Chinese President Hu Jintao has come and gone. During that visit we saw no discussion concerning human rights, as demonstrations and riots continue in China, nor was there any discussion of trade and business practices. How can presidents not discuss economic and financial developments and policies when China is the largest world exporter? We are sure they were discussed, but behind closed doors. It was as if everything was scripted and the media colluded completely. It is important to remember China has a predatory communist government. Their economic and monetary policies are similar to the Keynesian philosophy practiced in the US, a corporatist fascist program. As a result of the use of what can be considered forced slave labor and currency manipulation they control a good part of world trade, particularly with the US. As a result China has a $2.85 trillion foreign exchange surplus and holds about $900 billion in US dollar reserves. In fact, as a result, China has some of the very same bubble problems that America has. China is booming and the rest of the world is not. That is due to investment deals with mainly US transnational conglomerates. Free trade and globalization fit these partners just fine, but none of this is supposedly discussed, nor is the loss of 8.5 million jobs over 11 years, as well as the loss of 42,400 businesses. Thus it will be safely tax-free in offshore tax-free locations. The unleveled playing field continues as China makes sure it currency is undervalued by 35%. For years that has kept US inflation down and has allowed China to purchase vast amounts of US dollar denominated bonds. Now instead of using those funds to buy those assets they are getting rid of those assets by spending them back into the world economy. In addition the Chinese demand control of every business deal, plus they demand access to all the technology involved, which these transnationals are happy to comply with. They also employ predatory pric ing in almost everything they sell. This erodes the industrial base of other countries such as the US and Europe. You have already seen the decimation of American industry and it is going to get considerably worse. As this proceeds China builds up its war machine, far beyond what is normally necessary. China is not using the buildup of its military development to be used peacefully. Americaâs elitists obviously either want a military confrontation eventually, or an excuse not to have war and have all nations joined together militarily under One World government. As this transpires the US government and the controlled compliant media keep the US public in the dark as to what is really going on.
China with $2.85 trillion in foreign exchange reserves has by far the largest such reserves in the world. We expect China will continue to use US dollar profits, as well as US Treasury holdings to buy a variety of things worldwide as well as influence, as we have just seen with their lending to sick European countries. Eventually they will work off the majority of US dollar investments. The reply will be, as pointed out just a week ago, that the US dollar isnât worth the paper it is written on. In time the Chinese will de-peg from the dollar and make their currency even cheaper. It has already stopped using the dollar in trade with Russia. Next it will be with many more nations forcing world trade to use the yuan and not the dollar. They believe that will eventually lead to the supremacy of the yuan, which will be accompanied by gold backing. Under those circumstances the dollar will in fact become a second rate currency and its eventual destruction will be guaranteed. T hat is why converting all dollar assets into gold and silver shares and coins is so important. What the communist nations could not do militarily they are now doing financially. The only answer to this policy is tariffs on goods and services, not only for China, but also for all nations, which have been doing the same thing to a lesser degree.
Official Chinese inflation is 5.1%; some economists believe it is more than 10%. Our reports have it over 30%. Just leave Guangdong and shop in Hong Kong and you will see the difference. We published a letter this past week written by a Chinese woman that had just returned form China. It explained the extremely high inflation and the inability of the average Chinese to feed themselves properly. Due to government spies everywhere the terrible situation is never discussed in public, only among family and behind closed doors. If you are heard discussing such real issues you are sent to a retaining camp to learn the error of your ways. That can last as long as 15 years. China is still a totalitarian state.
In an effort to suppress unemployment whole cities have been created with no one living in them. Although not official you are limited to one child in order to suppress population growth. These are the people American elitists have opened our society to via transnational conglomerates. This we are afraid has been deliberately done to pursue a path to World Government.
Over the past 2-1/2 years china used a page from Keynesian economics and poured $2.5 trillion into the domestic economy to avoid its collapse just as the US and so many other countries did. Thus, china is faced with the same monetary and financial problems that the US and so many others face. This means China will face the same economic collapse as other nations. Even the increasing of banking reserves and higher interest rates has been ineffectual. This should not go unnoticed at the Fed. The only eventual outcome can be collapse. The remedy of higher rates and bank reserves wonât work this time. Western nations are dependent on the largess of the Fed, perhaps in time China will as well. How long can the Chinese central bank and the Fed keep up the charade? We donât know and neither does anyone else. All we are sure of is eventual collapse of the entire world financial system. At that time the elitists expect to implement world government. We have news for them. There are too many people who know what they are up to and it is not going to work. Obama and Hu are front men who do exactly what they are told; everything is totally scripted.
The US and states within the US do not realize that the design is to get America dependent on other nations. That reduces the USâs ability to maneuver in relation to other nations. While America descends into austerity the Fed is not only propping up the US economy, but that of Europe as well. China is doing the same thing domestically. All such efforts are doomed to failure and the players know that. This is not stupidity and incompetence. This is the way that the game is to be played out. China knows they are an integral part of this policy.
Last week the Dow fell 1.4%, S&P 1.8%, as the Russell 2000 gained 0.3% and the Nasdaq 100 added 0.1%. Banks fell 2.2%; broker/dealers 1.4%, as cyclicals rose 0.2%. Transports fell 1%; consumers fell 1.8%; utilities 1.1%; high tech gained 0.6% and semis jumped 1.6%. Internets were unchanged and biotechs fell 1.3%. Gold bullion fell $7.00, the HUI gold index rose 1% and the USDX was little changed at 78.15.
Two â"year t-bonds fell 7 bps to 0.55%, the 10-year notes fell 8 bps to 3.35% and the 10-year German bunds fell 3 bps to 3.15%.
The Freddie Mac 30-year fixed rate mortgage rose 6 bps to 4.80%; the 15âs rose 4 bps to 4.09%; one-year ARMs rose 1 bps to 3.26% and the 30-year jumbo fell 9 bps to 5.41%.
Fed credit increased $3.1 billion to $2.419 trillion. Fed credit rose $185 billion from a year ago, or 8.3%. Fed foreign holdings of Treasury, Agency paper jumped $7.8 billion to $3.351 trillion. Custody holdings from foreign central banks rose $403 billion year-on-year, or 13.7%.
Now get this, M2 narrow money supply, catapulted $46.6 billion to a record $8.862 trillion. Over the past year narrow money grew 4.5%.
Total money market fund assets grew to $2.7 billion, which tells us that money is again moving out of the markets. Year-on-Year assets are only down $4 billion.
Total commercial paper outstanding jumped $71.1 billion to $988 billion, which tells us the Fed is again in that market reinforcing it.
Â Over the past 15 years Chinaâs success has put other nations into second position when it comes to economic and financial development, but that progress has been accompanied by many problems and the imposition of free trade and globalization. Following the format laid out by the US, China now faces a real estate bubble of major proportions. Chinaâs manufacturing infrastructure, high technology level and $2.85 trillion in foreign exchange is formidable, as is their slave labor component. We should remark that wages have been rising, unemployment is still very high and the trillion dollars in US dollar foreign exchange could become a burden as US problems manifest themselves and the dollar falls lower against all benchmarks. In time we will find out why the US and UK and Europe deliberately allowed this to happen. We still do not know why this challenge was put into place.
There is no doubt in our minds that China is selling dollar dominated assets and buying gold. They correctly believe that their growing gold position will give them an upper hand in the next phase of monetary problems. The western central bank policy of suppression of gold prices only allows China to build up its gold position very cheaply. From our viewpoint the suppression program is eventually doomed to failure.
There is nothing complex about what the Chinese are doing in Europe. They are buying bonds of weaker nations at a discount and selling US Treasuries to do so. This way they reduce their dollar position, get a high yield and gain major influence in Europe. The Germans are happy about the Chinese move because it relieves them of some of the burden of funding wayward euro zone members. These efforts we view as temporary, because none of the underlying problems have been solved. The fact that China is supporting the euro is external and does little to solve its systemic problems. Chinaâs moves are exploitation. That has been their operating procedure in the past, so we expect no change in their policies. Germany has loosened up on technology transfers hoping China will step up and supply a $300 billion bailout at least for this year. It has also been rumored the Chinese intend to exchange those toxic bonds for gold. As far as the sovereign borrowers are concerned they are tr ying to buy time, so theyâll agree to just about anything.
There is no question by any measure that the US stock market is over priced. Bob Diamond at Barclays Bank says the Fed has already spent $1.7 trillion buying Treasuries. That means banks and brokerage houses have a massive liquidity backup along with zero interest rates. This means we could easily see a normal correction to 10,000 on the Dow and we could see inflation building throughout the year.
Global debt is expanding exponentially threatening the sovereignty of many countries. Along with this we now have problems in Tunisia and Egypt, which could spread throughout the region.
There has been a relentless turndown in the Baltic Dry Index that has to be telling us things could get rocky again in the future.
Considering the above and nine weeks of gains in a row, we should soon see a correction in this bear market rally. The transports have never confirmed the highs in the industrials and in fact they have fallen.
This year will be full of turmoil, so get ready for it.
Â âCarlyle Group and KKR & Co. are getting leveraged loans for buyouts at terms similar to those before the credit crisis as investors plow record amounts into funds that buy the debt, driving prices to a three-year high.Â The private-equity firms are obtaining so-called covenant lite loans, which lack typical protections for creditors, to back their leveraged buyoutsâ¦â
The amount of money raised through initial public offerings, or IPOs, of stock around the world in January is on track to set a record this year, according toâ¦ Dealogicâ¦ Proceeds from 81 IPOs so far this month stand at $10 billion, the second-largest amount on record.â
âFundraising by US states, cities, hospitals and other public bodies has plunged as fears of defaults and bankruptcies have intensified this month.Â âIt is likely to be the worst month in about a decade,â said Matt Fabian, managing director of Municipal Market Advisers, citing expectations for less than $11bn of issuance. That would be a monthly level not seen since 2000â¦ In 2010, municipal issuers sold an average of $36bn a month.Â âThe market has been in disarray and issuers have avoided it,â said George Friedlander, chief municipal strategist, at Citigroup.âÂ
âInvestors this month are trading the lowest volume of municipal bonds in more than eight years as new issues dwindle with the end of Build America Bonds and demand cools on speculation about state and local defaults.Â About $4 billion a day has been traded this month, the least since November 2002â¦ States and local governments plan to sell about $15.6 billion in fixed-rate debt this monthâ¦ A year ago, about $31.9 billion was sold in the month.â
âThe Texas Senate proposed a $79.7 billion budget that cuts education and health spending and doesnât raise taxes, mirroring a plan issued by the state House of Representatives.Â The draft two-year budget would slash general-revenue spending on schools by 7.6%, to $45.6 billion, from the current biennium. It would slash health and human services costs by 12%.
âThe Oklahoma budget-stabilization fund has been so depleted that it's no longer enough to cover the cost of a cup of coffee at most restaurants, let alone help balance the state budget.Â The rainy-day fund, which topped out at the legal limit of $596.6 million two years ago, now consists of $2.03. As in two dollars, three cents. No billion. No million. No pocket lint.â
âHamtramck, a city of 20,000 largely ringed by Detroit that has asked the state to let it file for bankruptcy protection, doesnât have enough spare cash to repave a single street, according to Mayor Karen Majewski.Â Money for payrolls will run out in March in the Michigan municipality where General Motors Co. builds Chevroletâs Voltâ¦ âThere is no money for fixing anything,â Majewski said.Â âFinding money to fix roads, itâs just an impossibility.ââ
âPayrolls decreased in 35 U.S. states while the unemployment rate rose in 20, showing the labor market recovery is slow to gather momentum.Â New York led the nation with 22,800 job cuts last month, followed by Minnesota with 22,400 firings, and Florida with 17,900â¦â
âDebt investors are wagering that the worst is over for commercial real estate, driving prices on mortgage bonds to the highest in more than two years.Â âInvestors have gotten more comfortable and have started putting money back into CMBS,â Chris Callahan, head of commercial-mortgage backed bond trading at Credit Suisseâ¦ âIt has gone from being the red-headed stepchild to being a viable asset class again.ââ Â
âThe nationâs budget deficit will widen to nearly $1.5 trillion this year, and the country faces âdaunting economic and budgetary challenges,â the nonpartisan Congressional Budget Office saidâ¦ The budget office noted that âthe deficits of $1.4 trillion in 2009 and $1.3 trillion in 2010 are, when measured as a share of gross domestic product, the largest since 1945 - representing 10% and 8.9% of the nation's output.âÂ â¦Senator Kent Conrad, Democrat of North Dakota and chairman of the Budget Committee, described the new deficit figures as sobering.Â âCBO's report should be another wake-up call to the nation,â Mr. Conrad saidâ¦ âIn the near-term, due to passage of the tax extension package and the slow pace of the economic recovery, CBO is now expecting to see deficits of more than $1 trillion a year continuing through at least 2012. And as disturbing as those near-term deficits are, the long-term outlook is even worse. It is the deteriorating long-te rm outlook that is the biggest threat to the country's economic security.ââ
âPresident Barack Obama faces a new challenge from deficit-plagued states over Medicaid costs just as he squares off with Republicans trying to repeal his 2010 health-care law, which extends coverage to 32 million Americans.Â Arizona Governor Jan Brewer asked for U.S. permission on Jan. 25 to reduce Medicaid eligibility and drop coverage for 280,000 people. That would save $541.5 million for the state, which projects a $1.2 billion budget deficit for the coming fiscal year.Â U.S. states must confront potential budget gaps of more than $140 billion for fiscal 2012 because tax collections declined by the most on record during the recessionâ¦ That may prompt more to seek release from some Medicaid obligations, their biggest expense, as federal aid that has helped them cover the costs for the last three years ends.Â âThere are other states contemplatingâ requests for waivers, said Dan Mendelsonâ¦ former associate director for health in the Office of Management and B udget under President Bill Clinton. âLetters are coming from some big states reaching the point of no return.â Mendelson declined to name them, saying âborder statesâ such as Texas were in âfiscally impossible situations.ââ
âThe federal Highway Trust Fund, which pays for U.S. road and mass transit construction, faces insolvency sometime next year as revenue from fuel taxes declines for the sixth yearâ¦ The Highway Trust Fund will run a deficit of $7 billion this year, compared with a surplus of $11 billion in 2010â¦ The highway and mass transit portions of the fund will probably be unable to meet their obligations in 2012 and 2013â¦âÂ
âCaliforniaâs capital city of Sacramento, facing a $35 million deficit, will bill out-of-town drivers whose traffic accidents require rescue crews, the latest U.S. municipality turning to a âcrash taxâ for revenue.Â The fees, ranging from $435 to $2,275 if a helicopter is needed, may generate as much as $500,000 a year, according to city data.â
The FBI has served more than 40 search warrants throughout the US as part of an investigation into computer attacks on websites of businesses that stopped providing services to WikiLeaks last month.
The FBI statement announcing the search warrants was the first indication that the US intends to prosecute the so-called hacktivists for their actions in support of WikiLeaks. The search warrants were executed on the same day authorities in Britain announced that they had arrested five people over the attacks, which temporarily crippled the websites of Amazon.com, PayPal, MasterCard, Visa, the Swiss bank PostFinance and others. Law enforcement agencies in France, Germany and the Netherlands have also sought to find those involved with the attacks.
FBI officials were unavailable for comment, and the statement did not say who was served or where the searches were conducted. The statement said that attacks, known as distributed denial of service attacks and which use easily available software to shut down a computer network by flooding it with millions of requests for information, violate US law and are punishable by a prison sentence of 10 years.
The statement noted that a group known as Anonymous had claimed credit for the attacks. Anonymous is also believed responsible in recent days for attacks on government websites in Tunisia and for providing intnernet access to Egyptians through dialup points.
British news reports said three of the five arrested were teenagers, aged 15, 16 and 19. Dutch police last month arrested two teenagers suspected of involvement in the online campaign. The attacks were organised through social networking sites such as Twitter in the days after WikiLeaks began publishing US State Department cables that had allegedly been downloaded by a US Army private serving in Iraq. Their first target was Amazon.com, which, at the behest of a US senator, Joe Lieberman, had stopped hosting the WikiLeaks website.
They spread to PayPal, MasterCard and Visa after those businesses declined to process credit-card payments destined to WikiLeaks.
PostFinance, a bank operated by Switzerland's postal service, also closed an account that was registered to Julian Assange, the founder of WikiLeaks. The account number had been published on the WikiLeaks website with a solicitation for donations.
The attacks did no long-term damage and in most cases only lasted a few hours. But legitimate would-be users were unable to contact the sites while the attacks were under way. The FBI said it was working with European governments and the National Cyber-Forensics and Training Alliance to identify the source of the attacks, which the FBI attributed to a type of software it identified as ''Low Orbit Ion Cannon'' tools. It said major anti-virus programs had been updated to block such software.
Â The FBI disclosed to a presidential board that it was involved in nearly 800 violations of laws, regulations or policies governing national-security investigations from 2001 to 2008, but the government won't provide details or say whether anyone was disciplined, according to a report by a privacy-watchdog group.
The San Francisco-based Electronic Frontier Foundation sued under the Freedom of Information Act to obtain about 2,500 documents the FBI submitted to the President's Intelligence Oversight Board.
The board was created in 1976 to monitor U.S. intelligence gathering.
Intelligence agencies are required to submit reports to the board about suspected violations of civil-rights-related laws or presidential orders.
The nonprofit foundation said it obtained documents from a variety of intelligence agencies, but most of the records were so heavily censored they couldn't be properly evaluated. The FBI provided the most substantive disclosures, although the documents were redacted to withhold names, exact dates and other identifying details, and they don't say what action was taken to remedy or punish the violations.
Nevertheless, the documents "constitute the most complete picture of post- 9/11 FBI intelligence abuses available to the public," says the report, which is to be released Monday but was obtained in advance by the Tribune Washington Bureau.
"The documents suggest," the report says, "that FBI intelligence investigations have compromised the civil liberties of American citizens far more frequently, and to a greater extent, than was previously assumed."
The new disclosures come as the Patriot Act is up for renewal in Congress before it expires in February.
Â At 10:30GMT on Thursday night, there was a massive interruption in Egyptâs internet service an internet blackout aimed to staunch the flow of Egyptâs popular democratic uprising.
âThe shut down involved the withdrawal of more than 3,500 Border Gateway ProtocolÂ (BGP) routes by Egyptian ISPs, according to Renesys, a networking firm. Only one ISP out of 10, Noor Data Networks, appeared largely unaffected. It connects to the outside world via an undersea cable operated by Telecom Italia.â
It should come as no surprise that a dictator like Hosni Mubarack and his military-backed regime would attempt to sever internet communication in Egypt, as protestors used social media like Twitter and Facebook to communicate and organize, just as occurred in June of 2009.
Twitter was also used in the G20 protests in Pittsburgh, where protestors actually had to sue the city in order to protest, after several protest permits were denied.
And the U.S. response to Americans using Twitter in a time of protests is little known but eye-opening. Â Activist Elliot Madison used Twitter to help crowds of protesters disperse from advancing police. Â The government didnât take kindly to Madison using the very same tactics they had encouraged Iranians to use in 2009, and so they raided Madisonâs hotel room. Â A week later the FBI raided Madisonâs home âTortuga Houseâ in Queens, NY, on a search warrant related to Madisonâs Pittsburgh tweets.
The message was profound: Twitter activism used abroad in unfriendly regimes like Iran is okay, but used here at home and it becomes a felony.
Now that Egypt has actually proceeded beyond denying service on Facebook and Twitter to a near wholesale internet blackout, we Americans should remember that Joe Liebermanâs parting gift, the âProtecting Cyberspace as a National Assetâ bill, would give the president the power to declare certain systems national assets in a time of a national emergency.
And while we have been instructed that the bill will in no way limit our free speech, the definition of a national emergency can be as flexible as a frightened president or Congress wants it to be, or as malleable as the Justice Department can make it.
What is to stop a U.S. president from using the âinternet kill switchâ to create a blackout similar to what weâve seen in Egypt?
The FBI and police have already proven that they donât like the use of Twitter in demonstrations, as seen in the G20 Pittsburgh protests. Â And even without the legal justification for such a move, a U.S. president could put pressure on internet service providers (ISPâs) to cancel service in a popular U.S. uprising like Egyptâs.
Rememberâ¦ Senator Lieberman used the Senate Homeland Security Committee as his personal fiefdom to intimidate Amazon, Mastercard and VISA to deny service to WikiLeaks. The internet blackout in Egypt should be harrowing to any person who values their freedom, because it proved to all governments that they can and will shut down the internet when it is in their vested interest.
Power only wishes to preserve itself and will go to any lengths to do so.
Â "Home values are falling at an accelerating rate in many cities across the U.S" As I parse through the Q4 GDP number released on Friday, the more I understand just how bogus it is. A large part of the input data is based on "estimates" and "assumptions." we'll see some downward revisions going forward. But one of the biggest components of the economy, especially over the last 10 years, has been homebuilding, home selling and any activity related to those two activities. As readers know, I expect 2011 to be a bad year for home prices. I think a lot of people will be in for a very rude surprise in this regard. So I wanted to highlight this online Wall Street Journal article from today. Here is the LINK. This article reaffirms a previous post of mine this month that foreclosures, inventory and lack of credit-worthy buyers will force housing prices much lower for the foreseeable future:
Market conditions could get worse in the months ahead. Millions of homeowners are in some stage of foreclosure or are seriously delinquent on their mortgages, and millions more owe more than their homes are worth. Real-estate agents are bracing for an uptick in distressed properties hitting the market, including foreclosures being sold by banks and homes sold by owners via a short sale, in which banks agree to a sale for less than the amount owed.
The dynamic described in that quote is going to accelerate this year, as people continue to lose jobs, unemployment benefits expire and banks are forced to convert serious delinquencies into foreclosures. How can the Government prevent this? By using Fannie Mae and Freddie Mac to monetize the delinquency and foreclosure problem. This could happen but it is more likely that those two GSE's will be used to monetize the debt after the properties are transferred to the banks. This of course will entail QE3, 4, etc. and, of course, much higher gold/silver prices. The other issue which is harder to prove is the "shadow" seller. The seller who wants to sell but decides to wait "for the market to come back" or can't sell for a price that takes out the mortgage on the house. But this article reaffirms my point:
Some sellers have opted to pull their homes from the market rather than lower their prices, either because they believe values will improve or because cutting the price would mean selling for less than the amount owed to the bank.
Anectdotally around the Denver area, I am starting to see more "for sale" signs pop up again (some of it early seasonal), more "price reduced" signs and a lot more "for rent" signs. The latter being people who want to sell but can't or want "to wait for the market to come back." The housing problem is causing a lot of pain in this country. Unfortunately, I believe we are entering into an "acceleration" phase, as a larger percentage of homes decline in value to a level below the outstanding debt on the property. I heard an ad from a large Denver mortgage broker last week advertising a 105% of value Fannie Mae refinancing product designed to allow homeowners to consolidate a 1st and 2nd mortgage into one. This is just one more indication of the Government "kicking the can down the road," as it means that the policy-makers are willing to use Taxpayer money to try and fix a problem that can only be fixed by the laws of supply and demand.Powered By iWebRSS.com