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.

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.)

By Greg Hunter’s USAWatchdog.com  

This week the Federal Reserve hit thousands of banks with wide ranging pay controls.  The so called “Pay Czar” Kenneth Feinberg said that salaries paid to the top earning executives at some of the biggest bailedout companies would be slashed by 50% and capped at 500 grand a year.  The companies taking the cuts are American International Group Inc, Bank of America Corp, Citigroup Inc, General Motors Co, Chrysler, GMAC and Chrysler Financial.  The reason why Feinberg singled out these companies is because, according to him, they received “exceptional federal aid.”  What about the “exceptional federal aid” Goldman Sachs and JP Morgan Chase got?  I think Goldman getting at least 13 billion in the AIG bailout and getting paid 100 cents on the dollar for their exposure to the company was pretty “exceptional!!”  Then there are toxic assets turned over to the Fed.   We may never know how many billions of dollars of bad debt Goldman pawned off on the taxpayer because, according to the Federal Reserve, it is a secret.

Same goes for JP Morgan Chase.  How many billions of dollars of  toxic assets did it turn over to the Fed?  Ditching billions in bad bets at little or no cost to the banks is “exceptional” financial help!  Wouldn’t you agree?   Remember the JP Morgan Chase, Bear Stearns deal?  The Fed gave a total of 55 billion dollars to Chase to take over Bear.  And get this, tax payers were put on the hook for up to 40 billion dollars in liability for the failed bank.  I would call that pretty darn “exceptional” government help.  I love the way one blogger put it, “JP Morgan got the money ($55 billion) and the taxpayers got the risk (up to $40 billion), a ruse called the privatization of profit and socialization of risk.”

Of all the big banks Goldman and Chase have probably gotten the most help by taxpayer largeness.  Both Goldman and Chase would have also been bankrupt if it were not for the many sweet heart deals and government handouts given to them.  Yes these two institutions did repay TARP money but they have been helped out in so many other ways.  In my mind Goldman and Chase executives should have their pay cut in half and capped at 500 thousand dollars a year just like the 7 big companies named above.  But that will never happen because  they are  the untouchables.

By Greg Hunter’s USAWatchdog.com  

Pakistan is in a real struggle for control of the country with the Taliban.  This is an actual war, not the threat of war as we see with Israel and Iran.  I wrote about Pakistan as being one of 2 big problem areas in the world today in “The 2 Biggest Geopolitical Wild Cards in the World” post.  Take a good look at the map on this post and see how close the Taliban stronghold in the northern part of the country is to the capitol which is Islamabad.   If the Taliban is  successful in gaining control of the capitol and the country’s nuclear arsenal, then it will affect you!  For one thing, immediately higher prices for fuel.  Also, If the Taliban gains control or is perceived to be gaining control, then there is no telling what the military response will be from India or the U.S.   So when I read this headline in Reuters today “Pakistan braces for attacks as offensive continues”,  I thought I would pass it along to you.

By Augustine Anthony

ISLAMABAD (Reuters) – Suspected Taliban militants shot and killed a Pakistani army brigadier and his driver in the capital on Thursday as the military continued a major offensive against the insurgents in their strongholds near the Afghan border.  Exposing the country’s frayed nerves, the stock market dipped nearly three percent on false reports that a bomb had been found and shots fired at a courthouse in the capital, Islamabad.  The false alarm came as the country remained on high alert for possible retaliatory strikes by Talibanmilitants while the army attacks their strongholds in South Waziristan.  The offensive is a test of the government’s determination to tackle Islamic fundamentalists, and the campaign is being closely followed by the U.S. and other powers embroiled in Afghanistan.  On Thursday, suspected militants shot and killed Brigadier Moin-ud-din Ahmed, deputy force commander of the United Nations Mission in Sudan(UNMIS), who was on vacation in Islamabad.  “Everyone in the mission is very shocked,” Kouider Zerrouk, UNMIS spokesman told Reuters.  (More from Reuters)

By Greg Hunter’s USAWatchdog.com  

The story below is what I call the canary in the banking coal mine.  Wells Fargo was downgraded today by top banking analyst Dick Bove.  He didn’t downgrade them because they were making too much money.  What the article doesn’t say is  before Wells Fargo bought Wachovia,  Wachovia bought Golden West Financial in 2006.  Golden West was a leader in a little something called a Pay Option ARM.  Golden West had about 120 billion in these loans when Wachovia bought them.   Payment Option Arms are also called “pick a payment” loan because you literally pick what kind of mortgage payment you make to the bank every month.  You know, pay as a 30 year fixed, or 15 year fixed or interest only or negative amortization.  Negative amortization adds to the principal every month.  Guess what most people are choosing to pay?  You guessed it, negative amortization which is the cheapest payment possible.  One analyst called these loans “payment option insanity.”  Most of these loans are now, not profitable.  Plenty of folks default when they realize they will owe more than the home will ever be worth!   Wells Fargo grabbed the headline today, but the other banks are still  in trouble too and weak banking equals a weak economy.  Check out the article below.

Oct. 21 (Bloomberg) — U.S. stocks tumbled in the final hour of trading after analyst Dick Bove downgraded Wells Fargo & Co., erasing an earlier rally spurred by better-than-estimated results at Morgan Stanley and Yahoo! Inc.

Wells Fargo, the largest U.S. home lender this year, slid 5.1 percent after Bove of Rochdale Securities cut the shares to “sell” and said earnings were boosted by mortgage-servicing fees rather than improving business trends. Wal-Mart Stores Inc., the world’s largest retailer, tumbled 2.1 after saying it expects a “tough” holiday shopping season. The Standard & Poor’s 500 Index reversed a 0.9 percent advance as nine of 10 industry groups retreated, led by financials.

“Wells Fargo’s downgrade spooked investors,” said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages about $2 billion in San Antonio. “Investors are concerned because that’s one of the biggest in the industry and most of the recent news has been positive so far. So that could be an indication of problems ahead for other big names.”  (more from Bloomberg)

By Greg Hunter’s USAWatchdog.com  

I have been warning about a currency crisis for weeks.  It appears I am not the only one worried about a big drop in value of the dollar.  David Einhorn of Greenlight Capital is also betting on a”currency death spiral.”  Einhorn is no small player.  He runs a 5 billion dollar fund and has a habit of making big calls.  In July, Einhorn sold 4.2 million shares of a gold ETF to buy physical bullion.  Buying physical gold couldn’t be more bearish and negative.  It is also play against the dollar.  Now, he is warning of more trouble coming for some of the big players in the financial industry.  Einhorn says some big banks like Citi should be broken up so they can not cause systemic risk.  To top it off, his fund is still buying gold!   This is a story you should read and pay attention to so you can understand what is really going on.

By Alistair Barr, MarketWatch

NEW YORK (MarketWatch) — Greenlight Capital is betting on the possibility of a major currency collapse and a surge in interest rates, the hedge-fund firm’s manager David Einhorn said Monday, citing ballooning government deficits in some of the world’s most developed countries.

Einhorn, who warned about Lehman Brothers’ frailty before it collapsed last year, also said financial institutions that are deemed as “too big to fail,” such as Citigroup Inc., should be broken up. 

Reuters
David Einhorn of Greenlight Capital. 

 Greenlight has been buying physical gold this year because Einhorn is concerned that efforts to save the financial system and fuel economic recovery are undermining the value of such currencies as the U.S. dollar.

On Monday, he said Greenlight has added new trades to this investment theme, buying long-dated options on much higher interest rates in Japan and other developed regions — effectively giving the firm the chance to make big profits from a jump in rates. The options, bought from major banks, are tied to interest rates four to five years out, Einhorn noted.

“Japan may already be past the point of no return,” he said during a presentation at the Value Investing Congress in New York.

 ‘Lehman shouldn’t have existed in any size to threaten the financial system.’ 

Japan’s debt is equal to 190% of the country’s gross domestic product and its government deficit will be 10% of GDP this year, according to Einhorn.

Japan has been able to borrow money at roughly 2% a year to finance these deficits, partly because the country has many savers willing to buy low-yielding government bonds. However, some of these savers may begin spending instead as they enter retirement, Einhorn argued.

“When the market refuses to refinance at cheap rates, problems emerge,” he said, adding that this could trigger a “currency death spiral.” (more from MarketWatch)

By Greg Hunter’s USAWatchdog.com  

This week I wrote a post about the announcemment of the recession being over.  Of course my post (Is the Ression over?  Don’t bet on it!)  clearly gave reasons why it is NOT over by a country mile. This story from Reuters on Friday is confirmation we have a long way to go.

By Leah Schnurr

NEW YORK (Reuters) – U.S. stocks fell on Friday after disappointing results from General Electric Co (GE.N) and Bank of America Corp (BAC.N) demonstrated the road to economic recovery will be bumpy.

GE, which sells products from aircraft engines to refrigerators, reported a 20 percent drop in revenue, while Bank of America posted a $1 billion loss as both struggled with still meager business and consumer spending.  

“As you came into the third quarter there was hypersensitivity to the quality of topline growth,” said Michael Feser, president of Zecco Trading in New York.

“Investors are linking that to the economy, trying to determine if these are quality earnings that are being reported and does it spell a solid economic recovery?”

Friday’s results contrasted sharply with those of JPMorgan Chase & Co (JPM.N) and Intel Corp (INTC.O) earlier this week, which breezed past Wall Street forecasts and helped the Dow to close above 10,000 for two straight days.  (more from Reuters)

By Greg Hunter’s USAWatchdog.com  

From John Williams at Shadowstats

– September Annual Inflation -1.3% (CPI-U), 6.1% (SGS)
– CPI-U Inflation Spike Due by Year-End
– No Recovery: September Real Retail Sales Continued
Bottom-Bouncing at Low-Level Plateau
– 10 Years of Retail Sales Growth Gone

shadowstats.com is a paid site that is worth the money for access to real numbers!    shadowstats.com   I do not get paid for plugging this site.

By Greg Hunter’s USAWatchdog.com  

The headline on Reuters this week read, “U.S. recession over, unemployment seen at 10 percent.”  This great news is according to a new survey by the National Association for Business Economics.   Forty-four professional forecasters took part in the assay.  After four straight quarters of declines, 80 percent of them believe the economy was growing again .  I would like to know who the recession is over for because it is not over for main street America.  I would also like to know how the 44 professional forecasters were chosen.  Did the NABE stack the deck?  Are these “professional forecasters” some of the same people who completely missed the financial crisis two years ago and told us everything was just great?

For one thing, the real unemployment rate stands at 21.4 percent not 10 percent.  That is according to John Williams of shadowstats.com who computes the UE rate the way it was done by the Bureau of Labor Statistics pre-1994.  That’s more than one in five working people who are unemployed or underemployed!  Bankruptcies shot past a million in the first nine months of 2009 according to the American Bankruptcy Institute.  What end of recession?

Just last month Bloomberg reported,  “Sept. 23 (Bloomberg) — The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said.  The “huge shadow inventory,” reflecting mortgages already being foreclosed upon or now delinquent and likely to be…”

What is the NABE looking at to make such a rosy forecast?  It is not this chart from Credit Suisse that shows the mortgage resets for millions of adjustable rate mortgages.  This chart shows a tsunami of debt that will wash ashore in waves here in America until mid 2012.  There is no doubt mortgage payments resetting higher will cause many more foreclosures than the one million we have had so far this year.

This is my favorite “a picture is worth a thousand words” picture.  I have used this before in a prior post because it says so much about where the real estate market is going.  Look!  The resets don’t stop until 2012.  How can the recession be over?

The FDIC is bracing for another round of bank failures according to Chairman Sheila Bair.   Banks are coming under increasing financial pressure due to an imploding commercial real estate market.  In early September Bair said, “Commercial real estate will be more of a driver of bank failures.”   What! You mean more than the imploding residential real estate market?  (Click here for more from the original post) This is what the end of a recession looks like?

Speaking of commercial real estate…“The other shoe to drop,” according to Daniel Tishman, Chairman and CEO of the Tishman Construction Corporation, is commercial real estate.  Tishman says 3.7 trillion dollars in commercial property will need financing in the next several years.   Financing will be difficult because commercial property values are in a steep, ongoing decline.  (Click here for a great chart about declining Commercial Real Estate)  Where is the end of the recession?  I do not see it and neither does a  close friend in North Carolina who makes his living as a business broker.  He tells me business in his area is definitely “slowing down” not getting better.

Finally, according to John Williams at shadowstats.com, there is still absolutely “no substance to the economic recovery.”  Williams works for very big companies and hedge funds as a consultant.  He also has a subscription based newsletter.  I am not getting paid to plug him.  I just admire his very accurate work.  He has been spot on with his numbers and predictions.  He sees unemployment topping out at 34 percent, computed the way BLS  did it pre-1994.

In his most recent alert, he sees the U.S. is “headed for still weaker growth.”  When I asked Williams about the new survey that says the recession is over, he said, “A  recession does not end until the ecomony begins to recover.  At best it has flattened out in some areas, but those are about to turn lower again, as the clunkers and first-time home buyers programs expire.  Employment still is plunging, and that is a coincident, not a lagging, indicator.”  My bet is Williams will be right again and we have a long way to go.

So as far as I can tell, the recession may be over for some greedy, reckless Wall Street types.  Also, the stock market has seen a more that 50 percent rise since March.  That is positive news, but that is probably a bear market rally.  The recession is not over for the overwhelming majority of Americans.  My advice:  Take some money off the table if you have enjoyed a big run up in your portfolio.  Pay down debt and stay conservative in your investments and purchases.  This is not what the end of a recesion looks like.  I think all indications show it is appearing more like a deepening depression!

By Greg Hunter’s USAWatchdog.com  

Everybody is wondering where all of the bailouts and spending are going to take us?  Just a few of the big companies the government has bailed out to keep them from going bankrupt are: General Motors, Chrysler, AIG, Citigroup, Bank of America, Wells Fargo, (all the big banks got some kind of bailout) Fannie Mae and Freddie Mac.  According to Pro Publica, 721 companies have received some sort of financial help from the taxpayer.  If the economy does not improve, many of these companies will require more money to stay afloat.

There were several stimulus programs.  The biggest is the 787 billion dollar spending bill passed by Congress earlier this year.   Also, there was “Cash for Clunkers.”   It was designed to give people with old gas guzzling vehicles up to $4,500 towards a new fuel efficient model.  Remember the $8,000  credit for first time home buyers?  It looks like the government is going to extend the program.  Let’s not forget the trillions of dollars that the Federal Reserve has given away in secret to the big banks.  Congress wants to audit the Fed to find out where the money went and why even foreign banks got a half trillion dollars!  Meanwhile, Congress is talking about giving every newborn $500 to fund a retirement account.  I kid you not! (Click here for the story.)

One respected news source recently claimed we have spent or committed 19 trillion dollars during the financial crisis.  Another government source said the final tab for the financial crisis could come in at 23.7 trillion dollars.  Who knows how much this will cost?  One thing is for sure, the final tab will be big, as in many trillions of dollars.   No country in all of history has ever bailed out itself with this much printed money. We are clearly in uncharted territory.  We have spent more on the financial crisis than all of these financial expenditures below, combined!

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion    (Click here for the complete story)

There’s an old saying, “When you find yourself in a hole, stop digging.”  But in America, we keep shoveling and piling on the debt.  A perfect example of an agency that keeps on digging is the Federal Housing Administration.  The FHA is involved in its own version of the bailout game by continuing to make loans to people with very shaky credit.  The down payment for its new loans is just 3.5 percent.  A recent New York Times article showed the FHA sinking further into trouble in an effort to keep housing prices from falling.  The Times said, in part, “The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.  Despite the agency’s attempt to outrun its fate by insuring ever-larger amounts of new loans…the current rate is over a billion dollars a day.  7.77 percent of the portfolio is in default, up from 5.6 percent a year ago.
Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.  “I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast.  That’s a policy.”

The FHA, which insures 675 billion in mortgages, will likely need a bailout of it’s own in as little as 24 months according to some experts.  I say the FHA will need help much sooner because the housing market will get worse before it gets better.  I talked about why real estate prices will continue to fall  in an August post called,  “Real Estate at a Bottom…NOT!”

And let’s not forget the two wars we are fighting in Afghanistan and Iraq.  Did your taxes go up to pay for that?  Of course they didn’t!   The only people sacrificing for the war efforts are the men and women of the armed forces and their families!   We are paying for all the bailouts and expenditures by simply printing the money!

The world is noticing what we are doing in our financial house.  Foreign governments are getting nervous about the creation of all these dollars.  There have been calls by many in the international community for a “Super Sovereign Currency.”   This would not replace the dollar but compete with it.

Gold is also in competition with the Buck.  That’s why the yellow metal hit all time highs last week.  Gold is not replacing the dollar but it is competing with it.  In a recent interview, gold expert Jim Sinclair said, “Gold is a competitor to currency.”   Unlike dollars, it is “hard to expand gold” supplies quickly.  Investors are turning to gold as an alternative to the dollar.

The same is true for oil.  Despite some pretty healthy supplies, the price is trading around $70 a barrel.  Everyone in the oil field knows there is a good quantity of oil, and that is why some have repeatedly predicted a steep decline.  A roll back in the oil price has failed to materialize.  The high price of oil, relative to supply, is reflecting the fact there is a huge supply of dollars.  More dollars are printed out of thin air everyday.

So what does this mean to you?  In the end, there is going to be a currency crisis.  I am not talking about a problem for the grandkids but a crisis in the here and now.  I quoted several experts on this issue in a post last month called, “Something Wicked This Way Comes.”   

The bailouts and the spending are going to continue because that, in the short run, that will get politicians re-elected.  In the long run, the massive money printing will ruin the buying power of every dollar you have.  Expect some deflation as we have right now in the real estate market but also expect big inflation.  Yes, deflation and inflation at the same time!   A weaker dollar is coming and there will be no way to avoid the inflation it will bring with it.

By Greg Hunter’s USAWatchdog.com  

For those of you who think the economy is doing well, gold is saying something altogether different.  Today AU hit a brand new high,  the record gold price is a major warning sign of, at the very least, big inflation coming.

…”NEW YORK (MarketWatch) — Gold finished at a new record closing level on Tuesday, after earlier hitting a record intra-day high of $1,045 an ounce, as the dollar slumped on a report suggesting the end of dollar-based oil trading”…(For more on the story click here)

By Greg Hunter’s USAWatchdog.com  

Could a meeting between the President and a Four Star General in Copenhagen signal a turning point in the war against the Taliban?  It has been reported that the NATO Commander in Afghanistan, General Stanley McChrystal, has angered the White House with a series of candid comments about the war that has been going on for 8 years.

When asked if General McChrystal supported proposals to switch to a strategy which used more drone missile strikes and special forces against the enemy, he said it would lead to “Chaos-istan.” McChrystal also said, “Waiting does not prolong a favorable outcome. This effort will not remain winnable indefinitely, and nor will public support.” General McChrystal delivered a report on Afghanistan requested by the President on August 31.  The  General has asked for 40 thousand more troops.  Mr. Obama  has held two meetings on the issue since the report was filed.  The White House said recently it will take weeks to reach a decision on more troops.

McChrystal also told Newsweek he was firmly against half measures in Afghanistan saying, “You can’t hope to contain the fire by letting just half the building burn.” Also, in a report sent to the Pentagon, McChrystal delivered a confidential assessment of the situation in Afghanistan.  The General described the situation there as “deteriorating,” and the likely outcome will be a “failure” unless America sends more troops.  This bombshell report was “leaked” to the press recently.

Bruce Ackerman, an expert on constitutional law at Yale University, said in the Washington Post: “As commanding general, McChrystal has no business making such public pronouncements.” Ackerman added that it was highly unusual for a senior military officer to “pressure the president in public to adopt his strategy.”

So why would a Four Star General do such a thing?  It is not because McChrystal is politically insensitive.  One does not get to be a Four Star General without some sense of political know- how.  I assume General McChrystal knows full well what he is doing and is not simply being insubordinate.

It was probably no surprise to McChrystal that President Obama scheduled a 25-minute face-to-face meeting on board Air Force One on the tarmac in Copenhagen last week.  President Obama was there to pitch Chicago’s unsuccessful Olympic bid while General McChrystal was giving a speech across the “Channel” in London.  Who knows what was said on Air Force One, but I feel the situation in Afghanistan is so severe that McChrystal was taking a risk to get the President’s attention.  By all accounts, McChrystal feels the situation is critical and is nearing an ominous turning point.  Let’s hope the right moves are made and things take a turn for the best!

By Greg Hunter’s USAWatchdog.com  

The President made a major misstep by going to Copenhagen to pitch the Windy City as host of the 2016 Olympics.  Barack Obama and wife Michelle  made impassionate speeches to urge the IOC to pick Chicago, Illinois, over all other cities in the world as the spot for the games in 7 years.  The U.S. was blown out in the first round of voting.  It was like Mike Tyson knocking out his opponent in the first 10 seconds of a fight.   A not even close, dismal defeat considering President Obama, and even Oprah, pitched the event to come to America.

What was he thinking?  We are on the brink of a depression.  Millions of homes will foreclose in the coming years according to the Treasury Secretary.  Unemployment inched higher this week.  It is at a 26 year record with 9.8 percent unable to find work.  According to shadowstats.com , the real unemployment rate is 21.4 percent if you calculate it the way the Bureau of Labor Statistics did it prior to 1994.  Obamacare is facing a major uphill battle from Republicans and Blue Dog Democrats in his own party. Generals in Afghanistan say there is a real possibility of “defeat” if they do not get 40 thousand additional troops to fight the Taliban.  Israel is signaling a first strike against Iranian nuclear facilities which could conceivably set off World War 3, and President Obama thought it was necessary for him to personally pitch Chicago for the Olympics 7 years from now!

You are kidding me, right?  Obama couldn’t send Vice President Biden or Secretary of State Clinton over to pitch Chicago for the Olympics?   You see, if they got shot down, it really would not be the same as the Leader of the Free World getting shot down.  The President thought going over to Europe with his buddy Oprah, a talk show host, with more than 15 million Americans out of work was a good idea?  How much did that cost…2 or 3 million bucks?  Did the President think this was a way to bolster American prestige?  Well, it backfired!  In my opinion, the trip cut our standing on the world stage when we so desperately need to look strong.  Instead, we look weak and unfocused.  The President appears oblivious to the massive problems facing the country.

I am sure the President thought getting the Olympics would be a way to create jobs.  I guess taking years to build facilities we will use for a month while the Olympics is in town 7 years from now would create jobs.  Wouldn’t it be better for the President to create jobs that will be with us long after the Olympics is over, such as permanent jobs in the energy field or maybe even find a way to bring manufacturing back to the U.S.?

I happen to like President Obama, but that doesn’t mean I should not criticize him when he is way off on Fantasy Island somewhere.   You will not hear critiscm about this trip from the mainstream media because most of them voted for Obama.  Still, the President needs to wake up and see this trip for what it really was… a complete failure on many levels.  The United States did not just lose the 2016 Olympics.  We lost some of our dignity and standing on the world stage.

By Greg Hunter’s USAWatchdog.com  

A Congressional Hearing was held Friday on H.R. 1207 also known as “Audit the Fed.”  As far as I can tell, there was very little in the mainstream media on this Ron Paul sponsored bill.  290 Congressmen of both parties are behind the bill.  The importance of an audit is profound as the Fed controls the value of money for anyone holding or using dollars.  The Federal Reserve has spent or committed trillions of dollars in the financial meltdown with virtually no accountability.  For example, the Fed took it on itself to bail out AIG.  The total cost of the government backstop, so far, is more than 180 billion dollars.  The Fed also gave 500 billion dollars to foreign banks during the crisis! If the bill is signed into law, it will enable the Government Accounting Office (GAO) to find out exactly who got money, how much, and why?

Scott Alvarez, General Counsel for the Board of Governors of the Federal Reserve, testified on behalf of the Fed as to why Congress should vote the bill down.  Alvarez said, in part, “Moreover, publication of the results of GAO audits related to monetary policy actions and deliberations would complicate and interfere with the FOMC’s communications to the markets and the public about current economic conditions and the appropriate stance of monetary policy. Households, businesses, and financial market participants would understandably be uncertain about the implications of the GAO’s findings for future decisions of the FOMC, thereby increasing market volatility and weakening the ability of monetary policy actions to achieve their desired effects.”

In layman’s terms, getting the Fed to open its books and do things out in the open would make it hard for the Fed to do its job.  Representative Brad Sherman said what the Fed is really saying is “trust us” with creating and distributing money “in enormous and unlimited amounts with secrecy.” The Fed contends secrecy is needed to maintain its independence.

Thomas E. Woods, Jr., was called to testify as to why H.R. 1207 should be passed.  Woods has a PhD in history and has written many best selling books including his most recent about the current financial meltdown.  He said, “The Fed’s arguments against the bill are unlikely to persuade, and will undoubtedly strike the average American as little more than special pleading. Perhaps the most frequent of the claims is that a genuine audit would jeopardize the alleged independence of the Fed. Congress could come to influence or even dictate monetary policy. This is a red herring.”

Woods also said, “If there is any truth to the idea of Fed independence, it lay in precisely this: the Fed may reward favored friends and constituencies with trillions of dollars in various kinds of assistance, while keeping the public completely in the dark. If that is the independence we’re talking about, no self-respecting American would hesitate for a moment to challenge it.”

Below is one of the better exchanges between Congress and the Fed’s lawyer.

The mainstream media’s lack of coverage of this historic bill is disturbing and disappointing. The Federal Reserve has never been audited in its 96 year history.  I worked for ABC and CNN as an investigative correspondent for 9 years.  If I were still working for either organization, I would be screaming to management to cover this because it is so important to almost everyone.  The “Audit the Fed” story has what I call mass audience appeal and, not just for the U.S., but for the world.  I have written various posts on this web site about the lack of transparency and downright secrecy of this government subcontractor.  I guess telling the truth and shining a light into the dark corners of government is the upside to being outside the control of the mainstream media. I will continue to follow stories involving the secret money and policies of the Federal Reserve.

  By Greg Hunter’s USAWatchdog.com   The test-firing of a new medium-range surface to surface missile, named Sejil-2, in Semnan in north-eastern Iran on 20 May 2009. Take a look at today’s headline from Reuters, “Obama Accuses Iran of Building Secret Nuclear Plant.”  This just one day after the Israeli Prime Minister said the U.N.’s most urgent challenge “is to prevent the tyrants of Tehran  from acquiring nuclear weapons.” This is just part of the scolding Benjamin Netanyahu delivered to the General Assembly. The President of the United States was flanked by the Prime Minister of the UK and  the President of France when he accused Iran of building a secret nuclear fuel plant and demanded Tehran immediately halt what he called a “direct challenge” to the international community. This was done under the backdrop of the G-20 meeting in Pittsburgh, PA.  The announcement has the backing of at least France and the UK.  It is an ominous development that could signal implementation of very strong sanctions or possible military action in the future.  This is appearing  like it is shaping up to be one or the other unless Iran capitulates on it’s nuclear ambitions which seems the least likely at this point.  A “direct challenge” is usually met with some sort of  “direct response” and signals that time may be running out on the sanctions option.  In my mind, the”direct challenge” language signifies an approaching showdown in an ever escalating impasse.  Please read my post directly after this called The 2 Biggest Geopolitical Wild Cards in the World for much more on this very important world issue.  (View the complete Reuters story or check the link under “Hunter’s Top Stories” on the right side of the USAWatchdog site.)