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Is the Fed Signaling More Trouble Ahead?

By Greg Hunter’s USAWatchdog.com

With all the euphoria about the stock market these days, it would seem that the worst of the economic meltdown is behind us.  After all, the S & P 500 is up an astounding 64% since March.  I have heard plenty of market pundits say “the worst is behind us.”   Then again, I saw this story on Bloomberg over the weekend.  It said, “Federal Reserve Bank of New York President William Dudley said the central  bank could curtail the risk of future liquidity crises by providing a “backstop” to solvent firms with sufficient collateral.  “The central bank could commit to being the lender of last resort” to such firms, Dudley said in a speech yesterday in Princeton, New Jersey. This would reduce “the risk of panics sparked by uncertainty among lenders about what other creditors think…” (Click here for the complete story)

Why would the New York Fed President even bring this up if it were not a potential problem?  My bet is  new “liquidity crises” is something the Fed sees in the not too distant future.   It seems the Fed wants the financial community to know it is on top of things, and  it will do whatever it takes to stop another meltdown.   I asked economist John Williams of Shadow Government Statistics (shadowstats.com) about the Bloomberg story above.  He told me, “It sounds to me like they are front-running a problem.”

Market and gold expert Jim Sinclair had a more critical view  on his website jsmineset.com about what Dudley said.   Sinclair wrote, “A “pre-emptive” backstop to “solvent firms” with “sufficient collateral” – that sounds like an oxymoron to me.  If they really want to work to prevent future liquidity crises they should do exactly the opposite. Stop providing implicit taxpayer guarantees to preferential industries and increase system transparency.”   

We have had a good quarter boosted by government spending, but one good quarter does not mean we have a new bull market.  NYU Economics Professor Nouriel Roubini feels the economy is going to get a lot worse before it gets better.  In a recent article Roubini said, “Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening.”  Roubini also said, “There’s really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, help fiscally strapped state and local governments and provide a temporary tax credit to the private sector to hire more workers.”  (For the complete article click here)

John Williams, on the other hand, thinks there is no “…quick fix” and that America needs to “rebuild its industrial base.”  However, Williams agrees with Professor Roubini and also thinks the worst is ahead of us.  So I asked Williams about the possibility of systemic failure?  He said, “My betting remains that the Fed and the Treasury will do everything in their power to prevent systemic failure, as they have been doing for the last two years…. The efforts to prevent systemic collapse, however, have a cost: inflation.  Given the government’s long-range fiscal bankruptcy, current efforts by the Feb at debasing the dollar have created high risk of eventual hyperinflation beginning to surface in the year ahead.”  

In my final question to John Williams I asked how people should protect their assets?  Williams said, “Holding some physical gold remains the best long term hedge against all that can go wrong here.  It maintains purchasing power in a liquid and portable form.  Long-term holding is emphasized, since any of these markets can go through wild, short-term gyrations, particularly with possible government intervention.  Gold was a buy at $200, $500, $1,000 and will be at $5,000 etc. on a long term basis.  Williams goes on to say, “If there is risk of systemic failure prior to a hyperinflation, holding some cash is worthwhile, as is stocking up on necessary supplies same as one would for a severe natural disaster.”    

Williams, Sinclair and Roubini have been most accurate in their predictions and assessments of the economy.  That is why I included them in this post.  In my humble opinion if everything was turning positive, the Fed would certainly say it.  Instead, William Dudley is talking about providing a “backstop” to solvent firms.  That sure sounds to me like trouble is coming soon.  

 

 

Pay No Attention To That Man Behind The Curtain

Wizard of OzBy Gene Tunney

Guest Writer for Greg Hunter’s USAWatchdog.com  

“Pay no attention to that man behind the curtain” is one of my favorite literary quotes. Today I have a vision of Obama and Congress, in place of the Wizard of Oz, telling the American people to please ignore the economy, unemployment and forget about what the Federal Reserve is doing in secret.

The “Wizard(s)” tell us we need to focus on health care. The government will take care of the people of America as we are too stupid to know what is good for us. After all, our politicians would NEVER put their petty self-interests ahead of the people.  When they do, it’s our fault!   We fail to vote the corrupt bastards out even in the face of overwhelming evidence. We fail to vote on the issues that need to be fixed now such as the economy, unemployment, Social Security and Medicare.  Global Warming is not an immediate issue.  Let’s concentrate on something that will impact all Americans in the next ten years instead of something that MAY happen in one hundred years.

If we ignore the economy and the extreme deficit spending, we are ignoring “that man behind the curtain.”   While ignoring these issues is easy, they increase in severity. If we keep our proverbial heads in the sand for much longer, we risk oblivion and we will deserve what we get. The American public holds as much of blame as the politicians. The politicians that want to do the right thing and propose legislation to fix the economy, Social Security or Medicare programs are crucified, while the politicians pushing the USA toward a “financial Armageddon” are rewarded with re-election.  Does anyone think that we elect and are governed by the best and the brightest? It is sad that most Americans are willing to trade a little comfort now at the expense of our children’s and their children’s future.

In my youth, I envisioned most of the American people as sheep being lead to slaughter by evil politicians. Imagine my surprise upon the epiphany that most of us are lemmings.  We eagerly follow our leaders off the cliff at a dead run and, when we get close enough to see our peril, we cannot stop because of selfish momentum. The entire country sees the precipice yet, almost unanimously, we continue our run toward it.

Our currency and our government Treasury bonds might someday end up worthless.  I hear you.  “What do you mean the U.S. dollar and U.S. government bonds might be worthless?  How can that be?  Everybody knows that U.S. Treasuries are a safe investment.” The answer is simple. We owe more now than we can ever repay, yet we continue to print and spend money.  Total obligations for the U.S. according to USA Today are “a record 63.8 trillion dollars.”  If the U.S. was audited like a public company, we would have been forced into bankruptcy by our creditors’ years ago.

Even using the pie in the sky revenue projections of the Obama administration we show a significant shortfall. That’s before you factor in another TRILLION or TWO for the proposed healthcare legislation.

We need decisive action now on the economy, spending, Social Security, and Medicare. We DO NOT NEED universal healthcare, the carbon tax and any increase in deficit spending. We need to elect Statesmen, not politicians.  And most of all, we need a public that cares about the future of the country and its children instead of the newest trinket or bobble that the current politicians toss them. We should have acted twenty years ago. We are so close to the edge that I can see fellow lemmings topple over the cliff.  I know if you look closely, you can see them falling too.

I am angling toward the edge of the herd, taking steps to protect my assets and the future of my wife and children.  Please turn away from the precipice and run toward a solvent nation, responsible government and personal freedom. Fellow lemmings, remember that when you run off that cliff, you carry your children and their future with you. Act now or continue to ignore “that man behind the curtain!”

Gold Hit Another All Time High! What It Means For You

GoldBy Greg Hunter’s USAWatchdog.com    

Gold hit another all time high this week.  I do not pretend to be a gold expert, but I do know a good story when I see one.  The yellow metal hitting one all time high after another is not just a fluke that makes a few gold bugs happy.    Gold is rising as the dollar is falling.  According to expert money manager Monty Guild, dollar weakness is part of the Obama administration’s plan.  On Tuesday, Guild wrote, Does the Obama Administration want the U.S. dollar to decline?  We believe it does.  On November 5th, the U.S. Federal Reserve announced that they intend to keep “interest rates exceptionally low” for an “extended period of time.”  Given that the U.S. Dollar is already under pressure due to low interest rates, the Fed’s announcement is the equivalent of saying: “go ahead and short the dollar”.  In our opinion, it is clear that this announcement ushers in a period of extreme volatility and a continued downward bias for the U.S. Dollar….”  For Monty Guild’s complete comentary (click here)

Guild went on to say, “… It does not take a rocket scientist to understand that his goals include more unionization and more exports.  And because U.S. union workers are in general much more generously compensated than non-union workers, we believe that the only way that the U.S. can achieve higher exports is to devalue the dollar.  We therefore believe that it is a goal of the Obama administration to see the dollar decline.”   

Low interest rates are not the only drag on the buck.  Money printing in the form of “quantitative easing” by the Fed is another big dollar downer.  The Fed has been printing money to buy Treasuries to suppress interest rates.  The Fed is also buying trillions of dollars in toxic assets to keep the banks from collapsing.  The Fed will keep buying this toxic stuff because hundreds of trillions of dollars of this financial poison is still floating around the globe and nobody else wants it.

We are paying people to buy houses because the residential real estate market is anemic.  What happens when the tax credits stop?  According to the FDIC, commercial real estate bankruptcies will cause even more banks to fail.  Do you think we will bailout some more banks or let them fail?   Speaking of failure, bond insurer AMBAC announced this week that it may have to file for bankruptcy protection.  Does that mean the biggest bond insurer, MBIA will also have to file?  Both companies have been in financial hot water because of bad investments in the real estate meltdown   One thing is for sure, if either of the companies go under you can bet there will be more government bailouts and none of this is dollar positive.

Take a look at state budgets around the country and you will see a sea of red ink.  According to the Center on Budget and Policy Priorities released earlier this year, 46 states could find themselves in dire budget trouble by the end of 2010.  Also, according to the latest Pew Center report released earlier this week 10 states face Fiscal Peril.”  New Jersey, Oregon, Rhode Island, Wisconsin, Arizona, Florida, Illinois, Michigan, Nevada, and California are in deep financial trouble according to the Pew report.  California alone is facing as much as a 14.4 billion dollar deficit.  Nevada is facing a 3 billion dollar shortfall on a 6 billion dollar budget!  These 10 states make up a third of the U.S. GDP.  Do you think there might be some sort of bailout for these states before the 2010 midterm elections?

Now, with the new 10.2% unemployment number (released last week) there is talk of even more stimulus to create jobs.  That is on top of the biggest stimulus package in U.S. history.   787 billion dollars was appropriated by Congress earlier this year and, with growing unemployment, chances are good we will spend even more.  (The true unemployment number is more than 22% according to Shadow Government Statistics.)

All this liquidity has been positive for the stock market.  The Dow and NASDAQ have been in a bear market rally since March because all that printed money had to go somewhere.  Also, plenty of stocks have done better because companies cut costs and laid people off.  That is not the sign of a growing economy and a new bull market in stocks.

Nothing goes straight up or straight down as they say.  You can expect a dollar rally as investor Jim Rogers predicts.  You can also expect some profit taking and corrections in the gold market.  But don’t expect this stock market rally to last.  Interest rates will start climbing when we try to sell all of this debt we are creating for bailouts and stimulus.  Bailouts and stimulus are definitely dollar negative and that seems to be the overarching trend.

Economist John Williams of Shadow Government Statistics told me gold at $1,100 an ounce is a “bargain.”  In addition, he said, “gold at $5,000 bucks will also be a bargain”.  That may seem farfetched but not if you factor inflation from 1980 until now.  The only catch is you have to compute inflation the way the government did it nearly 30 years ago.  If you did, the $850 and ounce peak in 1980, according to Williams, would equal more than $7,000 bucks today. If you compute the inflation rate the way the government does it today, you would have a gold price at near $2,400 an ounce.  Either way, there is still a long way for the price of gold to go up.

All the spending along with past and future bailouts will put more downward pressure on every dollar you save or spend.  That will mean big inflation and will make for tough choices for most of us as we get squeezed by higher prices.  This is not something that is far in the future.  Inflation is coming soon and the rising gold price is the proof!

 

 

 

Whatever Happened to The “Audit the Fed” Bill?

By Greg Hunter’s USAWatchdog.com  

Whatever happened to the “Audit the Fed” Bill?  (HR 1207)   You know, where “We the people” find out what the Fed did with trillions of dollars.  I for one would just like to know why the Fed gave a half trillion bucks to foreign  banks?  That’s a fact!   Some in Congress are trying to gut the legislation so we find out nothing.  What a surprise.  The Federal Reserve is like a vampire; it is sucking the country dry and it cannot live in the light of day.  Below is a great discussion on the stalled bill that aired late last week .  The clip is from MSNBC.  Enjoy… if it doesn’t make you sick.

Prediction Payoff and More Real Stats

By Greg Hunter’s USAWatchdog.com  

Last week, John Williams of Shadow Government Statistics predicted on USAWatchdog that the unemployment number would be worse than expected.  He said in an interview, “The risk is on the upside because the economy is weaker than consensus.”    Williams went on to tell me that, “Unemployment has a fair shot at hitting 10%.” On the phone interview he offhandedly said,”It might go as high as 10.2 percent.”   I did not print that number in the story because I didn’t want to seem alarmist.  My bad!!    Williams was right!  It came in at 10.2 percent on Friday!!  Most other economists expected it to come in at 9.9 percent.  Keep in mind that is according to the “official”  government numbers.   Williams also said there would be a new push for more stimulus in Congress.  Williams has a habit of making big predictions that come true.  For more on last weeks USAWatchdog post, please click here,”Unemployment And A New Stimulus Bill.”

Check out what Williams says is the real unemployment rate!  22.1 percent!  That’s what the unemployment rate would be if you calculated it the way the Bureau of Labor Statistics did before 1994.  After 1994, BLS changed the way it did unemployment to make it look less than what it really is.   Below are bullet points from the most recent report on shadowstats.com.

Shadow Government Statistics

- Annual Payroll Loss Rivals  (Greg’s Take:  We’re still losing jobs big time)

-End of World War II Production Shutdown (Greg’s Take:  Manufacturing is drying up)

- Unemployment Jumps to 10.2% (22.1% SGS) (Greg’s Take:  Simple math, more than 1 in 5 are out of work)

- Systemic Liquidity Problems Still Intensifying (Greg’s Take:  The worst of the economic meltdown is still ahead of us)

- Fed Continues to Explode Monetary Base (Greg’s Take:  We’re printing money like never before)

Shadow Government Statistics is a fee based site…for more click (here)

We Rescued The Top And Told The Bottom To Kiss Off!

By Greg Hunter’s USAWatchdog.com  

The following video was on the Friday MSNBC  “Morning Joe” program.  It features the Chair of the Congressional Oversight Panel, Elizabeth Warren.  This group is supposed to monitor the bank bailout.  Warren is a Harvard Law professor that specializes in bankruptcy and contract law.  Something that came out in the interview: U.S. taxpayers are on the hook for more than 4 trillion in guarantees for financial assets!  This little fact is just glossed over in the interview!!  I cannot believe how candid and critical Warren was on the bailout of the big banks.    The country should have never been put in this “give us money or we will have systemic failure” situation in the first place.    The heads of the big banks made stupid greedy decisions that would have caused them all to go bankrupt if it were not for the government bailouts!   Keep in mind, not a one of these banking chiefs got fired.  Watch the video below for a very good and candid discussion.

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The Government Approved Carry Trade and Free Money

By Greg Hunter’s USAWatchdog.com  

Mixed in with all the happy talk about better than expected jobless claims and high productivity numbers was this story.  (CNNMoney.com) – “The Federal Reserve kept its key interest rate near zero once again Wednesday.”   I think this was the biggest story of the week and here’s why.  The Fed gave a signal to Wall Street that free money was going to be available for many months to come.  In a statement, the Fed said the current economic conditions are “… likely to warrant exceptionally low levels of the federal funds rate for an extended period.”  To any Wall Street Banker participating in the “new dollar carry trade” it was an “all clear” signal.

(The simple definition of a carry trade is to borrow money at a low rate ( in this case near zero percent for dollars) and invest it elsewhere at a higher rate of return.  In order for this to be profitable, rates for the borrowed money have to stay stable and low.)

The Fed might as well have said, “Get your free money here and invest it anyway you like for a guaranteed return.”  The Fed’s action is, at the very least, a tacit if not an outright approval of this kind of dollar damaging speculation.  This weakens the currency and can cause prices to rise.    By the Fed saying the phrase “extended period,” as it has said in the past, it is telling speculators that making this trade is going to be a sure thing for a long time.  The dollar carry trade will likely mean billions of dollars of profits to Wall Street banks, which are now acting more like hedge funds than lending institutions.  Welcome back to the casino mentality.

Nouriel Roubini, NYU Economics Professor, says this is the “mother of all carry trades.”  The professor also says, “… But one day this bubble will burst, leading to the biggest co-ordinated asset bust ever…”  You may check out what Dr. Roubini had to say about this recently on CNBC in the video below.  Please keep in mind he gave fair warning about the current financial crisis long before it happened.

We live in a world where reckless speculators are encouraged and rewarded.  It is also a place where savers are disparaged and punished.  Savings is the bedrock of capital formation which is a key component of capitalism.  Look at Warren Buffet.  He just acquired a railroad for more than 30 billion dollars.  He didn’t do that with a good credit rating.  Buffet bought it with cold hard cash!   But who needs that when you have a printing press and zero percent interest rates that are abused by the privileged few.

 

Unemployment And A New Stimulus Bill

By Greg Hunter’s USAWatchdog.com  

The latest unemployment number will be released by the Bureau of Labor Statistics on Friday.  The consensus is it will be slightly higher than last month.   I interviewed John Williams, an economist at shadowstats.com.  He predicts, “The risk is on the upside because the economy is weaker than consensus.”    Williams went on to tell me that, “Unemployment has a fair shot at hitting 10%.”   Keep in mind that is according to the “official”  government numbers.  Williams contends if you caculate the unemployment number the way BLS did prior to 1994, then the real unemployment rate will be north of “21.4%.”

When the 10%  government number is hit, (that could be Friday) then Williams calls that an “odometer event.”  Meaning, folks will take notice, like when your car odometer rolls over from 99,999 to 100,000 miles.

Williams thinks the Democrats will then see the economy slipping further and says, “they will feel they have to act now!”  Everyone in Washington knows that a stimulus plan needs around 9 months to take effect.  If the Dems do not act soon, then the 2010 election will not be good for the party in power.  So, according to Williams, look for a higher than expected unemployment number and then a push for a new stimulus plan.

What will be the result of even more “stimulus?”  According to Williams, there will be more dollar weakness and higher prices.  A year an a half ago, while I was at CNN, I interviewed Williams.  Back in March of 2008, Williams predicted there would be an “inflationary depression.”  Check it out in the video below.

Williams told me yesterday that we are still heading for an “inflationary depression.”  He also said, “We still have the worst of the systemic and liquidity crisis and the worst of the economy ahead of us.”  Meaning, we are nowhere near a bottom.  Williams thinks gold at $1,100 an ounce is a “bargain.”

John Williams runs a subscription based web site called Shadow Government Statistics or shadowstats.com.  It is a site that is well worth the money.  Williams is a top notch economist that works for hedge funds and fortune 500 companies.  He is an expert in what I call the “real numbers.”  I do not get paid in any way for telling you about Williams or his site.

What the Big Headline Should be Today

Christie

By Greg Hunter’s USAWatchdog.com  

The headline today will probably be something like “Big Republican Wins on Election Day!”   Bob McDonnell won the Virginia Governor’s job and Chris Christie (left) unseated Democrat Jon Corzine for Governor in New Jersey.   I am sure there are going to be many stories about the revived party of Lincoln.  Some will proclaim the health care plan is dead or the Democrats will lose control of at least the House or the Senate in 2010.  Fact of the matter is, it’s not going to make much difference whether Democrats or Republicans are in power. The economy is in deep trouble because America is drowning in debt.  Many experts say the economy and the dollar are doomed to fall further in the future.

Today the Price of gold hit a new all time high!  It closed at $1,084.90!  What the headline should be is “Gold Flashing Warning Signal At New All-Time High.”  What caused the $30 run up in a single day?  India bought 200 metric tons of the yellow metal from the International Monetary Fund.   India buying gold is dollar negative and is just a small part of a world in the process of moving away from the U.S. Dollar.

According to Bloomberg…“This will encourage other countries and other investors, especially Indians, who are big buyers anyway, to jump into the market,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.

The Reserve Bank of India paid $6.7 billion for the bullion, which it bought from Oct. 19 to Oct. 30. It was “the biggest single central-bank purchase that we know about for at least 30 years in such a short period,” said Timothy Green, the author of “The Ages of Gold.” “The only comparable event was the U.S.’s steady purchases in the 1930s and 1940s.” (The complete Bloomberg story)   

The “other countries and other investors” include China and Russia.  China has already been a big buyer in the gold market.  Earlier this year, it disclosed it secretly increased the country’s gold holdings by 75%.  China is also the world’s biggest producer of gold and is keeping every ounce it produces.  Russia backs a partial return to the gold standard to help resolve the financial crisis that started in 2007.

The entire world sees a weaker dollar in the future.  The big question is how much weaker?  The feeble dollar will spell inflation and some say hyper-inflation is a real possibility.  Talk about the depreciating dollar seems to be everywhere.  Here is an excerpt from a Forbes article that came out yesterday: “…Make no mistake about it: Central banks have not been liquidating their gold. This sale by the IMF (to India) is therefore an extraordinary event at a time when there is little gold supply to meet the burgeoning demand by investors wary of paper currency. Trillions of dollars have been injected into the financial system to save it from Armageddon; they must find a home somewhere.

Just listen to Buffett. Back in May, he warned, “No one can know the precise level of net debt to GDP at which the United States will lose its reputation for financial integrity.” In other words, printing money can degrade the integrity of the dollar, making gold look like an attractive alternative to Treasuries that yield 3.5%….” (click her for the complete Forbes article)

I made the case for a much weaker dollar or even a dollar collapse in my early September post, “Something Wicked This Way Comes.”  As the dollar goes down in value, gold will go up in price.  Gold expert Jim Sinclair (jsmineset.com) has been predicting gold at $1,650 on or before January 2011 for at least 3 years.  He has said many times that his original prediction will be on the low side and that gold will go much higher in price.  The lower dollar will have a devastating effect on America’s standard of living.  The Republicans had a big day yesterday, but big inflation is on the way no matter who is in control.   

CIT Bankruptcy Dire for Main Street

By Greg Hunter’s USAWatchdog.com  

It is official, CIT filed for bankruptcy protection Sunday night (11/01/09).  This was not a surprise because the lender had been having financial trouble for months.  The government tried to save CIT with a 2.3 billion dollar bailout last fall.  Now that money will be written off by the taxpayer.    I was listening to CNBC, last week, talk about the prepackaged bankruptcy of CIT.  You would have thought it was some small bank with 1,000 depositors.  The CNBC commentator brought up the term “prepak” referring to a prepackaged Chapter 11 Bankruptcy.   That’s when a company tries to reorganize debt to stay in business.  This is different from Chapter 7 Bankruptcy where a company liquidates assets and goes out of business.   The inference was that “prepaks” happen all the time and that this was expected, so it is OK.  It is not OK!   CIT is the 5th largest bankruptcy in corporate history!   The lender has $71 billion in assets and more than $64 billion in liabilities.   This bankruptcy will be dire for small and medium businesses across America.

Reuters reports, “…But the company’s long-term prospects are uncertain and the bankruptcy could leave more than one million small and medium-sized businesses looking for another source of funding, lawyers said.  “This could have a devastating effect,” said Jerry Reisman, a partner at law firm Reisman Peirez & Reisman in Garden City, New York, who has been working with many of CIT’s factoring clients.  These clients — about 2,000 small companies — are in a particular bind when it comes to finding alternative financing since CIT is by far the biggest provider of factoring services.  In the factoring business, CIT buys accounts receivables from vendors that range from $5 million to $1 billion in size and then works with their customers to ensure payment.”  (Click here for the complete Reuters story)

CIT will have a lot less money to lend.  That means many small and medium business will go bust because financing will dry up.  This is not a sign of things getting better but a signal the economy is taking another turn downward.  The CIT bankruptcy will set off a chain reaction of other failures for businesses that will not be able to keep their doors open without ongoing backing.  Even CIT may or may not survive bankruptcy.

Keep in mind, this happened on a weekend the FDIC took over 9 other banks in one day!   That is a record (so far) for the financial crisis that started in 2007.  This brings the total number of failed banks to 115 this year.  The FDIC expects more failures.  More bank failures means less lending!  It is as simple as that. (more on CIT from Forbes)

Is The American Empire Being Looted?

washington-department-of-the-treasury-washington-d-c-dctb2

By Greg Hunter’s USAWatchdog.com  

It is said at the end of an empire, the Treasury is always looted.  In the case of America, it is the value of the dollar and the credit rating of the United States that is being robbed from the American people.

NYU Professor of Economics, Nouriel Roubini, said in August of last year, Recent economic, financial and geopolitical events suggest that the decline of the American Empire has started. After the collapse of the Soviet Union there was a brief period where the world switched from a bipolar balance of two superpowers to a unipolar world with one economic, financial, geostrategic superpower, or better, hyper power, i.e the United States. But by now three factors suggest that the US has squandered its unipolar moment and that the decline of the American Empire – as the US was in effect a global empire – has started.

No one is backing a truck up to Fort Knox to pilfer America’s gold.  Nor is anyone swiping pallets of hundred dollar bills from the Bureau of Engraving and Printing, at least not yet.  So how is America being looted?

Let’s start with the 787 billion dollar stimulus program that was passed by Congress early this year.  The Bill was supposed to create lots of jobs.  According to President Obama’s Council of Economic Advisors, 600 thousand to 1.1 million jobs are estimated to have been “saved or created.”  When I read that in the paper, I thought “wow that’s all the jobs we got out of all that money?”  

So, I called my tax man Steve to crunch some numbers for me.  Steve is a Certified Public Accountant.  I told Steve, “Let’s give the President’s Advisors the benefit of the doubt and say 1.1 million jobs were “saved or created.”  Divide 787 billion dollars by the 1.1 million so-called jobs and, according to Steve the CPA, it comes out to $715,000 per job “saved or created.”  This is not a mistake.  Steve checked the math.  It came out to 715 thousand dollars per job!   

There is no way on God’s green earth that you can spend that kind of money and get that few jobs without massive fraud, waste and abuse!

Then a day later we find out, according to the Associated Press, that the “stimulus jobs were overstated by thousands.”  The AP report said, “…some jobs credited to the stimulus program were counted two, three, four or even more times.” …  “A child care center in Florida said it saved 129 jobs with the help of the stimulus money.  Instead, it gave pay raises to its existing employees.”   What a boondoggle!

The same is true for the Troubled Asset Relief Program or TARP.  700 billion dollars was appropriated so the banks could buy toxic assets to “free up” lending.  No toxic assets were bought!  What a taxpayer rip-off.  The Treasury handed out the cash to financial institutions and let the bankers spend the money on whatever they wanted.  Surprise, the bankers did spend some of the money on billions in bonuses to reward the very people who caused the economic meltdown in the first place.  No bankers were fired.  They just got big bonuses!  Yes, some banks such as Goldman Sachs and JP Morgan Chase did pay back the TARP money, but so what!  Those banks got huge financial help in other ways.  Check out my post called “The Untouchables: Goldman and Chase” for more on those taxpayer rip-offs.

I don’t know if all the trillions created and spent is just waste, incompetence or downright fraud.  It is probably all of the above.  It really does not matter because, in the end, the outcome will be the same.  The dollar will be diminished and the credit rating of the U.S. will be destroyed.  In the Great Depression, the value of the dollar and the “Full Faith and Credit” of the country were never in question.  I predict, before this financial crisis is over, both will be looted from the American Empire.

 

The Real Numbers From Shadowstats.com

By Greg Hunter’s USAWatchdog.com  

The information below is provided complements of shadowstats.com.  I do not get paid in any way for posting this information.  Shadowstats.com is a paid subscription site and well worth the money.   Here is the link for the full report.  (shadowstats.com)

Shadow Government Statististics  

-Recession Is Not Over
 
- Quarterly GDP Growth Is Not Sustainable, with 92% of Growth in Nonrecurring Factors
 
- Annual GDP Down 2.3% (5.7% SGS)

 

- 4th-Quarter GDP Should Resume Quarter-to-Quarter Decline 

 

 

– Durables Goods Orders at 1997 Level

– Help-Wanted Adverting at New 58-Year Low

Red Alert on a Dollar Collapse

By Greg Hunter’s USAWatchdog.com  

Peter Schiff is a legitimate candidate for the U.S. Senate in Connecticut for the 2010 election.  He runs a big time fund called Euro Pacific Capital.  He has made some big calls that have proven to be correct.  For one, he predicted the current financial meltdown at least 2 years before it happened.  He has written three books on finance and investing.  All are best sellers.  According to him, this downturn is not over by a long shot.  Schiff was out recently with a You Tube video warning about the collapse of the dollar.  That’s right, collapse as in worthless or near worthless.   This is kind of a long rant but well worth the listen.  Schiff is an economist and is no fool.   Please give this a listen, if you have the time, and heed his warning.  And please protect your assets!

(Q)Are Things Getting Better? (A)Yes and No

By Greg Hunter’s USAWatchdog.com  

There is an old saying in the markets, “nothing goes straight up or straight down.”  If the economy has a lot more to fall, as I think it does, then it will not fall straight down.  I think we are on a proverbial plateau in this downturn.   Yesterday, Treasury Secretary Tim Geithner said, “The financial sector story is in a much stronger position than it was but it’s a mixed picture,”  and “The price of credit has come down dramatically.”  The economic picture has improved because of massive amounts of money printing for things such as “Cash for Clunkers” and the “$8,000 home buyers tax credit.”   There has also been hundreds of billions spent buying toxic assets and our own treasuries to suppress interest  rates.  Yes, pump hundreds of billions of dollars into the credit markets and economy and things will look better…for awhile.   John Williams of shadowstats.com says in his latest alert, “Fed Pushes Monetary Base to Record High.”  That certainly makes sense because of what the Fed has been doing.  Williams is not alone in tracking high money growth by the Fed.  Terry Coxon of The Casey Report said, “As of July, the M1 money supply (currency held by the public plus checking deposits) had grown 17.5% in a year’s time. That’s not just unusually rapid, it’s extraordinarily rapid.”

Yes, the economy is appearing to look better.  However, even with all the money creation, it is not great.  Secretary Geithner said as much with his “mixed picture” comment.  Economist John Williams concurs and takes it one step further by saying, “Recession Not Over Despite a Positive GDP Quarter.”  Williams thinks the government will continue to print money at or near record amounts and thinks the downturn has farther to go.  Williams is expecting the economy will not look very good in the 4th quarter.  I think that means brace yourselves for another leg down.

New York University Professor Nouriel Roubini is once again sending up warning flares about a different problem, the Fed’s zero interest rate policy.  We’re talking free money, folks.  You might remember that he was one of the few that predicted the current financial crisis.  For that, he earned the  nickname “Doctor Doom.”  Now you can call him “Doctor Right on the Money.”   Roubini sees the economy a little different than Williams.  In some ways, Roubini sees things more positive and in some ways not so much, as told in the excerpt below.

Reuters reports:  … “Investors worldwide are borrowing dollars to buy assets including equities and commodities, fueling “huge” bubbles that may spark another financial crisis….”Roubini said he sees a bubble in emerging-market equities and that gains in some developing-nation currencies are becoming “excessive.”  The rally in oil “is not justified by the fundamentals,” he said.  An asset “bust” may not occur for another year or two as a “wall of liquidity” pushes prices higher …  In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets.  Roubini said the U.S. recession seems to be over, though the economic recovery in advanced nations will be “anemic.”… (The complete Reuters story)

Money printing will make things look better, but will it last?  What will happen if the Fed stops printing?  What will happen if the Fed keeps on printing?  Don’t be fooled by the crooked path the economy is taking.  Stay defensive.   One thing is for sure, when Professor Roubini gets nervous, you should too.

Bernanke’s Trillion-Dollar Decision

By Greg Hunter’s USAWatchdog.com  

A good friend of mine sent me and article from Politico with the headline “Bernanke’s trillion-dollar decision.”   I read the article.  It talks about how Fed Chief Ben Bernanke has to decide whether or not he will continue to support the banking system with 1 trillion dollars in funding that is “propping the system up.”   The writer laments the fact that decision will be Bernanke’s alone and Obama  “will have almost nothing to do with it.”

I wrote my buddy back and told him, ” So what do you think they are going to do?  Let it all collapse?  Not a chance.  Big inflation in gold, silver and energy are coming.”  Let me explain further.  Back in August when President Obama renominated  Ben Bernanke to his post at the Federal Reserve, don’t you think that Obama asked if he would continue to support the economy?  Which means print money.   The result of all the money printing that has occurred, and all that will come, will be inflation.  Nobel Peace Prize winner Milton Friedman said, “inflation is always and everywhere a monetary phenomenon.”

If Bernanke would have hesitated or given the slightest implication he would let the economy fail, Larry Summers would be Fed Chief right now.  The fix is in and Bernanke will continue quantitative easing (printing money) to buy toxic debt or continue buying our own treasuries to suppress interest rates.  This will be done overtly or covertly, but it will be done.  There are the 2010 midterm elections and the Democrats will want to keep control of both houses.  Then there is the 2112 Presidential election and Barack Obama will want two terms just like everybody else who has held that office.   Expect the money printing  party to continue, no matter what!   (Here’s the story from Politico.)