Saturday, July 30, 2011

The Charade of the Debt Debate

The average American can’t be blamed for thinking that the debt ceiling debate that is monopolizing the news cycle is a crisis in the making. One can hardly turn on the TV or the computer and see anything else at the top of the news columns. It doesn’t matter what source you look at, left, right whatever, they are all playing to the hilt. After all hysteria and fear mongering makes for ratings and advertising dollars.

Growing right along with the media hype is a sense by the American people that government has just grown too big, too incompetent and just plain corrupt, a sense that politicians aren’t just lying to them but they are hiding the truth for their own political ends and desires to get re-elected. This opinion is beginning to cross all political lines and it has the politicians worried. How can they convince voters to re-elect them if ever increasing numbers of voters see them all, Republicans, and Democrats, as self-serving and disinterested it the problems of the average citizen? Politicians, being creatures of habit, of course resort to the partisan gamesmanship that has served them so well for all these years.

Problem is that every time they convince themselves and/or enough public opinion that the latest proposal is the “solution to the problem,” it fails before it even gets started. Hence the source of the paradigm shift in the public’s attitude, and as is to be expected the politicians are the last to recognize it.

Underlying all this are questions that the politicians don’t want to answer, hell they don’t even want them asked! If these questions are acknowledged to exist, the answers and the questions those answers would then generate will expose them for the frauds and wholly owned subsidiaries of Wall Street that they are.

While politicians and pundits on both sides of the aisle bemoan the $14.3 Trillion debt they all ignore the fact that the onetime audit of the FED revealed that it had loaned $16.1 Trillion in funds at near 0% interest to the Too Big To Fail banks and then turned around and hired these same banks to manage the loan portfolios and PAID them another $600 Million for the service! Yet no questions are asked about conflict of interest or hiring foxes to guard the hen house!

So just where did the FED get this $16.1 Trillion? They simply created it up out of thin air; they made a few magical entries on the computer and the assets of the banks in question (the very banks that own the FED) suddenly grew to the point of no longer being insolvent. Why are no questions being asked? Why were the members of the FED board given waiver on conflict of interest because they were personally invested in the very banks they were loaning money to?

So what we have is an unaccountable private monopoly that creates our money, sets interest rates, regulates the banking system in general and makes secret loans with the nation’s currency to whoever they want.

It has more power over the direction of the economy than any other institution. It has no oversight, is responsible to no one but itself and no one, no government body, no court can overrule or overturn its decisions.

How can any citizen, any elected official regard this as just or in any context "American"? Who could be surprised that while by any measure, anemic GDP growth, persistent unemployment numbers, growing debt and deficit, creeping inflation the economy flounders, the banks continue to not just prosper but report increasing profits and pay monumental bonuses to their top executives?

Unless and until structural changes are made to not just the government budget process but more importantly the FED there will be no viable solution to the fiscal and monetary crisis. Until the FED’s power to inflate the currency and steal the wealth of the public to pad the balance sheets of its constitute banks the fleecing will continue.

Any “shared sacrifice” must include the bottom line of the banks. Unless Glass-Stegal is re-instituted their power cannot and will not be broken. The largest holder of US debt paper is not China or any other sovereign power, it is the FED. Its balance sheet has swollen by nearly 200% solely of the accumulation of Treasury Bonds. Through the POMO process the banks have made billions on the growing indebtedness of the Federal Government and no politician or pundit utter a peep of protest. None will even dare question that this has been the very reason for the FED’s existence for all these years. Looking at this chart how could there be any other conclusion?

You want a solution? Audit the FED, declare the US Treasuries on its books as null and void. Declare the Treasuries held by its constituent banks as of a reduced value. Use a re-enacted Glass-Stegal to break up the “Too Big To Fail” banks just as Teddy Roosevelt broke up the oil and steel trusts. Reconstitute the FED along the lines of Alexander Hamilton’s “Bank of the United States” where under it would remain a private bank but with a board containing members appointed by both the Congress and the President and independent of any previous association with the banks. Any such new FED must be subject to periodic public audits and any failure to comply with law subject to not just civil prosecution of the bank but criminal prosecution of it board members.

Well don’t hold your breath, it won’t happen, not as long as the bankers dump their pocket change into the campaign funds of the politicians that would have to enact any such change in law.

Friday, July 15, 2011

Damned If You Do, Damned If You Don’t; The Debt Ceiling Question Answered, And You Won’t Like It.

I’m glad I have a pretty good sense of humor; otherwise all the pontification and debate about raising or not raising the debt ceiling might bring me to either to tears or a state psychosis. The truth being that all the rhetoric and finger pointing is nothing more than a grand illusion, a distraction to provide a na├»ve public with the boogey man of their particular partisan choice. In the end, the result of either raising or not raising the debt ceiling will be one and the same; the bankers will get the gold and the taxpayers will get the shaft.

If the present state of political deadlock stays in place and there is no “grand agreement,” the value of US debt paper would fall precipitously and the interest rates due will rise inversely. The holders of all this paper (with the exception of the FED of course) would then be between the proverbial rock and a hard place. Should they start to unload their holdings and get whatever cash out of it they can, or hold on and hope that US will somehow figure out a way to make the higher interest payments?

Any decision to sell would require they be both being willing to take and absorb a substantial loss of principle and finding a buyer willing to except the counter party risk in exchange for the potential higher interest draw. Holding on encounters the risks of both potential non-payment of interest, having their asset values fall and their own credit ratings placed in jeopardy.

So just who would be these buyers of last resort, and whom will they end up sticking with the bill in the end? Well that’s not exactly hard to figure out. Our dear friends, the Primary Dealers of the Federal Reserve System are presently sitting on massive “excess reserves” parked in their accounts at the FED. They will use these reserves as collateral to borrow even more created from thin air “magic money” at ¼% from the FED that they will then use to buy these foreign, mutual fund and hedge fund held Treasury bonds at discount prices. They will then turn around and sell these bonds back to the FED for 3% to 4% more than they paid for them. They can then “pay back” the “magic money” loans and deposit these newly created “profits” back into their FED “excess reserve” accounts. They then payout those fat bonuses they have all come to expect and actually think they’ve earned and then shuffle off their pocket change into campaign funds of their favorite corrupt politicians.

If you had doubts about what all the talk of “possible” further quantitative easing (QE3) was about, well there’s your answer. In the end the US taxpayer will get stuck with the bill for the higher interest payments and the bankers’ particular tax bill of choice: Inflation.

Added into this monumental and ongoing pillaging by Wall Street we will get the political chaos of the President then being responsible for deciding what gets cut and how much, to account for the Congress no longer being able to borrow the 40 cents on the dollar that they are now spending. If you think Congress is a bunch bickering, dysfunctional children now, just wait until that mess gets into the appropriation process.

So what then if there is some kind of “agreement” and the debt ceiling gets increased, coupled with spending cuts and/or increased taxes? Well Congress now has an additional $2.6 Trillion to spend on whatever new or old useless programs they can dream up. Whatever cuts in spending do go into place will result in layoffs of government employees and those of various federal contractors as well as their vendors. The politicians will call it “shared sacrifice,” I’d call it trickle down tyranny. Unemployment goes up and federal and state unemployment insurance payments go up. Home foreclosures go up and the housing markets sags even deeper. Welfare and assistance rolls then grow and in the end this little austerity play becomes a zero sum game in terms of Government expenditures.

This $2.6 Trillion that will now be available for spending will have to come from somewhere. Once again our old friend QE3 will rear its ugly head. New verse, same as the last verse. The Treasury Department puts more bonds up for auction; the Primary Dealers once again borrow from the FED at next to nothing and buy the bonds. As is standard procedure under the POMO process they even receive a fee from the Treasury Department for making the purchase. They then turn around and sell these Treasuries back to the FED at a premium over their purchase price. The “magic money” loans get repaid and more “excess reserves” get parked back in their FED accounts. The obscene bonuses get paid out and the politicians get their bribes. Only difference is this time there are fewer indirect bidders, as foreign nations, mutual funds and hedge funds will be much less inclined to bid at the auction. So then the prices will be lower and the interest rates will be higher. The direct bidders, the Primary Dealers, will then take on an even larger percentage of the auction offer and will subsequently make even more money under QE3 than they did under QE2.

Those Primary Dealers that are US branches of European banks will then transfer these newly created profits to their domestic accounts and use them to finance the ongoing bailout of the Euro PIIGS. Once again the US taxpayer will be stuck with the bill for rescuing Europe’s socialist nightmare, the burgeoning interest payments on another $2.6 Trillion in debt and the bankers’ favorite tax; Inflation.

Unless and until people wake up to this tyrannical fraud and realize that there is nothing in our Constitution or any statute of law that says our currency must be a debt instrument issued by a private bank, this game will go on and on until the whole world collapses into a hyper-inflation that will make Weimar Germany look like a tea party. At which point the powers that be will cook up a war that will spin out of control faster than Courtney Love on a crack binge.

Wednesday, July 13, 2011

Cheating the Arabs out of their own History.

In a couple of previous pieces I touched on how Islam has devolved into the direct inheritors of Nazi rhetoric and methods. (See ) Let’s add to this Gobbles’ principle of the “Big Lie.” Much of what we hear is about not just their desire to exterminate Israel and the Jews, but also about establishing a new Caliphate.

I find it a bit hard to believe these so-called “Islamic scholars” are completely ignorant of their own history. If they we being honest about it they would have to include in their narrative that the cultural accomplishments of the first Caliphate that arose in the 8th and 9th centuries would not have been possible without those same Jews that they now so despise. Or is it perhaps this fact that has them so twisted in lies and hatred? So first then let’s explore a little of the historical background.

What these modern protagonists of a new Caliphate don’t want their followers and recruits to know is something that the West has long forgotten, and the Islamists certainly hope it doesn’t remember. As Islam spread in the 8th and 9th centuries into those areas that had been former parts of the Greek and Roman Empires they quite naturally came across large amounts of documents of those periods (works that at the time were all but completely lost in Europe) and were also quite naturally curious about what these documents were and what they said. So just what group of people within the Islamic empire do you think still retained the educational levels and the linguistic skills needed to translate this vast library of knowledge that was about to become infused into the new Islamic empire? Well I’ll give you three guesses and the first two don’t count.

The Jews were quickly set to task to translate the Greek and Latin texts into Arabic (and Hebrew). It was thus that much of the elite, including the Jews, of the empire became Hellenized. For the Jews the process had been ongoing, and often resisted since the time of Alexander the Great. For the Arabs, the transformation was openly embraced. Jewish culture flourished in the Islamic empire. Jews and Arabs both quickly build upon the established grounds in the fields of architecture, astronomy, mathematics and philosophy. It may have taken another 500 years but these translated works eventually found their way back to Europe and gave birth to the Renaissance in the 14th century. Again it was the Jews living in the Islamic empire and in Europe who re-translated back into Latin and into the European vernaculars what had been previously translated into Arabic and Hebrew.

With such a history for the Islamic Caliphate, and given that the Arab people are no different than any others in that they are a product of their history, how then do these “scholars” get to a position of advocacy for the genocide of a people who are so much a part of what the Arab and Islamic world was and is?

Their codification into the Koran aside, Muhammad’s proscriptions against the Jews were little more than a political and military expediency that should be viewed within the context of their time. They were a reaction to the Jews of Medina (a city the Jews had founded) rejecting his request that they join him in his new vision of the Abrahamic God. It didn’t help either that he cast a jealous eye upon the wealth of that city that he may well have coveted to finance his growing armies.

After the death of Muhammad many of the political restrictions against the Jews (Pact of Omar 637 A.D.) simply were no longer enforced. The Arabs may have held them as suspect for their refusal to convert but they continued to respect them for their strong beliefs in education and family cohesion. In fact the Arabs were as much if not more tolerant than the Romans had been of religious differences. Jews rose to high rank in Islamic armies and served in the courts of Caliphs and Sultans as Doctors, financiers, and even religious advisors.

Hasdai ibn Shaprut ( was advisor to the Caliph of Cordoba in the mid-10th century, and was in essence his foreign minister.  
                                          Hasdi ibn Shaprut

Samuel Ha-Nagid ( was the Grand Vizier and architect to the 11th century sultans in Grenada.

I wish I could say that the current violent rhetoric was this same kind of political expediency, sadly it is not, the association with the Nazism and the shared rhetoric of genocide and violence is long and well established. But why are these historical truths being hidden from the very people who most deeply need to understand them? One has to wonder then if there is indeed some kind of deep psychological disconnect, an inferiority complex, a need to prove that the Arab world can prosper and grow without Western society and the Jews in particular?

As an example, look at what happened when Israel decided to withdraw all presence and settlers from the Gaza Strip. When they departed they left behind the infrastructure of a thriving agricultural industry, irrigation systems and hothouses for growing vegetables etc. Did the Palestinians take over these businesses and operate them for their own benefit? No. They were openly encouraged by their political leaders to destroy them, and destroy them they did. And now that same leadership bemoans to the world that the Israelis deliberately restrict the amount of food that can be imported through the check points into Gaza. Hypocrisy in the extreme, but as long as Israel is the target of the excuse; no one wants to examine the cause of hunger in Gaza as a self-inflicted condition.

What a great tragedy it is that such an immoral disservice is being perpetrated upon the Islamic world and especially the Palestinian Arabs. The old adage about catching more flies with honey than vinegar would seem to apply here. But the Imams and the “scholars” don’t want cooperation and progress; they want domination and the maintenance of their own positions of power. They don’t want to become part of a global civil society; they want to be masters of the world. For them the evil and corruption of Nazism and genocidal rhetoric are but the trap with which they ensnare and keep ignorant not only their own people but any and all who would tend to politically lean against the existence of Israel for whatever reasons of their own.

The exploitation of the weak and ignorant for political gain has been going since the first tribe waged war against its neighbors. That much of the Islamic world remains tribal in nature just makes it all the easier for them, and all the more dangerous for the rest of the world.

Tuesday, July 12, 2011

Like a Bad Hollywood Remake

Like most any Hollywood remake, the second or third in a series is always worse than the first. And so it goes on. The fun in Europe just never stops. Just when the banking and political elites had thought they had bought some breathing space with the passage of the on again off again interim bailout package for Greece along comes the Spaniards and Italians to gum up the works. Sadly the situations in Portugal and Ireland haven’t improved either but in the bigger picture appear small compared to what’s coming with Spain and Italy.

First, and almost as a side note, we get some of the Spanish provinces announcing that they are finding that their deficit conditions are almost twice as bad as previously reported. (Read their Credit Default Swaps are going down the toilet.)

Next comes corruption plagued Italy’s banks sinking faster than the Lusitania. They started collapsing so fast that trading had to be halted, only to resume once the markets were reopened. The replay of the Greek delusion that all could be settled with austerity packages and a few bond buy backs at below at below par blew up even quicker than it did in Greece. It seems those pesky rating agencies just won’t stay bought and informed the ECB and the IMF, not to mention the public that doing so would simply be default by another name. They can put all the ribbons on this steaming pile they want, it’s still going to stink.

Add in the new IMF President opening her mouth and saying that “nothing should be taken for granted on Greece” and the next thing you know the Euro drops back below $1.40 for the first time in a year. What more could possible go wrong? Oh that’s right Germany’s Angela Merkle said that any expansion of the existing €500 Billion bailout fund at Germany’s expense was off the table.

Hey I’m just an engineer but I still think €376.7B + €624.8B = €1001.5B is just a tad bit larger than €500B.

Gee I wonder why the price of gold is again approaching its all time high in Dollars and has already passed it in Euros. The real kicker in the PM markets though is the price of silver. While gold and the Swiss Franc again soar, silver remains in the summer doldrums to say the least. Guess these poor fools have bought the line that silver is just a mere commodity and not real money. Meanwhile inventories plunge and naked manipulation and price suppressions goes on at an accelerated pace. Just as the bankers and politicians solution to debt is more debt their solution to being naked short in silver is to go even farther naked short. It’s reached to point of hilarity.

Look at this chart for July 11th and try to tell yourself that this is not manipulation. While you’re at it click your heels together three times and you might find yourself back in Kansas too.

Just another opportunity to buy as far as I’m concerned. When the bill comes due the price will explode to $200 an oz. and then we will be seeing just who is sitting fat. Hint: It won’t be JP Morgan or HSBC.

Never mind, the one thing you will be able to count on is that the Central Banks will continue doing two things; churning out more propaganda to keep the view blurred and confused and continue using those piles of newly printed currency notes to buy hard assets to protect themselves from the growing debacle that they created, while everybody else’s situation only gets worse. Hey maybe I should go long on pitchforks and torches as a side investment.