The countdown to armadebtdon carries on and we are just 3 days away from the debt ceiling deadline. If a discussion is not reached will the US lose its AAA rating? The problem is we are not taking in enough revenue to continue spending like we are. Max Keiser of Keiser Report gives us his insight on what that means to the US.
The debt standoff continues and still lawmakers cannot come to terms on a deal. August 2nd is the day that the US is supposed to default and many are concerned on how this will affect the US's AAA rating. Gerald Celente, publisher of the Trends Journal, tells us the numbers don't lie.
The country which holds more U.S. debt than any other, has hit out at the failure of Congress to reach a deal over its debt ceiling. China says the political deadlock in Washington threatens the entire global economy.
So far Republicans and Democrats have delayed a vote over limiting what the country owes, as they haven't agreed on rival budgets. They have until Tuesday to avoid a potentially devastating default. Earlier in the week, U.S. Secretary of State Hillary Clinton was in Beijing to reassure Asian leaders, that America will not fall back on its debt payments. But Peter Schiff from investment company Euro Pacific Capital, thinks China could well dump the dollar as its main reserve currency.
Back in the days of the Mongol and Roman empires, the process of stealing wealth from the peasants and savers wasn’t very difficult. A little extra bronze in the treasury’s crucibles meant that you could create a few extra denarii (plural for the Roman denarius), and the emperor could have himself a nice little shopping spree. If any zealots thought about getting out of line, a spear to the side and a soak in the Tiber would silence any would-be threats.
With modernity comes complexity, though, and cross-border capital movements suddenly meant that the hard-laboring peasant could save his depreciating wealth by moving it into another country’s currency, or simply into a hard asset. But by the sheer act of doing that, the peasant would worsen inflation—because when he sells his denarii (or whatever currency he happens to be using) and buys assets, he drives down the value and the purchasing power of that currency.
When people howl about the government screwing them, they probably don’t realize that the government has to prevent the peasants from screwing themselves—and therefore the government must screw the peasants. It’s not that the government hates you; it's a product of the system—and all we can do is take advantage of the system.
Inflation is largely a social psychology problem. If people think inflation will persist, it will, and Brazil was no different. Since the 1950s, it had gone through the same cycle: A presidential candidate makes big promises, which get him elected. Once he’s elected he creates currency to build a new capital in Brasilia or invent some new type of social handout. The inflation caused by currency creation would destroy the economy, the president would get voted out or impeached, and the cycle would begin anew. Don't we love cycles?
In 1990 Brazil, inflation was running 80% per month. If eggs were $1 on Monday, at that rate, they would cost $1.03 on Tuesday. By the end of the week, they would cost $1.20, and by the end of the year, they would cost $1,157—nobody said hyperinflation is cheap.
As quickly and as quietly as possible, then-President Fernando Collor froze all financial assets, put caps on prices and salaries, and increased taxes. Needless to say, Collor’s plan failed, and he was impeached in 1992.
During the Thai baht crisis of July 1997, the government screwed savers and peasants royally. When the Thai government could no longer maintain its currency peg to the dollar, it cut the value of the Thai baht in half, immediately crushing the savings of millions. In order to keep people from fleeing with their wealth, the geniuses at the IMF suggested that Thailand raise interest rates to attract capital. When that strategy instead plunged the country into recession, the Thai government had to resort to locking down savings accounts and instituting capital controls to maintain whatever integrity was left in their currency.
With a U.S. default and another crisis seemingly around the corner, politicians and the Fed seem eerily calm about things. In yesterday’s news, the Financial Times wrote this:
“Wall Street bankers, from senior executives to traders, are complaining that the Federal Reserve is refusing to engage in scenario-planning for a downgrade or default by the US.
“With days to go until the US treasury’s August 2nd deadline to raise the debt ceiling, bankers said they were not getting a response to efforts to discuss the market impact of a failure to reach a deal in Washington or if rating agencies cut the country’s triple A rating.”
Is that non-response U.S. politicians being irresponsible, or are they just playing possum as they consider the ways in which they must screw us peasants in order to salvage what life is left in the dollar? We think it’s safe to assume that, regardless of what solutions the Fed and the Treasury come up with, it will be, as always, the savers and the peasant worker bees who are made to pay.
The countdown to armadebtdon continues and we are just four days away from the debt ceiling deadline. Many agree that the real issue isn't raising the debt ceiling, but the actual problem is the debt itself. Peter Schiff, president of Euro Pacific Capital, tells us what he'd do if he was in charge.
This week Max Keiser and co-host, Stacy Herbert, look at gold's standing ovation for the Obama-Boehner debt ceiling theater. In the second half of the show, Max talks to Stefan Molyneux about the Fed audit and the debt ceiling.
This week Stefan Molyneux (our video host) interviews Casey Research Chief Economist Bud Conrad on the current state of the U.S. and global economy, with a specific emphasis on investment implications.
Bud has a more bearish view on nuclear power than Casey Energy Strategist Marin Katusa, so we'll have to interview him soon as well. It's okay that their opinions differ; creative thinking can't occur where different views are not allowed. And Bud's basic analysis is highly consistent with the way Doug himself views things -- which is, in technical economic terms, "pretty darned scary."
There are 5 days until the default date of August 2nd. How will this affect everyday Americans? While Obama and Boehner play chicken Jim Rogers, co-founder of Quantum fund, sounds off on the economic issue. Is this a political charade?
The US dollar, which turned 150 this week, is finally starting to act its age. After a stormy childhood, it spent much of its 20th century prime as the unquestioned linchpin of global finance, particularly during the Bretton Woods era, when it was tied to gold. Today, the greenback is the primary reserve currency, largely due to tradition and lack of alternatives. With traders unwilling to bet on the troubled euro and unable to bet against the renminbi, gold's nominal record in dollar terms this week shows unease about the dollar's long-term strength.
In 1861, people getting paid in the untried new paper currency initially were wary, sending its value sharply lower versus specie. The phrase "not worth a Continental" – a reference to paper dollars issued to finance the Revolutionary War eight decades earlier – showed their skepticism about fiat currency. They feared the dollar, created to finance the Union's war against 11 rebel states who had issued their own dollar three months earlier, would suffer the same fate.
In fact, the dollar almost vanished several times. Yet the flowering of the US economy in subsequent decades, and the need for liquidity during panics, revived its fortunes. The longer it hung around, the more it became accepted as "legal tender". Federal Reserve notes, a 20th century development, eventually replaced original greenbacks backed by the Treasury, but the name stuck.
That was 40 years ago – the same year that the dollar's link to gold was severed. Hard-money types say that began the dollar's decrepitude, but perhaps they are wrong. US economic decline might easily have been quicker if the Federal Reserve under Paul Volcker had not restored faith in the dollar in the 1980s. Even backed only by faith, memories of the greenback's prime bought the US a few more decades of the good life. Now old and frail, the dollar is worryingly vulnerable to a nasty fall.
This week Max Keiser and co-host, Stacy Herbert, look at the one in 66 Americans now classified as psychotic and the matter of 'selective default' as the over prescribed anti-psychotic medication for financial marketss. In the second half of the show, Max talks to Adrian Salbuchi about the similarities between the financial attack on Greece and what happened to Argentina in 2001/2002.
The Federal Reserve gave 16 trillion dollars in loans to some of the largest financial institutions and corporations in the world revealed by the first top-to-bottom audit of the Fed. Today the dollar fell against the Swiss Franc showing a flight to quality and safety might be a flight away from the US dollar. And the economy is still shedding jobs as thousands of fresh layoffs at companies from Blackberry to Cisco are announced. Reason's Anthony Randazzo weighs in on these issues.
The surprise of the week has undoubtedly been panic over Italy’s finances. Until this happened, it was commonly assumed that the PIIGS would fall in strict order, with Spain due to follow Portugal. The political response to this development amounts to total confusion among the eurocrats. They recognize they must do something, but they do not know what, so they have meetings.
It is hard to have sympathy with these, the most statist of politicians, but there is in reality nothing they can do. The underlying problem is that western governments are nearly all running massive budget deficits, and the savings simply do not exist to fund them all, not even if interest rates doubled or tripled from current levels. In the funding queue some governments have precedence over others, either because they are seen as low-risk, or in the case of the US, because the dollar is the reserve currency. The propensity to save is important, which gives Germany and China, for example, a greater degree of funding security. This used to be true of Japan. The competition for savings leaves euroland’s PIIGS shut out of capital markets.
Bond market analysts, the rating agencies, and organizations such as the OECD and the IMF, all produce optimistic forecasts of the funding requirements for these countries in the coming years. They are optimistic because economic recovery is assumed, when it is actually becoming impossible. And as the prospects for economic recovery are replaced by the near certainty of slump, these nations become locked into a cycle of raising taxes and cutting welfare, plunging them further into depression.
This may be a fatal blow to the European project. It certainly puts the European Central Bank (ECB) in an impossible position. The central bank has done little to help the PIIGS governments with their financial difficulties, sticking mainly to keeping the eurozone banking system solvent. The ECB now faces the ultimate test: in the face of these escalating sovereign difficulties, will it continue to follow its relatively sound money policies? (Relative, that is, compared with the brazen money printers at the US Federal Reserve, Bank of England and Bank of Japan.) Sound money is bankrupting the PIIGS and will soon do the same for Belgium and France. Or will it cooperate by buying newly-minted PIIGS debt in a quantitative easing program? If it does, the eurozone will live to fight another day. Though the ECB’s charter says no to QE, political reality says it is vital.
Any easing of the ECB's stance against QE can be expected to fuel European demand for precious metals, and with gold hitting new highs this week, perhaps the smart money is ahead of it. And if the ECB starts its own QE program, we can expect the Bank of England to consider QE2, and thus the Fed will have an excuse for QE3.
The reality is that the only way the large budget deficits of many developed countries can all be funded is by printing money to buy debt. The alternative is far higher bond yields for all but the very best credit ratings, yields that few governments can afford to pay.
No wonder gold is so strong. The penny is finally dropping in the slot machine that passes for the collective brains of the investment community.
While the EU struggles to keep the euro afloat with bailouts for Portugal and Greece, and Spain looks to be next in line for a rescue package, financial journalist Johan Van Overtveldt believes the limit of what the EU can do for the euro is close. Johan Van Overtveldt believes that the EU will keep throwing cash into the failing economies until the Germany reaches its limits.
Greece let out a sigh of relief this week as - after long talks - EU leaders finally agreed on how to help the country avoid defaulting on its debt. Athens will now receive a new bailout worth an estimated 109 billion euros. The plan was agreed after Greece approved severe austerity measures, sending thousands onto the streets in protest. The rescue will also involve lowering interest rates on Greek debt and extending the repayment period.
The package also doubles the time given to bankrupt Portugal and Ireland to pay back their own loans. Meanwhile, Spain - which has the highest unemployment rate in the Eurozone - saw thousands of protestors converge on Madrid on Saturday. They camped out in the city centre, after marching from across the country.
The debt ceiling debate is providing plenty of opportunity for political theater in Washington. Proponents of raising the debt ceiling are throwing around the usual scare tactics and misinformation in order to intimidate opponents into accepting more debt and taxes. It is important to distinguish the truth from the propaganda.
First of all, politicians need to understand that without real change default is inevitable. In fact, default happens every day through monetary policy tricks. Every time the Federal Reserve engages in more quantitative easing and devalues the dollar, it is defaulting on the American people by eroding their purchasing power and inflating their savings away. The dollar has lost nearly 50% of its value against gold since 2008.
The Fed claims inflation is 2% or less over the past few years; however economists who compile alternate data show a 9% inflation rate if calculated more traditionally. Alarmingly, the administration is talking about changing the methodology of the CPI calculation yet again to hide the damage of the government's policies. Changing the CPI will also enable the government to avoid giving seniors a COLA (cost of living adjustment) on their social security checks, and raise taxes via the hidden means of "bracket creep." This is a default. Just because it is a default on the people and not the banks and foreign holders of our debt does not mean it doesn't count.
Politicians also need to acknowledge that our debt is unsustainable. For decades our government has been spending and promising far more than it collects in taxes. But the problem is not that the people are not taxed enough. The government has managed to run up $61.6 trillion in unfunded liabilities, which works out to $528,000 per household. A tax policy that would aim to extract even half that amount of money from American families would be unimaginably draconian, and not unlike attempting to squeeze blood from a turnip. This is, unequivocally, a spending problem brought about by a dramatically inflated view of the proper role of government in a free society.
Perhaps the most abhorrent bit of chicanery has been the threat that if a deal is not reached to increase the debt by August 2nd, social security checks may not go out. In reality, the Chief Actuary of Social Security confirmed last week that current Social Security tax receipts are more than enough to cover current outlays.
The only reason those checks would not go out would be if the administration decided to spend those designated funds elsewhere. It is very telling that the administration would rather frighten seniors dependent on social security checks than alarm their big banking friends, who have already received $5.3 trillion in bailouts, stimulus and quantitative easing. This instance of trying to blackmail Congress into tax increases by threatening social security demonstrates how scary it is to be completely dependent on government promises and why many young people today would jump at the chance to opt out of Social Security altogether.
We are headed for rough economic times either way, but the longer we put it off, the greater the pain will be when the system implodes. We need to stop adding more programs and entitlements to the problem. We need to stop expensive bombing campaigns against people on the other side of the globe and bring our troops home. We need to stop allowing secretive banking cartels to endlessly enslave us through monetary policy trickery. And we need to drastically rethink government's role in our lives so we can get it out of the way and get back to work.
A major U.S. credit agency says it will downgrade the Greek debt to default status as a result of the second bailout for the country. The plan agreed by EU leaders, includes both government and private loans totaling around 150 billion euros. The move has boosted the single currency for now, but critics say it's only plunging the struggling Eurozone into an even deeper debt hole.
Which warning is worse: the one from European Commission president Jose Manuel Barroso, who earlier this week said: a failure to deal with Greece's problems will have "negative consequences that will be felt in all corners of Europe and beyond, or the Greek president, who said Europe is "in danger", or how about the IMF, that a resulting crash might trigger a global recession?
This edition of News Analysis will be discussing the dire economic situation of eurozone countries as EU leaders are meeting in Brussels to do the same.
Marco Pietropoli, Max Keiser and Jeoffrey Hall have joined Kaveh Taghvai to discuss the issue.
A major U.S. credit agency says it will downgrade the Greek debt to 'default status' as a result of the second bailout for the country. The plan agreed by EU leaders, includes both government and private loans totaling around 150 billion euros. For a broader discussion on the state of the European economy we're joined live from Germany by William Engdahl, author of 'Gods of Money'.
Forced into action by the teetering economies of Italy and Spain - EU leaders and private investors have agreed on a second bailout worth around 220 billion dollars, to prop-up Greece's unravelling economy. In an unprecedented show of solidarity to save the ailing Euro, the heads of states also agreed on a plethora of new laws, including ones to protect the union from U.S. credit rating agencies. But economic journalist Patrick Young says it's only a temporary cure, patching over the inherent flaws of Eurozone finances.
Overcoming stereotypes and becoming closer partners with Russia is the natural way of development for European countries, to help them solve their problems, says Jean-Pierre Thomas, French presidential special representative for dealing with Russia.
This week Max Keiser and co-host, Stacy Herbert, look at the Cindy Sherman of monkeys sparking a revolution, the problem with #occupywallstreet and the truth about $500 silver if you want it. In the second half of the show, Max talks to Sandeep Jaitly about Austrian economics, Dr. Bernanke's view on gold and whether or not the dollar or the euro will kick the bucket first.
This week Max Keiser and co-host, Stacy Herbert, look at the political theatre of America's AAA rating in a land where gold is not money and shoplifting is a sign of a strong economy. In the second half of the show, Max talks to Amir Taaki, founder of BitcoinConsultancy, about the peer to peer currency, Bitcoin, and its recent trials and tribulations.
"The fact that Moody's can make such an asinine statement shows you the truth behind that organization. And that's why Moody's was putting triple-A ratings on mortgage-backed securities that went to ZERO. Because that's about how much credibility Moody's has in the ratings world...and that's ZERO.
Gold hit $1600 in London this morning and silver $40, although both fell back thereafter. But the barrier has been breached which would seem to be paving the way for further rises ahead.
Gold cracked the $1600 barrier, albeit briefly initially, this morning in London, while silver moved back up through the $40 mark as the safe haven aspects of the precious metals began to take hold once more on perhaps the increased understanding by the whole investment community of the global economic perils ahead. Whether this $1600 level can be returned to, and increased, through the day - and in the U.S. - obviously remains to be seen, but the fact remains that a psychological barrier has been overcome. Past patterns suggest that the metals may trade at close to this level and either make a substantial breakthrough, or consolidate at just below.
Silver back through $40, and the further small fall in the gold:silver ratio (GSR) to a fraction below 40:1 does seem to be a further indication that investor interest in this metal is again coming to the fore with the April fall-off quickly being forgotten. But silver's reputation as the ‘devil's metal' as far as investment is concerned should act as a cautionary warning, but as long as gold stays strong silver downside is small. But if gold should see even a temporary fallback then the corresponding drop in silver could be sharp.
Silver's proponents point to the increasing uses of the metal in such spheres as biocides and water purification as being a major positive factor, but it is both speculative and safe haven investment that is the driving force here - industrial usage is currently only a minor part of the silver equation. As Rhona O'Connell points out in today's article on Mineweb - see Comex silver longs bound higher - but much of it is short covering extraneous technical commodity market factors may well be distorting the picture here as well.
The European debt crisis is definitely not going to go away and if one of the more vulnerable European economies is actually allowed to default (and one does not see how some kind of default can be avoided for Greece) then the knock-on effects on the other crisis hit countries and the banking system as a whole, could be dire. The emergency funding for Greece that was recently agreed appears only to be sufficient to postpone the inevitable and we could be looking to an autumn of ever escalating financial meltdown.
If Greece defaults then one finds it difficult to conceive that Ireland and Portugal would not follow suit almost immediately, and then the pressures on the much more significant economies of Italy and Spain would be close to overwhelming. European banks would crash like ninepins and with the interconnections within the global banking system many non-European banks would collapse as well.
There is a sideshow in the U.S. at the moment too which is helping gold as Democrats and Republicans are playing a game of brinkmanship over the U.S. debt ceiling. If agreement can not be reached on raising the ceiling, and failing a Presidential bending of the rules, the U.S. itself could go into technical default in two weeks' time and the psychological financial repercussions of this could also be enormous. One suspects that a compromise will be reached at the 11th hour, but if intransigence on the part of the parties involved means that this drags on beyond the deadline then the effects on the financial system could be worse than the Lehman Brothers collapse.
Governments and central bankers are aware of the perils ahead and one suspects that they will somehow manufacture a solution that will ward off the seemingly inevitable, although whether they can do so to the satisfaction of the credit ratings agencies remains to be seen. Ratings downgrades lead to higher interest rates being applied and at current debt levels the amounts involved in resultant increased payments just make the likelihood of pulling out of the downward spiral almost impossible.
These are difficult - indeed exceedingly dangerous - times for the global economy and whether or not the politicians and central bankers can bring us back from the brink has to be questionable. In such times of uncertainty gold is likely to maintain its historical pattern of being the investment choice to preserve wealth, however anomalous this may seem in this day and age, and silver will likely follow suit on gold's back.
Eight European banks have failed a test measuring their ability to withstand a long recession. These lenders will now have to raise 2.5 billion euros in capital to strengthen their financial buffers against possible losses. The amount, however, is significantly less than expected.
The European Banking Authority says 8 of 90 banks have failed its stress tests, while 16 more barely passed.
Five banks in Spain, two in Greece, and one in Austria have flunked the analysis, which required the 90 lenders to reveal their profit forecasts for the first time. They also had to submit a breakdown of their sovereign bond holdings and funding costs.
The EBA says the failing banks should "promptly" take steps to strengthen their financial cushions against losses.
Back in January this year, economists debated whether China's economy was becoming over-heated. But six months later, worries about too much growth have all but dissipated. Instead, the latest flurry of economic data suggests the world's second-largest economy is putting its foot on the brakes. Yin Hang breaks down the numbers.
Many financial institutions have given various predictions on the Chinese economy, but one conclusion remains the same...China's economic growth is pacing down.
Goldman Sachs has downgraded its forecast on China's economic growth to 9.4 percent, from 10 percent. And Credit Suisse says China's economy will grow at a rate of 8.8 percent this year.
"Judging by the situation right now, I believe China's economic growth is slowing down. But the deceleration is not rapid in speed. Demand growth is also easing as well."
Eight out of 90 European banks have failed stress tests on whether they could withstand another financial crisis. None were in Italy - which it hopes might help the country fend off spiraling debt costs, along with the 70-billion-
Euro cuts which parliament passed on Friday. But, as RT's Sara Firth reports, there's only so much that can be done before the people take power into their own hands.
If a picture is worth 1,000 words, this main stream media publication (Time Magazine owned) just said a mouthful with its August edition. This is a pretty darn OVERT "subliminal message". We the informed SEE it and understand it, but the sheeple won't.
As the twin pillars of international monetary system threaten to come tumbling down in unison, gold has reclaimed its ancient status as the anchor of stability. The spot price surged to an all-time high of $1,594 an ounce in London, lifting silver to $39 in its train.
n one side of the Atlantic, the eurozone debt crisis has spread to the countries that may be too big to save - Spain and Italy - though RBS thinks a €3.5 trillion rescue fund would ensure survival of Europe's currency union.
On the other side, the recovery has sputtered out and the printing presses are being oiled again. Brinkmanship between the Congress and the White House over the US debt ceiling has compelled Moody's to warn of a "very small but rising risk" that the world's paramount power may default within two weeks. "The unthinkable is now thinkable," said Ross Norman, director of thebulliondesk.com.
Fed chair Ben Bernanke confessed to Congress that growth has failed to gain traction. "Deflationary risks might re-emerge, implying a need for additional policy support," he said.
The bar to QE3 - yet more bond purchases - is even lower than markets had thought. The new intake of hard-money men on the voting committee has not shifted Fed thinking, despite global anger at dollar debasement under QE2.
Fuelling the blaze, the emerging powers of Asia are almost all running uber-loose monetary policies. Most have negative real interest rates that push citizens out of bank accounts and into gold, or property. China is an arch-inflater. Prices are rising at 6.4pc, yet the one-year deposit rate is just 3.5pc. India's central bank is far behind the curve.
"It is very scary: the flight to gold is accelerating at a faster and faster speed," said Peter Hambro, chairman of Britain's biggest pure gold listing Petropavlovsk.
"One of the big US banks texted me today to say that if QE3 actually happens, we could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money."
Read All About It!" You couldn't not read all about it! The media was full of reports about how happy stock market days were here again. After a stormy start, June closed and July began with US benchmark indexes racking up their biggest weekly gains in two years on good news: the US manufacturing index had unexpectedly risen, and the beleaguered debt-burdened Greeks were bailed out yet again – piling un-payable new debt on top of un-payable old debt.
Yes, there was some concern, but, as The New York Times reported on June 25th, "Two years into the official recovery, the economy is still behaving like a plane taxiing indefinitely on the runway. Few economists are predicting an out-and-out return to recession ... analysts generally expect the economy to pick up in the second half."
The economists were forecasting strong job growth for June. But two weeks later, when the numbers came in, the Bureau of Labor Statistics reported that only 18,000 jobs had been created – not the 125,000 jobs projected ... by those same economists who were also not "predicting an out-and-out return to recession."
Accordingly, without missing a beat, the Times changed its tune – writing new words to replace the old words they would never be forced to eat:
Feeble Job Numbers Show Recovery Starting to Stall
Defying Economists Forecast for Hiring, Unemployment Creeps Up to 9.2%
For the second consecutive month, employers added scarcely any jobs in June, startling evidence that the economic recovery is stumbling ... The government also revised downward the small gain for the previous month to 25,000 new jobs, less than half the original estimate. (The New York Times, 9 July 2011)
"Dismal Jobs Data Rock US Recovery" and "Worries Grow Over Jobs," read the respective headlines in the Financial Times and Wall Street Journal on July 9th, dissipating the air of optimism that had recently rallied equity markets.
"Employment!" More than factory orders, GDP, corporate profits, retail sales, durable goods ... employment was the one big number that counted. There was no way to spin the consequences of 18,000 mostly low paying health care and hospitality jobs into the hopeful message implied by the 125,000 jobs forecast by most economists.
The equation was simple; the more people out of work, the less they consume. And in the United States, where consumer spending accounts for an estimated 70 percent of the GDP, without increased consumer spending, the economy was again recession bound.
Virtually overnight, one dire employment report unraveled two years' worth of government spin and media complicity. In April 2010, Vice President Joseph Biden promised, "we're going to be creating between 250,000 jobs a month and 500,000 jobs a month." And in August 2010, Treasury Secretary Timothy Geithner declared that the "actions we took at its height [of the crisis] to stimulate the economy helped arrest the freefall, preventing an even deeper collapse and putting the economy on the road to recovery."
But almost a year later, talking on "Meet the Press," two days after the devastating employment data was released, the new, revised Geithner forecast was, "Oh, I think it's [the recovery] going to take a long time still. This is a very tough economy. And I think for a lot of people it's going to be – it's going to feel very hard, harder than anything they've experienced in their lifetime now, for some time to come."
Like the Biden boast long-buried and un-exhumed, the Geithner statement, a direct contradiction of his former projection went unchallenged, given the usual free pass by the "Meet the Press" Presstitutes.
There was, and is, no "return to recession." As The Trends Research Institute had been forecasting since the onset of the Great Recession and the "Panic of '08," all those "bold actions" proudly cited by Geithner were no more than financial Prozac – multi-trillion-dollar band aids, palliatives, placebos and cover-ups packaged as TARP, the American Recovery and Reinvestment Act, QE2, and so on. At best, the "bold actions" merely guided the Great Recession into a brief remission, and that is all.
Global Ponzi It was a cover-up, not a recovery. And while the US may have been the first, it was not the only nation to try to fraudulently finagle its way out of a crisis and into prosperity. Like the US bailouts, the Greek survival package – praised as an important stopgap success only last week – has neither guaranteed keeping the Greek banking system afloat nor guaranteed it won't default.
Now Italy has caught the contagion. Fattest of the PIIGS (acronym for Portugal, Ireland, Italy, Greece and Spain) – the eurozone's third largest economy – with its 120 percent public debt to GDP ratio, Italy is bleeding red ink all over its balance sheet. Borrowing more to service its debt load and imposing draconian austerity measures to reign in government spending will, at best, provide a respite from the financial crisis ... or, at worst, foment a revolution. (See, "Off With Their Heads, 2.0, Trends Journal, Autumn 2010)
Then there's China, who panicked when the "Panic of 08" blew out their export driven economy, and, like the West, used cheap credit and huge stimulus packages to prevent a major economic contraction. While China's crisis differs from the West's in that it has large currency reserves and its debt is homegrown and home-loaned, it's still debt and has to be repaid.
And unlike the West, which pumped trillions into just keeping its economies afloat, the Chinese multi-trillion yuan infusions have created an immense, ready-to-pop property bubble. But this time, like the West, there will be no available fiscal or monetary government policies to re-inflate their faltering economy.
And as goes the US, Europe and China – so goes the rest of the world. From India to Israel, Brazil to Bangladesh, Chile to Russia, no nation will escape the economic fallout and few will escape the political consequences.
Yet, despite the widely available economic facts and the ample evidence of faulty forecasts and failed government policies, the mainstream media continues to sell the public the big lie. By providing cover for the politicians and financiers, the Presstitutes of the world – with their stable of "well respected" pundits – are accomplices in promoting the egregiously transparent cover-up as a "recovery."
Trendpost: After descending to $1,480 less than two weeks ago, as this is written, gold is flirting with $1,600. We see this surge as a recognition of the greater financial and socioeconomic collapse we have been forecasting since the onset of the "Panic of '08." We hold to our forecast of "Gold $2,000," and depending on how the coming crisis unfolds and the responses to it made by governments and central banks, $2,000 may prove but a temporary ceiling before climbing higher.
President Obama and Vice President Biden have just had yet another meeting with top lawmakers hoping to reach an agreement about the debt ceiling. One of those absent from the meeting, but who doesn't agree with Obama's suggestion, was Ron Paul, a congressman from Texas. Yesterday he exchanged some heated remarks with Ben Bernanke over the way Congress and the Fed have dealt with some of these problems during the last three years. Rep. Paul also asked Bernanke about what he sees as an important fix to some of these economic woes - gold. To talk more about the issue RT has Scott Carter, CEO of Goldline.
The renowned Canadian fund manager Eric Sprott told The Gold Report that he thinks the silver price is ready for a dramatic rally higher, and reiterated his prediction that silver will be the “investment of the decade”.
He thinks that the silver price has the potential to climb up to a level that would correspond with a gold/silver ratio of 16:1 – the historic average. According to Sprott, this will happen in the next five years; if the gold price rises to $2,500 per ounce in the wake of an escalating global debt crisis, he thinks a silver price of nearly $160 per ounce could be derived from it. This simple calculation alone shows silver’s enormous potential compared with the gold, despite the already big gains in the silver price over the last seven years.
In the course of an extraordinary rally from September last year until the end of April, the silver price came within cents of reaching its all-time nominal high of $50 per ounce – reached back in 1980. Afterwards the CME Group, operators of New York’s Comex metal futures exchange – a subdivision of the New York Mercantile Exchange – announced a series of margin rises on silver futures and options. As a result the silver price nosedived, falling nearly 40% from its peak at nearly $50 to $32. Since this sharp correction in early May, silver has traded in a narrow trading range between $34 and $38 per ounce, but over the last two trading days the metal appears to have again broken out to the upside.
The recent price correction has been a good thing in the view some. Renowned investor Jim Rogers warned that he would have been forced to sell his silver if the price had continued barreling higher in April, as it would have been a clear sign of a silver price bubble. Rogers thinks that the correction has offered people a good opportunity to buy more of the metal. Eric Sprott expects silver to rise above $50 per ounce by the end of the year.
Many people have been put off from buying silver by the volatility that has been exhibited in this market over the last few months, though interest has picked up in the metal again over the last week. Sprott expects silver sales to likely exceed gold sales in US dollar terms in a 5:1 ratio. More and more people will start to lose confidence in fiat currencies around the world, which will spur them to buy “the poor man’s gold”. Sprott expects the US Federal Reserve to start printing more money – “QE3” – by the end of this year.
Sprott also adds that demand from industry will also bolster silver prices. Combined with the buying pressure from people fleeing from weakening currencies, and in Sprott’s mind, we have the perfect storm to send the silver price through the roof.
The same credit rating agency that sparked fresh panic in the EU has now threatened the U.S. Moody's says it's reviewing America's top triple-A debt rating for a downgrade - citing the political bickering that's deadlocked budget negotiations in Washington. And even if the budget is approved - it's unlikely that it'll offer a solution to America's debt - that's according to investor and co-founder of the Quantum Fund, Jim Rogers...
This week Max Keiser and co-host, Stacy Herbert, look at how propaganda shapes political and economic outcomes in our economies. They report on Americans collecting government social welfare benefits without knowing it and U.S. Congressman taking financial bets against its government debt. And, finally, Max and Stacy suggest that if British teenagers are being extradited to America on copyright infringement, then George Michael ought to have a case against Rupert Murdoch under the Digital Millenium Copyright Act as well.
The Eurozone has been dealt a fresh blow as Ireland's debt is downgraded to 'junk' status by Moody's credit rating agency, fueling concerns the country could need a second bailout. This comes a week after Portugal's rating was also reduced and follows speculation that Italy too might soon ask for a helping hand. Paul Nuttall, MEP for North-West England has told RT the latest developments prove that single-currency union is sumply not working..
According to a report by Moody's Analytics, nearly two dollars out of every ten that came into Americans' wallets last year were payments like jobless benefits, food stamps, social security and disability. So what happens when state and federal benefits run out later this year? Economist and radio host Richard Wolff explains.
They say that only the Greeks know what tragedy is. Wish that it were so. Italians, too, can speak of their own great tragedie. In fact, they are on the verge of an economic one right now. The country's financial future lies in the balance. But what should Italy do? They should look to the past, and stop repeating bad habits.
From 1859 to 1914, the Italian nation went heavily into debt. Perhaps eager to glorify the new Italian state on the world stage, politician promised the Italian populace anything and everything that a modern state could supply. Public schools, roads, infrastructure, the “Regio Esercito” (The Royal Italian Army) – all were handsomely paid for by issuing government bonds. No social desire was left unsatisfied. No public work was spared.
The result: In June 1914, on the eve of World War I, Italy’s debt was a staggering 15,766,000,000 lira. The debt was so great in fact that one-half of all Italian government revenue had to be used to service the interest on that debt.
Italy’s 20th century was beginning amid mountains of debt.
Those same mountains of debt are with Italy today. According to the latest news, Italy has a debt of just over 1.8 trillion euros. Italy’s debt-to-GDP ratio stands at 120%.
Can we compare 1914 Italy with Italy's current problems?
Professor James MacDonald’s book A Free Nation in Debt: The Financial Roots of Democracy gives us a clue: He says, in essence, that we should use sound money to make the comparison.
The term lira comes from the Latin word libra, meaning “pound.” It was a term of measurement and the substance it measured was real money – gold and silver. But by the early 20th century, however, the Italian lira was no where near equal to a pound. In fact, after centuries of debasement and devaluations, an Italian lira was only set at 4.5 grams of silver.
Therefore, in 1914, Italy was actually in debt by 70,947,000,000 silver ounces. In today’s value, that silver would be the equivalent of 1,830,432,600,000 euros. (In US dollars, it would be $2,600,917,020,000).
The conclusion is undeniably striking: in real terms, Italy's debt burden today is virtually the same as it was back in 1914.
The implications of this knowledge are two fold: First, it demonstrates the irrefutable fact that silver (like gold) has an immense storage-of-value ability. In fact, it is more than just an ability; it is its very nature to be uncompromisingly stable. Not even 100 years of Italian war and debt and political turmoil could shake silver of its monetary steadfastness. It is, as they say, argento massiccio.
Despite the best efforts of Italian monetary authorities to devalue away debt (when the country still used the lira) and despite depreciation in the euro over the last decade, according to silver, Italy is in exactly the same debt situation as it was close to a century ago.
For the sake of the Italian people, let's hope that the country's debt burden actually falls over the next 100 years when measured in sound money.
This week Max Keiser and co-host, Stacy Herbert, report on declaring war on rating agencies and buying refrigerators to save the economy. In the second half of the show, Max talks to Professor Emeritus, Guy McPherson, who has exited empire to build a post-carbon community.
Jim Rogers, CEO and chairman of Rogers Holdings, appears on CNBC Europe and discusses the prospects for precious metals moving forward. Rogers believes that, ‘Silver is going to go much much higher over the next decade.’
With debt ceiling talks continuing and President Obama insisting on a long-term solution, the US is just three weeks away from a financial collapse. International investors such as the Chinese and rating agencies are already concerned, so what happens if Washington doesn't raise the debt limit? Peter Schiff, president of Euro Pacific Capital, talks to RT's Lauren Lyster.
In the past, there certainly have been governments that have gotten into trouble with debt, but what we are experiencing now is the first truly global sovereign debt crisis. There has never been a time in recorded history when virtually all of the governments of the world were drowning in debt all at the same time. This sovereign debt crisis is never going to end until there is a major global financial collapse. There simply is no way to unwind the colossal web of debt that we have constructed in an orderly fashion.
Right now, the EU and the IMF have been making "emergency loans" to nations such as Greece, Ireland and Portugal, but that is only going to buy those countries a few additional months. Giving more loans to nations that are already drowning in red ink may "kick the can down the road" for a little while, but it isn't going to solve anything. Meanwhile, dozens more nations all over the globe are rapidly approaching a day of reckoning.
All of the bailouts that you are hearing about right now are simply delaying the pain. The reality is that when the "emergency loans" for Greece stop, Greece is going to default. Greece is toast; the game is over. You can stick a fork in Greece because it is done.
One of the big problems for Greece is that since it is part of the euro, it can't independently print more money. If Greece cannot raise enough euros internally, it must turn to outside assistance. Unfortunately, at this point Greece has accumulated such a mammoth debt that it cannot possibly sustain it. By the end of the year, it is projected that the national debt of Greece will soar to approximately 166% of GDP.
The financial collapse of Greece is inevitable. If it keeps using the euro -- or even if it quits using it -- it will collapse. When the rest of Europe decides that it is tired of propping Greece up, the game will be over. And at this point, very few people are interested in lending Greece more money.
As I wrote yesterday, many of the nations around the world are only able to keep going because they are able to borrow huge amounts of money at low interest rates. Well, nobody wants to lend money to Greece at a low rate of interest anymore.
Today, the yield on two-year Greek bonds is back over 28 percent. Fortunately for the rest of the world, Greece is just a very, very small part of the global economy, but when interest rates start spiking like that on U.S. or Japanese debt, the entire world's financial system will be thrown into chaos.
So why is there so much of a focus on Greece right now? There is a real danger that the panic will start to spread. The other day, Moody's Investors Service slashed the credit rating on Portuguese government debt by four notches; that debt is now considered to be "junk." But even more alarming is that Moody's stated that what is going on in Greece played a role in reducing the credit rating of Portugal.
The following is a portion of what Moody's had to say when it cut the credit rating of Portugal by four notches:
Although Portugal’s Ba2 rating indicates a much lower risk of restructuring than Greece’s Caa1 rating, the EU’s evolving approach to providing official support is an important factor for Portugal because it implies a rising risk that private sector participation could become a precondition for additional rounds of official lending to Portugal in the future as well. This development is significant not only because it increases the economic risks facing current investors, but also because it may discourage new private sector lending going forward and reduce the likelihood that Portugal will soon be able to regain market access on sustainable terms.
Basically, Moody's is saying that the terms of the Greek bailout make Portuguese debt less attractive because Portugal will likely be forced into a similar bailout at some point. If the EU is not going to fully guarantee the debt of the member nations, then that debt becomes less attractive to investors.
The downgrade of Portugal is having all kinds of consequences. The cost of insuring Portuguese government debt set a new record high on Wednesday, and yields on Portuguese bonds have gone haywire. If you want to get an idea of just how badly Portuguese bonds have been crashing, just check out this chart.
But it is not just Portugal that is having problems. Just recently, Moody's warned that it may downgrade Italy's Aa2 debt rating at some point within the next few months. Spain is also on the verge of major problems and Ireland may need another bailout soon.
Things don't look good. Unfortunately, if the dominoes start to fall the entire EU is going to go down. Big banks all over Europe are highly exposed to sovereign debt and they are leveraged to the hilt. It is almost as if we are looking at a replay of 2008 in many ways.
When Lehman Brothers finally collapsed, it was leveraged 31 to 1. Today, major German banks are leveraged 32 to 1, and major German banks are currently holding a tremendous amount of Greek debt. Anyone with half a brain can see that this is going to end badly.
So how is the European Central Bank responding to this crisis? It's raising interest rates once again. That certainly is not going to help the PIIGS much. But Europe is not the only one facing a horrific debt crunch.
In Japan, the national debt is now up to about 226 percent of GDP. So far the Japanese government has been able to handle a debt load this massive because the citizens of Japan have been willing to lend the government gigantic mountains of money at interest rates so low that they are hard to believe. When that paradigm changes, and it will, Japan is going to be in a massive amount of trouble. In fact, an article in Forbes has warned that even a very modest increase in interest rates would cause interest payments on Japanese government debt to exceed total government revenue by the year 2019.
Of course, the biggest pile of debt sitting out there is the national debt of the United States. The U.S. is so enslaved to debt that there is literally no way out under the current system. To say that America is in big trouble would be a massive understatement.
In fact, the whole world is headed for trouble. Right now, government debt around the globe continues to soar at an exponential pace. At some point a wall is going to be hit.
"These processes are not linear," warns Prof. Reinhart. "You can increase debt for a while and nothing happens. Then you hit the wall, and -- bang! -- what seem to be minor shocks that the markets would shrug off in other circumstances suddenly become big."
That is the nature of debt bubbles; They keep expanding and expanding until the day that they inevitably burst.
Governments around the world will issue somewhere in the neighborhood of $5 trillion more debt this year alone. Debt to GDP ratios all over the globe continue to rise at a frightening pace. Because the world is so interconnected today, the collapse of even one nation will devastate banks all over the planet. If even one domino is toppled, there is no telling where things may end.
The combination of huge amounts of debt and huge amounts of leverage is incredibly toxic, and that is what we have all over the globe today. Almost every major nation is drowning in a sea of red ink and almost all of our major financial institutions are leveraged to the hilt.
There is only one way that the sovereign debt crisis can end: Very, very badly. I hope you are ready for what is coming.