesse Ventura Owned the Ultra Conservative Hannity on FOX , Jesse Ventura said that Obama inherited a mess , 2 wars an economic collapse ...etc

California debates legalizing and taxing Marijuana !!!


California is facing a massive budget shortfall and some are proposing filling the gap with revenues from the state's biggest cash crop: Marijuana. There is increasing debate on legalizing and taxing the drug. Al Jazeera's Rachel Levin reports.


The Weimar Hyperinflation? Could it Happen Again?

Ellen Brown
Global Research
May 20, 2009

“It was horrible. Horrible! Like lightning it struck. No one was prepared. The shelves in the grocery stores were empty. You could buy nothing with your paper money.” – Harvard University law professor Friedrich Kessler on the Weimar Republic hyperinflation (1993 interview)

Some worried commentators are predicting a massive hyperinflation of the sort suffered by Weimar Germany in 1923, when a wheelbarrow full of paper money could barely buy a loaf of bread. An April 29 editorial in the San Francisco Examiner warned:

“With an unprecedented deficit that’s approaching $2 trillion, [the President’s 2010] budget proposal is a surefire prescription for hyperinflation. So every senator and representative who votes for this monster $3.6 trillion budget will be endorsing a spending spree that could very well turn America into the next Weimar Republic.”1

featured stories   The Weimar Hyperinflation? Could it Happen Again?

Weimar



As in Weimar Germany, money creation in the U.S. is now being undertaken by a privately-owned central bank, the Federal Reserve.


In an investment newsletter called Money Morning on April 9, Martin Hutchinson pointed to disturbing parallels between current government monetary policy and Weimar Germany’s, when 50% of government spending was being funded by seigniorage – merely printing money.2 However, there is something puzzling in his data. He indicates that the British government is already funding more of its budget by seigniorage than Weimar Germany did at the height of its massive hyperinflation; yet the pound is still holding its own, under circumstances said to have caused the complete destruction of the German mark. Something else must have been responsible for the mark’s collapse besides mere money-printing to meet the government’s budget, but what? And are we threatened by the same risk today? Let’s take a closer look at the data.

History Repeats Itself – or Does It?

In his well-researched article, Hutchinson notes that Weimar Germany had been suffering from inflation ever since World War I; but it was in the two year period between 1921 and 1923 that the true “Weimar hyperinflation” occurred. By the time it had ended in November 1923, the mark was worth only one-trillionth of what it had been worth back in 1914. Hutchinson goes on:

“The current policy mix reflects those of Germany during the period between 1919 and 1923. The Weimar government was unwilling to raise taxes to fund post-war reconstruction and war-reparations payments, and so it ran large budget deficits. It kept interest rates far below inflation, expanding money supply rapidly and raising 50% of government spending through seigniorage (printing money and living off the profits from issuing it). . . .

“The really chilling parallel is that the United States, Britain and Japan have now taken to funding their budget deficits through seigniorage. In the United States, the Fed is buying $300 billion worth of U.S. Treasury bonds (T-bonds) over a six-month period, a rate of $600 billion per annum, 15% of federal spending of $4 trillion. In Britain, the Bank of England (BOE) is buying 75 billion pounds of gilts [the British equivalent of U.S. Treasury bonds] over three months. That’s 300 billion pounds per annum, 65% of British government spending of 454 billion pounds. Thus, while the United States is approaching Weimar German policy (50% of spending) quite rapidly, Britain has already overtaken it!”

And that is where the data gets confusing. If Britain is already meeting a larger percentage of its budget deficit by seigniorage than Germany did at the height of its hyperinflation, why is the pound now worth about as much on foreign exchange markets as it was nine years ago, under circumstances said to have driven the mark to a trillionth of its former value in the same period, and most of this in only two years? Meanwhile, the U.S. dollar has actually gotten stronger relative to other currencies since the policy was begun last year of massive “quantitative easing” (today’s euphemism for seigniorage).3 Central banks rather than governments are now doing the printing, but the effect on the money supply should be the same as in the government money-printing schemes of old. The government debt bought by the central banks is never actually paid off but is just rolled over from year to year; and once the new money is in the money supply, it stays there, diluting the value of the currency. So why haven’t our currencies already collapsed to a trillionth of their former value, as happened in Weimar Germany? Indeed, if it were a simple question of supply and demand, a government would have to print a trillion times its earlier money supply to drop its currency by a factor of a trillion; and even the German government isn’t charged with having done that. Something else must have been going on in the Weimar Republic, but what?

Schacht Lets the Cat Out of the Bag

Light is thrown on this mystery by the later writings of Hjalmar Schacht, the currency commissioner for the Weimar Republic. The facts are explored at length in The Lost Science of Money by Stephen Zarlenga, who writes that in Schacht’s 1967 book The Magic of Money, he “let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the ‘accepted wisdom’ the financial community has promulgated on the German hyperinflation.” What actually drove the wartime inflation into hyperinflation, said Schacht, was speculation by foreign investors, who would bet on the mark’s decreasing value by selling it short.

Short selling is a technique used by investors to try to profit from an asset’s falling price. It involves borrowing the asset and selling it, with the understanding that the asset must later be bought back and returned to the original owner. The speculator is gambling that the price will have dropped in the meantime and he can pocket the difference. Short selling of the German mark was made possible because private banks made massive amounts of currency available for borrowing, marks that were created on demand and lent to investors, returning a profitable interest to the banks.

At first, the speculation was fed by the Reichsbank (the German central bank), which had recently been privatized. But when the Reichsbank could no longer keep up with the voracious demand for marks, other private banks were allowed to create them out of nothing and lend them at interest as well.4

A Story with an Ironic Twist

If Schacht is to be believed, not only did the government not cause the hyperinflation but it was the government that got the situation under control. The Reichsbank was put under strict regulation, and prompt corrective measures were taken to eliminate foreign speculation by eliminating easy access to loans of bank-created money.

More interesting is a little-known sequel to this tale. What allowed Germany to get back on its feet in the 1930s was the very thing today’s commentators are blaming for bringing it down in the 1920s – money issued by seigniorage by the government. Economist Henry C. K. Liu calls this form of financing “sovereign credit.” He writes of Germany’s remarkable transformation:

“The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.”5

While Hitler clearly deserves the opprobrium heaped on him for his later atrocities, he was enormously popular with his own people, at least for a time. This was evidently because he rescued Germany from the throes of a worldwide depression – and he did it through a plan of public works paid for with currency generated by the government itself. Projects were first earmarked for funding, including flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at one billion units of the national currency. One billion non-inflationary bills of exchange called Labor Treasury Certificates were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. The workers then spent the certificates on goods and services, creating more jobs for more people. These certificates were not actually debt-free but were issued as bonds, and the government paid interest on them to the bearers. But the certificates circulated as money and were renewable indefinitely, making them a de facto currency; and they avoided the need to borrow from international lenders or to pay off international debts.6 The Treasury Certificates did not trade on foreign currency markets, so they were beyond the reach of the currency speculators. They could not be sold short because there was no one to sell them to, so they retained their value.

Read the entire article:

The Financial Storm

Stephen Lendman
Global Research
May 15, 2009

Reviewing Ellen Brown’s “Web of Debt:” Part III

This is the fourth in a series of articles on Ellen Brown’s superb 2007 book titled “Web of Debt,” now updated in a December 2008 third edition. It tells “the shocking truth about our money system, (how it) trapped us in debt, and how we can break free.” This article focuses on America’s “web of debt” entrapment.

The Debt Spider Captures America - American Workers Consigned to Debt Serfdom

America has been trapped for over two centuries, with today’s debt level way exceeding developing nations. Like bankrupt people staying “afloat by making the minimum payment(s) on (their) credit card(s), the government (avoids) bankruptcy by paying just the interest on its monster debt” - now double in size since Brown’s first edition and onerous enough for Controller of the Currency David Walker to warn earlier of its unaffordability by this year. If America can’t service the amount, it’s officially bankrupt and the economy will collapse. If it happens, IMF austerity will follow and turn America into Guatemala. Other vulnerable economies as well - permanent debt bondage and worker serfdom.

Catherine Austin Fitts was a former high-level Wall Street and government insider. She points to a “financial coup d’etat” conspiracy between the two to hollow out America, centralize power and knowledge, shift wealth to the top, destroy communities and local infrastructure, create new wealth by rebuilding them, and leave human wreckage in its wake.

She also calls today’s crisis “a criminal leveraged buyout of America (meaning) buying (the) country for cheap with its own money and then jacking up the rents and fees to steal the rest.” She calls it the “American Tapeworm” model:

It’s “to simply finance the federal deficit through warfare, currency exports, Treasury and federal credit borrowing and cutbacks in domestic ‘discretionary’ spending…This will then place local municipalities and local leadership in a highly vulnerable position - one that will allow them to be persuaded with bogus but high-minded sounding arguments to further cut resources. Then to ‘preserve bond ratings and the rights of creditors,’ our leaders can be persuaded to sell our water, national resources and infrastructure assets at significant discounts of their true value to global investors” - masquerading as a plan to “save America by recapitalizing it on a sound financial footing.”

In fact, it’s to loot the country by shifting wealth offshore and to the top. Also, to destroy the country’s middle class, consign US workers to serfdom, then meet expected civil disobedience with military force, followed by mass internment in over 800 FEMA detention camps in every state.

Today, the rich are getting richer while millions of Americans struggle daily to get by and live perilously from paycheck to paycheck, a mere one away from insolvent disaster.

Given where we’re heading, Warren Buffett warns that America is changing from an “ownership society” to a “sharecroppers’ ” one, no different than feudal serfdom. Economist Paul Krugman calls it “debt peonage,” much like the post-Civil War South that forced debtors to work for their creditors.

Make no mistake, it’s a corporate America scheme for a plentiful reserve army of labor no better off than in developing countries - at low wages, no benefits, weak unions if any, and government engineering the whole scheme. Even personal bankruptcy protection eroded under the Bankruptcy Abuse Prevention and Consumer Protection of 2005 - benefitting lenders at the expense of borrowers by keeping them chained to their debts.

It requires many more people “to file under Chapter 13, which does not eliminate debts but mandates that they be repaid under a court-ordered payment schedule over a three to five year period.” Homes, in some cases, may be seized and even owe a “deficiency, or balance due” if its sales price doesn’t cover it. This Act “eroded the protection the government once provided against (various) unexpected catastrophes (like job loss and high medical expenses) ensuring that working people (henceforth) are kept on a treadmill of personal debt.”

Even worse are loopholes in the law letting “very wealthy people and corporations….go bankrupt….and shield(ing) their assets from creditors…” This bill was written at the behest of credit card companies that entrap consumers in debt, charge usurious interest, and demand repayment no matter what besets them. In one respect, debt bondage is worse than slavery. As property, slaves had to be cared for. Debt slaves have to fend for themselves and pay tribute (interest) to their captors.

The Illusion of Home Ownership

In 2004, household home ownership rates were “touted” to be nearly 69%. In fact, only 40% of homes are debt-free, but that percentage fell given the amount of refinancing in recent years. As a result, “most mortgages on single-family properties today are less than four years old” meaning they’re many years away from free and clear ownership.

“The touted increase in home ownership actually means an increase in debt (and) Households today owe more relative to their disposable income than ever before,” although in recent months they’ve been repaying it and saving more.

Earlier, and still now, low “teaser rates” entrapped households in onerous debt, fueling the housing bubble as another Federal Reserve/lender ploy to pump “accounting-entry money into the economy,” set it up for trouble, then let financial predators exploit it for profit. The same strategies for Third World countries are playing out in America with too few people the wiser.

The 19th century “Homestead Laws that gave settlers their own plot of land (cost and debt free) have been largely eroded by 150 years of the ‘business cycle,’ in which bankers have periodically raised interest rates and called in loans, creating successive waves of defaults and foreclosures” - worst of all for subprime and other risky mortgage holders defaulting in record numbers with millions still ahead in what’s playing out as the nation’s worst ever housing crisis showing no signs of ending.

The Perfect Financial Storm

It looms in the form of inflation and deflation given the enormity of newly created money at the same time borrowers can’t repay loans that then default. When that happens, “the money supply contracts and deflation and depression result.”

When the housing market corrected between 1989 - 1991, “median home prices dropped by 17%, and 3.6 million mortgages” defaulted. The equivalent 2005 decline “would have produced 20 million defaults, because the average equity-to-debt ratio….had dropped dramatically” - from 37% in 1990 to 14% in 2005, a record low as a result of equity extracted refinancings.

“What would 20 million defaults do to the money supply?” Two trillion dollars would evaporate or about one-fifth of M3. The fallout would cause huge stock and home value declines, income taxes needing to be tripled, Social Security, Medicare and Medicaid benefits halved, and pensions and comfortable retirements gone for the vast majority of workers. And that’s assuming a modest housing price decline when it’s already far more severe and continuing, giving pause to the virtually certain calamity ahead and devastation for the millions affected.

Policy changes in 1979 - 1981 laid the groundwork for today’s crisis by “flood(ing) the housing market with even more new money,” and much more. They let Fannie and Freddie speculate in derivatives and mortgage-backed securities and by so doing assume enormous risk.

In June 2002, writer Richard Freeman warned of the impending dangers in an article titled: “Fannie and Freddie Were Lenders - US Real Estate Bubble Nears Its End.” He cited the largest housing bubble in history made all the greater by Fannie and Freddie manipulation and stated: ….”what started out as a simple home mortgage has been transmogrified into something one would expect to find at a Las Vegas gambling casino. Yet the housing bubble now depends on (highly speculative derivatives as new) sources of funds,” made all the riskier through leverage.

In 2003, Freddie was caught cooking its books to make its financial health look sound. In 2004, Fannie did the same thing. Meanwhile, housing peaked in 2006, then steadily imploded, bringing the economy down with it.

Read The Entire Article:

There Will Be No Recovery


by James West, MidasLetter.com | May 15, 2009
All the glad-handing, back-slapping self-congratulatory accolades the Obama administration and Wall Street are heaping upon themselves in the press is scant comfort for the vast majority of citizens now unemployed and of no fixed address. For them, this economic crisis isn’t so much a temporary crisis as a permanent redistribution of wealth and living standards representative of a downgrade in the quality of life.

A dispassionate eye, equitably minded, would regard the current gross imbalance among haves and have nots as a simple case of injustice, easily rectified. Those travelling daily in jets and Escalades leveraged the savings and credit ratings of the common people to agglomerate assets onto their own balance sheets to satisfy a sense of entitlement derived from an overpriced education.

Simply go back into all the family trusts and holdings of the top 10% of the population, see who made what from which leveraged revenue scheme (or scam, as the case should be), and liquidate the assets of each to the benefit of every impoverished bank account until the distribution of wealth and purchasing power is restored to something approaching equilibrium.

I can hear the howls of protest from the neo-conservative right already, accusations of socialism and communism manifest in their strident shouts. But this nation must surely be growing tired of a financial elite who wave the democracy banner when their hand is in your pocket, and the socialist banner when their little game of marbles goes bust and they stand crying and wailing for government help. Lets reach up high into the financial food chain and pull down a little manna from heaven.

The feeble feints towards the regulation of derivatives is already transparently disingenuous in the preservation of non-standardized privately negotiated contracts from the balancing forces of clearing houses. These are the very contracts that represent the highest dollar figures in the hundreds of trillions of dollars worth of contracts leaning hard over the economy’s tattered remains still. Lets quit faking regulation, and either drop the charade or regulate everything equitably.

If I overuse the term “equitably” in this rant, please forgive me, but that is the commodity most impaired by the government-banking-media mafia’s perennial raids on the American pantry. Equity is the foundation of, if not the spirit, then at least the ideals behind the Constitution. There will be no recovery until that basic premise is liberated from the dungeon under the White House into which it disappeared decades ago.

The terms “equity”, “equitable”, and “equality”, though having different meanings under various subjective subsets, are all derived from a concept embracing fairness.

According to the definition at InvestorWords.com, equity is:

“Definition 1
Ownership interest in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value. In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirements.

Definition 2
Ownership interest in a corporation in the form of common stock or preferred stock.

Definition 3
Total assets minus total liabilities; here also called shareholder's equity or net worth or book value.

Definition 4
The value of a property minus the owner's outstanding mortgage balance.

Definition 5
Fairness in law.”

Another decree from the dispassionate eye equitably minded would be to forbid the foreclosure upon any home by an institution who received a bailout under the TARP, TALF, or any other anagrammed government financial rescue program. That would be fair, and equitable. Which, unfortunately, considering the incarceration of those twin concepts, is almost guaranteed not to happen.

Is it coincidental that the “recovery” apparent in inexplicable stock index exuberance happened to coincide with the expiration of the majority of moratoriums on foreclosures? Was the happy countenance of a healthy economy required to distract the nation from the other face whose fangs are now rotating into full view?

The idea of revolution keeps popping up, albeit intermittently, in the fringe blogosphere. I wonder just how far the disconnect goes between what the government-banking-media mafia thinks the public will swallow without complaint, versus the grave and solemn outrage dangerously smoldering in the hearts and minds of its victims that is the reality that brings that idea closer to an explosive existence?

This is the real and stark potential future for the United States. With crime on the rise in virtually all sectors, and the population already armed to the teeth, there is a fine line on the horizon that this organized crime gang seems intent on crossing.

The basic requirement of all humanity is food, shelter, and gainful employment. Historically, armed revolutions are ignited when those basic elements disappear from the daily lives of a majority of the population, such that most have nothing better to do than steal, beg, or roll over and die. When enough of that despair permeates any portion of humanity, there is an organic, deeply-rooted fury that, expressed collectively, has never failed to topple governments and rewrite the world order.

Proponents of globalization point to the fact that there has never been a longer period in the history of the planet where more people have enjoyed a peaceful and prosperous existence. That may be true, but one must question if that is because we have been living under a system that is for the most part fair and equitable, or have we just so thoroughly mastered the arts of manipulation and delusion through the offices of mass media that there has also never been a time where such astonishingly massive concentrations of personal wealth have accrued to such a proportionate few in the same time span?

The larger question in terms of a recovery is exactly what must we recover? The mafia most clearly wants us to believe that a return to over-leveraged and exuberant economic growth is the priority underlying the idea of recovery. I opine that there is something far more valuable that needs to be recovered, and issues economic are puny in comparison. For without the recovery of equity, there can be no recovery.

SOURCE: http://www.midasletter.com/commentary/090515-1_There-will-be-no-economic-recovery.php

Copyright © 2009 James West

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Recovery? What Recovery?

Recovery? What Recovery?
Kevin Kelly
Newsweek
May 9, 2009
Don’t tell me that the economy is getting better, or has even hit rock bottom. My faith in an imminent recovery deserted me on May 5, when one of our customers, Salyer American Foods, based in Monterey, Calif., suddenly fell into receivership. There had been little to no indication that the company was so close to financial ruin. As it turns out, the company’s lenders say Salyer owes them over $34 million, a debt equal to almost half its sales. A company attorney told local media that tight credit markets and the economic recession had pushed Salyer over the edge. If the receiver doesn’t find some way to revive the company’s fortunes, our bag manufacturing company stands to lose nearly $1.5 million in revenue, about 2 percent of our $60 million in sales.

On the same day my customer fell into receivership, Fed chairman Ben Bernanke told a congressional committee that he believed the economy was in the process of bottoming out and “would turn up later this year.” He’s not alone in his optimism. Over the past two weeks or so, it has become a cottage industry among economists and the media to spot the first “green shoots” of a recovery. Certainly shoots there may be. The stock market has rebounded smartly over the past two months, as has consumer confidence. Pending home sales have ticked up, while unemployment claims are easing. And many economists insist a manufacturing revival is in the wings because inventories have fallen so low that restocking must begin soon.

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