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Ruble Takedown Exposes Cracks In Putin’s Defense

December 20, 2014 by · Leave a Comment 

Putin’s Next Move Is Crucial…

The plunge of the Russian currency this week is the drastic outcome of policies implemented by the major imperialist powers to force Russia to submit to American and European imperialism’s neo-colonial restructuring of Eurasia. Punishing the Putin regime’s interference with their plans for regime change in countries such as Ukraine and Syria, the NATO powers are financially strangling Russia.” Alex Lantier, Imperialism and the ruble crisis, WSWS

“The struggle for world domination has assumed titanic proportions. The phases of this struggle are played out upon the bones of the weak and backward nations.” Leon Trotsky, 1929

Russian President Vladimir Putin suffered a stunning defeat on Tuesday when a US-backed plan to push down oil prices sent the ruble into freefall. Russia’s currency plunged 10 percent on Monday followed by an 11 percent drop on Tuesday reducing the ruble’s value by more than half in less than a year. The jarring slide was assisted by western sympathizers at Russia’s Central Bank who, earlier in the day, boosted interest rates from 10.5 percent to 17 percent to slow the decline. But the higher rates only intensified the outflow of capital which put the ruble into a tailspin forcing international banks to remove pricing and liquidity from the currency leading to the suspension of trade. According to Russia Today:

“Russian Federation Council Chair Valentina Matviyenko has ordered a vote on a parliamentary investigation into the recent activities of the Central Bank and its alleged role in the worst-ever plunge of the ruble rate…

“I suggest to start a parliamentary investigation into activities of the Central Bank that has allowed violations of the citizens’ Constitutional rights, including the right for property,” the RIA Novosti quoted Tarlo as saying on Wednesday.

The senator added that according to the law, protecting financial stability in the country is the main task of the Central Bank and its senior management. However, the bank’s actions, in particular the recent raising of the key interest rate to 17 percent, have so far yielded the opposite results.” (Upper House plans probe into Central Bank role in ruble crash, RT)

The prospect that there may be collaborators and fifth columnists at Russia’s Central Bank should surprise no one. The RCB is an independent organization that serves the interests of global capital and regional oligarchs the same as central banks everywhere. This is a group that believes that humanity’s greatest achievement is the free flow of privately-owned capital to markets around the world where it can extract maximum value off the sweat of working people. Why would Russia be any different in that regard?

It isn’t. The actions of the Central Bank have cost the Russian people dearly, and yet, even now the main concern of RCB elites is their own survival and the preservation of the banking system. An article that appeared at Zero Hedge on Wednesday illustrates this point. After ruble trading was suspended, the RCB released a document with “7 new measures” all of which were aimed at protecting the banking system via moratoria on securities losses, breaks on interest rates, additional liquidity provisioning, easier credit and accounting standards, and this gem at the end:

“In order to maintain the stability of the banking sector in the face of increased interest rate and credit risks of a slowdown of the Russian economy the Bank of Russia and the Government of the Russian Federation prepare measures to recapitalize credit institutions in 2015.” (Russian Central Bank Releases 7 Measures It Will Take To Stabilize The Financial Sector, Zero Hedge)

Sound familiar? It should. You see, the Russian Central Bank works a lot like the Fed. At the first sign of trouble they build a nice, big rowboat for themselves and their dodgy bank buddies and leave everyone else to drown. That’s what these bullet points are all about. Save the banks, and to hell the people who suffer from their exploitative policies.

Here’s more from RT:

“Earlier this week a group of State Duma MPs from the Communist Party sent an official address to Putin asking him to sack (Central Bank head, Elvira) Nabiullina, and all senior managers of the Central Bank as their current policies are causing the rapid devaluation of ruble and impoverishment of the majority of the Russian population.

In their letter, the Communists also recalled Putin’s address to the Federal Assembly in which he said that control over inflation must not be in the way of the steady economic growth.

“They listen to your orders and then do the opposite,” the lawmakers complained.” (RT)

In other words, the RCB enforces its own “austerity” policy in Russia just as central bankers do everywhere. There’s nothing conspiratorial about this. CBs are owned and controlled by the big money guys which is why their policies invariably serve the interests of the rich. They might not call it “trickle down” or “structural adjustment” (as they do in the US), but it amounts to the same thing, the inexorable shifting of wealth from working class people to the parasitic plutocrats who control the system and its political agents. Same old, same old.

Even so, the media has pinned the blame for Tuesday’s ruble fiasco on Putin who, of course, has nothing to do with monetary policy. That said, the ruble rout helps to draw attention to the fact that Moscow is clearly losing its war with the US and needs to radically adjust its approach if it hopes to succeed. First of all, Putin might be a great chess player, but he’s got a lot to learn about finance. He also needs a crash-course in asymmetrical warfare if he wants to defend the country from more of Washington’s stealth attacks.

In the last 10 months, the United States has executed a near-perfect takedown of the Russian economy. Following a sloppy State Department-backed coup in Kiev, Washington has consolidated its power in the Capital, removed dissident elements in the government, deployed the CIA to oversee operations, launched a number of attacks on rebel forces in the east, transferred ownership of Ukraine’s vital pipeline system to US puppets and foreign corporations, created a tollbooth separating Moscow from the lucrative EU market, foiled a Russian plan to build an alternate pipeline to southern Europe (South Stream), built up its military assets in the Balkans and Black Sea and, finally–the cherry on the cake–initiated a daring sneak attack on Russia’s currency by employing its Saudi-proxy to flood the market with oil, push prices off a cliff, and trigger a run on the ruble which slashed its value by more than half forcing retail currency platforms to stop trading the battered ruble until prices stabilized.

Like we said, Putin might be a great chess player, but in his battle with the US, he’s getting his clock cleaned. So far, he’s been no match for the maniacal focus and relentless savagery of the Washington powerbrokers. Yes, he’s formed critical alliances across Asia and the world. He’s also created competing institutions (like the BRICS bank) that could break the imperial grip on global finance. And, he’s also expounded a vision of a new world in which “one center of power” does not dictate the rules to everyone else. That’s all great, but he’s losing the war, and that’s what counts. Washington doesn’t care about peoples’ dreams or aspirations. What they care about is ruling the world with an iron fist, which is precisely what they intend to do for the next century or so unless someone stops them. Putin’s actions, however admirable, have not yet changed that basic dynamic. In fact, this latest debacle (authored by the RCB) is a severe setback for the country and could impact Russia’s ability to defend itself against US-NATO aggression.

So what does Putin need to do to reverse the current trend?

The first order of business should be a fundamental change in approach followed by a quick switch from defense to offense. There should be no doubt by now, that Washington is going for the jugular. The attack on the ruble provides clear evidence that the US will not be satisfied until Russia has been decimated and reduced to “a permanent state of colonial dependency.” (Chomsky) The United States has launched a full-blown economic war on Russia and yet the Kremlin is still acting like Washington’s punching bag. You can’t win a war like that. You have to take the initiative; take chances, be bold, think outside the box. That’s what Washington is doing. The rout of the ruble is perhaps the most astonishingly-successful asymmetrical attack in recent memory. It involved tremendous risks and costs on the part of the perpetrators. For example, the lower oil prices have ravaged important domestic industries, created widespread financial instability, and sent markets across the planet into a nosedive. Even so, Washington persevered with its audacious strategy, undeterred by the vast collateral damage, never losing sight of its ultimate objective; to deprive Moscow of crucial oil revenues, to crash the ruble, and to open up Central Asia for imperial expansion and US military bases. (The pivot to Asia)

This is how the US plays the game, by keeping its “eyes on the prize” at all times, and by rolling roughshod over anyone or anything that gets in its way. That is why the US is the world’s only superpower, because the voracious oligarchs who run the country will stop at nothing to get what they want.

Does Putin have the grit to match that kind of venomous determination? Has he even adjusted to the fact that WW3 will be unlike any conflict in the past, that jihadi-proxies and Neo Nazi-proxies will be employed as shock troops for the empire clearing the way for US special forces and foot soldiers who will hold ground and establish the new order? Does he even realize that Barbarossa 2 is already underway, but that the Panzer divisions and 2 million German regulars have been replaced with high-powered computers, covert ops, color-coded revolutions, currency crises, capital flight, cyber attacks and relentless propaganda. That’s 4th Generation (4-G) warfare in a nutshell. And, guess what? The US attack on the ruble has shown that it is the undisputed master of this new kind of warfare. More important, Washington has just prevailed in a battle that could prove to be a critical turning point if Putin doesn’t get his act together and retaliate.

Retaliate?!?

You mean nukes?

Heck no. But, by the same token, you can’t expect to win a confrontation with the US by rerouting gas pipelines to Turkey or by forming stronger coalitions with other BRICS countries or by ditching the dollar. Because none of that stuff makes a damn bit of difference when your currency is in the toilet and the US is making every effort to grind your face into the pavement.

Capisce?

There’s an expression is football that goes something like this: The best defense is a good offense. You can’t win by sitting on the sidelines and hoping your team doesn’t lose. You must engage your adversary at every opportunity never giving ground without a fight. And when an opening appears where you can take the advantage, you must act promptly and decisively never looking back and never checking your motives. That’s how you win.

Washington only thinks in terms winning. It expects to win, and will do whatever is necessary to win. In fact, the whole system has been re-geared for one, sole purpose; to beat the holy hell out of anyone who gets out of line. That’s what we do, and we’ve gotten pretty good at it. So, if you want to compete at that level, you’ve got to have “game”. You’re going to have to step up and prove that you can run with the big kids.

And that’s what makes Putin’s next move so important, crucial really. Because whatever he does will send a message to Washington that he’s either up to the challenge or he’s not. Which is why he needs to come out swinging and do something completely unexpected. The element of surprise, that’s the ticket. And we’re not talking about military action either. That just plays to Uncle Sam’s strong hand. Putin doesn’t need another Vietnam. He needs a coherent gameplan. He needs a winning strategy. He needs to takes risks, put it all on the line and roll the freaking dice. You can’t lock horns with the US and play it safe. That’s a losing strategy. This is smash-mouth, steelcage smackdown, a scorched-earth event where winner takes all. You have to be ready to rumble.

Putin needs to think asymmetrically. What would Obama do if he was in Putin’s shoes?

You know what he’d do: He’d send military support to Assad. He’d arm rebel factions in Saudi Arabia, Somalia, Nigeria and elsewhere. He’d strengthen ties with Venezuela, Bolivia, Ecuador providing them with military, intelligence and logistical support. He’d deploy his NGOs and Think Tank cronies to foment revolution wherever leaders refused to follow Moscow’s directives. He would work tirelessly to build the economic, political, media, and military institutions he needed to impose his own self-serving version of snatch-and-grab capitalism on every nation on every continent in the world. That’s what Obama would do, because that’s what his puppetmasters would demand of him.

But Putin must be more discreet, because his resources are more limited. But he still has options, like the markets, for example. Let’s say Putin announces that creditors in the EU (particularly banks) won’t be paid until the ruble recovers. How does that sound?

Putin: “We’re really sorry about the inconvenience, but we won’t be able to make those onerous principle payments for a while. Please accept our humble apologies.” End of statement.

Moments later: Global stocks plunge 350 points on the prospect of a Russian default and its impact on the woefully-undercapitalized EU banking system.

Get the picture? That’s what you call an asymmetrical attack. The idea was even hinted at in a piece on Bloomberg News. Here’s an excerpt from the article:

“Sergei Markov, a pro-Putin academic, wrote in a column on Vzglyad.ru. “Since the reasons for the ruble’s fall are political, the response should be political, too. For example, a law that would ban Russian companies from repaying debts to Western counterparties if the ruble has dropped more than 50 percent in the last year. That will immediately lower the pressure on the ruble, many countries have done this, Malaysia is one example. It’s in great economic shape now.” (Is Russia ready to impose capital controls? Chicago Tribune)

Here’s more background from RT:

“Major banks across Europe, as well as the UK, US, and Japan, are at major risk should the Russian economy default, according to a new study by Capital Economics. The ING Group in the Netherlands, Raiffeisen Bank in Austria, Societe General in France, UniCredit in Italy, and Commerzbank in Germany, have all faced significant losses in the wake of the ruble crisis…

Overall Societe General, known as Rosbank in the Russian market, has the most exposure at US$31 billion, or €25 billion, according to Citigroup Inc. analysts. This is equivalent to 62 percent of the Paris-based bank’s tangible equity, Bloomberg News reported.

Following the drop, Raiffeisen, which has €15 billion at risk in Russia, saw its stocks plummeted more than 10 percent. Raiffeisen also has significant exposure in Ukraine, which is facing a similar currency sell-off as Russia.” (Russia crisis leaves banks around the world exposed by the billions, RT)

So Putin defaults which nudges the EU banking system down the stairwell. So what? What does that prove?

It proves that Russia has the tools to defend itself. It proves that Putin can disrupt the status quo and spread the pain a bit more equitably. “Spreading the pain” is a tool the US uses quite frequently in its dealings with other countries. Maybe Putin should take a bite of that same apple, eh?

Another option would be to implement capital controls to avoid ruble-dollar conversion and further capital flight. The beauty of capital controls is that they take power away from the big money guys who run the world and hand it back to elected officials. Leaders like Putin are then in a position to say, “Hey, we’re going to take a little break from the dollar system for while until we get caught up. I hope you’ll understand our situation.”

Capital controls are an extremely effective of avoiding capital flight and minimizing the impact of a currency crisis. Here’s a short summary of how these measures helped Malaysia muddle through in 1998:

“When the Asian financial crisis hit, Malaysia’s position looked a lot like Russia’s today: It had big foreign reserves and a low short-term debt level, but relatively high general indebtedness if households and corporations were factored in. At first, to bolster the ringgit, Deputy Prime Minister Anwar Ibrahim pushed through a market-based policy with a flexible exchange rate, rising interest rates and cuts in government spending. It didn’t work: Consumption and investment went down, and pessimism prevailed, exerting downward pressure on the exchange rate.

So, in June 1998, Prime Minister Mahathir Mohammad… appointed a different economic point man, Daim Zainuddin. In September, on Daim’s urging, Malaysia introduced capital controls. It banned offshore operations in ringgit and forbade foreign investors to repatriate profits for a year. Analysts at the time were sharply critical of the measures, and Malaysia’s reputation in the global financial markets inevitably suffered.

According to Kaplan and Rodrik, however, the capital controls were ultimately effective. The government was able to lower interest rates, the economy recovered, the controls were relaxed ahead of time, and by May 1999 Malaysia was back on the international capital markets with a $1 billion bond issue.” (Is Russia ready to impose capital controls, Chicago Tribune)

Sure they were effective, but they piss off the slacker class of oligarchs who think the whole system should be centered on their “inalienable right” to move capital from one spot to another so they can rake-off hefty profits at everyone else’s expense. Capital controls push those creeps to the back of the line so the state can do what it needs to do to preserve the failing economy from the attack of speculators. Here’s a clip from a speech Joseph Stiglitz gave in 2014 at the Atlanta Fed’s 2014 Financial Markets Conference. He said:

“When countries do not impose capital controls and allow exchange rates to vary freely, this can give rise to high levels of exchange rate volatility. The consequence can be high levels of economic volatility, imposing great costs on workers and firms throughout the economy. Even if they can lay off some of the risk, there is a cost to doing so. The very existence of this volatility affects the structure of the economy and overall economic performance.”

That sums it up pretty well. Without capital controls, the deep-pocket Wall Street banks and speculators can simply vacuum the money out of an economy leaving the country broken and penniless. This nihilistic decimation of emerging markets via capital flight is what the kleptocracy breezily refers to as “free markets”, the unwavering plundering of civilization to fatten the coffers of the swinish few at the top of the foodchain. That’s got to stop.

Putin needs to put his foot down now; stop the outflow of cash, stop the conversion of rubles to dollars, force investors to recycle their money into the domestic economy, indict the central bank governors and trundle them off to the hoosegow, and reassert the power of the people over the markets. If he doesn’t, then the speculators will continue to peck away until Russia’s reserves are drained-dry and the country is pushed back into another long-term slump. Who wants that?

And don’t think that Putin’s only problem is Washington either, because it isn’t. He’s got an even bigger headache in his own country with the morons who still buy the hogwash that “the market knows best.” These are the fantasists, the corporate toadies, and the fifth columnists, some of whom hold very high office. Here’s a clip I picked up at the Vineyard of the Saker under the heading “Medvedev declares: more of the same”:

(Russian Prime Minister) “Medvedev has just called a government meeting with most of the directors of top Russian corporations and the director of the Russian Central Bank. He immediately announced that he will not introduce any harsh regulatory measures and that he will let the market forces correct the situation. As for the former Minister of Finance, the one so much beloved in the West, Alexei Kudrin, he expressed his full support for the latest increase in interest rates.”

This is lunacy. The US has just turned Russia’s currency into worthless fishwrap, and bonehead Medvedev wants to play nice and return to “business as usual”??

No thanks. Maybe Medvedev wants to be a slave to the market, but I’ll bet Putin is smarter than that.

Putin’s not going to roll over and play dead for these vipers. He’s got to much on the ball for that. He’s going to beat them at their own game, fair and square. He’s going to implement capital controls, restructure the economy away from the west, and aggressively look for ways to deter Washington from spreading its heinous resource war to Central Asia and beyond.

He’s not going to give an inch. You’ll see.


Mike Whitney is a regular columnist for Veracity Voice

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

The Oil Coup

December 20, 2014 by · Leave a Comment 

US-Saudi Subterfuge Send Stocks and Credit Reeling…

U.S. powerbrokers have put the country at risk of another financial crisis to intensify their economic war on Moscow and to move ahead with their plan to “pivot to Asia”.

Here’s what’s happening: Washington has persuaded the Saudis to flood the market with oil to push down prices, decimate Russia’s economy, and reduce Moscow’s resistance to further NATO encirclement and the spreading of US military bases across Central Asia. The US-Saudi scheme has slashed oil prices by nearly a half since they hit their peak in June. The sharp decline in prices has burst the bubble in high-yield debt which has increased the turbulence in the credit markets while pushing global equities into a tailspin. Even so, the roiled markets and spreading contagion have not deterred Washington from pursuing its reckless plan, a plan which uses Riyadh’s stooge-regime to prosecute Washington’s global resource war. Here’s a brief summary from an article by F. William Engdahl titled “The Secret Stupid Saudi-US Deal on Syria”:

“The details are emerging of a new secret and quite stupid Saudi-US deal on Syria and the so-called IS. It involves oil and gas control of the entire region and the weakening of Russia and Iran by Saudi Arabian flooding the world market with cheap oil. Details were concluded in the September meeting by US Secretary of State John Kerry and the Saudi King…

..the kingdom of Saudi Arabia, has been flooding the market with deep discounted oil, triggering a price war within OPEC… The Saudis are targeting sales to Asia for the discounts and in particular, its major Asian customer, China where it is reportedly offering its crude for a mere $50 to $60 a barrel rather than the earlier price of around $100. That Saudi financial discounting operation in turn is by all appearance being coordinated with a US Treasury financial warfare operation, via its Office of Terrorism and Financial Intelligence, in cooperation with a handful of inside players on Wall Street who control oil derivatives trading. The result is a market panic that is gaining momentum daily. China is quite happy to buy the cheap oil, but her close allies, Russia and Iran, are being hit severely…

According to Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center, the dramatic price collapse is being deliberately caused by the Saudis, OPEC’s largest producer. The public reason claimed is to gain new markets in a global market of weakening oil demand. The real reason, according to Abanmy, is to put pressure on Iran on her nuclear program, and on Russia to end her support for Bashar al-Assad in Syria….More than 50% of Russian state revenue comes from its export sales of oil and gas. The US-Saudi oil price manipulation is aimed at destabilizing several strong opponents of US globalist policies. Targets include Iran and Syria, both allies of Russia in opposing a US sole Superpower. The principal target, however, is Putin’s Russia, the single greatest threat today to that Superpower hegemony. (The Secret Stupid Saudi-US Deal on Syria, F. William Engdahl, BFP)

The US must achieve its objectives in Central Asia or forfeit its top-spot as the world’s only superpower. This is why US policymakers have embarked on such a risky venture. There’s simply no other way to sustain the status quo which allows the US to impose its own coercive dollar system on the world, a system in which the US exchanges paper currency produced-at-will by the Central Bank for valuable raw materials, manufactured products and hard labor. Washington is prepared to defend this extortionist petrodollar recycling system to the end, even if it means nuclear war.

How Flooding the Market Adds to Instability

The destructive and destabilizing knock-on effects of this lunatic plan are visible everywhere. Plummeting oil prices are making it harder for energy companies to get the funding they need to roll over their debt or maintain current operations. Companies borrow based on the size of their reserves, but when prices tumble by nearly 50 percent–as they have in the last six months– the value of those reserves falls sharply which cuts off access to the market leaving CEO’s with the dismal prospect of either selling assets at firesale prices or facing default. If the problem could be contained within the sector, there’d be no reason for concern. But what worries Wall Street is that a surge in energy company failures could ripple through the financial system and wallop the banks. Despite six years of zero rates and monetary easing, the nation’s biggest banks are still perilously undercapitalized, which means that a wave of unexpected bankruptcies could be all it takes to collapse the weaker institutions and tip the system back into crisis. Here’s an excerpt from a post at Automatic Earth titled “Will Oil Kill the Zombies?”:

“If prices fall any further, it would seem that most of the entire shale edifice must of necessity crumble to the ground. And that will cause an absolute earthquake in the financial world, because someone supplied the loans the whole thing leans on. An enormous amount of investors have been chasing high yield, including many institutional investors, and they’re about to get burned something bad….. if oil keeps going the way it has lately, the Fed may instead have to think about bailing out the big Wall Street banks once again.” (Will Oil Kill the Zombies?, Raúl Ilargi Meijer, Automatic Earth)

The problem with falling oil prices is not just mounting deflation or droopy profits; it’s the fact that every part of the industry–exploration, development and production — is propped atop a mountain of red ink (junk bonds). When that debt can no longer be serviced or increased, then the primary lenders (counterparties and financial institutions) sustain heavy losses which domino through the entire system. Take a look at this from Marketwatch:

“There’s ‘no question’ that for energy companies with a riskier debt profile the high-yield debt market “is essentially shut down at this stage,” and there are signs that further pain could hit the sector, ” senior fixed-income strategist at U.S. Bank Wealth Management, Dan Heckman told Marketwatch. “We are getting to the point that it is becoming very concerning.” (Marketwatch)

When energy companies lose access to the market and are unable to borrow at low rates, it’s only a matter of time before they trundle off to extinction.

On Friday, the International Energy Agency (IEA) renewed pressure on prices by lowering its estimate for global demand for oil in 2015. The announcement immediately sent stocks into a nosedive. The Dow Jones Industrial Average (DJIA) lost 315 points by the end of the day, while, according to Bloomberg, more than “$1 trillion was erased from the value of global equities in the week”.

The world is awash in cheap petroleum which is wreaking havoc on domestic shale producers that need prices of roughly $70 per barrel to break-even. With West Texas Intermediate (WTI) presently headed south of 60 bucks–and no bottom in sight–these smaller producers are sure to get clobbered. Pension funds, private equity, banks, and other investors who gambled on these dodgy energy-related junk bonds are going to get their heads handed to them in the months ahead.

The troubles in the oil patch are mainly attributable to the Fed’s easy money policies. By dropping rates to zero and flooding the markets with liquidity, the Fed made it possible for every Tom, Dick and Harry to borrow in the bond market regardless of the quality of the debt. No one figured that the bottom would drop out leaving an entire sector high and dry. Everyone thought the all-powerful Fed could print its way out of any mess. After last week’s bloodbath, however, they’re not nearly as confident. Here’s how Bloomberg sums it up:

“The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt….Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations…

The Fed’s decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.” (Fed Bubble Bursts in $550 Billion of Energy Debt: Credit Markets, Bloomberg)

The Fed’s role in this debacle couldn’t be clearer. Investors piled into these dodgy debt-instruments because they thought Bernanke had their back and would intervene at the first sign of trouble. Now that the bubble has burst and the losses are piling up, the Fed is nowhere to be seen.

In the last week, falling oil prices have started to impact the credit markets where investors are ditching debt on anything that looks at all shaky. The signs of contagion are already apparent and likely to get worse. Investors fear that if they don’t hit the “sell” button now, they won’t be able to find a buyer later. In other words, liquidity is drying up fast which is accelerating the rate of decline. Naturally, this has affected US Treasuries which are still seen as “risk free”. As investors increasingly load up on USTs, long-term yields have been pounded into the ground like a tentpeg. As of Friday, the benchmark 10-year Treasury checked in at a miniscule 2.08 percent, the kind of reading one would expect in the middle of a Depression.

The Saudi-led insurgency has reversed the direction of the market, put global stocks into a nosedive and triggered a panic in the credit markets. And while the financial system edges closer to a full-blown crisis every day, policymakers in Washington have remained resolutely silent on the issue, never uttering as much as a peep of protest for a Saudi policy that can only be described as a deliberate act of financial terrorism.

Why is that? Why have Obama and Co. kept their mouths shut while oil prices have plunged, domestic industries have been demolished, and stocks have gone off a cliff? Could it be that they’re actually in cahoots with the Saudis and that it’s all a big game designed to annihilate enemies of the glorious New World Order?

It certainly looks that way.


Mike Whitney is a regular columnist for Veracity Voice

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

Mystery, Fear, And Confusion

December 14, 2014 by · 2 Comments 

The Product of The American Government…

I have vowed not to watch programs on TV Channels that select the majority of their participants from two particular racial minorities. C-Span has been guilty of that distortion and I have purposely neglected it as a result.  However, I like Brian Lamb’s interviews when he is not stuck with the anointed races.  Recently he interviewed James Risen http://www.c-span.org/video/?322401-1/qa-james-risen , a New York Times writer and the author of a couple of investigative books that have gotten him indicted by our tyrannical government.

It is difficult to comprehend how in about two centuries the United States of America has evolved from a new nation whose leaders advised that it not become involved with foreign intrigues to a nation that seeks to dominate the entire world.

There were clues.  Even in its infancy it was avaricious.  Expansion seemed to be in its blood.  It captured the land from the Atlantic to the Pacific and garnered the Far Eastern island of the Philippines, Cuba in the Caribbean, and Alaska to our North.  It imposed its will on South American nations and fought several wars including one with our Southern neighbor, Mexico.  It even tried to annex Canada.

Following the devious imposition of the Federal Reserve System it flowered into international leadership.  Wars became a means for gaining control over other nations and no longer had anything to do with the nation’s welfare.  From that time on a mysterious power seemed to have hand on the rudder of the America ship.  The League of Nations, founded after WWI, was unable to gain widespread support but following WWII the United Nations, a second similar organization, emerged and has been working behind the scenes to gain control over various entities within nations around the world.

Suddenly, after the mysterious 9/11 event, United States separated itself from the United Nations and became the leader of an operation called the “War on Terror”.  The War on Terror did not specify an enemy; the dictionary defines terror as a “state of intense fear”.  From that definition it appears that the United States has embarked on a mission to eliminate fear by bombing, invading, and tyrannizing a series of Middle Eastern nations most of which are Muslim and enemies of neo-Israel.

While we fight the endless war on terror Muslims have been encouraged to immigrate into Western nation in both Europe and America.  Allowing the so-called enemy to infiltrate the adversary’s borders is a seeming contradiction in intent and has caused serious conflicts.

Near the end of the interview with Brian Lamb, Risen tells Lamb that the purpose of the War on Terror is mysterious and that many things are hard to understand.  He says it is difficult to determine what is real and what is fiction.  Lamb made no comment and did not pursue the subject.

Risen recounted a story about Senator Ron Wyden who for several months spoke of some injurious action that would upset the American people but he could not say what it was.  Only after Edward Snowden’s NSA revelation did the Senator admit that this was the thing he had not mentioned.  Risen used this to illustrate the lack of oversight that surrounds our intelligence agencies and the war in general.

If James Risen with his extensive investigation cannot understand the war on terror it is not wonder that United States citizens neither understand it nor pay much attention it.  Life goes on as if continuous war is normal. Trillions of dollars of debt accumulate to the account of American citizens and neither congress nor the people, nor the press mounts a substantial challenge.

This mysterious war on terror has caused the structure of a police state to rise over freedom.  Most of the laws enacted to protect the people from the government have been abolished and the structure that has been erected can be activated at will.

Risen has challenged a tiny part of the monster.  He seeks freedom of the press as indispensable for the maintenance of a free nation.  He is not challenging the entire series of questionable events that have brought us to this point nor the pervasive press control that has saturated all of our news outlets. The destruction of the World Trade Centers has never been properly investigated.  The evidence available defies the government’s story but our timid elected officials fail to provide a challenge. The mysterious power that seems to control us has frightened everyone and the highly visible, small, though brave, challenge Risen has mounted is a drop in the bucket.

As airplanes fly over our cities and create long slender clouds citizens ignore them.  The mention of this startling operation brings a hush to the conversation.  People know that a mysterious force is operating and are afraid of it.  In previous times a shocking appearance of this kind would have brought a crowd to government offices demanding to know what was going on.  Today, like frogs in the boiling pot we are accepting more and more serious infractions without protest.

The Bush family has been pawns in the quest for world tyranny for several generations.  In the coming national election Jeb Bush, the former Governor of Florida, is positioning himself to be the Republican nominee.  The American people will not be given a choice.  Jeb Bush affixed his signature to the Project for the New American Century (PNAC). https://en.wikipedia.org/wiki/Project_for_the_New_American_Century  This organization bears substantial responsibility for the war on terror.  It signers and crafters were stained with the philosophies of Leon Trotsky.

As a presidential election looms the press and media begin to give the pre-selected candidates free publicity.  Widely hated former President George W. Bush wrote a book and is now seen on TV doing light and jolly sessions with former President William J. Clinton.  Though Jeb Bush is not shown the publicity is designed to create a favorable impression of the candidate in the minds of the public.  It is effective.  One need only look to the inappropriate candidacy of President Barak Obama to understand the ability of the press and media to manipulate the electorate.

Any candidate for President of the United States that sincerely means to act in the best interests of the people of the United States will be purposely marginalized by the press and media.  Both Congressman Dr. Ron Paul and Patrick Buchanan had to fight a negative press.  Though these candidates had a sizeable following their platform was never given serious coverage.  They were lucky to be allowed to join the presidential debates and when they did they were marginalized and were made to look foolish.

The next President of the United States of America will continue the policies set in place by President George W. Bush and President Barak Obama.  Massive debt will continue to accumulate, perpetual war will continue, moral deterioration will progress, the presidency will increase in power, and freedom will continue to deteriorate.  It is in the best interests of the world power seekers to maintain peace but that does not mean the riots will not continue.  Trotskyites in the press and media view riots as an opportunity to consolidate power.

We have forgotten the Creator, the Triune Christian God who was the power behind the founding of our nation.  We have forsaken the humility of the creature and usurped the station of the Creator, a position we are ill equipped to occupy.  We are created beings, unable to govern ourselves; the confusion of cognitive dissonance is a result.   Peace tarries until we begin to allow the Master to assume His role of King and Ruler.


Al Cronkrite is a writer living in Florida, reach him at: trueword13@yahoo.com

Al Cronkrite is a regular columnist for Veracity Voice

Will Falling Oil Prices Crash The Markets?

December 14, 2014 by · Leave a Comment 

Shale Leads The Way…

Crude oil prices dipped lower on Wednesday pushing down yields on US Treasuries and sending stocks down sharply. The 30-year UST slipped to a Depression era 2.83 percent while all three major US indices plunged into the red. The Dow Jones Industrial Average (DJIA) led the retreat losing a hefty 268 points before the session ended. The proximate cause of Wednesday’s bloodbath was news that OPEC had reduced its estimate of how much oil it would need to produce in 2015 to meet weakening global demand. According to USA Today:

“OPEC lowered its projection for 2015 production to 28.9 million barrels a day, or about 300,000 fewer than previously forecast, and a 12-year low…. That’s about 1.15 million barrels a day less than the cartel pumped last month, when OPEC left unchanged its 30 million barrel daily production quota…

The steep decline in crude price raises fears that small exploration and production companies could go out of business if the prices fall too low. And that, in turn, could cause turmoil among those who are lending to them: Junk-bond purchasers and smaller banks.” (USA Today)

Lower oil prices do not necessarily boost consumption or strengthen growth. Quite the contrary. Weaker demand is a sign that deflationary pressures are building and stagnation is becoming more entrenched. Also, the 42 percent price-drop in benchmark U.S. crude since its peak in June, is pushing highly-leveraged energy companies closer to the brink. If these companies cannot roll over their debts, (due to the lower prices) then many will default which will negatively impact the broader market. Here’s a brief summary from analyst Wolf Richter:

“The price of oil has plunged …and junk bonds in the US energy sector are getting hammered, after a phenomenal boom that peaked this year. Energy companies sold $50 billion in junk bonds through October, 14% of all junk bonds issued! But junk-rated energy companies trying to raise new money to service old debt or to fund costly fracking or off-shore drilling operations are suddenly hitting resistance.

And the erstwhile booming leveraged loans, the ugly sisters of junk bonds, are causing the Fed to have conniptions. Even Fed Chair Yellen singled them out because they involve banks and represent risks to the financial system. Regulators are investigating them and are trying to curtail them through “macroprudential” means, such as cracking down on banks, rather than through monetary means, such as raising rates. And what the Fed has been worrying about is already happening in the energy sector: leveraged loans are getting mauled. And it’s just the beginning…

“If oil can stabilize, the scope for contagion is limited,” Edward Marrinan, macro credit strategist at RBS Securities, told Bloomberg. “But if we see a further fall in prices, there will have to be a reaction in the broader market as problems will spill out and more segments of the high-yield space will feel the pain.”…Unless a miracle happens that will goose the price of oil pronto, there will be defaults, and they will reverberate beyond the oil patch.” (Oil and Gas Bloodbath Spreads to Junk Bonds, Leveraged Loans. Defaults Next, Wolf Ricter, Wolf Street)

The Fed’s low rates and QE pushed down yields on corporate debt as investors gorged on junk thinking the Fed “had their back”. That made it easier for fly-by-night energy companies to borrow tons of money at historic low rates even though their business model might have been pretty shaky. Now that oil is cratering, investors are getting skittish which has pushed up rates making it harder for companies to refinance their debtload. That means a number of these companies going to go bust, which will create losses for the investors and pension funds that bought their debt in the form of financially-engineered products. The question is, is there enough of this financially-engineered gunk piled up on bank balance sheets to start the dominoes tumbling through the system like they did in 2008?

That question was partially answered on Wednesday following OPEC’s dismal forecast which roiled stocks and send yields on risk-free US Treasuries into a nosedive. Investors ditched their stocks in a mad dash for the exits thinking that the worst is yet to come. USTs provide a haven for nervous investors looking for a safe place to hunker down while the storm passes.

Economist Jack Rasmus has an excellent piece at Counterpunch which explains why investors are so jittery. Here’s a clip from his article titled “The Economic Consequences of Global Oil Deflation”:

“Oil deflation may lead to widespread bankruptcies and defaults for various non-financial companies, which will in turn precipitate financial instability events in banks tied to those companies. The collapse of financial assets associated with oil could also have a further ‘chain effect’ on other forms of financial assets, thus spreading the financial instability to other credit markets.” (The Economic Consequences of Global Oil Deflation, Jack Rasmus, CounterPunch)

Falling oil prices typically drag other commodities prices down with them. This, in turn, hurts emerging markets that depend heavily on the sale of raw materials. Already these fragile economies are showing signs of stress from rising inflation and capital flight. In a country like Japan, however, one might think the effect would be positive since the lower yen has made imported oil more expensive. But that’s not the case. Falling oil prices increase deflationary pressures forcing the Bank of Japan to implement more extreme measures to reverse the trend and try to stimulate growth. What new and destabilizing policy will Japan’s Central Bank employ in its effort to dig its way out of recession? And the same question can be asked of Europe too, which has already endured three bouts of recession in the last five years. Here’s Rasmus again on oil deflation and global financial instability:

“Oil is not only a physical commodity bought, sold and traded on global markets; it has also become an important financial asset since the USA and the world began liberalized trading of oil commodity futures…

Just as declines in oil spills over to declines of other physical commodities…price deflation can also ‘spill over’ to other financial assets, causing their decline as well, in a ‘chain like’ effect.

That chain like effect is not dissimilar to what happened with the housing crash in 2006-08. At that time the deep contraction in the global housing sector ( a physical asset) not only ‘spilled over’ to other sectors of the real economy, but to mortgage bonds…and derivatives based upon those bonds, also crashed. The effect was to ‘spill over’ to other forms of financial assets that set off a chain reaction of financial asset deflation.

The same ‘financial asset chain effect’ could arise if oil prices continued to decline below USD$60 a barrel. That would represent a nearly 50 percent deflation in oil prices that could potentially set in motion a more generalized global financial instability event, possibly associated with a collapse of the corporate junk bond market in the USA that has fueled much of USA shale production.” (CounterPunch)

This is precisely the scenario we think will unfold in the months ahead. What Rasmus is talking about is “contagion”, the lethal spill-over from one asset class to another due to deteriorating conditions in the financial markets and too much leverage. When debts can no longer be serviced, defaults follow sucking liquidity from the system which leads to a sudden (and excruciating) repricing event. Rasmus believes that a sharp cutback in Shale gas and oil production could ignite a crash in junk bonds that will pave the way for more bank closures. Here’s what he says:

“The shake out in Shale that is coming will not occur smoothly. It will mean widespread business defaults in the sector. And since much of the drilling has been financed with risky high yield corporate ‘junk’ bonds, the shale shake out could translate into a financial crash of the US corporate junk bond market, which is now very over-extended, leading to regional bank busts in turn.” (CP)

The financial markets are a big bubble just waiting to burst. If Shale doesn’t do the trick, then something else will. It’s just a matter of time.

Rasmus also believes that the current oil-glut is politically motivated. Washington’s powerbrokers persuaded the Saudis to flood the market with petroleum to push down prices and crush oil-dependent Moscow. The US wants a weak and divided Russia that will comply with US plans to increase its military bases in Central Asia and allow NATO to be deployed to its western borders. Here’s Rasmus again:

“Saudi Arabia and its neocon friends in the USA are targeting both Iran and Russia with their new policy of driving down the price of oil. The impact of oil deflation is already severely affecting the Russian and Iranian economies. In other words, this policy of promoting global oil price deflation finds favor with significant political interests in the USA, who want to generate a deeper disruption of Russian and Iranian economies for reasons of global political objectives. It will not be the first time that oil is used as a global political weapon, nor the last.” (CP)

Washington’s strategy is seriously risky. There’s a good chance the plan could backfire and send stocks into freefall wiping out trillions in a flash. Then all the Fed’s work would amount to nothing.

Karma’s a bitch.


Mike Whitney is a regular columnist for Veracity Voice

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

There Are Four Sides To The Ferguson Mess

December 6, 2014 by · 3 Comments 

Press, Cops, Blacks, Whites…

FIRST, it is a difficult job to be a policeman in the USA.  The scourge of racial diversity has created tensions and patterns of behavior that can quickly become violent and the loss of a solid moral fiber has further tangled the job.

As the social structure of our nation deteriorates policemen are faced with a citizenry that often defies their authority and efforts to react to confrontations with conciliation no longer bring a peaceful solution. Youth gangs in Inner-city neighborhoods can quickly overpower individual policemen and in many cities there are areas that firefighters and policemen try to avoid.

This loss of social restraint made it impossible for officers to address lawless behavior without fear for their own safety.  Fear is not only from the offending individual but also from his social peers.  A result of this cultural deterioration is a tendency for policemen to shoot first and ask questions later.

Overreaction to pervasive fear has resulted in dictatorial policies that actually contribute to the problem.  From peacekeepers and guardians of social freedom policemen have become a defense group of belligerent individuals who are armed and often dangerous.  They arrogantly demand instant submission often from innocent citizens thereby destroying the freedom they are vested to support.

Surprise military style raids on homes and apartments that sometimes go terribly wrong are an abomination.  Handcuffing every suspect including women and children is a cowardly procedure that demeans citizens and tarnishes the reputation of law enforcement.  Police squad cars regularly endanger the public by needlessly chasing suspects when recording a license number and waiting would be much more appropriate.  Presenting the public with vigilante justice does not enhance their reputation.

Policemen are hired to be servants of the people but they have become a clannish group that seeks their own protection at the expense of those they are hired to protect. When a single policeman is killed in the line of duty the funeral is a public event with hundreds of “their own” coming from miles around.

Local policemen are the main deterrent to social anarchy and when their ability to create order is lost, the chaos of Ferguson, Missouri is a result.  With this critical understanding the courts support the police in spite of flagrant injustice.

George Zimmerman, not a policeman, was indicted; Darren Wilson, a member of the elite class, was not indicted!

Read an excellent article on police exceptionalism here.

SECOND, the social perspective of Black Americans has been consistently maligned creating a sense of oppression and entitlement that is both unrealistic and potential incendiary.  Freedom is not enough for many Black leaders.  They have made a profession of blaming society for Black problems fabricating a biased picture that fosters indolence, resentment and animosity.   Blacks have a crime rate that is seven or more times higher than White Americans.  This high crime rate makes them a target for suspicion.

Welfare neighborhoods with absent fathers and mothers supported by the government with checks proportional to the number of their illegitimate children are fertile beds for rebellion, disobedience, crime, drugs, and anarchy.

White policemen in Black neighborhoods face a complex problem; pervasive anger and resentment and excessively high crime rates.  The result is suspicion and harassment of all young Blacks.

There are encouraging signs in Black communities.  Some Black families are functioning properly with fathers heading the home and children being disciplined and growing in obedience and productivity.  Some Blacks are tiring of the demeaning effect of welfare and are urging their peers to make it on their own.

A realistic video here.

THIRD, The Caucasian European culture that founded America has been incrementally disenfranchised and replaced by a polyglot of foreign elements that vie for power.  A slow theft of the fabric of our society has been accomplished with guile that exceeds the “Trojan Horse”.  Little insults here and there followed by major incursions now and again have resulted in a transfer of power from the hands of the original inhabitants to those of interlopers with devious intentions. This transfer is from top down and has been sustained by government officials elected by the citizens who incur the loss.

The majority of White Americans want to be left alone to work, provide for their families, and enjoy some recreation.  They are nominally religious and overtly law abiding.  As their neighborhoods have deteriorated into crime and degradation they have moved to other neighborhoods.  They have occasionally staged minor demonstrations but White riots are almost nonexistent.

FOURTH, The American press and Media consistently and with malice aforethought distorts the news.   Both the Michael Brown and Trayvon Martin events would have been judged on a local level if the incidents had not been intentionally corrupted and nationalized.  Scarce as it is White on Black crime is highly publicized while much higher Black on White crime is regularly ignored.

The Trotskyite background that emanates from the lofty towers of the press and media covets the centralization of power that results from the animosity they create. Widespread rioting might bring Martial Law.   Fraudulent coverage of events like the police encounters with Martin and Brown designed to stir up violent, unbridled emotional reactions in the Black community is a criminal offense, and those that are responsible should be indicted and prosecuted.

Though both were found innocent, the press and media has destroyed the lives of both George Zimmerman and Darren Wilson.  Zimmerman has been divorced.  His reputation has been tainted and he is hopelessly in debt.  Now Darren Wilson has resigned from the Ferguson Police force.  Misrepresenting and censoring the news, which is a daily occurrence in America, creates severe social problems.

Pernicious efforts to create discord make the Black community needlessly angry and angry people regularly distort reality.  Blacks do not understand that they are being used as pawns in an effort to weaken the culture.  Lies are interwoven into our news.  When we began to forsake justice and replace it with human sentimentality we created a pit of confusion with walls that resist escape.

Infecting problems are so numerous in American society that solutions have become difficult.  Press and media management has consistently supported what we used to call sin and when the moral fiber of a society is lost problems fester.

  1. J. Rushdoony puts the truth into one short paragraph: “For a man to be guilty requires that he be responsible to a higher being. For a law or justice to prevail over all men, there must again be a God over all.  Having rejected God – (we) –logically rejected both guilt and justice.  If we want justice, we must also accept God.   Our problem today is that our federal and state governments and courts have rejected God.  Therefore, they have rejected justice.  All that is left of the law are empty technicalities.”  (A name was removed and replace with “we”)

We have lost the ability to produce justice.  Our courts no longer seek justice, our policemen no longer understand the meaning of the word; our government has chosen power over justice, and our press and media have supported the whole mess.

God is just; humans are not!


Al Cronkrite is a writer living in Florida, reach him at: trueword13@yahoo.com

Al Cronkrite is a regular columnist for Veracity Voice

Defending Dollar Imperialism

December 6, 2014 by · Leave a Comment 

Ukraine War Driven by Gas-Dollar Link…

“The Fed’s ‘need’ to take on an even more active role as foreigners further slow the purchases of our paper is to put the pedal to the metal on the currency debasement race now being run in the developed world — a race which is speeding us all toward the end of the present currency regime.” Stephanie Pomboy, MacroMavens

“No matter what our Western counterparts tell us, we can see what’s going on. NATO is blatantly building up its forces in Eastern Europe, including the Black Sea and the Baltic Sea areas. Its operational and combat training activities are gaining in scale.” Russian President Vladimir Putin

If there was a way the United States could achieve its long-term strategic objectives and, at the same time, avoid a war with Russia, it would do so. Unfortunately, that is not an option, which is why there’s going to be a clash between the two nuclear-armed adversaries sometime in the near future.

Let me explain: The Obama administration is trying to rebalance US policy in a way that shifts the focus of attention from the Middle East to Asia, which is expected to be the fastest growing region in the coming century. This policy-change is called the “pivot” to Asia. In order to benefit from Asia’s surge of growth, the US plans to beef up its presence on the continent, expand its military bases, strengthen bilateral alliances and trade agreements, and assume the role of regional security kingpin. The not-so-secret purpose of the policy is China “containment”, that is, Washington wants to preserve its position as the world’s only superpower by controlling China’s explosive growth. (The US wants a weak, divided China that will do what it’s told.)

In order to achieve its goals in Asia, the US needs to push NATO further eastward, tighten its encirclement of Russia, and control the flow of oil and gas from east to west. These are the necessary preconditions for establishing US hegemonic rule over the continent. And this is why the Obama administration is so invested in Kiev’s blundering junta-government; it’s because Washington needs Poroshenko’s neo Nazi shock troops to draw Russia into a conflagration in Ukraine that will drain its resources, discredit Putin in the eyes of his EU trading partners, and create the pretext for deploying NATO to Russia’s western border.

The idea that Obama’s proxy army in Ukraine is defending the country’s sovereignty is pure bunkum. What’s going on below the surface is the US is trying to stave off irreversible economic decline and an ever-shrinking share of global GDP through military force. What we’re seeing in Ukraine today, is a 21st century version of the Great Game implemented by political fantasists and Koolaid drinkers who think they can turn the clock back to the post WW2 heyday of the US Empire when the world was America’s oyster. Thankfully, that period is over.

Keep in mind, the glorious US military has spent the last 13 years fighting sheep herders in flip-flops in Afghanistan in a conflict that, at best, could be characterized as a stalemate. And now the White House wants to take on Russia?

Can you appreciate the insanity of the policy?

This is why Secretary of Defense Chuck Hagel was sacked last week, because he wasn’t sufficiently eager to pursue this madcap policy of escalating the wars in Afghanistan, Iraq, Syria and Ukraine. Everyone knows it’s true, the administration hasn’t even tried to deny it. They’d rather stick with foam-at-the-mouth buffoons, like Susan Rice and Samantha Powers, then a decorated veteran who has more credibility and intelligence in his little finger than Obama’s whole National Security team put together.

So now Obama is completely surrounded by rabid warmongering imbeciles, all of whom ascribe to the same fairytale that the US is going to dust-off Russia, remove Assad, redraw the map of the Middle East, control the flow of gas and oil from the ME to markets in the EU, and establish myriad beachheads across Asia where they can keep a tight grip on China’s growth.

Tell me, dear reader, doesn’t that strike you as a bit improbable?

But, of course, the Obama claque think it’s all within their grasp, because, well, because that’s what they’ve been told to think, and because that’s what the US has to do if it wants to maintain its exalted position as the world’s lone superpower when its economic significance in the world is steadily declining. You see, here’s the thing: The exceptional nation is becoming more unexceptional all the time, and that’s what has the political class worried, because they see the handwriting on the wall, and the writing says, “Enjoy it while it lasts, buddy, cuz you ain’t gonna be numero uno much longer.”

And the US has allies in this wacky crusade too, notably Israel and Saudi Arabia. The Saudis have been particularly helpful lately by flooding the market with oil to push down prices and crush the Russian economy. (On Friday, Benchmark crude oil prices plummeted to a four-year low, with Brent crude sinking to $69.11 a barrel.) The Obama administration is using the classic one-two punch of economic sanctions and plunging oil revenues to bully Moscow into withdrawing from Crimea so Washington can move its nuclear arsenal to within spitting distance of Moscow. Here’s a bit of background from the Guardian:

“Think about how the Obama administration sees the state of the world. It wants Tehran to come to heel over its nuclear programme. It wants Vladimir Putin to back off in eastern Ukraine. But after recent experiences in Iraq and Afghanistan, the White House has no desire to put American boots on the ground. Instead, with the help of its Saudi ally, Washington is trying to drive down the oil price by flooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal with.

John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.” (Stakes are high as US plays the oil card against Iran and Russia, Larry Eliot, Guardian)

And here’s more from Salon’s Patrick L. Smith at Salon:

“Less than a week after the Minsk Protocol was signed, Kerry made a little-noted trip to Jeddah to see King Abdullah at his summer residence. When it was reported at all, this was put across as part of Kerry’s campaign to secure Arab support in the fight against the Islamic State.

Stop right there. That is not all there was to the visit, my trustworthy sources tell me. The other half of the visit had to do with Washington’s unabated desire to ruin the Russian economy. To do this, Kerry told the Saudis 1) to raise production and 2) to cut its crude price. Keep in mind these pertinent numbers: The Saudis produce a barrel of oil for less than $30 as break-even in the national budget; the Russians need $105.

Shortly after Kerry’s visit, the Saudis began increasing production, sure enough — by more than 100,000 barrels daily during the rest of September, more apparently to come…

Think about this. Winter is coming, there are serious production outages now in Iraq, Nigeria, Venezuela and Libya, other OPEC members are screaming for relief, and the Saudis make back-to-back moves certain to push falling prices still lower? You do the math, with Kerry’s unreported itinerary in mind, and to help you along I offer this from an extremely well-positioned source in the commodities markets: “There are very big hands pushing oil into global supply now,” this source wrote in an e-mail note the other day.” (What Really Happened in Beijing: Putin, Obama, Xi And The Back Story The Media Won’t Tell You, Patrick L. Smith, Salon)

The Obama team managed to persuade our good buddies the Saudis to flood the market with oil, drive down prices, and put the Russian economy into a nosedive. At the same time, the US has intensified its economic sanctions, done everything in its power to sabotage Gazprom’s South Stream pipeline (that would bypass Ukraine and deliver natural gas to Europe via a southern route), and cajole the Ukrainian parliament into auctioning off 49 percent of the leasing rights and underground storage facilities to privately-owned foreign corporations.

How do you like that? So the US has launched a full-blown economic war against Russia that’s been completely omitted in the western media. Are you surprised?

Washington is determined to block further Russo-EU economic integration in order to collapse the Russian economy and put foreign capital in control of regional energy distribution. It’s all about the pivot. The big money guys figure the US has to pivot to Asia to be a player in the next century. All of these unprovoked attacks on Moscow are based on that one lunatic strategy.

But aren’t people in the EU going to be angry when they can’t get the energy they need (at the prices they want) to run their businesses and heat their homes?

Washington doesn’t think so. Washington thinks its allies in the Middle East can meet the EU’s energy needs without any difficulty. Check out this clip from an article by analyst F. William Engdahl:

“…details are emerging of a new secret and quite stupid Saudi-US deal on Syria and the so-called IS. It involves oil and gas control of the entire region and the weakening of Russia and Iran by Saudi Arabian flooding the world market with cheap oil. ….

On September 11, US Secretary of State Kerry met Saudi King Abdullah at his palace on the Red Sea. The King invited former head of Saudi intelligence, Prince Bandar to attend. There a deal was hammered out which saw Saudi support for the Syrian airstrikes against ISIS on condition Washington backed the Saudis in toppling Assad, a firm ally of Russia and de facto of Iran and an obstacle to Saudi and UAE plans to control the emerging EU natural gas market and destroy Russia’s lucrative EU trade. A report in the Wall Street Journal noted there had been “months of behind-the-scenes work by the US and Arab leaders, who agreed on the need to cooperate against Islamic State, but not how or when.

The process gave the Saudis leverage to extract a fresh US commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority.”
(The Secret Stupid Saudi-US Deal on Syria, F. William Engdahl, BFP)

So the wars in Ukraine and Syria are not really separate conflicts at all. They’re both part of the same global resource war the US has been prosecuting for the last decade and a half. The US plans to cut off the flow of Russian gas and replace it with gas from Qatar which will flow through Syria and onto the EU market after Assad is toppled.

Here’s what’s going on: Syria’s troubles began shortly after it announced that it was going to be part of an “Islamic pipeline” that would transfer natural gas from the South Pars gas field off the coast of Iran across Iraq and Syria, eventually connecting to Greece and the lucrative EU market. According to author Dmitri Minin:

“A gas pipeline from Iran would be highly profitable for Syria. Europe would gain from it as well, but clearly someone in the West didn’t like it. The West’s gas-supplying allies in the Persian Gulf weren’t happy with it either, nor was would-be no. 1 gas transporter Turkey, as it would then be out of the game.” (The Geopolitics of Gas and the Syrian Crisis: Syrian “Opposition” Armed to Thwart Construction of Iran-Iraq-Syria Gas Pipeline, Dmitri Minin, Global Research)

Two months after Assad signed the deal with Iraq and Iran, the rebellion broke out in Syria. That’s quite a coincidence, don’t you think? Funny how frequently those kinds of things happen when foreign leaders don’t march to Washington’s tune.

Here’s more from Minin:

“Qatar is doing all it can to thwart the construction of the pipeline, including arming the opposition fighters in Syria, many of whom come from Saudi Arabia, Pakistan and Libya…

The Arabic newspaper Al-Akhbar cites information according to which there is a plan approved by the U.S. government to create a new pipeline for transporting gas from Qatar to Europe involving Turkey and Israel…

This new pipeline is to begin in Qatar, cross Saudi territory and then the territory of Jordan, thus bypassing Shiite Iraq, and reach Syria. Near Homs the pipeline is to branch in three directions: to Latakia, Tripoli in northern Lebanon, and Turkey. Homs, where there are also hydrocarbon reserves, is the project’s main crossroads, and it is not surprising… that the fiercest fighting is taking place. Here the fate of Syria is being decided. The parts of Syrian territory where detachments of rebels are operating with the support of the U.S., Qatar and Turkey, that is, the north, Homs and the environs of Damascus, coincide with the route that the pipeline is to follow to Turkey and Tripoli, Lebanon. A comparison of a map of armed hostilities and a map of the Qatar pipeline route indicates a link between armed activities and the desire to control these Syrian territories. Qatar’s allies are trying to accomplish three goals: to break Russia’s gas monopoly in Europe; to free Turkey from its dependence on Iranian gas; and to give Israel the chance to export its gas to Europe by land at less cost.”

How do you like that; another coincidence: “The fiercest fighting (in Syria) is taking place” where there’s massive “hydrocarbon reserves” and along the planned pipeline route.

So the conflict in Syria isn’t really about terrorism at all. It’s about natural gas, competing pipelines and access to markets in the EU. It’s about money and power. The whole ISIS-thing is a big hoax to conceal what’s really going on, which is a global war for resources, more blood for oil.

But how does the US benefit from all of this, after all, won’t the gas revenues go to Qatar and the transit countries rather than the US?

Yep, they sure will. But the gas will also be denominated in dollars which will shore up demand for USDs thus perpetuating the petrodollar recycling system which creates a vast market for US debt and which helps to keep US stocks and bonds in the nosebleed section. And that’s what this is all about, preserving dollar supremacy by forcing nations to hold excessive amounts of USDs to use in their energy transactions and to service their dollar-denominated debts.

As long as Washington can control the world’s energy supplies and force the world to trade in dollars, it can spend well in excess of what it produces and not be held to account. It’s like having a credit card you never have to pay off.

That’s a racket Uncle Sam is prepared to defend with everything he’s got, even nukes.


Mike Whitney is a regular columnist for Veracity Voice

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

Chinese And Japanese Deflationary Economies

November 29, 2014 by · Leave a Comment 

The global economy has just hit the wall. Do not underestimate the significance of the Asian downturn. Japan saw a dramatic rebirth after WWII and China was transformed into an industrial powerhouse from the “Free Trade” debacle. Now that the Central Bankers of the world are turning to Japan and China to keep the financial bubble from blowing, the focus pivots to the East. Pushing on a string is no easy task. Nervously, all eyes have to wonder if more debt will prevent the expected crash.

When the British financial press warns about Spreading deflation across East Asia threatens fresh debt crisis, people should listen.

“Deflation is becoming lodged in all the economic strongholds of East Asia. It is happening faster and going deeper than almost anybody expected just months ago, and is likely to find its way to Europe through currency warfare in short order.

China is in effect strapped to the rocketing dollar through its quasi-peg, increasingly a torture machine. George Magnus from UBS says this cannot continue. “What is happening in the property market is the tip of the iceberg for the whole economy. China will have to resort to monetary reflation over the winter, and I think this will include a lower yuan. We are heading into a currency war,” he said.”

The Economist provides the establishment viewpoint of the latest strategy in Deflation, deflated.

“WHEN people think of a large Asian country on the brink of deflation, they probably have Japan in mind. But China, the biggest of them all, is now skirting close to outright falls in prices across a wide swathe of the economy. Producer prices have been declining for nearly three years and consumer price inflation is mired at its lowest level since 2010.

Deflation is rightly feared by central bankers around the world as a most destructive economic force, making debts more expensive in real terms and leading to a vicious cycle of contraction as consumers delay purchases and companies put off investments. Yet the Chinese central bank has been remarkably laid-back about the downward lilt in prices. The most obvious tool in its kit to arrest the slide would be to cut interest rates, but it has not done so since July 2012; the benchmark one-year lending rate remains lofty at 6%. What explains the central bank’s calm in the face of falling prices, and is it making a big mistake?”

This last assessment demonstrates that when the shift in direction was announced, the financial community jumped on the bandwagon to In Change of Strategy, China Cuts Interest Rate.

“China finally admitted it has a growth problem — and that is a big step to getting the global economy back on track.

In cutting rates, China joins the parade of global policy makers who are stepping up their stimulus efforts to support growth. They are filling a void left by the United States Federal Reserve, which just ended a six-year bond-buying campaign that has kept borrowing costs low and has encouraged spending worldwide.”

The admission that a massive infusion to recapitalize the international system requires a new source to finance the retracting economies is significant. It seems that a tag team effort between China and Japan will hit the banking houses from different directions.

Japan Fires Another Shot in Global Currency War is the analysis from the Wall Street Journal.

“The Bank of Japan 8301.TO -1.63%’s surprise move to increase its asset purchases has sent the yen plummeting, with the dollar passing through ¥110 Friday to trade at highs not seen in six years. This is the mechanism through which Japan will try to restore inflation to its perennially stagnating economy. The BOJ describes its actions in terms of boosting domestic growth and pricing power, but the real way it works is to export deflation to the rest of the world – it has been doing this ever since the yen began an 30% decline versus the dollar once “Abenomics” stimulus measures were first floated in the fall of 2012.”

Japan will play the role of the QE Federal Reserve policy and the Chinese will finally slash their interest rates. Such moves are not taken because the global economies are prospering. Looking for actual growth is like Waiting for Godot.

The mystery that faces all economies is when does deflation become impervious to further stimulus? How many more times can the deficits, imbalances and shortfalls be papered or rolled over before a depression ensues.

Japan is already the poster child for negative growth and with the irrational expenditures that China has spent on ghost cities, their reported growth rates are about as valid as a stock buy recommendation from a Wall Street firm that is shorting their own portfolio.

Looking to the orient to pull the world out of a lethargic corporatist spiral is problematic at best. China slowed growth now reported at 7.3 percent is seen as setting the stage that fuels debt and property bubbles. Yet the balance of trade surpluses that China continues to build up against American consumption from their exports has never benefited economic conditions in the United States.

The Dollar Collapse site asks: Most of the World Panics — Is the US Next?

  • Will stepped-up debt monetization and interest rate reductions succeed where the past batch failed?
  • Can the US remain aloof from the carnage taking place all around it?

As the Asian economies suffer their own version of contraction on the road to a meltdown, who believes that the transnational corporations that have plotted to off shore their production for decades, will ever reverse their strategy and start returning manufacturing back in the US?

Who will buy the ever increasing US Treasury debt if China unwinds? Of course the Federal Reserve will ratchet up and even bigger QE infusion that will result with more zeros to the national debt.

The most effective solution for America is establishing a tax reform that encourages a domestic renaissance and setting tariffs at levels that will reverse the systemic balance of payments deficits. The worldwide deflation has commenced, so start thinking local and not global.


Sartre is the publisher, editor, and writer for Breaking All The Rules. He can be reached at: BATR

Sartre is a regular columnist for Veracity Voice

Trotsky At The IMF

November 27, 2014 by · Leave a Comment 

Does the Name “Strauss-Kahn” Ring a Bell?

The International Monetary Fund has finally admitted that it was wrong to recommend austerity as early as it did in 2010-2011. The IMF now agrees that it should have waited until the US and EU economies were on a sustainable growth-path before advising them to trim their budget deficits and reduce public spending.  According to a report issued by the IMF’s research division, the Independent Evaluation Office (IEO):  “IMF advocacy of fiscal consolidation proved to be premature for major advanced economies, as growth projections turned out to be optimistic…This policy mix was less than fully effective in promoting recovery and exacerbated adverse spillovers.”

Now there’s an understatement.

What’s so disingenuous about the IMF’s apology,  is that the bank knew exactly what the effects of its policy would be, but stuck with its recommendations to reward its constituents.  That’s what really happened. The only reason it’s trying to distance itself from those decisions now, is to make the public think it was all  just a big mistake.

But it wasn’t a mistake. It was deliberate and here’s the chart that proves it:


(Democrats Reap What They Sowed, Rob Urie, CounterPunch)

There it is, six years of policy in one lousy picture. And don’t kid yourself, the IMF played a critical role in this wealth-shifting fiasco. It’s job was to push for less public spending and deeper fiscal cuts while the Central Banks flooded the financial markets with liquidity (QE). The results are obvious, in fact, one of the Fed’s own officials, Andrew Huszar,  admitted that QE was a massive bailout for the rich.  “I’ve come to recognize the program for what it really is,” said Huszar who actually worked on the program, “the greatest backdoor Wall Street bailout of all time.”  There it is, straight from the horse’s mouth.

So now the IMF wants to throw a little dust in everyone’s eyes by making it look like it was a big goof-up by well-meaning but misguided bankers. And the media is helping them by its omissions.

Let me explain: Of the more than 455 articles on Google News covering the IMF’s mea culpa, not one piece refers to the man who was the IMF’s Managing Director at the time in question. Doesn’t that strike you as a bit odd?

Why would the media scrub any mention of Dominique Strauss-Kahn from its coverage? Could it be that (according to NPR):

“The IMF’s managing director wanted to give Greece, Portugal and Ireland the time needed to put their accounts in order, and he also argued for softening the austerity measures associated with the bailouts for those countries.

Greek economists say that under Strauss-Kahn’s leadership, the IMF was a counterbalance to the strict austerity policies favored by northern European leaders. In fact, according to the daily Le Monde, Strauss-Kahn is fond of calling those who argue for tighter austerity “fous furieux,” which roughly translates as “mad men.”

Strauss-Kahn’s view is that shock-therapy measures imposed on Greece and other European countries with sovereign debt crises will lead only to economic recession and severe social unrest.

Several commentators pointed out Monday that at a time of turmoil in the eurozone and division among European leaders, it was the IMF, under Strauss-Kahn’s leadership, that kept the eurozone’s rescue strategy on track.

The Financial Times said that the IMF’s single most important influence in the resolution of the eurozone crisis was political — amid a lack of political leadership, the paper said, the IMF filled a vacuum.
(IMF Chief’s Arrest Renews Euro Debt Crisis Fears, NPR)

Ah-ha! So Strauss-Kahn wasn’t on board with the IMF’s shock doctrine prescription. In fact, he was opposed to it.  So there were voices for sanity within the IMF, they just didn’t prevail in the policy debate.

But why would that be, after all, Strauss-Kahn was the IMF’s Managing Director, his views should have carried greater weight than anyone else’s, right?

Right. Except DSK got the ax for a sexual encounter at New York’s ritzy Sofitel Hotel. So the changes he had in mind never took place, which means that the distribution of wealth continued to flow upwards just like the moneybags constituents of the IMF had hoped for.

Funny how that works, isn’t it? Funny how it’s always the Elliot Spitzers, and the Scott Ritters, and the Dominique Strauss-Kahn’s who get nailed for their dalliances, but the big Wall Street guys never get caught.
Why is that?

The fact is, Strauss-Kahn was off the reservation and no longer supported the policies that the establishment elites who run the IMF wanted to see implemented.  They felt threatened by DSK’s Keynesian approach and wanted to get rid of him. That’s it in a nutshell.

Do you know why the bigwig plutocrats hated DSK?

It had nothing to do with his sexual acrobatics at the Sofitel Hotel. Nobody cares about that shite.   What they were worried about were his plans for the IMF which he laid out in a speech he gave at the Brookings Institution in April 2011, one month before he got the boot. The speech got very little attention at the time, but– for all practical purposes– it was DSK’s swan song.  And, I think you’ll see why.

The experience must have been a real shocker for the gaggle of tycoons and hangers-on who attend these typically-tedious gatherings. Instead of praise for “market discipline”, “labor flexibility” and “fiscal consolidation”, Strauss-Kahn delivered a rousing 30 minute tribute to leftist ideals and wealth-sharing sounding more like a young Leon Trotsky addressing the Forth International than a cold-hearted bureaucrat heading the world’s most notorious loan sharking operation. By the time the speech ended, I’m sure the knives were already being sharped for the wayward Managing Director. To put it bluntly, DSK’s goose was cooked. Here’s a clip from the speech that will help to explain why:

“…The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes”…
Not everyone will agree with the entirety of this statement. But what we have learnt over time is that unemployment and inequality can undermine the very achievements of the market economy, by sowing the seeds of instability…

.. the IMF cannot be indifferent to distribution issues…

Today, we need a similar full force forward response in ensuring that we get the recovery we need. And that means not only a recovery that is sustainable and balanced among countries, but also one that brings employment and fair distribution…

But growth alone is not enough. We need direct labor market policies…

Let me talk briefly about the second lung of the social crisis—inequality…IMF research also shows that sustainable growth over time is associated with a more equal income distribution…

We need policies to reduce inequality, and to ensure a fairer distribution of opportunities and resources. Strong social safety nets combined with progressive taxation can dampen market-driven inequality. Investment in health and education is critical. Collective bargaining rights are important, especially in an environment of stagnating real wages. Social partnership is a useful framework, as it allows both the growth gains and adjustment pains to be shared fairly…

We have also supported a tax on financial activities (and) organized jointly with the ILO … to better understand the policies behind job-creating growth…

Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda. Thank you very much.”   (The Global Jobs Crisis— Sustaining the Recovery through Employment and Equitable Growth, Dominique Strauss-Kahn, Managing Director IMF, April 13, 2011)

Can you imagine the chorus of groans that must have emerged from the crowd when Strauss-Kahn made his pitch for “progressive taxation”, “collective bargaining rights”, “protecting social safety nets”, “direct labor market policies” and  “taxes on financial activities”? And how do you think the crowd reacted when he told them he’d settled on a more enlightened way to distribute the wealth they’d accumulated over a lifetime of insider trading, crooked backroom deals and shady business transactions?

Do you think they liked that idea or do you suppose they lunged for their blood pressure medication before scuttling pell-mell towards the exits?

Let’s face it; Strauss-Kahn was headed in a direction that wasn’t compatible with the interests of the cutthroats who run the IMF. That much is clear. Now whether these same guys concocted the goofy “honey trap” at the Sofitel Hotel, we may never know.  But what we do know is this: If you’re Managing Director of the IMF, you’d better not use your power to champion “distribution” or collective bargaining rights or you’re wind up like Strauss-Kahn, dragged off to the hoosegow in manacles wondering where the hell you went wrong.

DSK was probably done-in by the people who hated his guts. Now they want to polish-up their image by rewriting history.

And, you know, they’re rich enough to pull it off, too.


Mike Whitney is a regular columnist for Veracity Voice

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

G 20 And BRICS Great Schism

November 22, 2014 by · Leave a Comment 

Global trade relationships and agreements are moving in very different directions. The public relations press releases hide the undercurrents that are driving the formations of alternative economic alliances. While the G 20, markets its all inclusive umbrella policy forums, the mere formation of a BRICS counterweight forecasts deep and fundamental differences. So what is really behind the creation of a different approach to the post WWII dominate U.S. lead model? A clue can be found in an attempt to modify the operations and direction of IMF functions.

Announced in the Russian press, BRICS to propose IMF reform at G20 summit, is a pressure attempt to move the center of power away from current synergism.

“At the G20 summit in the Australian city of Brisbane on November 15-16, Russia and other BRICS countries (Brazil, India, China and South Africa) will propose alternative solutions concerning the reform of the International Monetary Fund, involving, in particular, gradual implementation of reforms, Russian G20 Sherpa Svetlana Lukash told reporters.

“The most important thing for us is the still unresolved G20 problem of the IMF reform,” Lukash said. She recalled the U.S. Congress has yet to ratify the 2010 resolution. “Not only does it thwart the process of renewing the IMF in accordance with the current reality where we see a big rise in the role of emerging economies. It also prevents the decisions to double the IMF capital from coming into force,” she said.”

The appearance of maintaining a working relationship among opposing interests may present an assuring PR message, but who really believes that the path to a new cold war is paved with mutual cooperation? Impetus for a parallel financial system is certainly based more on political objective than commerce or economic benefits.

The Washington Post describes What the new bank of BRICS is all about in this manner.

“Heads of state from Brazil, Russia, India, China, and South Africa (the so-called BRICS countries) agreed to establish a New Development Bank (NDB) at their summit meeting. They will have a president (an Indian for the first six years), a Board of Governors Chair (a Russian), a Board of Directors Chair (a Brazilian), and a headquarters (in Shanghai). What is the purpose of this BRICS bank? Why have these countries created it now? And, what implications does it have for the global development-finance landscape?

The “what” is relatively straightforward. The NDB has been given $50 billion in initial capital. As with similar initiatives in other regions (see below), the BRICS bank appears to work on an equal-share voting basis, with each of the five signatories contributing $10 billion. The capital base is to be used to finance infrastructure and “sustainable development” projects in the BRICS countries initially, but other low and middle-income countries will be able buy in and apply for funding. BRICS countries have also created a $100 billion Contingency Reserve Arrangement (CRA), meant to provide additional liquidity protection to member countries during balance of payments problems. The CRA—unlike the pool of contributed capital to the BRICS bank, which is equally shared—is being funded 41 percent by China, 18 percent from Brazil, India, and Russia, and 5 percent from South Africa.”

China’s motivation to participate in BRICS banking is most interesting and revealing. Since it is not absolutely essential for China to be a member of BRICS, Gudrun Wacker, from the German Institute for International and Security Affairs presents this finding in a report, China’s role in G20 / BRICS and Implications, may shed an insight on their reasoning.

“The future of BRICS depends on the future performance of the G7/8 and G20: If the G20 develops into a real coordination mechanism, there might be less Chinese interest in BRICS. The future prospects of BRICS were presented as less promising than those of the G20, since BRICS will not be able to solve global problems. It is not yet clear whether the main deliverable of BRICS will be directed at cooperation among its members or at third countries. While the idea of BRIC as a group was originally picked up by Russia (the invitation to the first summit, as a move toward “extension” of the strategic triangle Russia, China. India?), its members are now all active in certain fields. For China, it is also an important effort to emerge from its isolation (Copenhagen climate summit). Another factor shaping the future of BRICS might be the development of US-China relations: While all interview partners agreed that BRICS does not aim at creating a new, anti-Western world order, it can be seen as a response to the US-led world order.”

The methodology of Mr. Wacker’s research relied upon comments from interviews. Relying on sentiments that BRICS goal is not bent on developing a counterbalance to Western banking hegemony is poppycock. Geopolitical dimensions in international affairs have Russia as the latest bogyman. Any economic analysis that ignores power brokers desperate attempt to shift the causes of a failing world economy onto the backs of enemy nations is flawed.

Also, the notion that major economic transnational corporatists operate with altruism for third world countries is sheer lunacy. All these trade organizations are attempts to position vying interests to settle for a subservient role to a subordinate structure under a global debt creation banking system.

Attempts to scare the populist into believing that Global Warming inaction raises specter of war over climate change are absurd. “At the G20 summit, other nations overrode host Australia’s attempts to keep climate change off the agenda and agreed to call for strong action with the aim of adopting a binding protocol at the Paris conference.” Such initiatives are pure political “PC” orthodoxy and actually diminish prosperity.

The great schism in trade among nations is that some countries are not willing to lie down with diseased parasites. This should not be construed to favor the emergence of the BRICS union as a shining future. However, what it does purport is that the road to the NWO modeling for globalism by entrenched financial elites has produced opposition.

Conflict is the normal human condition, and especially when money is used as a medium of world control and domination is the goal. The G 20 is useless. Breaking the banking monopoly that fosters endless terror and war is the universal objective for the inhabitants of this planet. Another unsavory photo op for world leaders just produces more nausea.


Sartre is the publisher, editor, and writer for Breaking All The Rules. He can be reached at: BATR

Sartre is a regular columnist for Veracity Voice

Globalism Free Trade Immigration Connection

November 21, 2014 by · Leave a Comment 

How is your life going under the Global Empire? If you answer honestly, for non billionaires, the response must reflect disappointment if not immense distress. Middle America stands on the precipice of oblivion. While the recent past decades have shown steep declines in financial security and net wealth, the future looks much more ominous. The link between the shift to an internationalist de-industrialization economy and open border immigration has hit the United States hard. This harsh reality is routinely denied in the financial press, but the social chaos that engulfs society is largely caused by this betrayal mindset. Corporatists are waging war against the American public.

Summing up the battle lines is the quintessential voice of an America First philosophy. Pat Buchanan on Free Trade is a collection of quotations and references that should be a must read for every displaced citizen. And that group includes virtually everyone.

“Good for global business” isn’t necessarily good for US

“Global capitalists have become acolytes of global governance. They wish to see national sovereignty diminished and sanctions abolished. Where yesterday American businesses suffered damage to their good name for selling scrap iron to Japan before Pearl Harbor, today [war materiel is routinely exported] to potentially hostile nations. Once it was true that what was good the Fortune 500 was good for America. That is no longer true, and what is good for America must take precedence.”

Source: “A Republic, Not an Empire,” p.349 , Oct 9, 1999

The most puzzling malady that penetrates the “PC” culture is a fear of confronting the direct consequences of encouraging an invasion of illegal’s into the country. The disconnect that sweeps across national borders is not isolated just to the United States. Western Europe is not only in decay but is on the verge of social and economic collapse.

Demetrios Papademetriou, PhD, Director of the Migration Policy Institute, wrote in his Sep. 2005 Migration Policy Institute essay “The Global Struggle with Illegal Migration: No End in Sight”: How Are Illegal Immigration and Globalization Related?

“For nearly two decades now, capital and the market for goods, services, and workers of many types have weaved an ever more intricate web of global economic and social interdependence… No aspect of this interdependence seems to be more visible to the public of advanced industrial societies than the movement of people. And no part of that movement is proving pricklier to manage effectively, or more difficult for publics to come to terms with, than irregular (also known as unauthorized, undocumented, or illegal) migration…”

Dr. Papademetriou’s assumption that interdependency is the new normal may be supported with the procession of the Trilateral Commission’s “New International Economic Order”. Nonetheless, the destruction of national sovereignty is a price that no country can afford to adopt, much less pay and remain a nation. Interdependency is the death knell of traditional values, autonomous commerce and individual civil liberties. With the ringing of the bell at the NY Stock exchange, the sound of prosperity goes deaf for the populist, while globalist elites extract the last pound of flesh from an intentionally designed consolidation of a Corporatocracy economy.

The fate of the world is at stake if the forces of globalization are left to complete their total domination of monetary and financial control. It is just as important to prevent the next bipartisan arrangement to grant effective amnesty to millions of illegal foreigners, who have shown little interest to assimilate or adopt the heritage and values of our founding principles.

Warren Mass wrote over a year ago in Permanent Amnesty, Temporary Border.

“An important part of regulating legal immigration, in addition to evaluating each prospective immigrant’s ability to become a productive, law-abiding citizen, is to determine how many immigrants the United States is capable of absorbing each year, taking into consideration the impact on our nation’s economy and culture.”

If this standard needs to apply to those who apply for citizenship, by what absurd twist of logic or sanity pertains to President Obama’s intentions of issuing executive orders that are clearly unconstitutional? How insulting it is to hard press citizens, relegated to enduring impoverishment from off shoring livable wage jobs, while awarding effective amnesty to illegals.

Columnist Glenn R. Jackson review of author Kenneth Buchdahl’s book, Dismantling The American Dream: Globalization, Free Trade, immigration, Unemployment, Poverty, Debt, Foreign Dependency hits the mark.

“First and foremost it is good to see the recognition by Buchdahl of American culture as   critical to the building of the American Dream.  As Buchdahl writes the development of a culture is grounded in a unique American personality and intricate system of values and beliefs that is responsible for America’s enviable situation.  And it is that enviable situation that has contributed to creating the forces that are working rapidly, knowingly or not, to dismantle the American Dream.

Dismantling the American Dream chronicles the unintended impact of America’s pop culture belief in globalization as a force for good in our economy and the failure of leadership to recognize that belief gone awry.  America’s political leaders continued belief in free trade and give-away trade deals, in the face of the near deathblow of NAFTA to American manufacturing is but one of the delusions of globalization that Buchdahl lays bare.”

The interjection of cultural aspects may well be the missing link that escapes most chronicles on current events. Documenting the actual results from Free Trade Treaties, should in and of itself win the intellectual argument that economic destruction of Middle America has already happened. Add in the deliberate call for mass migration and social incentives to cross the border has created the latest flood in undocumented aliens.

When Democracy Now asks, Obama & McConnell Pledge Cooperation; Will Fast-Tracking Secretive TPP Trade Deal Top Their Agenda?, and presents Ralph Nader on TPP and the “Unstoppable” Left-Right Anti-Corporate Movement, one has hope that the Buchanan Brigades message is being heard.

With the celebrity coronation that the Democrats are showering on their new favorite daughter, the “Pocahontas Princess”, Elizabeth Warren’s Crusade Against Disastrous “Free Trade” Agreements, is welcomed.

An inquiry was made to NY Senator Charles E. Schumer on the TPA, Trade Priorities Act of 2014 (S.1900). His reply can be read on this link.

An alliance among anti-free trade factions from all ideological camps is necessary to stop the globalist juggernaut. Even if such a coalition could be grown, the likelihood that linkage to the need to stop illegal immigration and opposition to amnesty, would be frosty.

This brings up the opportunity to interject the appeal, WE MUST NOT SURRENDER TO IMMIGRATION AMNESTY, by Frosty Wooldridge. ““Why would any member of Congress who opposes executive amnesty provide President Obama the funds to carry it out? A Republican majority must force congressional Democrats to answer this question through their votes”.

Likewise, why would as covered in the New American essay, Republicans to Obama: We Will Give You Trade Promotion Authority, patriots want to grant “fast track” authority to a President, who is defiant to congressional constitutional separation of powers?

“Fast track authority eventually expired on April 16, 1994, and was not reauthorized by Congress until the passage of the Bipartisan Trade Promotion Authority Act (BPTAA) of 2002. BPTAA reinstated fast track authority renamed as “trade promotion authority” (TPA), which expired in 2007. In 2012, President Obama requested renewal of TPA/fast track authority to complete negotiations for the TPP and TTIP.”

The answer should be apparent that any support of “fast track” or for TPP is a vote bought with globalist control. If it is so obvious that such influence is at play in trade deals, why are so many confused activists not able to see through the “Open Border” fraud and act upon the best interests for American workers and families?

That taboo culture factor, covered in the Buchdahl book explains the blind spot from the Loony Left. A review of a pro immigration site, Open Borders will demonstrate a systemic disconnect from reality. Often Libertarian purists, also fall under the spell of a transcendental fantasy. To their credit, Open Borders presents the concept of CITIZENISM and provides the following its key features.

Citizenism places substantially greater weight on the rights and interests of citizens than non-citizens, though it operates within moral side-constraints.

Citizenism is about current citizens, not about the people who may become citizens as a result of immigration or deportation policy.

Citizenism, as conceived by its original proponent Sailer, is both about the individual ethics of voters and about the responsibilities of elected representatives.

Citizenism is about loyalty, not admiration, toward one’s fellow citizens.

If you understand the destructive nature of corporatist trade agreements that only benefit transnational conglomerates, while poisoning economic commerce for Middle Americans, why would you not oppose the lunacy of unrestrictive mass migration? The imperative moral directive is to protect and defend your own nation, its traditional culture and responsible citizens.

Saving the world is a concept that resides in the sick minds of the Save the Planet Kill Yourself mindset. If they are so devoted to a globalist utopia, the influx of trespassers must be leaving their own homeland in better shape. Just how well is life south of the border doing?


Sartre is the publisher, editor, and writer for Breaking All The Rules. He can be reached at: BATR

Sartre is a regular columnist for Veracity Voice

Matt Taibbi On JPMorgan Chase’s Worst Nightmare

November 12, 2014 by · Leave a Comment 

The attention that Taibbi is receiving for the Rolling Stone essay, The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare, may push forward a serious debate on the systemic corruption that is common knowledge among informed observers of the financial structure. Zero Hedge can always be depended upon to incisively sum up the issue.

“In reality, there is nothing surprising in Matt Taibbi’s latest piece since returning to Rolling Stone from the Intercept, as it tells a story everyone is by now is all too familiar with: a former bank employee (in this case Alayne Fleischmann) who was a worker in a bank’s (in this case JPM) mortgage operations group, where she observed and engaged in what she describes as “massive criminal securities fraud” and who was fired after trying to bring the attention of those above her to said “criminal” activity.

The story doesn’t end there, and as Carmen Segarra already showed, when she revealed that Goldman runs the NY Fed, once Alayne was let go and tried to “whistleblow” on the house of Jimon from the outside, she found the that US Department of Justice headed by Eric Holder is just as, if not more, corrupt, and in his desperate attempt to prevent discovery and bring JPM et al to justice, he would stretch the statue of limitations on frauds committed during the crisis long enough to where nobody had any legal recourse any more, up to and including the US taxpayer.”

Well, that is a sober and tragic assessment. Even more heartbreaking is the statement made by Ms. Fleischmann as reported in Straight Line Logic.

“And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the finishing touches on what will amount to a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption. “I could be sued into bankruptcy,” she says. “I could lose my license to practice law. I could lose everything. But if we don’t start speaking up, then this really is all we’re going to get: the biggest financial cover-up in history.”

The only coherent response that regular citizens can exert, when dealing with the mega financial houses, is to avoid entanglements whenever possible. What good is it to establish accounts, whether as loans, savings or investments, when the rules of survival are stacked against main street customers?

Firms like JP Morgan or Goldman are not terrified by fines because they are protected by the “To Big To Fail” culture. Bailouts are a way of life and infusion of easy money into the liquidity flow of balance sheets employ the most creative accounting techniques to cover up accurate net worth.

The threat of principals actually doing jail time is so remote that the probability is far greater that the next Secretary of the Treasury will come from their ranks.

This plight produces a true dilemma of confidence. In this environment only brave souls dare become a whistleblower. Public support for such individuals like Fleischmann and Segarra is faint because neither are public persons, readily recognized by most people. This lack of notoriety as individuals is far less important than the criminal activity both are documenting.

However, in a media driven and social networking society, the personality of celebrity far out paces the substance of the offenses. Matt Taibbi’s star persona, deserved or manufactured, illustrates that getting attention through the clutter and noise of the sound bites is possible. For an unknown person, getting your 15 minutes of fame requires even more creative strategies, to expose the basic purpose in the news revelations.

The dying main stream presstitutes will not confront the intrinsic nature of the abuses because their own financial futures depend upon Wall Street support. Yet, struggling Middle America foolishly rely upon their reporting and advice in most financial matters.

JPMorgan Chase’s Worst Nightmare fundamentally is the unwinding of the derivative debt black hole of their making. The essential risk of a collapse and implosion of the financial manipulated markets only grows because no effort or willingness exists to purge the system of crooked companies, practices or individuals. The culture of corruption survives because the pattern of exposing and demanding justice is so brutally punished.

How can meaningful accountability come from internal reform, when the price of disclosure is the end of your professional endeavors and even your livelihood?

Arguments, data and evidence of generational embedded fraud have been made by some of the most intuitive minds on finance and economics. Nonetheless, the degeneracy accelerates. The wolves of Wall Street target their prey when they lobby regulators to allow for more exotic financial products that are designed to fleece the public and place the entire monitory system in greater jeopardy.

Activists rally during elections cycles to pressure the establishment. The Occupy Wall Street movement, misguided on potential solutions, did muster awareness with media exposure. However, most taxpayers do not exert sufficient outrage about the selling out of their financial security.

Stopping “massive criminal securities fraud” is a true national security requirement. Internet revelations can only expose the latest schemes. As stated in the essay, Repeal of Glass-Steagall and the Too Big To Fail Culture, is a major reason for the current unsustainable breakdown in trust and lack of liability consequences for financial institutions.

Take the opportunity of the Alayne Fleischmann disclosures to demand that your newly elected representatives exert the courage to advance a national debate on a major overhaul of the ground rules for Wall Street.

While the prospects are slim that any constructive and critical legislation will come out of the new Congress, public indignation needs to grow and intensify. The battle for economic viability and perseverance of capital is being lost for ordinary citizens. An angry constituency is necessary to confront the outrageous abuses that pass as normal conduct. The sacrifices of Alayne Fleischmann and Carmen Segarra need not be in vain. Mobilize for action; boycott the big banks and security fraudsters.


Sartre is the publisher, editor, and writer for Breaking All The Rules. He can be reached at: BATR

Sartre is a regular columnist for Veracity Voice

Subprime Loans And Auto Sales: Debt On Wheels

November 8, 2014 by · Leave a Comment 

“It’s not the underlying economics that’s driving things, it’s central bank liquidity.”

— Matt King, Citigroup

Soaring auto sales are not so much a sign of a strong economy as they are an indication of financial hanky-panky. We saw this same type of fakery play out in housing between 2004 – 2006, when prices went through the roof due to a mortgage-lending scam (“subprime”) that crashed the stock market and sent the economy reeling. Now the bigtime money guys are at it again, writing up auto loans for anyone who can sit upright in a chair and scribble an “X” on the dotted line. As a result, car sales have surged to over 16 million for the last 6 months. (A full 7 million more than the low point in January, 2009.)   And it’s not hard to see why either. The finance gurus are packaging these sketchy subprimes into bonds, offloading them on eager investors, and recycling the profits into more crappy loans. It’s a perfect circle and it won’t end until the loans start blowing up, jittery investors head for the exits,  and Uncle Sugar rides to the rescue with more bailouts.

But we’re getting ahead of ourselves.  First take a look at these charts by House of Debt which shows the disparity between auto spending and other types of spending since the end of the slump in 2009.

House of Debt:  “New auto purchases have driven the consumer spending recovery to a large degree. The chart below shows the spending recovery for new auto sales and for all other retail spending…

From 2009 to 2013, spending on new autos increased by 40% in nominal terms. All other spending increased by only 20%. Further, excluding autos, 2013 saw lower growth in nominal retail spending than 2012…

The concern is that a lot of auto purchases are being fueled with debt, given a strong recovery in the auto loan market. Below is the net flow of auto loans from 2002 to 2013. It is a net flow because it includes pay downs in addition to new originations. As it shows, auto lending in 2012 and 2013 tops any other year during the previous expansion from 2002 to 2007 (although it is still below the amount of new auto loans in 2000 and 2001).


(“Another Debt-Fueled Spending Spree?” House of Debt) 

How about that? So there’s a bigger debt bubble in auto loans today than there was before the bust. But why? Is it because demand is strong,  jobs are plentiful, wages are rising, the economy is growing, and people are optimistic about the future?

Heck, no. It’s because rates are low, credit is easy, and dealers are ready to put anyone with a license and a heartbeat into a brand-spanking new car no questions asked.  Here are the details from an article in the New York Times titled “In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates” by Jessica Silver-Greenberg and Michael Corkery:

”Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scores at or below 640.

The explosive growth is being driven by some of the same dynamics that were at work in subprime mortgages. A wave of money is pouring into subprime autos, as the high rates and steady profits of the loans attract investors. Just as Wall Street stoked the boom in mortgages, some of the nation’s biggest banks and private equity firms are feeding the growth in subprime auto loans by investing in lenders and making money available for loans.

And, like subprime mortgages before the financial crisis, many subprime auto loans are bundled into complex bonds and sold as securities by banks to insurance companies, mutual funds and public pension funds — a process that creates ever-greater demand for loans.

The New York Times examined more than 100 bankruptcy court cases, dozens of civil lawsuits against lenders and hundreds of loan documents and found that subprime auto loans can come with interest rates that can exceed 23 percent. The loans were typically at least twice the size of the value of the used cars purchased, including dozens of battered vehicles with mechanical defects hidden from borrowers. Such loans can thrust already vulnerable borrowers further into debt, even propelling some into bankruptcy, according to the court records, as well as interviews with borrowers and lawyers in 19 states.

In another echo of the mortgage boom, The Times investigation also found dozens of loans that included incorrect information about borrowers’ income and employment, leading people who had lost their jobs, were in bankruptcy or were living on Social Security to qualify for loans that they could never afford.” (“In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates”, New York Times)

Can you believe that this kind of chicanery is going on in broad daylight without the regulators stepping in? Think about it for a minute: If the NYT’s journalists can find “dozens of loans that included incorrect information about borrowers’ income and employment”, then why can’t the government regulators? It’s ridiculous. What we’re talking about here is a new version of “liar’s loans” where dealers are helping people who don’t have the means to repay the debt, to fudge the details on their loan application so they can drive off in a shiny new Impala.

Haven’t we seen this movie before?

Here’s more from USA Today: “In the first quarter of 2014, 24.9% of all new-car loans were 73 to 84 months long. Four years ago, less than 10% of loans were that long. In fact, such lengthy terms have pulled the average new-car loan to 66 months. That’s an all-time record.”

7 years to pay off a car?  You got to be kidding me? It’s like a second mortgage. And there’s more, too. The average monthly payment and average amount financed hit record highs in the first quarter too. This is from Auto News:

“The average monthly new-vehicle payment was $474 in the first quarter, up 3.3 percent from a year ago. The average monthly used-vehicle payment was $352, up 1.1 percent, Experian Automotive said.

Also in the first quarter, the average amount financed on a new-vehicle loan was $27,612, an increase of $964, or 3.6 percent. For used vehicles, the average amount financed was $17,927, up $395 or 2.3 percent.”

(“Auto loan terms, monthly payments hit high in Q1, Experian says“, Auto News)

So Americans are not just loading on more debt, they’re also assuming that they’re financial situation is going to be stable enough to make these large payments well into the future.  Good luck with that.

It’s also worth noting that, in many transactions, dealers are actually lending more than the value of the vehicle. According to Reuters David Henry,

“The average loan-to-value on new cars rose to 110.6 percent… On used cars it rose to 133.2 percent…

Auto lenders often provide loans that exceed the value of cars they are financing because borrowers want cash to pay sales taxes and fees.”

(“U.S. car buyers borrow more as rates fall and standards loosen“, David Henry, Reuters)

Let me see if I got this straight: You walk onto a car lot without a dime in your pocket, and drive off in a brand new car with everything paid for upfront? Such a deal! Can you see why we think that the sales numbers are a big fake?  This isn’t the sign of a strong economy. It’s the sign of another gigantic credit bubble rip-off. But what do the dealers get out of this thing? Is it really worth their while to botch the underwriting when they know that eventually they’ll have to repossess the vehicle? Sure, it is, because there’s big money in stuffing people into loans they can’t afford.

Here’s how the Times explains it: ”Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year.”

Bingo. So not only do they make dough on the high interest rates they charge their subprime borrowers, (Sometimes 23 percent or more.) they also make it by selling the loan to investors who are eager to buy any manner of crappy bond provided it offers a better return than US Treasuries. This is the mess Bernanke created by fixing interest rates at zero for nearly 6 years.  Zirp (zero interest rate policy) unavoidably leads to excessive risk taking by yield-crazed speculators.    The voracious appetite for subprime securities (ABS–Asset-Backed Securities) has even surprised the bond issuers who are constantly beating the bushes looking for sketchier products.  This is from the same article by the NY Times:

“Investors, seeking a higher return when interest rates are low, recently flocked to buy a bond issue from Prestige Financial Services of Utah. Orders to invest in the $390 million debt deal were four times greater than the amount of available securities.

What is backing many of these securities? Auto loans made to people who have been in bankruptcy.

An affiliate of the Larry H. Miller Group of Companies, Prestige specializes in making the loans to people in bankruptcy, packaging them into securities and then selling them to investors.

“It’s been a hot space,” Richard L. Hyde, the firm’s chief operating officer, said during an interview in March. Investors are betting on risky borrowers. The average interest rate on loans bundled into Prestige’s latest offering, for example, is 18.6 percent, up slightly from a similar offering rolled out a year earlier…. To meet that rising demand, Wall Street snatches up more and more loans to package into the complex investments.” (NYT)

HA! Now there’s a good way to feather the old retirement fund; load up on bonds made up of loans to people who’ve gone bust.

This is the impact that zero rates have on investor behavior. The abundance of cheap and plentiful liquidity invariably leads to trouble. And there are victims in this Central Bank-authored gold rush too, namely the unsophisticated borrowers who pay prohibitively high rates on beater vehicles that are typically worth less-than-half the value of the loan. (Check the NYT article for examples.)

The Times also notes that the ratings agencies have been playing along with the finance companies just as they did during the subprime mortgage fiasco. Here’s more from the Times:

“Rating agencies, which assess the quality of the bonds, are helping fuel the boom. They are giving many of these securities top ratings, which clears the way for major investors, from pension funds to employee retirement accounts, to buy the bonds. In March, for example, Standard & Poor’s blessed most of Prestige’s bond with a triple-A rating. Slices of a similar bond that Prestige sold last year also fetched the highest rating from S.&P. A large slice of that bond is held in mutual funds managed by BlackRock, one of the world’s largest money managers.” (NYT)

Ask yourself this, dear reader: How are the ratings agencies able to give “many of these securities top ratings”, when the investigators from the Times found “dozens of loans that included incorrect information about borrowers’ income and employment, leading people who had lost their jobs, were in bankruptcy or were living on Social Security to qualify for loans that they could never afford”?

Let’s face it: The regulatory changes in Dodd-Frank haven’t done a damn thing to protect the victims of these dodgy subprime schemes. Borrowers and investors are both getting gouged by a system that only protects the interests of the perpetrators. The sad fact is that nothing has changed. The system is just as corrupt as it was when Lehman went down.

So, how long can this go on before the market implodes?

According to the Times:

“financial firms are beginning to see signs of strain. In the first three months of this year, banks had to write off as entirely uncollectable an average of $8,541 of each delinquent auto loan, up about 15 percent from a year earlier, according to Experian…

In another sign of trouble ahead, repossessions, while still relatively low, increased nearly 78 percent to an estimated 388,000 cars in the first three months of the year from the same period a year earlier, according to the latest data provided by Experian. The number of borrowers who are more than 60 days late on their car payments also jumped in 22 states during that period….” (NYT)

(According to Amber Nelson at loan.com: “In the second quarter, the value of all auto loans late by 60 days or more was more than $4 billion, up 27 percent from the prior year, according to Experian.”)

So, yeah, the trouble is mounting, but that doesn’t mean that this madness won’t continue for some time to come. It probably will. It’ll probably drag-on until the economy turns south and more borrowers start falling behind on their payments. That will lead to more defaults, heavier losses on auto bonds, and a hasty race to the exits by investors. Isn’t that how the subprime mortgage scam played out?

Indeed. But at least there are signs of hope on the regulatory front. Check out this clip from an article at CNBC:

“In August, both Santander Consumer and General Motors Financial Co. acknowledged receiving Justice Department subpoenas in connection with a probe over possible violations of civil-fraud laws. And the Consumer Financial Protection Bureau and the Securities and Exchange Commission have both stepped up their scrutiny of the auto-loan market.” (“New debt crisis fear: Subprime auto loans“, CNBC)

So the SEC, the DOJ, and the CFPB are actually investigating the underwriting practices of these behemoth finance companies to see if they violated “civil fraud laws”?

Will wonders never cease?

Just don’t hold your breath waiting for convictions.


Mike Whitney is a regular columnist for Veracity Voice

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

The American Dream, Gone

November 8, 2014 by · Leave a Comment 

15 Reasons Why Americans Think We’re Still in a Recession…

1: Wage StagnationWhy America’s Workers Need Faster Wage Growth—And What We Can Do About It, Elise Gould, EPI

Economic Policy Institute:

“The hourly compensation of a typical worker grew in tandem with productivity from 1948-1973. …. After 1973, productivity grew strongly, especially after 1995, while the typical worker’s compensation was relatively stagnant. This divergence of pay and productivity has meant that many workers were not benefitting from productivity growth—the economy could afford higher pay but it was not providing it.

Between 1979 and 2013, productivity grew 64.9 percent, while hourly compensation of production and nonsupervisory workers, who comprise over 80 percent of the private-sector workforce, grew just 8.0 percent. Productivity thus grew eight times faster than typical worker compensation…” (EPI)

(Note: Flatlining wages are the Number 1 reason that the majority of Americans still think we’re in a recession.)

2: Most people still haven’t recouped what they lost in the crash: Typical Household Wealth Has Plunged 36% Since 2003, Zero Hedge

Zero Hedge:

“According to a new study by the Russell Sage Foundation, the inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36% decline… Welcome to America’s Lost Decade.

Simply put, the NY Times notes, it’s not merely an issue of the rich getting richer. The typical American household has been getting poorer, too.

The reasons for these declines are complex and controversial, but one point seems clear: When only a few people are winning and more than half the population is losing, surely something is amiss. (chart)”

3: Most working people are still living hand-to-mouth76% of Americans are living paycheck-to-paycheck, CNN Money

CNN:

“Roughly three-quarters of Americans are living paycheck-to-paycheck, with little to no emergency savings, according to a survey released by Bankrate.com Monday.

Fewer than one in four Americans have enough money in their savings account to cover at least six months of expenses, enough to help cushion the blow of a job loss, medical emergency or some other unexpected event, according to the survey of 1,000 adults. Meanwhile, 50% of those surveyed have less than a three-month cushion and 27% had no savings at all…

Last week, online lender CashNetUSA said 22% of the 1,000 people it recently surveyed had less than $100 in savings to cover an emergency, while 46% had less than $800. After paying debts and taking care of housing, car and child care-related expenses, the respondents said there just isn’t enough money left over for saving more.”

4: Millennials are Drowning in Red Ink:  Biggest economic threat? Student loan debt, USA Today

USA Today:

“Total student loan debt has grown more than 150% since 2005… We have more than $1.2 trillion of student loan debt…
And while 6.7 million borrowers in repayment mode are delinquent, the sad fact is that many lenders aren’t exactly incentivized to work with borrowers. Unlike all other forms of debt, student loans can’t be discharged in bankruptcy. Moreover, lenders can garnish wages and even Social Security benefits to get repaid…

In 2005 student loans accounted for less than 13% of the total debt load for adults age 20-29. Today, student loans account for nearly 37% of that group’s outstanding debt. Student loan debt’s slice of the total debt pie for the age group nearly tripled! The average loan balance for that age group is now more than $25,500, up from $15,900 in 2005.”

5: Downward mobility is the new reality: Middle-Class Death Watch: As Poverty Spreads, 28 Percent of Americans Fall Out of Middle Class, Truthout

Truthout:

“The promise of the American dream has given many hope that they themselves could one day rise up the economic ladder. But according to a study released those already in financially-stable circumstances should fear falling down a few rungs too. The study…  found that nearly a third of Americans who were part of the middle class as teenagers in the 1970s have fallen out of it as adults…  its findings suggest the relative ease with which people in the U.S. can end up in low-income, low-opportunity lifestyles — even if they started out with a number of advantages. Though the American middle class has been repeatedly invoked as a key factor in any economic turnaround, numerous reports have suggested that the middle class enjoys less existential security than it did a generation ago, thanks to stagnating incomes and the decline of the industrial sector.”

6: People are more vulnerable than ever:  “More Than Half Of All Americans Can’t Come Up With $400 In Emergency Cash… Unless They Borrow“, Personal Liberty

“According to a Federal Reserve report on American households’ “economic well-being” in 2013,  fewer than half of all Americans said they’d be able to come up with four Benjamins on short notice to deal with an unexpected expense…
Under a section titled “Savings,” the report notes that “[s]avings are depleted for many households after the recession,” and lists the following findings:

*Among those who had savings prior to 2008, 57 percent reported using up some or all of their savings in the Great Recession and its aftermath.

*39 percent of respondents reported having a rainy day fund adequate to cover three months of expenses.

*Only 48 percent of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.

7: Working people are getting poorer: The Typical Household, Now Worth a Third, New York Times

NYT:

“The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation.

Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially….“The housing bubble basically hid a trend of declining financial wealth at the median that began in 2001,” said Fabian T. Pfeffer, the University of Michigan professor who is lead author of the Russell Sage Foundation study.

The reasons for these declines are complex and controversial, but one point seems clear: When only a few people are winning and more than half the population is losing, surely something is amiss.”

8: Most people can’t even afford to get their teeth fixed:  7 things the middle class can’t afford anymore, USA Today

USA Today:

“A vacation is an extra expense that many middle-earners cannot afford without sacrificing something else. A Statista survey found that this year 54% of people gave up purchasing big ticket items like TVs or electronics so they can go on a vacation. Others made sacrifices like reducing or eliminating their trips to the movies (47%), reducing or eliminating trips out to restaurants (43%), or avoiding purchasing small ticket items like new clothing (43%).

2–New vehicles…
3–To pay off debt…
4–Emergency savings…
5–Retirement savings…
6–Medical care…
7–Dental work…

According to the U.S. Department of Health and Human Services, “the U.S. spends about $64 billion each year on oral health care — just 4% is paid by Government programs.” About 108 million people in the U.S. have no dental coverage and even those who are covered may have trouble getting the care they need, the department reports.”

9: The good, high-paying jobs have vanishedRecovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones, New York Times

NYT:

“The deep recession wiped out primarily high-wage and middle-wage jobs. Yet the strongest employment growth during the sluggish recovery has been in low-wage work, at places like strip malls and fast-food restaurants.

In essence, the poor economy has replaced good jobs with bad ones. That is the conclusion of anew report from the National Employment Law Project, a research and advocacy group, analyzing employment trends four years into the recovery.

“Fast food is driving the bulk of the job growth at the low end — the job gains there are absolutely phenomenal,” said Michael Evangelist, the report’s author. “If this is the reality — if these jobs are here to stay and are going to be making up a considerable part of the economy — the question is, how do we make them better?”

10: More workers are throwing in the towel:  Labor Participation Rate Drops To 36 Year Low; Record 92.6 Million Americans Not In Labor Force, Zero Hedge

Zero Hedge:

“For those curious why the US unemployment rate just slid once more to a meager 5.9%, the lowest print since the summer of 2008, the answer is the same one we have shown every month since 2010: the collapse in the labor force participation rate, which in September slid from an already three decade low 62.8% to 62.7% – the lowest in over 36 years, matching the February 1978 lows. And while according to the Household Survey, 232,000 people found jobs, what is more disturbing is that the people not in the labor force, rose to a new record high, increasing by 315,000 to 92.6 million!

Bottom line: Unemployment has gone down because more people aren’t working and have fallen off the radar.”

11: Nearly twice as many people still rely on Food Stamps than before the recession: Food-stamp use is falling from its peak, Marketwatch

Marketwatch:

“Food-stamp use is finally moving away from the peak. At 46.1 million people, total food-stamp usage is down about 4% from its high in December 2012 of 47.8 million. Only eight states in March (the latest data available) were up from the same month of 2013.

It’s still not great news, however, considering there were 26.3 million people receiving food stamps in 2007…”

12: The ocean of  red ink continues to grow: American Household Credit Card Debt Statistics: 2014, Nerd Wallet Finance

Nerd Wallet Finance:

U.S. household consumer debt profile:

*Average credit card debt: $15,607

*Average mortgage debt: $153,500

*Average student loan debt: $32,656

In total, American consumers owe:

*$11.63 trillion in debt

*An increase of 3.8% from last year

*$880.5 billion in credit card debt

*$8.07 trillion in mortgages

*$1,120.3 billion in student loans

*An increase of 11.5% from last year

13: No Recovery for working people: The collapse of household income in the US, World Socialist Web Site

WSWS:

“The US Federal Reserve’s latest Survey of Consumer Finances, released last Thursday, documents a devastating decline in economic conditions for a large majority of the population during the so-called economic recovery.

The report reveals that between 2007 and 2013, the income of a typical US household fell 12 percent. The median American household now earns $6,400 less per year than it did in 2007.


Source: Federal Reserve Survey of Consumer Finances

Much of the decline occurred during the “recovery” presided over by the Obama administration. In the three years between 2010 and 2013, the annual income of a typical household fell by an additional 5 percent.

The report also shows that wealth has become even more concentrated in the topmost economic layers. The wealth share of the top 3 percent climbed from 44.8 percent in 1989 to 54.4 percent in 2013. The share of wealth held by the bottom 90 percent fell from 33.2 percent in 1989 to 24.7 percent in 2013.”

14: Most people will work until they die:  The Greatest Retirement Crisis In American History, Forbes

Forbes:

“We are on the precipice of the greatest retirement crisis in the history of the world. In the decades to come, we will witness millions of elderly Americans, the Baby Boomers and others, slipping into poverty.

Too frail to work, too poor to retire will become the “new normal” for many elderly Americans.

That dire prediction… is already coming true. Our national demographics, coupled with indisputable glaringly insufficient retirement savings and human physiology, suggest that a catastrophic outcome for at least a significant percentage of our elderly population is inevitable. With the average 401(k) balance for 65 year olds estimated at $25,000 by independent experts …the decades many elders will spend in forced or elected “retirement” will be grim…

The signs of the coming retirement crisis are all around you. Who’s bagging your groceries: a young high school kid or an older “retiree” who had to go back to work to supplement his income or qualify for health insurance?”

15: Americans are more pessimistic about the future, Polling Report

According to a CNN/ORC Poll May 29-June 1, 2014:

“Do you agree or disagree? The American dream has become impossible for most people to achieve.”

Agree: 59%

Disagree: 40%

Unsure: 1%

According to a NBC News/Wall Street Journal Poll conducted by the polling organizations of Peter Hart (D) and Bill McInturff (R). April 23-27, 2014:

“Do you agree or disagree with the following statement? Because of the widening gap between the incomes of the wealthy and everyone else, America is no longer a country where everyone, regardless of their background, has an opportunity to get ahead and move up to a better standard of living.”Agree: 54%

Disagree: 43%

Mixed: 2%

Unsure: 1%

Also, according to a CBS News Poll. Jan. 17-21, 2014. N=1,018 adults nationwide.

“Looking to the future, do you think most children in this country will grow up to be better off or worse off than their parents?”Better off: 34%

Worse off: 63%

Same: 2%

Unsure: 1%

The majority of people in the United States, no longer believe in the American dream, or that America is the land of opportunity, or that their children will have a better standard of living than their own.  They’ve grown more pessimistic because  they haven’t seen the changes they were hoping for, and because their lives are just as hard as they were right after the crash.  In fact, according to a 2014 Public Religion Research Institute poll– 72 percent of those surveyed said they think “the economy is still in recession.”

Judging by the info in the 15 links above,  they’re probably right.


Mike Whitney is a regular columnist for Veracity Voice

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

Do You Want The Facts? You Are Probably A Conspiracy Theorist

October 26, 2014 by · Leave a Comment 

Conspiracy theorists, those who look for the facts, ignoring the pressure of jeers, flawed appeals to authority, and intimidation, are the sanest among us. The steady migration of investigative journalists, who turn their backs on more lucrative employment, is only one indication of this.

In a recent article, Scientific Study Reveals Conspiracy Theorists The Most Sane Of All, the author, J. D. Hayes, cites a recent study, published July 2013, by psychologists Michael J. Wood and Karen M. Douglas of the University of Kent in the UK. It was entitled “‘What about Building 7?’ A Social Psychological Study of Online Discussion of 9/11 Conspiracy Theories.”

Their conclusion is that, contrary to those mainstream media stereotypes, “conspiracy theorists” appear to be more sane than people who accept official versions of controversial and contested events.

Attempts to demonize our perception on conspiracy theorists erects barriers to protect those whose profits are endangered by the truth.

These techniques for manufacturing opinion were outlined by Edward Bernays, whose book, “Propaganda,” asserts those who rule should use the trust accorded them in exactly this way.

Interestingly, Leo Strauss, whose political philosophy is in alignment with Bernays, asserted the same opinion.  Strauss’ work was largely adopted by those who call themselves NeoConservatives who are anything but Conservative.

The opinion shared was that those in power are justified to lie, cheat and steal to keep and increase their power. The Kochs use these techniques in business and politically.

The use of the term, “Conspiracy Theory” increased rapidly in the wake of the JFK assassination due to its pejorative use in the MSM. This worked to stifle questions already being raised.

The issue which underlies the article by William Saletan, Conspiracy Theorists Aren’t Really Skeptics attempts to validate intellectual bullying, a logical extension of the philosophies of Bernays and Strauss. You don’t get more MSM than the Washington Post.

In the original formulation of American society those in positions of authority were morally and ethically obligated to explain themselves. The facts were to be available to all. Journalists investigated and reported the truth, as they saw it. This changed.

Saletan raised the issue of human psychology but failed to mention a perplexing issue which has long troubled us. This is the presence of those without conscience. For most of the 20th Century therapists believed these individuals could change, the problem was psychological. Today we know this is a neurological issue.

Advances in neurobiology have brought objective understanding. Now, thousands of criminals have been identified as psychopaths using an fMRI. The scan identified malfunctions in areas of the amygdala, which is now known to be associated with conscience, empathy, and compassion.

According to Dr. Robert Hare, serial murderers and con-men are always psychopaths. But Hare has also noted many who are also psychopathic are not violent and well able to control their impulses to gain far more expansive goals.

These individuals are highly intelligent. At any time there are 20,000 psychopaths with I.Q.s over 180 at large in the United States.

It would be instructive to see test results from MRI scans done on Dick Cheney, Karl Rove, and their cadre.

The cost of psychopathy has been calculated at around 360 billion a year – in the US. This does not include the highly intelligent ones which, clearly cost far more, given the impact of Cheney and company on America. Could the people who so desperately wanted torture as a tool be emotionally normal?

Today, experts believe the explanation for the financial meltdown now ongoing can be explained by the concentration of psychopathic individuals in corporations, finance and government.

The characteristics of the condition include calloused unconcern for others. This accounts for the oil companies which routinely externalize their costs, leaving those harmed by the toxic waste they cause, to struggle and die.

Those without conscience, willing to lie for their own profit, have long been with us. But today they can avoid the troublesome issue of having their actions known and understood. They have learned to spin.

To ensure this continues they must continue manufacturing public opinion about their previous actions. This is why they began using the term, “Conspiracy Theory.” They work vigorously to ensure the facts remain hidden.

Refusing to accept the officially mandated opinion on any subject, be in the JFK assassination or whether or not to give your child pharmaceuticals as treatment for ADHD has been used to  categorize individuals who refuse to accept predigested conclusions as crazy, stupid or paranoid. When this happens, rest assured, some corporation’s profits could be impacted.

This is a form of control intended to intimidate and inject fear. It also marginalizes vast numbers of people, keeping them in fear so they can be controlled.

To that end they, I call them Greedvilleins, also use our love of each other, country, loyalty, and trust, to manipulate us into wars which profit them and place us in perpetual debt.

If you limit what is acceptable to hold as opinions and deny people full access to the facts you  destroy the trust basis of our society.  Emotionally normal people are not comfortable when they cannot trust those around them.

These are rational responses to existing conditions.

What is insane is trusting psychopaths. Yet these are now common in finance and government. You can be sure they will routinely act with a sublime lack of conscience, for your freedom, your assets and your very life.

To cope with these conditions many still refuse to think about it, thus avoiding extreme anxiety. Others, for instance those who look for the facts, and are demeaned as “conspiracy theorists.”

The presence of highly intelligent psychopaths among us, who generally avoid being prosecuted, is one of these explanations.

Saladan’s article passes today as investigative journalism. It pays well and explains why so many truly honest journalists left to work in the alternative media.


Melinda Pillsbury-Foster will soon begin her new weekly radio program on Surviving Meltdown. The program examines how government can be brought into alignment with the spiritual goal of decentralizing power and localizing control and links also to America Goes Home americagoeshome.org, a site dedicated to providing information and resources.

She is also the author of GREED: The NeoConning of America and A Tour of Old Yosemite. The former is a novel about the lives of the NeoCons with a strong autobiographical component. The latter is a non-fiction book about her father and grandfather.

Her blog is at: http://howtheneoconsstolefreedom.blogspot.com/ She is the founder of the Arthur C. Pillsbury Foundation. She is the mother of five children and three grandchildren.

Melinda Pillsbury-Foster is a regular columnist for Veracity Voice

John Fund – Pimping The Vote

October 26, 2014 by · Leave a Comment 

It is ironic that John Fund claims some kind of victory by pointing out a highly marginal way of stealing a few votes via the unusual opportunity of finding unused ballots. In his recent article, James O’Keefe Strikes Again, the back slapping was thick and gleeful.

James O’Keefe, again, scored a media event in these last days before the coming election. This time he was not dressed up in his pimp dudes, but he should have been.

The election would have to extraordinarily close for this kind of voter fraud to matter. Argument like these are like blaming the national debt on shop lifting by senior citizens. It happens, but it is rare.

The Big Game is being run by the Number Two Man on Fund’s own speed dial, Karl Rove. Stealing Elections was essential if the Number One Man on Fund’s speed dial in the same period, Dick Cheney, of Halliburton, was to win and so become even richer. The three are linked by common interests as well as a solid and long term friendship. They scratch each other’s backs, as the expression goes.

When John beats up a woman, or otherwise misbehaves, they are there for him.

Fund, having made himself a kind of a ‘reputation’ for pimping the idea of Voter Fraud lays it on thick and cheesy in his article.

The other side, located in Colorado, make themselves look pathetic because a NeoCon had to give them this exciting idea – and these twits golly gosh, gee’d all over James O’Keefe instead of showing him the door.

Franklin’s state director, Meredith Hicks, told O’Keefe that committing voter fraud using unused ballots was perfectly okay. “That’s not even lying or stealing, if someone throws out the ballot. If you want to fill it out you should do it,” she told O’Keefe on tape.

Note: Cheating is always wrong. It destroys trust in the integrity of the entire electoral process and is repulsive in anyone.

That said, can’t you see this woman rooting round in people’s trash cans looking for those ballots? How would you know when they would appear? Many of these ballots will end up in the trash, but only after election day. “Oh. Never mind, that was yesterday.” Others will be used as grocery lists, book marks, made into paper airplanes and other purposes for which they were not intended. Some will also be used for voting.

Really, it makes you cringe.

There is a magnitude of difference between this level of electoral dishonesty and the Big Game. That is where the real money is and this article is evidence John Fund is still Pimping for the same folks who profited by murdering a million and a half Iraqis, killing off babies doomed by the effects of DU to short and horrible lives, and other war crimes galore. Remember Bush and his administration’s excitement over ‘rendering’ people?

You can’t say Fund is not consistent. So are No. One SpeedDial and No. Two SpeedDial.

To get the money you have to win the election and if you are Dick Cheney or George Bush you can’t win unless you cheat.

Rove is not into retail, he is all about Whole Selling out America with Ballot Fraud via cool electronics. He has made millions this way. Cheney, No. Two SpeedDial, made billions.

Fund and Friends are all Pimps. They should dress the role.


Melinda Pillsbury-Foster will soon begin her new weekly radio program on Surviving Meltdown. The program examines how government can be brought into alignment with the spiritual goal of decentralizing power and localizing control and links also to America Goes Home americagoeshome.org, a site dedicated to providing information and resources.

She is also the author of GREED: The NeoConning of America and A Tour of Old Yosemite. The former is a novel about the lives of the NeoCons with a strong autobiographical component. The latter is a non-fiction book about her father and grandfather.

Her blog is at: http://howtheneoconsstolefreedom.blogspot.com/ She is the founder of the Arthur C. Pillsbury Foundation. She is the mother of five children and three grandchildren.

Melinda Pillsbury-Foster is a regular columnist for Veracity Voice

Banks Hold Treasuries And Make Loans

October 26, 2014 by · Leave a Comment 

Ever since the 2008 financial collapse, banks have reduced their lending while accumulating U.S. Treasuries. On the surface placing capital into the safest depositor may seem prudent.   On the other hand, Why Big Banks Are Suddenly Interested in Talking to You Again? According to Inc, “After years of turning away small-business borrowers, the country’s largest banks are now granting one out of five loan applications they receive. The 20 percent benchmark represents a post-recession high for big banks (assets of $10B+). Further, small banks have been approving more than half of the funding requests they receive.”

Such news would normally be welcomed. The Sovereign Man article, Here’s Why US Banks Are Now Extremely Vulnerable, presents a sober warning that the banking industry is at risk from a bond market sell-off.

“In just the last month alone American banks increased their holdings of US treasuries by $54 billion, to a record $1.99 trillion.

Facing $127 trillion in unfunded liabilities – which is nearly double 2012’s total global output – and with no inclination to reduce those numbers at all, at this point disaster for the US is entirely unavoidable.

Under the rather arbitrary Bank of International Settlements Basel capital adequacy rules government debt rated at least AA continues to carry a “zero risk” weighting. Meaning that banks do not need to set aside capital against it.

Beyond that, regulations imposed after the last crash to reduce risk require banks to hold $100 billion in liquid assets, which of course includes bonds. Thus, they are not only encouraged, but actually forced to buy government bonds.”

The fundamental change in the last six years is that the banks were rescued from normal capital requirements under a zero interest rate discount window. The inevitable result starved the small business and personal borrowing market from obtaining loans. With the loosing of funds to finance business and consumers, could the dire warning that the banks understand they need to rotate out of Treasuries, be the reason for the shift in lending?

However, the rush to come into compliance has America’s Banks Pile Up Treasuries as Deposits Overwhelm Lending. This explanation of a change in regulation ordains that U.S. Bonds are still a necessary component in their balance sheet.

“Rules approved Sept. 3 by the Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. leave banks about $100 billion short of the $2.5 trillion in easy-to-sell assets that they need to meet the liquidity standard, according to the Fed. Lenders must reach 80 percent of their liquidity coverage ratios by January and have until the start of 2017 to reach full compliance.”

Illustrating this point, “Bank of America alone may need to purchase as much as $65 billion of government debt to become fully compliant, according to report last month from Marty Mosby, a banking analyst at Memphis, Tennessee-based Vining Sparks.”

Providing additional encouragement is a WSJ report that U.S. Bank Profits Near Record Levels.

“On the heels of the financial crisis, some lawmakers, regulators and consumers complained that banks weren’t lending enough. But steady improvement in credit quality, or borrowers’ ability to repay loans, is prompting banks not only to lend more but also to ease their standards.

The higher loan levels come as banks are easing up on their underwriting standards to borrowers. A Federal Reserve survey of senior loan officers released last week found that lenders were loosening standards and loan terms for commercial and industrial loans and commercial real-estate loans.”

Reconciling the need to keep buying treasuries and originating new loans to satisfy business demand is a challenging objective. By returning to the old fashion business model, of actually making loans to customers, banks are generating significant profits.

While graphs show the downward trend in loans since TARP, the current upturn is ready to be charted. Lending money for productive enterprise has contributed to a rise in GDP. The transition to a consumer based economy is dependent on the flow of transactions. When the pace of the velocity of money increases and confidence strengthens, prosperity usually follows.

The different in this feeble recovery phase is that the debt assumed by the Treasury, monetized within Federal Reserve liabilities, requires servicing no matter the health of the general economy. Near zero or cost free interest rates is approaching an expected crisis of uninterrupted maintenance. The exact trigger that drives up rates, while elusive to forecast, is inevitable in coming.

The Money Show article, Rising Rates? Beware of Big Banks, describes the predicament accordingly.

“The reality is that traditional commercial and consumer lending is no longer the big money maker that it used to be for banks. Since the 2008 financial crisis, households and businesses have been deleveraging—paying down debt—and demand for loans has been limp.

In recent years, the big banks have fattened their profits mainly from capital-markets businesses: Mergers and acquisitions, stock and bond offerings, and other types of trading. Rising interest rates also make the cost of capital go up for businesses, which can result in less deal making, lowering financing fees for the banks.”

Hype that loan demands have returned in earnest is overstated. Coming off such a low level, any modest increase looks bigger than it really is. That revered business cycle, simply is no longer the same.

So what happens in the catch-22 scenario when banks are adjusting to different capital requirements and Treasuries drop in price with a rise in interest rates? That’s the 64 trillion dollar question.

Banking is more about mathematics than business acumen when additional debt created money is needed to pay the service of obligations that come due. The roll over can be staggering. Banksters make up the monetary rules. That $127 trillion nut is bigger than all the bank reserves put together.

For those who argue the economy can grow its way out of this liquidity squeeze must have a time frame longer than the imaginative bag of tricks left in the vaults of banks.


Sartre is the publisher, editor, and writer for Breaking All The Rules. He can be reached at: BATR

Sartre is a regular columnist for Veracity Voice

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