Friday, March 27, 2009

You and I Can't Buy the Guns Mexican Cartels Own

I jacked this from Catman's site. Thanks Catman!!

You and I Can't Buy the Guns Mexican Cartels OwnThe Administration is Not Dealing Straight With Us on Mexico's Gun ProblemRalph WellerMarch 1 2009
Let's set things straight right up front. Yes, some guns are being smuggled into Mexico from the U.S. Most are handguns. But, handguns are being illegally trafficked from state to state and from the U.S. to Canada. It should come as no surprise that guns are smuggled into Mexico. But, the problem being portrayed by the U.S. media and our government is not as it seems. You see, Mexico doesn't allow ownership of most firearms, so ordinary Mexican people seeking self-protection will find a way to get them into Mexico. As for the drug cartels operating in the border towns along the U.S., they have other sources for their weapons and have become the prime supplier within Mexico.I worked in Mexico in a border town for about five years. It was far enough from San Diego County in the Sonora Desert of Mexico that commuting several hundred miles daily was impossible. So, for a few years I lived in the city and commuted home periodically on some weekends. As crime grew out of control, I eventually moved into a place on the U.S. side and commuted daily in and out of Mexico for my own safety.I stayed in Mexico for a Mexican holiday my first year. I don't recall the holiday. Normally, I would leave Mexico for a holiday, but it was in the middle of the week and one day was not long enough to come home. All I know is that on that particular Mexican holiday, Mexicans love to fire guns into the air. That evening as I sat on the balcony of my hotel, the gun fire that erupted in celebration was quite unbelievable. It was so intense I backed off the balcony and watched the festivities from a couple three feet in the room. We're talking war-like firing of weapons, it was that intense.As I listened that night to the gun fire, I was somewhat shocked at the amount of fully automatic gun fire. It wasn't sporadic. It was continuous throughout the city. For a country that bans guns I thought, how in the world did they get their hands on all these full-auto weapons? Clearly what sounded like M16 fire was prolific along with 7.62 x 39 AK autos with a smattering of smaller caliber full-autos, most likely 9mm. Gun fire can be heard in most American cities on New Years, but I've never heard full-auto weapons being fired, at least not in the San Diego area.The next day I went into work and sat down with a trusted senior Mexican manager. I looked at him and said, "I thought guns were illegal in Mexico." He chuckled and said, "So you stayed in town last night?" As the conversation progressed, it became clear that guns are as common in Mexico as tamales at Christmas. Everyone he knows, including himself, own at least one gun. And, it matters not whether it's a semi-auto or fully automatic, they're all illegal, so why stop with semi-autos? Though clearly illegal in the states in most instances, a lot of Mexicans have more firepower in terms of military weapons than we can only dream of owning here.As time went on, parties in the city at middle class Mexican homes become a way of life. Most Mexican managers in the plant knew I was a gun wonk. As it turns out, they couldn't wait to invite me over to their place on a Friday night to show me their collection. Semi-autos, some very high-end Sigs and other European handguns were not uncommon along with piles of old revolvers. I thought I had seen everything in the states, but in Mexico it's not uncommon for people to own full-auto military rifles. Everything from an M16, UZI machine pistols and the most popular, select-fire AK47 military rifles. These are not the so-called "assault weapons" you can buy at the local gun shop in the U.S., but full select-fire military-issue rifles. Now, I know you want to know and are dying to ask; Did I see any U.S. military-issue weapons stolen from the U.S. military? Not a single one was marked with U.S. military markings. Everything was marked with additional foreign markings on the receiver, including M16 rifles, or they had nothing at all. I saw firearms manufactured in Europe, China, Russia and South America along with U.S. manufactured weapons. I saw rifles that looked familiar with no place of manufacture, no serial number or manufacturer's logo. The information was not removed, it was never there to begin with. I can only assume they came from illegal arms manufacturers in India or Pakistan that produce copies of weapons. It was obvious that none of these firearms came from a U.S. gun shop in Tucson or San Diego. You couldn't buy them from a gun shop in the states if you tried.It seems Mexicans have a rich heritage of firearms ownership prior to the ban in 1968. Despite the laws against owning them, they ignore it. Most Mexicans will say they need it for personal protection of themselves and their family. The other reason is they don't trust the government or local law enforcement. If they have to use it in their home for self-defense, whether they end up in jail is all dependent on how much money they can come up with, or who they know in the government. It also depends on who they shoot. But, given the alternative with high crime rates, most middle class Mexicans willingly and without reservations take the risk. Despite being able to own .22 caliber pistols or rifles, Mexican law requires them to be stored at an approved firing range. Where's the firing range I asked many times? No one knew of one. Where's the gun stores in town to buy legal guns? Gun stores? No one ever recalled seeing one anywhere in Mexico, let alone their city. I'm sure somewhere, maybe in Mexico City you might be able to buy a gun, but not in this city of almost 1.5 million residents. And the gun traffickers know it. Where do ordinary Mexicans get their weapons? Most buy them from a 'friend' or a friend of a friend or cousin or uncle. Where the friend gets them is not talked about. But, it seems that drug cartels in Mexico are heavily involved in gun trafficking of military weapons and related hardware. And, who are these ordinary Mexicans? They range from people who work in factories as managers and senior managers, government workers, doctors, dentists and anyone with the financial means to buy a firearm. I even ran into a couple of government bureaucrats, one a lawyer for the federal government who owns firearms. He confirmed that people he knew in the government, some very highly ranked bureaucrats and politicians all own illegal firearms. The other works for the Mexican equivalent of the IRS. It's a way of life in Mexico. It seemed to me that you aren't in the 'in-crowd' in Mexico unless you own at least one firearm. I was amazed at the whole thing after believing for years that gun ownership in Mexico was non-existent. That is hardly the case.All this flies in the face of news articles published by the U.S. media in the last week or two. Mexico's gun problems are a direct result of gun runners buying "assault weapons" in the U.S. and taking them into Mexico to arm drug cartels, says the U.S. media and government. That is a bunch of government and media nonsense. The cartels aren't arming themselves from U.S. gun stores with semi-auto AR15 and AK47 rifles. They've moved on up. Not to completely dismiss arms moving into Mexico from the U.S., but it is not as it seems when the U.S. media tells the story. The firearms moving across the border are semi-auto rifles and handguns sold to middle class or wealthy Mexicans seeking personal protection from criminals that have no connections in Mexico with gun runners. For the most part the wealthy in Mexico are targets of criminal elements, so they have no intention of connecting up with them to buy a self-defense firearm. You're better off buying a weapon from someone within the Mexican government than buying it from the criminal element, namely a drug cartel.Cartels buy their arms from countries around the world, most any place where military weapons can be purchased on the black market, or from countries wishing to destabilize North America. They arm themselves from a worldwide black market of full auto military weapons including grenades, land mines and RPGs. They also "procure" their weapons from the less than savory from within the Mexican military. The drug cartels can easily afford to fly their weaponry into Mexico using their own fleet of aircraft on to remote airfields, or land them on remote Mexican shores from their fleet of vessels. They do it with drugs all of the time. Drug cartels buying semi-auto AR15 or AK rifles from U.S. gun dealers is viewed as a joke by Mexico's drug cartel, most Mexicans, and unfortunately by the Mexican government. The only people fooled by all the political rhetoric are Americans listening to the likes of Attorney General Eric Holder and other anti-gun politicians.Mexico has a gun problem, just like they have a drug problem and both the U.S. and Mexican governments are trying to place the blame on U.S. gun owners. U.S. gun owners aren't the problem. Mexico is the problem. The government is corrupt from the lowest level law enforcement officer shaking down American tourists for traffic violations, to officials and politicians highly placed within the Mexican government, including elements within the military. Everyone knows it. Everyone in Mexico knows it. Every law enforcement official in the U.S. knows it, and everyone in our government knows it. And anyone who has worked for any length of time within border cities and lived in the local community knows it. This is taking a Mexican problem, blaming the U.S. by turning it into a crisis in order further an agenda, and Eric Holder and President Obama knows it and they are taking advantage of it.The next time you see a news report of illegal full-auto weapons and grenades being found here in the U.S., you know where they came from. It wasn't from a gun store in Tucson or Phoenix. The administration is right that gun trafficking along the U.S./Mexico border is a problem. Not only do we have drugs and illegal aliens coming in our southern border, but we also have military arms and explosives coming into our country illegally as well. That's the issue and our government is being disingenuous in its argument.This AP news report published today is typical of what is going on. It is disgustingly biased and flat wrong: AP report for Detroit Free PressDon't believe me and what I say? See what the Latin American Herald is saying about a recent arrest of cartel members and their weaponry in Mexico. No, the items listed weren't purchased at a gun store in Phoenix or Tucson. Grenades and RPGs are illegal in the U.S.: LAH StoryGunNewsDaily authorizes the distribution of this commentary providing that is recognized as the originating source.

Tuesday, March 24, 2009

Must read from Urban Survival - Silently Self-Profiling -- YOU

Coping: Silently Self-Profiling -- YOU

A couple of readers have asked me lately "Is there some stuff on your mind that's bothering you? You sound kinda bleak lately." Well, yeah, kinda sorta maybe. Let me share just one of those things that's been bothering me; perhaps you'll understand. Here's what's going on:

It starts off simply get an email from a friend and it says something like: "OMG You have to see this video about [fill in the blank]. Because you're very interested in [fill in the blank] as a topic, you click over to the link to see what's a highly charged video about [fill in the blank] and the video urges you to 'tell all your friends about this video and send them the link...'.

If you're not computer/military/PowersThatBe savvy, you're likely to pass on the link without giving it a second thought. But you should give it some serious thought whenever you follow links because when you follow links you are self-profiling yourself to the government.

Amazing? Well, no, pretty simple programming exercise, really. And, if you had the 'summer of hell/2009' coming up due to all kinds of social stresses and the breakdown of the social contract, right about now if you were trying to defend the existing social paradigm, you'd be doing the same thing, too.

It's called 'memeering' and according to our predictive linguistics friends at the program is already underway. Toward what end? Well, what's a low-cost way to find out who is what kind of potential threat to your paradigm? I'll show you how it works, step-by-step so you 'get it'.
It begins with a government setting up a web site with an emotionally charged video about something like 'black powder' or 'inter-racial relations'.
Then a series of postings is put out on the net in places where such a video would likely get a lot of attention. Say, in a 'black powder' kind of video they will post something emotionally compelling to a bunch of gun web sites and discussion groups.
Next, when someone goes to the web site involved, it's a simple matter for the site to log your internet protocol address. Skeptical? go to and your 'net address comes up.

Congratulations! You have just gotten yourself into a government database of people who have an 'interest in black powder'. Since you probably don't spend as much 'head space' as we do, thinking about such computer applications, what this looks like in database set theory can be visualized this way:

So far, so good. Now, let's further suppose that want to narrow down the kind of people that would also be interested in anti-establishment direct action. Next step? Another video (or web site) only this time, we are going to use a topic like, oh, say "Startling New WTO video!" Such that folks going to this second vid site will likely include some people who also have an interest in black powder, like so:

Now, it becomes a simple matter to say "Hey! See that IP Address That shows up in BOTH groups. This intersection between sets in database operations is the vesica pisces.

But now, let's take it one step further, because so far, it's still far too many people to round up and throw in special 'camps' should the country get into a period of social unrest; say over a 'summer of hell/2009' period. So we will put up another site, only this time it might be something like "List of upcoming "Tea Party" events. Like so:

So, you see, it's all very simple, once you get the basis concept down: How will you be self-selecting whether you get judged a 'threat' or not is a simple matter of keeping track of which links you followed to get where.

More important? There's also a simple way to build 'social networks' this way because not only is your IP address logged, but so is the time of your visit. So as this kind of data snooping continues - as long as lots of folks don't understand it, when you forward one of these sites, you are then in effect telling whatever government "Hey, I am linked to Joe your bother-in-law over here"...and pretty quick not only do they know who has an interest in guns, WTO demonstrations, and upcoming Tea Party events, but they also know that when your IP address shows up, in say half a dozen such exercises, that "Joe your brother-in-law" shows up within a day or two, and he's already on their 'threats to society' list because he actually carried a sign and was ID'ed at some other kind of event...maybe an environmentalist affair of some kind. And they get all Joe your brother-in-laws connections, too, until pretty quick you get a map in a social networking application that might look like this:

So here's my bottom line: When you do any kind of social networking, be extremely careful with whom you associate. Or, in the case of Cliff and me, simply don't follow unknown links. Nothing wrong with YouTube and Google video, but even there, the IP snooping that goes on at the phone company level is pretty awesome,; which is what the privacy people get all worked up about.

Why am I bringing this up today? Because the web bot project has been running across more of these kinds of memeering operations lately which means one of these days, one or more of them will show up in your email. And, as they do, no matter how tempting it may seem to follow this emotionally highly-charged link just remember that in the process you are self-sorting yourself into some kind of a government profile as part of 'total information awareness' programs designed to enable preemptions, national security rating, and in a worst of all cases scenario, your round-up priority if you've identified yourself as a 'risk' to the existing paradigm.

Although it may be too late to do anything about it, if you've already gotten such emails and followed them. But WTF, its easier to explain it now than waiting till the October-November period when there is a small, but non-zero, chance some rounding up will be done. more thing: If you think you can 'beat the system' by using an open access proxy server somewhere? Are you kidding? Those would be almost the very first people to round up because they're smart enough to 'get it' and therefore are the most threatening there are to the existing paradigm, are you kidding?

Yes, this is exactly what the electronic freedom fighters are all about, but that battle's been over for a long time. Sorry. You lost. Oh sure, something like the Google Street View controversy seems like the right fight, but are you kidding? Hell no, it's a minor distraction to keep the public off the real deal memeering.

All plausibly deniable, too. How so? There are something like 27 levels of security classifications above even the President of these United States. So you just know how far down the food chain Congress and watchdog agencies are. But then you knew that, too, or at least you should have. Or, maybe you don't. And maybe there really are no PowersThatBe, no shadow government, above the elected, and acting as self-appointed caretakers for the existing way things are because it sorta works. Of course.

Then again, you might inspect those links to web sites that aren't on the beaten path, and even then, you gotta wonder what the phone companies are really up to in their central office frame rooms, and why that's so important to 'national security'. Except now you know.

Pickdog comment: Probably too late for me....LOL

Sunday, March 22, 2009

All Private Guns Will Be Confiscated By September 2009, US Tells Russia

Pickdog comment: This is from a cite I monitor. They have been right enough to give me concern.

All Private Guns Will Be Confiscated By September 2009, US Tells Russia

By: Sorcha Faal, and as reported to her Western Subscribers (Traducción al Español abajo)

Kremlin reports on the extraordinary meeting held today between President Medvedev and former United States Secretaries of State Henry Kissinger (under Nixon), James Baker (under Bush Sr.), Charles Shultz (under Regan), former United States Defense Secretary William Perry (under Clinton), and former US Senator and top defense expert Sam Nunn, are stating that the Americans are acknowledging for the first time their acceptance of a New Global Order in which they seek to partner with natural resource rich Russia and the oil rich Nations of the Middle East in order to ensure their survival into the 21st Century.

Leading the United States to the shocking conclusion that their very survival is at risk has been the evaporation of 45 percent of the World’s wealth which has caused a rapid plunge in Global manufacturing leading to a 49 percent collapse in US trade exports which the International Monetary Fund is reported has caused the World’s economy to shrink for the first time in 60 years and has lead Canada’s Central Bank chief David Dodge to state the World is “facing a long and deep recession that will fundamentally alter the nature of capitalism”.

Though Prime Minister Putin has warned that “resorting to a printing press would be unwise and extremely dangerous”, the already bankrupt United States, whose staggering debt is four times higher than their entire National income, has allowed its Federal Reserve Bank Chairman Ben “Throw Money Out of Helicopters” Bernanke to ‘create out of thin air’ a further $1.2 Trillion to stabilize the American economy, but which in turn has led to the collapse of the US Dollar leading the United Nations to recommend next week that the World “ditch the dollar as its reserve currency in favor of a shared basket of currencies”.

Russian economists further state in these reports that the United States has been left with ‘no other option’ than to force the massive devaluation of the US Dollar in order to ‘shake lose’ from banks and private investors the hundreds of billions they are currently hoarding and is being blamed for collapsing a United States where consumer spending accounts for two-thirds of its economy and which without money to borrow, or borrowers to loan to, is fast approaching the abyss.

With the devaluation of the US dollar, however, massive inflation will ensue causing the value of these currently hoarded hundreds of billions of US Dollars to plummet and forcing them to be spent before they become totally worthless, a policy which China, the largest Global holder of US debt, has voiced increasing concerns about and have cut back on their purchases of American debt even as desperation hits their own factories as orders plunge.

These top American Officials have also assured President Medvedev that new laws being written by the Obama administration will ‘completely’ reform the American financial system by fully integrating it into a single Global Economy due to be enacted during the coming G-20 summit in London.

When President Medvedev voiced his concerns to the Americans over his belief that the US Congress would not allow such a radical new set of laws to pass, these reports continue, Kissinger stated that the American people were being ‘primed’ to overwhelm their lawmakers into swiftly enacting ‘in its entirety’ the Obama administrations new banking and financial laws by the outrageous behavior of those collapsed financial giants that includes: 1.) The insurance giant AIG which after receiving over $300 billion in US taxpayer money paid out nearly $200 million in bonuses; 2.) The collapsed stock selling giant Merrill Lynch which after receiving $20 billion in US taxpayer money paid out $3.6 billion in bonuses; and 3.) The collapsed US banking giant Citigroup who after receiving $45 billion in US taxpayer money announced a $10 million redecoration of their executive office suites.

News from the United States today further confirm Kissinger’s assertions to President Medvedev as US Treasury Secretary Timothy Geithner has now admitted that he had ordered US Senator Christopher Dodd to include the executive pay provision into the stimulus bill which was, in fact, a loophole allowing these controversial bonuses to be paid out.

To such machinations being utilized by their supposed ‘leaders’ against them in order to pave the road from a once sovereign United States to this New World Order these Americans remain nearly clueless, but when pressed by President Medvedev on the plans to ensure that civil society on the North American continent doesn’t break down Kissinger reportedly replied, “By September we’ll have confiscated all privately owned guns so it really doesn’t matter what we do, we’ll still be in charge”.

Russian Intelligence reports state that gun ownership statistics in the United States vary widely, but is estimated to be that nearly 50 percent of US households have nearly 270 million guns, none of which these Americans seem now ready to part with without a fight.

But, new reports coming from the United States show that they are fast adopting the tactics used by the German Nazis to disarm their society prior to the installation of fascist rule and martial law by first rendering all private guns useless by eliminating and restricting the ammunition they use. And from new reports coming from the United States we can see that this ‘plan’ is already being instituted with ammunition shortages being reported in Idaho, Georgia, and Louisiana, and a new law just introduced in California which would:
1. Stop the private transfer between individuals of more than 50 rounds of ammunition.
2. License and tax anyone selling handgun ammunition commercially and force these stores to get background checks on anyone selling ammunition.
3. Get a thumbprint from anyone buying handgun ammunition.
4. Ban all ammunition sales that don't take place face-to- face, in other words, ban mail-order sales.

Even more chilling for American gun owners was the Obama administrations order to the US Military on March 12 which stated: “Effective immediately DOD Surplus, LLC, will be implementing new requirements for mutilation of fired shell casings. The new DRMS requirement calls for DOD Surplus personnel to witness the mutilation of the property and sign the Certificate of Destruction.” which would have crippled the US ammunition industry, who are the largest purchasers of used military ammunition brass, but after found out about by US Senators was quickly withdrawn.

To the reasons feared by the leadership class in the United States of their citizens retaining the right to firearms we can read:
“As the growing world-wide economic crisis deepens, military forces from Canada, the United States, and the United Kingdom are preparing to meet angry citizens on the street. The economic crisis - and the public outrage it is causing - is at the forefront of intelligence agencies and military forces in the western world.
Prominent trends forecaster Gerald Celente has been sounding the alarm for years, warning that riots and tax revolts are coming to America. The Pentagon, U. K. Ministry of Defense, and Canadian military apparently agree. In November of 2008 the United States Army War College released the report Known Unknowns: Unconventional "Strategic Shocks" in Defense Strategy Development. The report identifies economic collapse as a reason for the defense establishment to conduct domestic operations. The report states,

"Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security. Deliberate employment of weapons of mass destruction or other catastrophic capabilities, unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency..."
The CIA and MI5 are both watching the economic situation for signs of unrest and political instability. As the Washington Post reports, the CIA has added an economic situation report to its threat assessment for the White House. A further sign that the United States government is anticipating widespread unrest comes with the domestic stationing of the 1st Brigade Combat Team of the 3rd Infantry Division. The Army Times reports,
"They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack."
Canadian military forces have been given a nearly identical domestic mission in a synchronized move with the United States. Canada's National Post reports that,
"The Canadian military has embarked on a wide-ranging plan to turn its reserve soldiers into focused units trained and equipped to respond to a nightmarish array of domestic threats, including terrorist "dirty bomb" attacks, biological agent containment, Arctic catastrophes and natural disasters.”

Reports from the United States are also revealing that for the first time since their Civil War, active duty US Army Troops were put into the streets of Alabama after the killing spree of a crazed gunman, but which the US Army is now reporting it is ‘investigating’ because it doesn’t know who deployed them.

To whom the leadership elite in America are actually planning on protecting themselves from we can further read: “A new document meant to help Missouri law enforcement agencies identify militia members or domestic terrorists has drawn criticism for some of the warning signs mentioned.
The Feb. 20 report called "The Modern Militia Movement" mentions such red flags as political bumper stickers for third-party candidates, such as U.S. Rep. Ron Paul, who ran for president last year; talk of conspiracy theories, such as the plan for a superhighway linking Canada to Mexico; and possession of subversive literature.”
As to what these dangerous American terrorists can expect once they are in the custody of their US intelligence services?
“The International Committee of the Red Cross (ICRC) concluded in 2007 that US methods to extract information from prisoners at secret CIA jails as part of the "war on terror" amounted to torture.”

Even worse for these dissident Americans are the chilling revelations from top investigative news journalist Seymour Hersh: “After 9/11, I haven’t written about this yet, but the Central Intelligence Agency was very deeply involved in domestic activities against people they thought to be enemies of the state. Without any legal authority for it. They haven’t been called on it yet. That does happen.”

So today, as the United States ‘watch list’ for domestic and International terrorists has hit 1 million names, in a country that already has more prisoners than any other Nation in the World, or our entire Earths’ history for that matter, and as sales of weapons and ammunition are still hitting record highs in America since President Obama’s election, it would appear more than likely that the assertions of US officials to Russia that they remain in control of their country is highly doubtful…and needing just one single ‘spark’ to plunge it into full scale civil war.
And whose to say that hasn’t been their ‘plan’ all along?

© March 20, 2009 EU and US all rights reserved
[Ed. Note: The United States government actively seeks to find, and silence, any and all opinions about the United States except those coming from authorized government and/or affiliated sources, of which we are not one. No interviews are granted and very little personal information is given about our contributors, or their sources, to protect their safety.] .

Thursday, March 19, 2009

Maybe this is why I feel a deep foreboding

Bernanke Inserts Gun In Mouth
I'm not at all sure I believed what I read today.

Posted by Karl Denninger in Federal Reserve at 08:32

(my comments in italics, indented)

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

The economy is screwed, and although we have made statements for the last year that our actions would solve the problem, we've been wrong. Exponents (that is, compound interest) are a bitch and its unfortunate that you were too stupid to call us on this two years ago.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

The economy is deflating. We can see the deflation in the CPI and PPI numbers, not to mention home prices. The data we have that we're not publishing is even worse. This is a major problem because we have literally run our playbook that should have prevented this according to our thesis, but it didn't.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments.

We've got over a trillion in trash on our balance sheet now, which we promised would fix the problem but it didn't do jack. That's because nobody in their right mind will borrow money when the economy is in the tank and debt levels are above sustainable maximums. The only borrowers are people who are deadbeats, and that doesn't help. Instead of clearing this out by forcing the bankrupt to take their medicine our "solution" is to attempt to devalue the currency by explicit monetization. We have little choice in this matter because the most-recent TIC data that has been published, along with what hasn't been published (yet) but which we have, shows that foreigners have given us the finger in buying any more of our agency, corporate and sovereign debt. In short, we're screwed - within months - and we know it.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

We've all stuck guns in our mouths and are now threatening to blow our brains out. Oh, and each of us is holding a dead-man's switch to a thermonuclear weapon, strategically placed somewhere in the United States economy. If one goes, we all go, and so do you - this is a murder-suicide pact, and you're the potential homicide victim. Have a nice day.

Folks, this is the most frightening statement I've read from the FOMC - ever.

Notice what's missing - the statement just a few days ago from Ben Bernanke in which he said that the economy would recover in early 2010, and the recession would end in late 2009.

If this was the base case the FOMC believed, there would be no reason for the actions taken today. Monetary policy has a six month (or thereabouts) leadtime, which means that should Ben believe what he spewed on 60 Minutes then his actions to date were sufficient to fix the problem, needing only the fullness of time to flow through the system and restart credit creation.

I believe Ben knows what he said on 60 minutes was a lie.

But this action also tells us a few other things about the short term:

1) The banks aren't in as much trouble as we've been led to believe. That is, imminent business failure is not going to happen; this action had a dramatic and instantaneous impact in flattening the yield curve, which means the banks earn less in net interest margin. In the short term this means that the risk of upside surprises in earnings for next quarter are very real, even if those earnings are "cooked". Short take-away: beware if you're short banks.

2) Bernanke and pals have in their possession enough non-public information on the credit markets (likely TIC data - that is, foreign investment flows) that they have been effectively forced into doing this, lest something even worse happen immediately. Has China (along with others) finally woken up and said "no mas"? The sabre-rattling makes one wonder, especially in conjunction with this action yesterday.

Now $300 billion in purchases out the curve, to be sure, isn't all that much. In fact its about half of the issue expected over the next three months - significant to be sure, but not huge. More important to the market is the GSE ("agency") debt and coupon being purchased; a program that has been underway for some time, but has now been more than doubled in size. This program would appear to be low risk but really isn't, as Fannie and Freddie (where this paper is mostly coming from) are both bleeding money like crazy, and as such one has to wonder whether these notes being bought are really "money good" or not. The answer is almost certainly "not", which in turn strongly implies that there are monstrous hidden embedded losses that will appear down the road.

The problem with the direct Treasury purchase is the potential precedent.

See, Ben will effectively "overpay" for these bonds. As we saw in England with their buy this results in an immediate "sold to you!" response. Their "bid to cover" was insane, showing that essentially everyone and their brother was attempting to unload these bonds into the Bank of England - knowing full well that once this policy starts it always ends badly, and when you are given the opportunity to sell at higher than actual market value you take it.

The danger is that in trying to suppress the long end of the curve is that it can fail. That is, the move we had today (which was massive) can be fleeting - and then reverse. This of course would force Ben to do it again, and again, and again. Ultimately he could wind up owning the entire long end of the curve or even worse, the entire $6 trillion public Treasury float.

This is the "economic collapse" scenario, because further government spending in such a situation requires the dilution of all existing money in the system by the same amount spent. This is a circle jerk - you're not actually able to spend that money and get the goods and services you want as a government, since you are creating and consuming at the same time. As such the operations cancel each other in effect and the government finds it cannot fund its internal operations with Treasury issuance any more, being forced back onto whatever tax base it has left (which won't be much at that point!)

Here is the problem, graphically illustrated:

see chart above


Note the breakdown. We are anticipating at least a $1 trillion shortfall this year, and frankly, that's unreasonably "good"; the real shortfall is likely closer to $2 trillion.
So what happens if half of that $2 trillion is no longer "money" from foreigners - it is a circle-jerk from The Fed and Treasury? You can basically remove it, that's what.
Now look at that chart - you can't remove the "net interest" (about $250 billion), because that has to be paid. "Other spending", that is, other than defense, interest, and social programs, is about $700 billion. Defense is also about $700 billion.
If we find ourselves unable to sell debt to actual investors with actual money, and are circle-jerking ourselves; to balance this budget we would need to contract spending to roughly $1.0-1.5 trillion in total.
Since the interest payments are inviolate, that leaves us $1.25 trillion for everything else. Assume we can cut half of the defense budget, and we've got $800 billion left. Cutting "other spending" (that is, all other programs) by 50% would leave us with about $500 billion net-net for social programs - forcing a reduction of about sixty percent in Social Security, Medicare and Medicaid - all at once.
In short this would wind up costing us roughly a 50% across-the-board cut in every program within government on an immediate basis. That in turn would force further reductions in GDP, which would further shrink tax revenues.
You can see where this leads, I'm sure, and it's not pretty.
Ben Bernanke may think he can extricate The Fed from this outcome before it happens. But I must ask - exactly why would anyone believe that? He hasn't been able to extricate himself from anything he's tried thus far.

The danger here is that this really is "the last bullet in the gun." If it fails, our currency and political system would appear to many who read this to go down the toilet in a hyperinflationary detonation.
Not so fast grasshopper.
See, if he fails, it won't be simply a United States phenomena. Quite to the contrary. That failure will in fact be global - Bernanke has guaranteed it by tying The Fed to every other major central bank in the world via his "unlimited swap lines." We may be a cheap $5 hooker in the bar, but of the hookers, we've got crabs and everyone else has AIDS!
The error in the hyperinflationist scenario is that without being able to couple price increases back into wages they are unsustainable - price increases instead collapse demand. If gasoline goes to $20/gallon you will buy less of it - a lot less - not because you want to, but because you simply don't have the money. This in turn destroys the gasoline retailer and oil company's operating cash flow, which in turn causes them to lay off more people. In a debt-laden economy the debt percentage (of GDP) continues to rise even as spending drops and a mad dash to try to redeem what debt can be repaid soaks up all available money.
The nightmare scenario that is staring us in the face, right here, right now isn't hyperinflation. It
is in fact a collapse of monetary systems driving demand for dollars through the roof in a crescendo of attempted redemptions into collapsed ("no bid") asset prices - a demand that Ben will not be able to meet, as the collateral backing those dollars will have all been exchanged for toilet paper. Whether Bernanke holds all this trash on his balance sheet or manages to scam Treasury into exchanging it for T-bills, the result is the same - there is no collateral behind Bucky and as employment collapses no production to replace it with either.
The mad scramble will be on, and as it happens trade will be choked off by not a collapsing dollar but other currencies collapsing around the world.
Paradoxically, the DX, or dollar index, will skyrocket - not go through the floor - as this plays out.
Unfortunately this shuts down virtually all exports - at a time when we desperately need them, as we cannot borrow to consume any more. he economy collapses, along with government funding and our currency - but not through hyperinflation. The mad dash to redeem and sell anything and everything instead collapses pricing (that is, it becomes out-of-control deflation in an exponentially-increasing fashion) irrespective of Ben's attempt to halt it.
The "death spiral" ends in the destruction of our monetary base - not due to hyperinflation but due to the inability to borrow any more funds, the reduction of the currency's base to a giant circle jerk, asset fire sales in a mad liquidation dash and ultimately, the collapse of both the monetary and political systems in the United States as tax revenues collapse to very close to zero.

This is a national security emergency that quite literally can take down our government and way of life within months or even days, and I'm willing to bet that not one person in Congress understands the seriousness of the matter.
By refusing to confront the bankrupt nature of institutions under Bernanke's supervision and by choosing instead to continue to bail them out and take their trash onto his (our) balance sheet,
Bernanke is risking something much worse than a Depression.
He is literally risking the end of America as a political and economic power.
Watch for a bond market dislocation very carefully.

I will be, and hopefully I will detect it in time to warn people if Ben's "last bullet" gambit ends up blowing up in his face.
In the meantime, for however long this rally in the market lasts (and it might be a while if the sheeple misdiagnose what's coming - if the newsletters I've seen thus far this evening are any clue, most people have) use it to raise cash and be prepared for some really tough times.
I have been singing this song - raise cash now - for quite some time. Let me be succinct - it has been my considered belief that you need enough in liquid cash - not credit access in the form of credit card available balances or anything similar - for at least six to twelve months. I'm upping that here and now to twelve to twenty-four months - that's right - one to two full years of "minimum necessary to make it" expenses. Figure out right here and now what your minimum "monthly nut" is, and raise 12-24 months of that much in safe, liquid funds.
That's a minimum; if you can in fact have enough available to be able to execute a "bug out" plan where you are able to become effectively self-sufficient on short notice (a couple of months maximum) if necessary, that's even better. Yes, we're talking chickens, goats, enough arable land to grow what you need to survive (bartering for what you don't have with what you do) and the means to defend it. If you live in a big city consider carefully what you intend to do if unemployment goes north of 20% and the city effectively goes feral - if you're interested in "how bad can it get" go drive through major parts of Detroit - bring an armored vehicle for your tour and/or at least semi-automatic weapons.
There's an ill-wind blowing and while this storm has not yet reached the shore, I'm putting up the plywood.
Pickdog comment - we are "*&%#*&"!
Comment edited by RW.

Tuesday, March 17, 2009


With regard to whether Chinese advisors and experts think the US government is creating a dangerous and unstable Treasuries bubble, note this statement:
"Buying US government bonds amid an economic downturn, [a purchase] that is not based on the sound performance of the US economy itself, indicates a huge bubble," said Zuo Xiaolei, chief economist of China Galaxy Securities.

Chinese officials exChinese officials express mounting alarm at the likely negativepress mounting alarm at the likely negativenear-to-medium term effects upon the dollar, and upon their huge reserves, of the spend-spend-spend policy emanating from Washington:

The huge deficit would not immediately lead to inflation, since banks were likely to curb lending as the financial system remained weak, Zuo said. "It might be two or three years before the huge deficit leads to serious inflation." Analysts noted that if the stimulus plan didn't accomplish its goal of restarting growth, the US government would have to ease its large fiscal burden by borrowing more and issuing more dollars, instead of relying on economic growth.

Huge Treasury bond issues would exacerbate the depreciation of the US dollar and world wealth. Such developments would be more catastrophic than the global financial crisis, according to Zhang Yansheng, head of the International Economic Research Institute under the National Development and Reform Commission, the chief economic planning body in China.

A weaker US dollar would hurt that currency's international status, he said, which would "not be in the interests of the United States and other countries and would exacerbate the crisis." Said Zuo: "US dollar depreciation is inevitable in the long run. China should prepare and reduce its holdings of US Treasuries to a proper size."

In a strong hint that China's central bank won't be adding to its holdings of Treasuries at anywhere near the rate it did in 2008, that it may already have clandestinely achieved more diversification out of the dollar than is widely known, and may well find ways to further decrease its holdings without explicitly telegraphing its moves, note this statement:

Fang Shangpu, deputy director of the State Administration of Foreign Exchange, noted Wednesday that the report released by the US Treasury of the amount of government bonds held by China included not only the investment from the reserves, but also from other financial institutions. It might be a hint that Chinese government is not holding as much US government bonds.

China is managing its foreign exchange reserves with a long-term and strategic view, Fang told a press briefing. "Whether China is to purchase, and to buy how much of the US government bonds, will be decided according to China's need," Fang said. "We will make judgment based on the principle of ensuring safety and the value of the reserves," Fang said.The foregoing quotes beg the following questions:

What about the widely held view, which is even at times recited by Chinese central bank officials themselves, that says China has no choice but to maintain its holdings of Treasuries and to keep buying more, lest any significant slowdown in its rate of purchases risk triggering a global dollar panic?

Is that view correct, or does China's central bank actually have other viable options, as Luo Ping and other officials insist that it does?

What might those other options be, are they really viable, and what might happen to the dollar if China's central bank began to exercise its professed "other options"?

What kind of scenario might prompt China's central bank to attempt to do so?
Could its enactment of "other options" be carried out in a way that would be difficult to trace, so that China would avoid triggering a dollar panic while it steadily reduced its exposure to the dollar over the coming months?

Saying "goodbye!" sooner, not later

With respect to whether China will continue to purchase Treasuries at anywhere near the same rate at which it has in the recent past, a new and fundamental problem is arising. Its significantly slowing economy is causing a rapid slowing of the rate of growth of its reserves, which makes much less new reserve accumulation available, and therefore also undermines the need for the purchase of Treasuries. Experts state that even if China's central bank uses all of its new accumulation of reserves each month to purchase Treasuries, the sums it would purchase would still fall.

Additionally, China must now fund its new $585 billion domestic stimulus package, and that will only further decrease funds available for the purchase of Treasuries. Therefore, its rate of purchase of Treasuries will almost certainly decline significantly from here forward.

This potentially potent new fundamental comes into play at the most inopportune time for the US, when it intends to sell perhaps as much as $2.5 trillion in Treasuries this fiscal year alone. The question that begs an answer, and that is increasingly being asked around the globe, is who's going to buy this huge new supply of debt? Certainly not Japan, for its exports are plunging, as is its new reserve accumulation, as it suffers a severe economic contraction at an annual rate of 12.7% according to the latest figures.

It certainly appears likely that as new Treasuries flood the market, the point could soon be reached where supply outstrips demand, causing yields to rise. The Fed is trying to keep yields as low as possible so as to attract big buyers that already have large holdings of Treasuries, such as China. For such holders of Treasuries, rising yields would ravage the value of their holdings, making the purchase of yet more Treasuries distinctly unattractive. Yet, lower yields tend to be less attractive for new buyers, except in the case where such a buyer is suffering from strong risk aversion and is looking, not so much for profit, but rather for a safe haven.

Therefore, minus the environment of extreme risk aversion that still plagues the markets, the US is caught between multiple contradictory interests. On the one hand, it wants to keep yields low so as to attract buyers such as China to purchase significantly more Treasuries. On the other hand, it needs higher yields to attract many new buyers because the big buyers are becoming much less able to keep up their purchases, let alone increase them. But those higher yields would almost certainly force investors such as China's central bank to begin to more quickly divest themselves of Treasuries - or risk seeing the value of the dollar-denominated portion of their reserves eaten away.

The biggest factor that has so far prevented a destructive collision of all these conflicting interests is the persistence of extreme risk aversion in the markets, causing a global rush into Treasuries as a safe haven.

If that extreme risk aversion were to subside, then investors holding Treasuries and prospective new buyers of Treasuries would be lured instead to investments that offer greater profit potential. The yields on Treasuries would have to rise in order to attract buyers, but that would undermine the value of investors' holdings of Treasuries, which would in turn drive them to sell out in favor of better safe stores of wealth. As yields rise rapidly, prospective buyers would likely stay on the sidelines to wait for the best deal rather than jump in too soon only to see their holding ravaged by yields that continue to rise.

The yields would rise yet further on the falling demand for Treasuries, and the downward spiral would feed into itself in a stampede out of Treasuries and the dollar. What I am describing here is a bursting of the Treasuries bubble. It would most likely be disorderly and chaotic.

But such a bubble burst for Treasuries could come about even if risk aversion persists, or perhaps intensifies, in this deepening global crisis. What if investors become more worried about the safety of Treasuries, fearing, as China's central bank increasingly does, that the flooding of the market with huge new sums of US debt will inevitably inflate away the value of their Treasury holdings? Or what if the costly new US stimulus package and bank rescue fail, and the US descends into a much deeper recession or a full-blown depression and is forced to nationalize virtually the entire financial sector, stoking fears that the US government may have no choice but to default on at least a portion of its gargantuan debt?

In that case there is a real threat that investors will begin to transfer their risk aversion strategy from focusing on Treasuries and the dollar to focusing on something else that is deemed much safer - perhaps including hard assets like gold and other precious metals and commodities. If US gross domestic product (GDP) deteriorates significantly further than it has already, the dollar will become much more vulnerable and will likely fall as investors begin to value the safe haven currency more in line with the fundamentals of the US economy. Then, the same self-reinforcing downward spiral described above would likely come into play, and the Treasuries bubble would burst in chaotic fashion in an investor stampede to havens safer than the shaky dollar.

One can begin to see how very tentative is the dollar's recent appeal as a safe haven in the mounting storm. In verification of that fact, investors have been piling into short-dated Treasuries for the most part, for two reasons. First, these assets are less vulnerable to the ravages of higher yields, which tend to hit the long-dated Treasuries earliest and hardest. Second, the short-dated assets facilitate a quick exit in the event that it is deemed justified. When taken together, these two factors are not a very solid vote of confidence in Treasuries and the dollar.

Next: China Inoculating Itself against a Dollar Collapse

W Joseph Stroupe is a strategic forecasting expert and editor of Global Events Magazine online at



Before the stampede
By W Joseph Stroupe

Increasingly ominous clouds are gathering in what could soon be the perfect storm against the United States dollar and against the present dollar-centric global financial order.

This is not shaping up to be a storm that anyone is trying to initiate, not even those who are actively driving for a new global financial order that is no longer centered on the dollar. Instead, it will result from a correlation of forces arising out of the deepening global financial and economic crises, coupled with recurring and conspicuous miscalculation on the part of some of the world's political, financial and economic leaders.

The storm has the potential to cause upheaval on a grand scale, opening the door to swift, and largely uncontrolled, fundamental transformation.

As is widely recognized, the present financial order that isinordinately reliant on the US dollar must some day give way to a new order that is more balanced, stable, resilient and reliable, one that is based on multiple currencies and that therefore won't be plagued by the extremely dangerous structural drawback of an increasingly worrisome elemental single point of failure (the dollar).

But if the current dollar-centric financial order should become more seriously shaken than it already has been, perhaps even suffering a collapse, as a casualty of the present deepening global crisis, then the transition to any new global financial order is most likely to be disorderly, disruptive and unmanageable rather than gradual and orderly.

We can hope - but cannot be at all confident - that world leaders and global investors will act coherently, cohesively and intelligently enough in this crisis so as to ensure that the policies and actions being undertaken will not put at further serious risk the fundamental structure of the current dollar-centric financial order, and that they will instead be effective in bolstering deteriorating global confidence in the present order and in the safety of the dollar, at least until we get through this crisis.

Unfortunately, we cannot be confident that world leaders know what they are doing in seeking to resolve the crisis. Are their measures attacking the heart of the problem, or only its periphery? Are they exacerbating the crisis, either by enacting certain misdirected measures, or by failing to enact certain required measures? Are they setting up conditions that make a dollar crisis and radically increased financial upheaval virtually inevitable, by blindly pushing ahead with a simplistic agenda of trying to spend their way out of the present crisis?

If the dollar is being put at significant short- and medium-term risk by such measures, then we're seriously risking plunging the global financial order into a depth and breadth of transition that we cannot adequately control.

Investment, finance and economics are a complex mix of at times downright illogical human psychology with the pure logic of mathematical science, introducing possibilities for potent wild-card factors that must be taken into consideration in any calculation.

History provides many unfortunate examples of how the psychological components of uncertainty, fear and panic can, at crucial times, trump the components of logic, reason, knowledge and discipline to give impetus to shortsighted and risky policies and actions that create a full-blown crisis. Humans simply don't always act in a rational and logical way that is in their best strategic interests. And institutions, regulatory agencies and governments, being composed of humans, don't always act rationally either.

All are subject to the potent influence of human psychology, which can at times be quite defensive, knee-jerk, irrational and somewhat unpredictable. In a crisis situation such as we presently find ourselves, the darker side of psychology's influence is often and unfortunately magnified.

Added to this is the fact that global investment, financial and economic systems have become increasingly complex and interrelated much faster than the ability of experts and leaders to adequately comprehend them. This makes it much easier to make mistakes of real consequence. This complexity also at times prevents governments and other institutions from taking requisite bold, comprehensive actions in the midst of crisis for fear that these may backfire by producing some unforeseen and intolerable effects and repercussions.

Further complicating matters, investment, finance and economics are nearly always deeply intertwined with politics, adding to potential uncertainty - especially so in a time of deepening global crisis, when individual governments invariably lean toward self-interest, nationalism, protectionism and self-preservation.

To illustrate the disturbing truthfulness of the foregoing, remember when experts and leaders confidently concluded that the free markets could mostly regulate themselves with success; when they concluded that no housing bubble existed in the US, but only some "regional froth"; when they insisted that complex new mortgage-backed securities, including high-risk mortgage paper, dispersed throughout the financial and investment system, would decrease default risk.

Empty reassurances

Remember when the present crisis broke in 2007, the reassurances that it would not spread beyond the confines of subprime; when it did spread, the forecasts that Wall Street banks' losses would amount only to a total of about US$200 billion. Remember when "experts" insisted no widespread credit crunch would result. Remember when they insisted that the crisis was unlikely to spread from Wall Street to the real economy on Main Street?

Remember when they said the hundreds of billions of dollars of liquidity thrown into the system would free up the credit seizure. Remember when they said the October 3, 2008, $700 billion stimulus package and the many more hundreds of billions of dollars in bank and corporate bailouts would move the system out of crisis. Where are all these pseudo-intellectual ideas, beliefs, ideologies, assessments and assurances now? On the trash heap, precisely where they belonged in the first place.

The record inspires little confidence in the ongoing efforts of governments to resolve the crisis, or even that they know how to resolve it. The damage and outright destruction inflicted on vital components of the present global investment, finance and economic orders just keeps piling up while governments keep trying their various "solutions".

As for the newly passed $787 billion stimulus package, and its accompanying sketchy bank rescue plan, economists and the markets widely doubt whether the two measures are potent enough and targeted accurately enough to come anywhere near accomplishing their stated aims.

The same is true of the perpetually disjointed and half-hearted efforts of the Group of Seven (G-7) leading industrialized nations, whose most recent confab in Rome ended with the customary whimper. In addition to its historic impotency, the G-7 is now being almost totally emasculated by the broader Group of 20 nations, to which has fallen the task of designing and constructing a new global order to replace the present broken one. If you concluded based on the hard facts that this crisis is spinning increasingly out of control in spite of, and in some important ways due to, the efforts of governments to resolve it, you would not be far wrong.

Investors, both private and official, around the globe have generally given in to a crisis reflex psychology of extreme risk aversion and have been clutching the US dollar ever more tightly, massively running into Treasuries as a refuge in the mounting storm. This fact would seem to imply that global confidence in the dollar is still fundamentally sound, despite the well-documented bruises it has received over the past few years.

The truth is that the potential for a global dollar panic is becoming greatly heightened, in spite of (and in part, actually because of) the dollar's recent significant gains as a refuge for investors, the bulk of whom continue to be distinctly risk-averse. Ironically, this massive piling onto the dollar opens yawning new vulnerabilities and risks that either did not exist before, or were at most very minimal.

For example, a number of experts warn that US Treasuries are increasingly taking on the characteristics of a bubble, and they remind us that bubbles inevitably deflate, and they rarely, if ever, do so in an orderly fashion. When this one deflates there could be uncontrolled, perhaps even chaotic, repercussions for the dollar.

Much discussion and debate is currently underway as to whether the US will find sufficient global demand for the more than $2 trillion in new Treasuries coming online this fiscal year alone. But the fundamental risks for the dollar aren't only arising out of that fear over whether demand for Treasuries will be sustained.

Serious risks for the dollar also arise if global demand for Treasuries is sustained. Why? Because that would only thrust the present Treasuries bubble to even more gigantic proportions, further warping the structure of the already severely deformed present global financial order, magnifying the dangerous distortions that already exist and increasing the likelihood of a massive second wave of damage and destruction in this present crisis, and an eventual burst in the Treasuries bubble.

The emerging markets and their banks and governments are suffering under increasingly tighter credit strangulation and mounting financial and economic losses, with skyrocketing risks of default, due to the tightening global credit seizure. And US and European commercial credit not explicitly backed by governments is also suffering likewise. As if that dangerous situation were not bad enough, the massive spending and debt issuance policies being embarked on by the US government only greatly exacerbate the increasingly unstable situation for all these players.

By facilitating and encouraging the massive global flight into Treasuries, and by issuing a huge new supply of US sovereign debt, emerging markets, their governments and banks, and US businesses are deeply suffering. As the US government sucks all the air out of the global credit markets via the unstemmed growth of its latest in a series of dangerous asset bubbles, namely the Treasuries bubble, these other entities find it extremely difficult to issue debt (obtain credit) at feasible costs, if at all. Investors are demanding very high yields to exit the relative "safety" of Treasuries to invest in corporate and government bonds in the emerging markets and in large swaths of the US and Western Europe as well.

These increasingly high yields demanded by investors translate into high costs and mounting losses by banks across the financial system. The situation is moving rapidly to a potential massive wave of bank, corporate and government defaults. Eastern Europe is on the very precipice as a result. If such already severely weakened emerging market governments, banks, businesses and US corporations do default, they will place enormous new pressures on European and US banks which are either heavily exposed, or not sufficiently immunized, to the risks.

The global credit markets and financial systems are deeply interconnected, meaning that contagion spreading from an Eastern Europe default to the rest of Europe and the US is virtually assured. So those pressures will be felt by the entire global financial order, and such new and profound stresses upon an already extremely shaky order won't likely be endured without a genuine meltdown of the entire system.

These huge and dangerous distortions in the global financial order are due largely to US government policies regarding Treasuries and the shortsighted willingness of global investors to participate in pumping up that profoundly harmful bubble. If the US succeeds in selling its greatly increased supply of Treasuries, then such distortions in the global order will only become more profound, their negative repercussions (credit strangulation) will only become much more potent, and the feared second wave will be virtually assured. And so far, demand for Treasuries has remained high, thereby ensuring the dangerous persistence of the credit strangulation referred to here.

That second wave, if it comes, will also carry profoundly negative repercussions for the Treasuries bubble itself, because the US and Europe will be plunged into undeniable, full-blown depression via a financial meltdown by the heavy burden of the cascading effects of default in Eastern Europe. That eventuality will force global investors to finally begin to evaluate the safety and appeal of Treasuries and the dollar based much more on the swiftly disintegrating fundamentals of the US economy and much less on a psychological reflex, driven by extreme risk aversion, that at present corrals investors into Treasuries for their supposed safe-haven benefits.

The stampede in the making

Investors will begin to stampede out of financial assets such as Treasuries and into hard assets like precious metals and certain commodities whose price has been severely beaten down. These will offer comparatively much safer stores of wealth, ones with a real profit potential. China, via its resource buys, is already blazing the trail, going energetically into hard assets, rather than sustaining its 2008 rate of purchases of Treasuries and other financial assets.

Replay the recent histories of the chaotic housing and the commodities bubble bursts. Global investors, at the behest of enthusiastic governments, largely ignored the inevitable risks and piled into these assets on a grand scale, with the hottest interest coming just before the burst occurred. The environment of very low global interest rates and a massive global credit excess set the stage for enormous investor profits on these gigantic and mushrooming asset bubbles.

But when mounting inflation obliged the Fed to begin to steadily hike interest rates, the housing bubble began to burst in late 2006. As the dollar weakened under mounting inflation and loss of its appeal as a safe store of wealth, global investors piled ever faster into commodities for safety and for profit, inflating that bubble to gigantic proportions by the summer of 2008, when oil nearly reached $150 per barrel.

Then, when the global recession emerged later that summer, investors realized global demand and prices for commodities would plunge, so they stampeded out of commodities and into Treasuries, and the commodities bubble burst. Both bubble bursts left a great deal of wreckage in their wakes, with asset values collapsing, pulling businesses, banks and even governments into the abyss.

Though the present Treasuries bubble is more about safety than it is about profit, the fundamental risks associated with bubbles still apply to it. The bigger it gets, and the more reliant upon it as a safe store global investors become, the more unstable it turns out to be because it becomes more sensitive to various factors, both internal and external, both real and psychological.

The bigger and hotter any bubble gets, the more prepared its devotees become to speedily abandon it in favor of the next one. That explains why investors have mostly piled into very short term Treasuries - they know they may well have to sell out even faster than they bought in.

So, no one should assume that the present crisis will moderate or move toward resolution just because global demand for Treasuries might remain high in coming months. That would only signal that the Treasuries bubble is growing more massive, and that the distortions in the global financial order are only becoming more profound and dangerous, threatening to bring in a second wave of destruction, and that the bubble is therefore much nearer to bursting. This constitutes a potential perfect storm against the dollar and against the present global financial order that no one wants, but no one is seeking to prevent either.

W Joseph Stroupe is a strategic forecasting expert and editor of Global Events Magazine online at

Sunday, March 15, 2009

No Safe Place?

For those of you who would like a little insight on a real life scenario of when things go bad this article has some very enlightening information of what may be in store for all of us.

Frugal's Forums Archive 2001-2006: Thoughts on Urban Survival. COMPLETE !! A MUST READ FOR ALL SQUIRRELS!!!

Read the entire article to get a true picture. Here is an excerpt from this article:


“Someone once asked me how did those that live in the country fare. If they were better off than city dwellers. As always there are no simple answers. Wish I could say country good, city bad, but I can’t, because if I have to be completely honest, and I intend to be so, there are some issues that have to be analyzed, especially security. Of course that those that live in the country and have some land and animals were better prepared food-wise. No need to have several acres full of crops. A few fruit trees, some animals, such as chickens, cows and rabbits, and a small orchard was enough to be light years ahead of those in the cities. Chickens, eggs and rabbits would provide the proteins, a cow or two for milk and cheese, some vegetables and fruit plants covered the vegetable diet, and some eggs or a rabbit could be traded for flower to make bread and pasta or sugar and salt.

Of course that there are exceptions, for example, some provinces up north have desert climate and it almost never rains. It is almost impossible to live of the land, and animals require food and water you have to buy. Those guys had it bad; no wonder the Northern provinces suffer the most in my country. Those that live in cities, well they have to manage as they can. Since food prices went up about 200%-300%. People would cut expenses wherever they could so they could buy food. Some ate whatever they could; they hunted birds or ate street dogs and cats, others starved. When it comes to food, cities suck in a crisis. It is usually the lack of food or the impossibility to acquire it that starts the rioting and looting when TSHTF.

When it comes to security things get even more complicated. Forget about shooting those that mean you harm from 300 yards away with your MBR. Leave that notion to armchair commandos and 12 year old kids that pretend to be grown ups on the internet.

Some facts:

1) Those that want to harm you/steal from you don’t come with a pirate flag waving over their heads.

2) Neither do they start shooting at you 200 yards away.

3) They won’t come riding loud bikes or dressed with their orange, convict just escaped from prison jump suits, so that you can identify them the better. Nor do they all wear chains around their necks and leather jackets. If I had a dollar for each time a person that got robbed told me “They looked like NORMAL people, dressed better than we are”, honestly, I would have enough money for a nice gun. There are exceptions, but don’t expect them to dress like in the movies.

4) A man with a wife and two or three kids can’t set up a watch. I don’t care if you are SEAL, SWAT or John Freaking Rambo, no 6th sense is going to tell you that there is a guy pointing a gun at your back when you are trying to fix the water pump that just broke, or carrying a big heavy bag of dried beans you bought that morning.

The best alarm system anyone can have in a farm are dogs. But dogs can get killed and poisoned. A friend of mine had all four dogs poisoned on his farm one night, they all died. After all these years I learned that even though the person that lives out in the country is safer when it comes to small time robberies, that same person is more exposed to extremely violent home robberies. Criminals know that they are isolated and their feeling of invulnerability is boosted. When they assault a country home or farm, they will usually stay there for hours or days torturing the owners. I heard it all: women and children getting raped, people tied to the beds and tortured with electricity, beatings, burned with acetylene torches. Big cities aren’t much safer for the survivalist that decides to stay in the city. He will have to face express kidnappings, robberies, and pretty much risking getting shot for what’s in his pockets or even his clothes.

So, where to go? The concrete jungle is dangerous and so is living away from it all, on your own. The solution is to stay away from the cities but in groups, either by living in a small town-community or sub division, or if you have friends or family that think as you do, form your own small community. Some may think that having neighbors within “shouting” distance means loosing your privacy and freedom, but it’s a price that you have to pay if you want to have someone to help you if you ever need it. To those that believe that they will never need help from anyone because they will always have their rifle at hand, checking the horizon with their scope every five minutes and a first aid kit on their back packs at all times…. Grow up”

Thanks D!

Be aware. Be informed. Be prepared.


Wolf Tracks: "Three Percenter" Patch

Wolf Tracks: "Three Percenter" Patch

A Very Bad Development

Well it appears that Military Once Fired Brass is no more.

Soon powder, primers, and bullets will be next. Better get while you can.


Thursday, March 12, 2009

Gov't considers anyone who believes that Liberty is the way a Terrorist - updated link

From a fellow Patriot:

I thought you ought to know that law enforcement considers you Ron Paul supporters part of the evil anti-government militia movement.

See it for yourself here:

Be sure to see the 5th page of the report, and the disclaimer at the end.

It's total hogwash, most of it. I know, because I got labeled a "militia leader" by Roll Call magazine back in 1996 for doing nothing more than organizing gun owners for political action at election time (i.e., walking door to door for a Congressman).

In a sense, it's true, since by federal law, and the common law, the 'militia' is defined as every adult abled bodied male. We're all the militia.

I find the list of infiltrated militias in the report that were prosecuted for "plots" and conspiracy interesting, considering this report from Sean Hannity that says the government just "can't touch" known training camps in the US where muslim extremists train themselves for war on the rest of us. See it for yourself here:

Pickdog comment: We are recruiting for the militia in Hays County :)

Army War College Document

Here is the link that you will want to read if you read no other. It is from the Army War College (Nov 08) that tells of a contingency plan to station US troops inside the US for "domestic control" in the event of an emergency (economic?)

More Doom and Gloom - But money talks...BS walks

Welcome to the "New Normal"
Even with all that has occurred so far, the spirit of optimism remains strong. If you watch the presentations, read the reports, listen to the commentaries, and, more generally, keep your ears to the ground, it seems pretty clear that many Americans are still hanging on in hope that the events of the past two years are just a bad dream, and that when they wake up, everything will be back to "normal."
While that may be true in one respect -- because the financial crisis phase has passed -- what comes next almost certainly won't be anything like what it was before. Lifestyles, living arrangements, and livelihoods will change. And more unsettling still, as economist and writer Gary North suggests in a commentary at, "Retirement Living in Elkhart, Indiana," the dream will be gone.
In early February, President Obama was looking for a place to symbolize the recession. He wanted to rally support for his proposed $800 billion bailout of the economy, a bailout that he admitted would send the Federal government's annual deficit to $1.7 trillion in fiscal 2010.
He chose Elkhart, Indiana, which advertises itself as the recreation vehicle capital of America, and hence the world. Elkhart's economy has collapsed. There is 15% unemployment and no hope in sight.
For years, the RV industry grew. The scene in About Schmidt was representative. The retired middle manager bought an RV for his retirement. Then his wife died. He went out on the open road by himself. He went back to his home town. Nothing remained of the places he remembered.
This industry is today representative of the profound economic breakdown we are experiencing. This is not business as usual. The industry is close to collapse.
In 2005, the Indiana Business Magazineran a story: "On a roll? What's behind the dramatic growth of Indiana's RV industry? Baby Boomers buying vs. higher fuel costs." It reflected the final year of Greenspan's decade-long bubble economy. Like California housing, the RV industry seemed to levitate high above economic rationality.
It would seem like the past few years should have been tough on the recreation-vehicle business. The economy was in recession for a time and sluggish even longer, and gas prices have been moving ever-upward, which would seem like a poor climate for selling expensive discretionary items that don't exactly sip gas. Yet the RV industry – which is centered in Indiana – in recent years has enjoyed dramatic growth. And as sales have grown, Indiana's share of the business has increased as well.
These words now seem as realistic as a real estate salesman's promise to some young couple that paying ten times annual income for a house was a good bet. The home would appreciate.
The article reported that in 2004, RV manufacturers shipped 370,000 units. Of these, 236,000 were made in Indiana. The article quoted Dennis Harney, executive director of the Recreation Vehicle Indiana Council and the Indiana Manufactured Housing Association.
"The RV industry directly employs nearly 20,000 people and indirectly employs another 20,000," he says, adding that most of the jobs pay well. "The RV industry enjoys a lack of competition from foreign producers – very few RVs are imported from competing nations. Although we're a quiet industry and the business is distributed among a number of manufacturers, there are many states that would relish the opportunity to have an industry like this." Not these days.
He went on to say, "I think it's a critical industry for the state that's enjoying growth. I think the future is very, very bright for the industry."
Fast forward to November 2008. The RV Dealers Association sent out a press release in the form of a letter to President-elect Obama. It was a plea for a government bailout.
There are an estimated 12,332 RV-related businesses in the nation with combined revenues of $37.5 billion in 2006, including a combined payroll of nearly $5 billion for American workers in the manufacturing, retail and service sectors – employment which, as with boating, totals some 150,000. One out of every 12 American households owns an RV – a category that ranges from inexpensive pop-up tent campers to large, self-propelled motorhomes. Today, there are 8.5 million RVs in operation.
It noted that Elkhart, Indiana, had the highest unemployment rate in the nation. It still does.
Banks had ceased lending on RVs, the letter said. I wonder why. Here is a product whose largest market share is people age 55 and older. The recession is cutting into their income. The falling stock market is cutting into their retirement portfolios.
Consider the economics of an RV. Like any vehicle, RVs depreciate rapidly. They are consumer goods. They are not capital goods.
They cost a lot to operate. Gasoline is only part of it. There are maintenance expenses. Also, they suffer from competition from the used RV market.
No one needs an RV. Anyone can get into a car and drive to a vacation spot. He can pay retail for a motel, eat fast food, and fish for two weeks. Then he can go home. The cost will be far less than the depreciation of an RV plus 6 miles per gallon. The economics of the RV have little to do with efficiency. It has to do with lifestyle.
There lies the rub.
Over the last 18 months, Americans over age 55 have suffered a reversal in their capital that has not fully registered psychologically. They will not be able to afford a comfortable retirement.
This was true 18 months ago, just less obvious. Very few Americans enjoy a combination of private pensions, annuities, and Social Security payments sufficient to fund what Social Security says retirees need: at least 70% of their pre-retirement income in the last year of employment. They are oblivious to this assessment on the Social Security website.
Today, about half of all workers are covered under an employer-sponsored pension, and many people are not saving as much as they should. While Social Security replaces about 40 percent of the average worker's pre-retirement earnings, most financial advisors say that you will need 70 percent or more of pre-retirement earnings to live comfortably. Even with a pension, you will still need to save. If you will not have a private pension, you will need to save more – and start saving sooner.
Yet throughout Greenspan's bubble economy, the savings rate of American households fell, going negative in 2005. The boom fooled Americans who owned stocks that they were getting richer. They weren't. They were merely benefitting from the greater fool theory of investing. That theory has brought down the real estate bubble. There will be further declines. It has ended the stock market mania. And it has just about shut down Elkhart, Indiana.
Americans have not yet recognized what has been done to them by the Federal Reserve System and the highly leveraged banks and hedge funds that thought the good ship Effortless Wealth had come into port. The hot-shots did not understand Ludwig von Mises' theory of the business cycle as the product of central bank monetary inflation. They never saw it coming.
Now the investors who believe the same dream, but without multimillion dollar severance deals, have seen their dreams called into question.
They have not yet dumped their stocks. They have just stopped buying as many. The fall of 55% by the Dow and the S&P 500 was not accompanied by a huge sell-off. The decline has been one of dribbling away. The dreams of would-be retirees have not yet been smashed. They have merely dribbled away. The crash has not yet come. It will.
First, there is a dream: easy prosperity. This dream is funded by fiat money. Next, there is a boom: easy prosperity. This boom is funded by fiat money. Next, there is reality: the stabilization of fiat money. Next, there is recession: the end of the dream.
Then what?
In the conventional scenario, there is recovery. But recovery since Greenspan arrived as chairman in October 1987 has always been based in more fiat money. That was his solution to the 22% one-day fall in the stock market in 1987. That was his solution to Bush I's recession in 1991. That was his response to the recession of 2001 and 9-11. Again and again, fiat money solved the problem. It brought back the recovery.
It is not working this time. The federal funds rate is at 0%. The economy is still falling. The Federal deficit is headed toward $2 trillion a year. No recovery is visible.
When recovery comes, it will be accompanied by price inflation on a scale never seen in peacetime America. Those who rely on pension payments and annuities will see their income shrink. They will be the primary victims.
The target market of the RV industry will be the victims of the recovery's familiar solution: fiat money. They will remain the victims for the foreseeable future.
The people at CNBC do not see this yet. The high-paid hot shots on Wall Street who lost their jobs may suspect that the gravy train has gone off the rails, but what can they do about it? They are trained in high finance, and high finance is now an appendage of the Federal government. The era of salaries has replaced the era of stock options and bonuses. The Democrats have vowed that the old days will not return. I don't think the Republicans are likely to run on a platform to bring back the world that ended in 2008.
When they run on a platform to end Medicare, I will be impressed. In 2016 or 2017, and maybe earlier, Medicare goes into the red. At that point, political reality will meet actuarial reality. There will be an inter-generational pile-up. The geezers will lose. They won't have the votes in Congress.
People over 55 today will spend their golden years in the equivalent of Elkhart, Indiana.
Drive up Main Street in your town. All over America, Main Street – where people drive at 4 p.m. – is the same: Lowe's, Home Depot, Office Max, Office Depot, Wal-Mart, McDonald's, Burger King, Taco Bell, Chili's, and T.G.I. Friday. Wal-Mart is doing well. It is the place that sells what people really need, and it sells it cheap. McDonald's stock price has held up. Like Wal-Mart, it sells cheap.
Fast food saves time and is addictive: high fat. People want it, and it does not cost much. But yuppie restaurants that sell lifestyle are headed for trouble. People don't have to go to them. They offer atmosphere, but it's expensive. It's not like the neighborhood tavern, which rests on friendship. It's ersatz community. Television screens with no sound are all over the walls, often tuned to different sports events. Silent sports are ersatz sports.
If I were advising a fund manager on what to sell, it would be any company whose income relies on restaurants with silent TVs. There are no TVs at McDonald's and Taco Bell. Those places make it on volume. There is no community. They get you in and move you out. Only the playgrounds for children keep anyone there for long. Nobody takes his wife to a fast food restaurant for a romantic evening. He may take her so that she can get a break from the day's routine. That incentive will keep fast food restaurants solvent after the yuppie restaurants have closed.
Liquor sales keep yuppie restaurants going, but liquor by the drink is expensive. If someone wants to drink, he can do it at home cheaper.
The crunch will come. The yuppie restaurants have survived so far, but they will face the reality of discretionary income. It's shrinking, and it's beginning to go into savings. The more fearful Americans become, the higher the percentage of discretionary income they will save.
We have not yet seen real fear. We will. We have not yet seen Main Street in the condition that it has become in Elkhart, Indiana. We will.
President Obama told Elkhart that he had not forgotten the city. I suspect that by now, he has. The photo op is over. The bailout was passed. The economy is falling. The least of his concerns – and yours – is the fate of a city that bet its future on the RV industry.
In every recession, there are permanent victims. The RV industry is the poster child as this recession's permanent victim. The industry is finished. Its target market – retirees and people who dream of becoming retirees – is also a permanent victim. The dream of freedom, permanent income, no job, no kids at home, and the open road was nice while it lasted, but it's over for most people. As they die or get shipped off to retirement homes, their children will sell the old folks' RVs for pennies on the dollar. The supply of used RVs will be strong for the next decade.
Elkhart, Indiana is the symbol of the boom gone bust.
If life on the road has been your dream ever since Then Came Bronson, find a new dream. As with Bronson, the show has been canceled.