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Obamageddon - 2012

Iacocca - Where Have All The Leaders Gone?

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Remember Lee Iacocca, the man who rescued Chrysler Corporation from its death throes? He's now 82 years old and has a new book, 'Where Have All The Leaders Gone?'.

Lee Iacocca Says...

Am I the only guy in this country who's fed up with what's happening? Where the hell is our outrage? We should be screaming bloody murder! We've got a gang of clueless bozos steering our ship of state right over a cliff, we've got corporate gangsters stealing us blind, and we can't even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, 'Stay the course..'

Stay the course? You've got to be kidding. This is America , not the damned, 'Titanic'. I'll give you a sound bite: 'Throw all the bums out!'

You might think I'm getting senile, that I've gone off my rocker, and maybe I have. But someone has to speak up. I hardly recognize this country anymore..

The most famous business leaders are not the innovators but the guys in handcuffs.. While we're fiddling in Iraq , the Middle East is burning and nobody seems to know what to do. And the press is waving 'pom-poms' instead of asking hard questions. That's not the promise of the ' America ' my parents and yours traveled across the ocean for. I've had enough. How about you?

I'll go a step further. You can't call yourself a patriot if you're not outraged. This is a fight I'm ready and willing to have. The Biggest 'C' is Crisis! (Iacocca elaborates on nine C's of leadership, with crisis being the first.)

Leaders are made, not born. Leadership is forged in times of crisis. It's easy to sit there with your feet up on the desk and talk theory. Or send someone else's kids off to war when you've never seen a battlefield yourself. It's another thing to lead when your world comes tumbling down.

On September 11, 2001, we needed a strong leader more than any other time in our history. We needed a steady hand to guide us out of the ashes. A hell of a mess, so here's where we stand.

We're immersed in a bloody war with no plan for winning and no plan for leaving.

Obama is running the biggest deficit in the history of the country.

We're losing the manufacturing edge to Asia , while our once-great companies are getting slaughtered by health care costs.

Gas prices are skyrocketing, and nobody in power has a coherent energy policy. Our schools are in trouble due to poor leadership in school districts.

Our borders are like sieves.

The middle class is being squeezed every which way.

These are times that cry out for leadership.

But when you look around, you've got to ask: 'Where have all the leaders gone?' Where are the curious, creative communicators? Where are the people of character, courage, conviction, omnipotence, and common sense? I may be a sucker for alliteration, but I think you get the point.

Name me a leader who has a better idea for homeland security than making us take off our shoes in airports and throw away our shampoo?

We've spent billions of dollars building a huge new bureaucracy, and all we know how to do is react to things that have already happened.

Name me one leader who emerged from the crisis of Hurricane Katrina. Congress has yet to spend a single day evaluating the response to the hurricane or demanding accountability for the decisions that were made in the crucial hours after the storm.

Everyone's hunkering down, fingers crossed, hoping it doesn't happen again. Now, that's just crazy. Storms happen. Deal with it. Make a plan. Figure out what you're going to do the next time.

Name me an industry leader who is thinking creatively about how we can restore our competitive edge in manufacturing. Who would have believed that there could ever be a time when 'The Big Three' referred to Japanese car companies? How did this happen, and more important, what are we going to do about it?

Name me a government leader who can articulate a plan for paying down the debit, or solving the energy crisis, or managing the health care problem. The silence is deafening.. But these are the crises that are eating away at our country and milking the middle class dry.

I have news for the gang in Congress. We didn't elect you to sit on your asses and do nothing and remain silent while our democracy is being hijacked and our greatness is being replaced with mediocrity. What is everybody so afraid of? That some bonehead on NBC news or CNN news will call them a name? Give me a break. Why don't you guys show some spine for a change?

Had Enough? Hey, I'm not trying to be the voice of gloom and doom here. I'm trying to light a fire. I'm speaking out because I have hope - I believe in America.

In my lifetime, I've had the privilege of living through some of America 's greatest moments. I've also experienced some of our worst crises: The 'Great Depression,' 'World War II,' the 'Korean War,' the 'Kennedy Assassination,' the 'Vietnam War,' the 1970s oil crisis, and the struggles of recent years culminating with 9/11.

If I've learned one thing, it's this: 'You don't get anywhere by standing on the sidelines waiting for somebody else to take action. Whether it's building a better car or building a better future for our children, we all have a role to play.
 
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“Dollar’s future unstable”

05 August, 2009, 23:09

The dollar’s role as the world's main currency is over and its future is unstable, says author and journalist Webster Tarpley.

Meanwhile, the US Senate could soon approve a $2 billion plan for a car trade-in program called cash-for-clunkers. Its aim is to encourage people to buy more fuel efficient models.

It is all part of the bail-out plan to save the struggling US economy. However, experts fear Obama's methods will lead to an economic crash.

For his part, President Barack Obama has recently said that the US is witnessing the beginning of the end of the recession. He says new figures show progress is being made, with the economy shrinking less than expected.

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A Question of Eligibility: Is Obama's Presidency Constitutionally Legitimate?

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The Next Fannie Mae
Ginnie Mae and FHA are becoming $1 trillion subprime guarantors.
REVIEW & OUTLOOK
AUGUST 11, 2009, 9:09 A.M. ET


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Associated Press

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too.

Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. (See the nearby table.) Earlier this summer, Reuters quoted Anthony Medici of the Housing Department’s Inspector General’s office as saying, “Who would have predicted that Ginnie Mae and Fannie Mae would have swapped positions” in loan volume?

Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration, which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages—quadruple the amount in 2006. Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.

Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.

On June 18, HUD’s Inspector General issued a scathing report on the FHA’s lax insurance practices. It found that the FHA’s default rate has grown to 7%, which is about double the level considered safe and sound for lenders, and that 13% of these loans are delinquent by more than 30 days. The FHA’s reserve fund was found to have fallen in half, to 3% from 6.4% in 2007—meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a “Congressional appropriation intervention to make up the shortfall.”

The IG also fears that the recent “surge in FHA loans is likely to overtax the oversight resources of the FHA, making careful and comprehensive lender monitoring difficult.” And it warned that the growth in FHA mortgage volume could make the program “vulnerable to exploitation by fraud schemes . . . that undercut the integrity of the program.” The 19-page IG report includes a horror show of recent fraud cases.

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If housing values continue to slide and 10% of FHA loans end up in default, taxpayers will be on the hook for another $50 to $60 billion of mortgage losses. Only last week, Taylor Bean, the FHA’s third largest mortgage originator in June with $17 billion in loans this year, announced it is terminating operations after the FHA barred the mortgage lender from participating in its insurance program. The feds alleged that Taylor Bean had “misrepresented” its relationship with an auditor and had “irregular transactions that raised concerns of fraud.”

Is anyone on Capitol Hill or the White House paying attention? Evidently not, because on both sides of Pennsylvania Avenue policy makers are busy giving the FHA even more business while easing its already loosy-goosy underwriting standards. A few weeks ago a House committee approved legislation to keep the FHA’s loan limit in high-income states like California at $729,750. We wonder how many first-time home buyers purchase a $725,000 home. The Members must have missed the IG’s warning that higher loan limits may mean “much greater losses by FHA” and will make fraudsters “much more attracted to the product.”

In the wake of the mortgage meltdown, most private lenders have reverted to the traditional down payment rule of 10% or 20%. Housing experts agree that a high down payment is the best protection against default and foreclosure because it means the owner has something to lose by walking away. Meanwhile, at the FHA, the down payment requirement remains a mere 3.5%. Other policies—such as allowing the buyer to finance closing costs and use the homebuyer tax credit to cover costs—can drive the down payment to below 2%.

Then there is the booming refinancing program that Congress has approved to move into the FHA hundreds of thousands of borrowers who can’t pay their mortgage, including many with subprime and other exotic loans. HUD just announced that starting this week the FHA will refinance troubled mortgages by reducing up to 30% of the principal under the Home Affordable Modification Program. This program is intended to reduce foreclosures, but someone has to pick up the multibillion-dollar cost of the 30% loan forgiveness. That will be taxpayers.

In some cases, these owners are so overdue in their payments, and housing prices have fallen so dramatically, that the borrowers have a negative 25% equity in the home and they are still eligible for an FHA refi. We also know from other government and private loan modification programs that a borrower who has defaulted on the mortgage once is at very high risk (25%-50%) of defaulting again.

All of which means that the FHA and Ginnie Mae could well be the next Fannie and Freddie. While Fan and Fred carried “implicit” federal guarantees, the FHA and Ginnie carry the explicit full faith and credit of the U.S. government.

We’ve long argued that Congress has a fiduciary duty to secure the safety and soundness of FHA through common sense reforms. Eliminate the 100% guarantee on FHA loans, so lenders have a greater financial incentive to insure the soundness of the loan; adopt the private sector convention of a 10% down payment, which would reduce foreclosures; and stop putting subprime loans that should have never been made in the first place on the federal balance sheet.

The housing lobby, which gets rich off FHA insurance, has long blocked these due-diligence reforms, saying there’s no threat to taxpayers. That’s what they also said about Fan and Fred—$400 billion ago.
 
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Steinitz: It's not the forex speculators, it's the weakening dollar
By TheMarker

The Bank of Israel's decision to abandon its scheduled daily dollar purchases and to continue buying only on an as-needed basis is a step in the right direction, Finance Minister Yuval Steinitz said during a interview on Reshet Bet radio yesterday.

"We have a real problem, and it is not caused by speculators. It's caused by the dollar weakening all over the world," Steinitz said.

Steinitz confirmed that the central bank and the Finance Ministry have coordinated the matter.

The ministry considered taxing foreign currency speculators, but other countries have had bad experiences with such a move, Steinitz added.

Meanwhile, the treasury is listening to and seeking to help exporters, he said.

However, the government will not be setting or limiting the dollar exchange rate - the days of linked currency are over, Steinitz said.

In general, Israel is on the right economic track, said Steinitz, qualifying the statement by adding that he cannot say unequivocally that the crisis is behind us, and that bumpy times are still ahead.

He hopes to be able to raise the economic growth forecast in the month or two, he said.

Steinitz believes that unemployment will begin to decline a few months, after economic growth resumes.
 
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Gerald Celente 2.5 Million Jobs Lost Since Obama’s Presidency
August 12, 2009

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An Economic Time-Bomb Being Mishandled by the Obama Administration?
Posted : 08/12/09
By David Corn


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Is there a ticking time-bomb for the US economy? And is the Obama administration, Congress, and the media not paying it sufficient attention? That seems to be the message of a government report released this week that drew not as much notice as it deserves.

This is all about those toxic assets--now euphemistically referred to by the US government as "legacy assets"--that were at the core of the economic meltdown. Though some economic news of late has been not so bad--economic contraction slowing, job losses leveling off, banks passing stress tests--these toxic assets still pollute the nation's financial system and endanger it.

On Tuesday, the Congressional Oversight Panel, which was set up to monitor the $700 billion Troubled Assets Relief Program (aka the Big Bank Bailout), put out another of its monthly reports, and this one notes that the Treasury Department has not used its TARP billions to purchase this junk--which includes both lousy commercial and residential mortgages and securities based on lousy mortgages--and that billions of dollars of toxic assets remain on the books, threatening the security of numerous financial institutions.

In other words, <blink>whoops</blink>.

What's happened is that accounting changes have made it easier for banks to contend with these assets. But this bad stuff hasn't gone anywhere. It's literally been papered over. And it still has the potential to wreak havoc. As the report puts it:

If the economy worsens, especially if unemployment remains elevated or if the commercial real estate market collapses, then defaults will rise and the troubled assets will continue to deteriorate in value. Banks will incur further losses on their troubled assets. The financial system will remain vulnerable to the crisis conditions that TARP was meant to fix.

So all those hundreds of billions spent by TARP were for naught? Treasury officials will tell you that they used the money to pump capital into banks--rather than buy their garbage--and this stabilized the financial system. Perhaps that worked. But, as the report makes clear, the original sin still stands.

In a conference call with a few reporters (myself included), Elizabeth Warren, the Harvard professor heading the Congressional Oversight Panel, noted that the biggest toxic assets threat to the economy could come not from the behemoth banks but from the "just below big" banks. These institutions have not been the focus of Treasury efforts because their troubled assets are generally "whole loans" (that is, regular loans), not mortgage securities, and these less-than-big banks have been stuck with a lot of the commercial real estate loans likely to default in the next year or two. Given that the smaller institutions are disproportionately responsible for providing credit to small businesses, Warren said, "if they are at risk, that has implications for the stability of the entire banking system and for economic recovery." Recalling that toxic assets were once the raison d'etre of TARP, she added, "Toxic assets posed a very real threat to our economy and have not yet been resolved."

Yes, you've heard about various government efforts to deal with this mess. With much hype, Secretary Timothy Geithner in March unveiled a private-public plan to buy up this financial waste. But the program has hardly taken off, and it has ignored a big chunk of the problem (those "whole loans"). As the WhyYouCare.com website, which tracks news at the intersection of politics and finance, points out, "The regulators have started to move to make financial institutions address these troubled assets, but their efforts have been tenative."

The Congressional Oversight Panel warned that "troubled assets remain a substantial danger" and that this junk--which cannot be adequately valued--"can again become the trigger for instability." Warren's panel does propose several steps the Treasury Department can take to reduce the risks. But it's frightening that Treasury needs to be prodded by Warren and her colleagues, who characterized troubled assets as "the most serious risk to the American financial system."

It's also frightening that this fundamental issue barely registers a blip on our collective Attention-O-Meter. The panel's report warranted merely a small article on the second page of The New York Times' business section. White House reporters didn't ask press secretary Robert Gibbs about it. Sarah Palin's stupid comments about health care reform certainly light up the blogosphere. But Treasury not taking all necessary steps to avert another financial collapse? That's a yawner. The Obama White House--and all of us--better hope that this panel is worrying needlessly.
 
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The Economy is in Deep, Deep Trouble...
Question for Bernanke: "Do you have the cojones to raise rates?"
by Mike Whitney
Global Research, August 14, 2009


Booyah. It's morning in America. The jobless numbers are stabilizing, the stock market is sizzling, quarterly earnings came in better than expected, traders have turned bullish, housing is showing signs of life, and clunker-swaps have given Detroit a well-needed boost of adrenalin. Even Cassandra economists --like Paul Krugman and Nouriel Roubini--have been uncharacteristically optimistic. Is is true; did we avoid a Second Great Depression? Is the worst really behind us?

Maybe. But there is only one way to find out for sure. Raise rates.

Bernanke should welcome the opportunity to show everyone how he's pulled the world's biggest economy back from the brink of disaster. All he needs to do is stop giving away free money, shut down a few of his so-called lending facilities, and stop manipulating interest rates by purchasing mortgage-backed securities (MBS) from Fannie and Freddie. How hard is that? The S&P 500 has skyrocketed 48 percent since March 9. What's Bernanke waiting for; a 75 percent increase; a 100 percent increase??? How high do stocks have to go to convince Bernanke that the economy can stand on its own two feet without the torrent of cheap liquidity issuing from the Fed?

Bernanke can prove to his critics that the US economy doesn't need the Fed's monetization programs and price fixing; that it doesn't need the liquidity injections and the buying up of junk mortgages. ($80 billion last month alone) After all, as Bernanke opines, "The fundamentals of our economy are strong!"

Right. Now prove it.

All Bernanke has to do is boost rates by a point or two and demonstrate that he's willing to mop up some of the $13 trillion he's pumped into the financial markets. With just one announcement, the Fed chair could show our biggest creditor--China--that he's serious about defending the dollar and the trillion dollars of US Treasuries China purchased believing that the US was a responsible trading partner who would never write checks on an account that was overdrawn by $12 trillion. (The National Debt)

So, go ahead, Ben. Raise rates, shut down the printing presses, roll up the corporate welfare programs. Be a He-man. Make your critics eat their words. This is from Bloomberg News 8-12-09:

"The Fed’s policy-setting Open Market Committee will today keep the target rate at zero to 0.25 percent and retain plans to buy as much as $1.45 trillion of housing debt by year-end to help secure a recovery, analysts said. The FOMC’s statement is expected at about 2:15 p.m. in Washington."

Hmmmmmm. So all the "green shoots" happy talk is pure gibberish, right? There is no recovery. Bernanke plans to continue flooding the financial system with cheap liquidity. It's all a fraud. Things aren't better; they're worse.

Look at the facts.

There were 1.9 million foreclosures in 2009 in the first six months, and there will be another 1.5 before the end of the year. Is that better? According to Bloomberg: "A glut of unsold homes is also pushing down prices. The 3.8 million homes for sale in June would take 9.4 months to sell at the current pace of transactions, according to the National Association of Realtors. The inventory turnover rate averaged 4.5 months in the six years from 2000 to 2005.....More than 18.7 million homes, including foreclosures, residences for sale and vacation homes, stood vacant in the U.S. during the second quarter. That compared with 18.6 million a year earlier, the U.S. Census Bureau said July 24

Total home sales fell 23.7 percent in June versus a year earlier." Bloomberg)

Massive supply, falling prices, record foreclosures, flagging demand--and according to Deutsche Bank--48 percent of all mortgages will be underwater by 2011. It's all bad.

Here's another clip from Bloomberg today 8-12-09:

"Home price declines in the U.S. ACCELERATED in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values.

The median price of an existing single-family home dropped to $174,100, THE MOST IN RECORDS dating to 1979, the National Association of Realtors said today.

“I don’t think we’re at a bottom yet in home prices,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. “There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent up supply out there.”...Home prices are tumbling even as mortgage rates remain near all-time lows. The average U.S. rate for a 30-year fixed home loan was to 5.22 percent last week, down from 5.25 percent the prior week." (Bloomberg)

The decline in housing prices is ACCELERATING, not slowing down. The historic collapse in real estate is ongoing and it is wiping out trillions in homeowner equity making it increasingly difficult for consumers to borrow on the diminishing value of their collateral. This is why foreclosures, defaults and personal bankruptcies are soaring. (According to the American Bankruptcy Institute: consumer bankruptcy filings reached 126,434 in July, a 34.3% increase year over year, and a 8.7% increase sequentially (116,365 in June). July's number is the highest monthly total since the October 2005 bankruptcy reform aka the Bankruptcy Abuse Prevention and Consumer Protection Act.)

This is why households and consumers can no longer spend as much as they had before the crisis. Credit lines are being pared back; personal savings are rising, and GDP (excluding fiscal stimulus) is shrinking. Every one of the 3.5 million foreclosures represents hundreds of thousands of dollars the banks will never recoup. NEVER. That's why the rate of bank failures will be much greater than current estimates. The banks are facing a triple-whammy; soaring foreclosures, plummeting asset prices, and a meltdown in commercial real estate. The combo has created a gigantic capital-hole which is forcing the banks to slow lending even to applicants with flawless credit. The Fed has built up excess bank reserves by $800 billion, but it hasn't made a bit of difference. They banks are still not able to lend.

The uptick in housing last month reflects seasonal changes and a shifting of pain from the low end of the market to higher priced homes; nothing more. Homes that are priced over $1 million are now sitting on the market for 20 months; a lifetime in real estate parlance. High-end neighborhoods have turned into leper colonies. Zero interest; zero traffic. Expect a crash this year.

Now take a look at this from CNBC's Diana Olick:

"The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg," said Stan Humphries, chief economist at real estate website Zillow.com in Seattle, Washington. According to Zillow's latest Homeowner Confidence Survey, 12 percent of homeowners said they would be "very likely" to put their home on the market in the next 12 months if they saw signs of a real estate market turnaround, 8 percent said "likely," while 12 percent said "somewhat likely." Survey results could translate into around 20 million homeowners trying to sell their homes, a startling number given that the Census bureau indicates there are 93 million U.S. houses, condos and co-ops, Humphries said.

According to the National Association of Realtors, the market is currently on track to sell 4.89 million homes annually.

"At this pace, it would take about four years to run through this amount of backlogged inventory," he said. "Shadow inventory has the potential to give us another leg down on home prices during the second half of the year," said Steven Wood, chief economist at Insight Economics in Danville, California. (Diana Olick, "Shadow inventory lurks over US housing recovery" CNBC)

The banks are using all types of accounting tricks to hide the real losses or the true value of downgraded assets. The only difference between a common crook and a commercial banker is a well-paid accountant. The banking system is broken and its only going to get worse as the hammer comes down on the commercial real estate market. The Fed and Treasury are already working out the details for another stealth bailout that they'll initiate without Congress's approval. It's all very "hush-hush". The plan will involve more mega-leveraging of government liabilities. Bernanke has appointed himself the de facto Czar of Hedge Fund Nation, Clunkerville USA.

...
 
...An article in this week's Financial Times further illustrates how the Fed has transformed the economy into a riverboat casino:

"The Federal Reserve Bank of New York is aggressively hiring traders as its seeks to manage its burgeoning securities holdings, making the central bank one of Wall Street's most active recruiters of financial talent.

The New York Fed - the arm of the US central bank that implements its monetary policy - plans to increase the staff in its markets group to 400 by the end of the year - up from 240 at the end of 2007.

The Fed, which says that most of its new recruits come from private sector financial firms, is hiring employees as many banks, rating agencies, hedge funds and private equity groups shed staff. New York city officials recently estimated that the sector's woes would lead to a loss of up to 140,000 jobs.

The Fed's need for more traders is a direct consequence of the central bank's efforts to keep credit flowing through the US economy. The Fed has been buying fixed-income securities at such a rate that its assets have more than doubled to $2,000bn in the past year, leading the central bank to conclude that it needs more people to monitor the markets and to manage its credit risks." (Financial Times, "NY Fed in hiring spree as assets soar", Aline van Duyn)

Nice, eh? So now the Fed needs to enlist a gaggle of professional speculators just to keep all the balls in the air. What a joke. This isn't a rebound; it's just more hype. Here's Warren Buffett summing it up on CNBC:

"I get figures on 70-odd businesses, a lot of them daily. Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while.... I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true." "The economy is in a shambles". That's from the horse's mouth. Inventories are down 11 percent year-over-year, durable goods are down 10.4 percent y-o-y, industrial capacity is at record lows, manufacturing is still contracting, housing is in the tank, shipping and rail freight are scraping the bottom, retail is in a long-term funk, and--according to Krugman--the slight dip in unemployment was a statistical anomaly. Here's Bob Herbert's great summary of the unemployment data:

"Some 247,000 jobs were lost in July, a number that under ordinary circumstances would send a shudder through the country. It was the smallest monthly loss of jobs since last summer. And for that reason, it was seen as a hopeful sign. The official monthly unemployment rate ticked down from 9.5 percent to 9.4 percent....The country has lost a crippling 6.7 million jobs since the Great Recession began in December 2007...

The percentage of young American men who are actually working is the lowest it has been in the 61 years of record-keeping, according to the Center for Labor Market Studies at Northeastern University in Boston. Only 65 of every 100 men aged 20 through 24 years old were working on any given day in the first six months of this year. In the age group 25 through 34 years old, traditionally a prime age range for getting married and starting a family, just 81 of 100 men were employed.... The numbers are beyond scary; they’re catastrophic.

This should be the biggest story in the United States. When joblessness reaches these kinds of extremes, it doesn’t just damage individual families; it corrodes entire communities, fosters a sense of hopelessness and leads to disorder....

A truer picture of the employment crisis emerges when you combine the number of people who are officially counted as jobless with those who are working part time because they can’t find full-time work and those in the so-called labor market reserve — people who are not actively looking for work (because they have become discouraged, for example) but would take a job if one became available.

The tally from those three categories is a mind-boggling 30 million Americans — 19 percent of the overall work force.

This is, by far, the nation’s biggest problem and should be its No. 1 priority.("A Scary Reality" Bob Herbert, New York Times)

Sorry, Bob, the media has no time for unemployment news. It tends to undermine the positive vibes from green shoots stories.

The stock market rally has made it harder for people to see the truth. But the facts haven't changed. Deflation is setting in across all sectors and the economy has reset at a lower rate of economic activity. Housing prices are falling, consumer spending is slowing, layoffs are rising, and demand is getting weaker. That means growth will be sub-par for the foreseeable future. Here's an excerpt from a speech given by San Francisco Fed Janet Yellen drawing the same conclusion:

"I don’t like taking the wind out of the sails of our economic expansion, but a few cautionary points should be considered... a massive shift in consumer behavior is under way.. American households entered this recession stretched to the limit with mortgage and other debt. The personal saving rate fell from around 8 percent of disposable income two decades ago to almost zero. Households financed their lifestyles by drawing on increasing stock market and housing wealth, and taking on higher levels of debt. But falling house and stock prices have destroyed trillions of dollars in wealth, cutting off those ready sources of cash. What’s more, the stark realities of this recession have scared many households straight, convincing them that they need to save larger fractions of their incomes.... a rediscovery of thrift means fewer sales at the mall, and fewer jobs on assembly lines and store counters....
 
...This very weak economy is, if anything, putting downward pressure on wages and prices. We have already seen a noticeable slowdown in wage growth and reports of wage cuts have become increasingly prevalent—a sign of the sacrifices that some workers are making to keep their employers afloat and preserve their jobs. Businesses are also cutting prices and profit margins to boost sales..... With unemployment already substantial and likely to rise further, the downward pressure on wages and prices should continue and could intensify....

If the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation. Worse still, if deflation were to intensify, we could find ourselves in a devastating spiral in which prices fall at an ever-faster pace and economic activity sinks more and more."

"Falling prices." "Deflation." "Devastating spiral." That's not the kind of honesty that one expects from a Fed chief. Yellen must not be drinking the lemonade.

And don't forget the banking system is still broken. Not a dime from the $700 billion TARP bailout was used to purchase toxic assets. The banks are still drowning in red ink. . Bernanke has known since last September when Lehman Bros. defaulted, that the bad assets would have to be removed before the economy could recover. An underwater banking system is a constant drain on public resources and a drag on growth. Bernanke knows this, but rather than remove the assets by nationalizing the banks or restructuring their debt (as he should have done) he expanded the Fed's balance sheet by $1.2 trillion which provided the liquidity that financial institutions pumped into the stock market. "Bernanke's Rally" has generated the capital the banks needed to keep them from writing-down their debts or filing for Chapter 11, but the problems still persist right below the surface. Just this week, Elizabeth Warren's Congressional Oversight Panel released a damning report which stressed the need to address the issue of toxic assets. According to the COP's report:

"Financial stability remains at risk if the underlying problem of toxic assets remains unresolved....

If the economy worsens, especially if unemployment remains elevated or if the commercial real estate market collapses, then defaults will rise and the troubled assets will continue to deteriorate in value. Banks will incur further losses on their troubled assets. The financial system will remain vulnerable to the crisis conditions that TARP was meant to fix....

Changing accounting standards helped the banks temporarily by allowing them greater leeway in describing their assets, but it did not change the underlying problem. In order to advance a full recovery in the economy, there must be greater transparency, accountability, and clarity, from both the government and banks, about the scope of the troubled asset problem.

The problem of troubled assets is especially serious for the balance sheets of small banks. Small banks‘ troubled assets are generally whole loans, but Treasury‘s main program for removing troubled assets from banks‘ balance sheets, the PPIP will at present address only troubled mortgage securities and not whole loans.

Given the ongoing uncertainty, vigilance is essential. If conditions exceed those in the worst case scenario of the recent stress tests, then stress-testing of the nation‘s largest banks should be repeated to evaluate what would happen if troubled assets suffered additional losses."

To sum up: There will be NO real recovery until the toxic assets problem is resolved. Unfortunately, the Treasury and Fed have shown that they intend to sweep this issue under the rug for as long as possible.

Toxic assets, falling home prices, widespread malaise in the credit markets are just part of the problem. The deeper issue is the dismal condition of the US consumer who has seen his home equity dissipate, his retirement funds sawed in half,his access to credit curtailed, and his job put at risk. Ordinary working class Americans now face what David Rosenberg calls, "the era of consumer frugality---new paradigm of savings, asset liquidation and debt repayment ." Life styles will have to be toned-down and living standards lowered to meet the new deflationary reality. More and more people will be forced to jettison their credit cards and live within their means.

It's not the end of the world, but it does foreshadow a protracted period of negative growth, social unrest and persistent high unemployment. Here's how the Wall Street journal sums it up: "A surprisingly large number of money managers and economists are warning that, despite the hopeful signs, the economy is still deep in the woods, not strong enough to support a long-running stock and bond recovery....Even after the recession ends, economists expect the gradual reduction of the nation's massive consumer debt to take years.

The debt data are striking. According to the Federal Reserve, total household indebtedness peaked at the end of 2007 at 132% of disposable income. That was by far the highest level since at least the end of World War II, nearly quadruple the 36% of 1952. By the end of March, with families boosting savings, repaying debt and defaulting, the ratio had fallen to 124%, a tad lower but still miles from the level of, say, 69% in the middle of 1985. Consumer spending today accounts for two-thirds or more of economic output. But as they boost savings and cut borrowing, consumers can't be the drivers of economic growth that they were at the end of other recent recessions.

Consumer borrowing fell in June for the fifth consecutive month....

"Consumers are under significant financial pressure," Goldman notes in its report. "The weakness in household income -- partly resulting from the sharp slowdown in hourly wage growth -- will make it harder to raise saving without significant constraints on consumption."

As for home building and capital spending, two other possible growth motors, "we do not expect a 'traditional' rebound in these sectors, largely because the overhang of unused capacity in both the housing and business sectors remains enormous," Goldman said." ("Debt Burden to Weigh on Stocks", E.S. Browning and Annelena Lobb, Wall Street Journal)

Stock market euphoria can last a long time, but the laws of gravity still apply. The economy is in deep, deep trouble and Bernanke knows it or he'd be raising rates right now. The patient is haemorrhaging my friends, and no amount of happy talk is going to stop the bleeding.
 
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Israeli government and US conservatives behind Obama’s birth certificate
10 August, 2009, 23:36

“The Netanyahu government is very upset with Obama over his administration’s insistence that there’ll be a freeze on settlements, including in East Jerusalem,” says investigative journalist Wayne Madsen.

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China reduces holdings in US debt
Tuesday, 18 August 2009 12:27 UK

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China wants to establish a new global currency regime

China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury.

China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June, said the BBC's Chris Hogg.

Japan and the UK - second and third largest holders of US debt - increased their holdings over the same period.

China's holding of US debt is about 7% higher than at the turn of the year.

Inflation fear


In recent months the US government's budget deficit has widened thanks in part to the Obama administration's costly stimulus plan.

Our correspondent in Shanghai says that China is worried about this, and fears the stimulus efforts will fuel inflation in the US, reducing the value of the dollar.

This would then erode the value of the debt China holds in the US currency.

In June, China cut its holdings of US securities by about $25bn, a fall of 3.1%.

'Dollar alternative'

The sales were made as the US treasury secretary was visiting Beijing to try to reassure the Chinese that their investment in his country's government debt is safe.

In 2008, the Chinese increased their holdings in US debt by 52% over 12 months.

"China has said it would like to establish an alternative to the US dollar as the world's favoured currency for foreign exchange reserves," said our correspondent.

"So far there is no evidence that there is a suitable alternative. But these figures suggest they are exploring ways to diversify their investments where they can."
 
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Up to two million march to US Capitol to protest against Obama's spending in 'tea-party' demonstration

By Mail Foreign Service
Last updated at 9:39 PM on 12th September 2009


Up to two million people marched to the U.S. Capitol today, carrying signs with slogans such as "Obamacare makes me sick" as they protested the president's health care plan and what they say is out-of-control spending.

The line of protesters spread across Pennsylvania Avenue for blocks, all the way to the capitol, according to the Washington Homeland Security and Emergency Management Agency.

People were chanting "enough, enough" and "We the People." Others yelled "You lie, you lie!" and "Pelosi has to go," referring to California congresswoman Nancy Pelosi.

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Tens of thousands of people converged on Capitol Hill on Saturday to protest against government spending

Demonstrators waved U.S. flags and held signs reading "Go Green Recycle Congress" and "I'm Not Your ATM." Men wore colonial costumes as they listened to speakers who warned of "judgment day" - Election Day 2010.

Richard Brigle, 57, a Vietnam War veteran and former Teamster, came from Michigan. He said health care needs to be reformed - but not according to President Barack Obama's plan.

"My grandkids are going to be paying for this. It's going to cost too much money that we don't have," he said while marching, bracing himself with a wooden cane as he walked.

FreedomWorks Foundation, a conservative organization led by former House of Representatives Majority Leader Dick Armey, organized several groups from across the country for what they billed as a "March on Washington."

Organizers say they built on momentum from the April "tea party" demonstrations held nationwide to protest tax policies, along with growing resentment over the economic stimulus packages and bank bailouts.

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US President Barack Obama sports a mustache famously worn by German dictator Adolf Hitler

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Demonstrators hold up banners on Capitol Hill in Washington on Saturday

Many protesters said they paid their own way to the event - an ethic they believe should be applied to the government.

They say unchecked spending on things like a government-run health insurance option could increase inflation and lead to economic ruin.

Terri Hall, 45, of Florida, said she felt compelled to become political for the first time this year because she was upset by government spending.

"Our government has lost sight of the powers they were granted," she said. She added that the deficit spending was out of control, and said she thought it was putting the country at risk.

Anna Hayes, 58, a nurse from Fairfax County, stood on the Mall in 1981 for Reagan's inauguration. "The same people were celebrating freedom," she said. "The president was fighting for the people then. I remember those years very well and fondly."

Saying she was worried about "Obamacare," Hayes explained: "This is the first rally I've been to that demonstrates against something, the first in my life. I just couldn't stay home anymore."

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The heated demonstrations were organized by a Conservative group called the Tea Party Patriots

Like countless others at the rally, Joan Wright, 78, of Ocean Pines, Md., sounded angry. "I'm not taking this crap anymore," said Wright, who came by bus to Washington with 150 like-minded residents of Maryland's Eastern Shore. "I don't like the health-care [plan]. I don't like the czars. And I don't like the elitists telling us what we should do or eat."

Republican lawmakers also supported the rally.

"Republicans, Democrats and independents are stepping up and demanding we put our fiscal house in order," Rep. Mike Pence, chairman of the House Republican Conference, said.

"I think the overriding message after years of borrowing, spending and bailouts is enough is enough."

Other sponsors of the rally include the Heartland Institute, Americans for Tax Reform and the Ayn Rand Center for Individuals Rights.

Recent polls illustrate how difficult recent weeks have been for a president who, besides tackling health care, has been battling to end a devastatingly deep recession.

Fifty percent approve and 49 percent disapprove of the overall job he is doing as president, compared to July, when those approving his performance clearly outnumbered those who were unhappy with it, 55 percent to 42 percent.

Just 42 percent approve of the president's work on the high-profile health issue.

The poll was taken over five days just before Obama's speech to Congress. That speech reflected Obama's determination to push ahead despite growing obstacles.

"I will not waste time with those who have made the calculation that it's better politics to kill this plan than to improve it," Obama said on Wednesday night. "I won't stand by while the special interests use the same old tactics to keep things exactly the way they are.

"If you misrepresent what's in the plan, we'll call you out. And I will not accept the status quo as a solution."

Prior to Obama's speech before Congress U.S. Capitol Police arrested a man they say tried to get into a secure area near the Capitol with a gun in his car as President Barack Obama was speaking.

Police spokeswoman Sgt. Kimberly Schneider said Thursday that 28-year-old Joshua Bowman of suburban Falls Church, Virginia, was arrested around 8 p.m. Wednesday when Obama was due to speak.

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'Parasite-in-chief': The title given to the American President during the demonstrations on Saturday


Bowman's intentions were unclear, police said.

Today's protests imitated the original Boston Tea Party of 1773, when colonists threw three shiploads of taxed tea into Boston Harbour in protest against the British government under the slogan 'No taxation without representation'.

The group first began rising to prominence in April, when the governor of Texas threatened to secede from the union in protest against government spending. Waves of tea party protests have crossed America since.

Today's rally, the largest grouping of fiscal conservatives to march on Washington, comes on the heels of heated town halls held during the congressional August recess when some Democratic lawmakers were confronted, disrupted and shouted down by angry protestors who oppose President Obama's plan to overhaul the health care system.
 
Oh please Obama is a 1000 times better than the previous idiot who plunged America into a war.
 
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The Increasingly Obvious Failure of Obama's Middle East Policy
Prof. Barry Rubin - 9/25/2009

It’s a development of shocking proportions if properly noticed and evaluated. President Barack Obama’s entire Arab-Israeli and Iranian policies are miserably failing, though partly concealed by theatrical events and media protection.

Here's the latest development. French Foreign Minister Bernard Kouchner arriving at the UN General Assembly session, stated that he doesn’t favor blocking the export of refined oil products to Iran, the keystone of the new sanctions proposed by Obama.

The New York Times reported this story but grossly underplayed its implications:

“But if France is to come out against fuel sanctions analysts said, they will most likely be off the table as an option for increasing the pressure on Iran.”

Ha! If France does so it will be the end of Obama’s whole strategy against Iran. For Tehran, it will be a straight, largely untroubled stroll to nuclear weapons, unless derailed by an Israeli attack.

“I think this is a bit dangerous,” Kouchner said about the proposed sanctions. Would that be more dangerous than Iran getting nuclear weapons? But Kouchner didn't make clear to whom or in what way it's dangerous. He did say, however, that it would mostly harm “poor people” in Iran.

[An aside: This is the kind of phony “humanitarian” considerations that paralyze Western policy today. Sure, there is some patriotic reaction against foreign pressures in places like Iran, but do the millions opposing that regime as a repressive dictatorship really want the West to coddle and court their oppressors? Do Gazans favor Western actions ensuring Hamas remains in power? Do Iraqis retrospectively curse Western sanctions against Saddam Hussein’s regime?

[Can the West fight no war because there will be civilian casualties; can it not preserve its freedoms because Muslims or others might be offended? Is the “zero-harm” approach an effective way for policy to be conducted, or even for democracies to survive at all?]

Of course, French President Francois Sarkozy may reverse his foreign minister’s stance. Yet it is extraordinarily significant that a major ally supposedly wowed by Obama’s charisma and popularity, can publicly do the equivalent of throwing a pie into the president’s face with no consequences.

And there's a virtual parade of pie-throwers. Obama’s Arab-Israeli policy was derailed by similar responses. Israel refused to bow to American demands stated in the most extreme, public, peremptory manner and Obama gave in. Egypt, Jordan, Saudi Arabia, and other Arab states all publicly made clear that they would defy the president and reject the confidence-building measures with Israel he request. Obama smiled and thanked them for their help.

Then the same thing happened with his Iran policy. First, Russia and China rejected his efforts to get their agreement to increased sanctions. Now, France may be doing the same thing. In between, the White House accepted an insulting Iranian message for talks.

Could it be any more obvious? Obama’s salient international characteristic is not popularity but weakness. Already, Obama has been defied or has buckled under to a long list of countries including: China, Egypt, Iran, Israel, North Korea, Pakistan, Russia, Saudi Arabia, Syria, Venezuela, and now perhaps France.

That's why the conspiratorial notion that Obama aims to sell out Israel is wrong. He will back away if anyone stands up to him. The risk posed by administration policy is not to Israel but to U.S. interests altogether as he refuses to confront radical anti-American forces.

A strong argument could be made that the United States should boycott meetings with Iran altogether. After all, even if the Tehran regime wasn’t working on nuclear weapons, the mere fact that it is a dictatorship that has just stolen an election, repressed a peaceful opposition, put on trial many dissident leaders, and appointed a wanted terrorist as defense minister should be sufficient to inspire such a boycott.

Just this week, there are reports leaked by U.S. military officials—frustrated at White House policy?—that Iran’s Qods force (whose former head is now Iran’s defense minister) is training and arming Taliban gunmen in Afghanistan. The official spin is that this poses no current threat to American forces there. Right. Only when the Taliban soldiers finish their training and go out to kill Americans will there be an immediate threat. Already, though, the same Qods force has been involved in helping to kill Americans in Iraq, according to U.S. intelligence reports.

Instead of action, the administration delivers the photo op of a meeting between Israeli and Palestinian leaders in New York that will enable Obama to portray himself as a great success in peacemaking. In fact, what he has “accomplished”—a meeting of the two leaders—would have happened months ago if Obama’s injection of the construction freeze issue had not given the Palestinians a rationale for suspending talks.

[After I wrote this article, I heard National Public Radio's report on this event. It explained clearly the main problem clearly as Israel not wanting to freeze construction and the Palestinians not wanting to negotiate unless that was done. But it never mentioned that the whole problem arose because Obama made the issue the central factor. In other words, this conflict didn't just arise from Israel or the Palestinians but is all Obama's fault. This is rather typical of how most of the media has dealt with the administration's mistakes.]

[And the AP coverage was equally wrong:

"Despite months of effort, the sides remain far apart on a staunch Palestinian precondition for talks: that Israel halt all construction of Jewish settlements in Palestinian territory. Obama has publicly echoed that demand to Israeli leaders...."

Echoed? The Palestinians got the idea from Obama! Before he got started there were no Palestinian preconditions about meeting Israeli officials.

Continuing with the kind of insanity that seems to seize many reporters when they cover Obama, the AP story continues:

"Bristling with impatience, President Barack Obama sternly prodded Israeli and Palestinian leaders to relaunch Mideast peace negotiations Tuesday, grasping a newly personal role in their historic standoff."

How patronizing can you get? This is a man whose role in dealing with the conflict goes back about six months meeting two leaders who have been coping with it for more than thirty years. It is as if the Israeli and Palestinian leaders are schoolchildren, as if their duty was not to their own people but to satisfy Obama. With an attitude like this--arrogance plus weakness--he can expect no success in this part of the world.

Nahum Barnea, arguably the Israeli left’s most distinguished writer, who backs a complete settlement freeze and would like to support Obama, wrote the get-together at the UN meeting, “Is a joke at the expense of an American president who tried to get involved in Middle East politics and was stung….The Americans,” Barnea continued, “discovered that they want an Israeli-Palestinian agreement more than the leaders of both sides desire one.”

Precisely. And in this regard nothing has changed much since 2000 when the Palestinian leadership rejected peace. That reality should have been clear to the Obama Administration from the beginning rather than its attitude of bravado about how it was going to hit the ground running and solve the conflict very fast.

Barnea concluded: Obama “is cool….Yet the U.S. president is not Brad Pitt or George Clooney. He’s supposed to bring results.”

Well-put. While American opinion-makers continue to focus on Obama’s “coolness” and Western Europeans cheer him—what’s not to cheer in an American president who let’s you do whatever you want?—the world is giving him the cold shoulder.

Prof. Barry Rubin is director of the Global Research in International Affairs (GLORIA) Center, Interdisciplinary university.
 
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Asia steps in to support dollar
By Kevin Brown in Singapore, and Peter Garnham and Chris Giles in London
Published: October 8 2009 15:09 | Last updated: October 8 2009 20:43


Asian central banks intervened heavily in the currency markets on Thursday to stem the appreciation of their currencies against the US dollar amid fears that their exports could be losing ground against China.

The mainly south-east Asian countries have been spurred to defend the competitiveness of their currencies by China’s decision to in effect re-peg the renminbi to the dollar since July last year.

Simon Derrick, at Bank of New York Mellon in London, said: “Other Asian central banks outside China are naturally looking to aggressively defend their competitive edge against undesirable currency strength as the dollar weakens.”

After allowing the renminbi to appreciate by about 20 per against the US dollar from mid-2005, Beijing re-pegged its currency to the greenback when export growth contracted.

The greenback hit one-year lows against a raft of regional currencies. The dollar index, which tracks its value against a basket of six main currencies, hit a 14-month low in afternoon trading in New York.

Jean-Claude Trichet, European Central Bank president, issued a warning about the euro’s strength on Thursday and said that authorities on both sides of the Atlantic would “co-operate as appropriate”.

Marco Annunziata, chief economist at Unicredit, said: “He clearly tried to signal as convincingly as possible that the eurozone and the US are united in the desire to limit the rise in the euro versus the dollar – but the market is calling his bluff.”

Gold prices hit an all-time high for the third day in a row, on the dollar’s weakness. Base metals such as aluminium and copper jumped 4 per cent, while crude oil surged almost $3 to more than $70 a barrel.

The central banks identified by traders as substantial buyers of US dollars included Thailand, Malaysia and Taiwan. Hong Kong and Singapore, which both have managed currency regimes, were also buyers.

The moves to limit Asian currency appreciation is ammunition for those who warn that the new Group of 20 framework for strong and balanced growth is toothless. Less than a week after the world’s finance ministers and central bankers agreed to foster more balanced world economic growth in Istanbul, Asian officials have intervened to prevent exchange rates playing their part in the process.

However, traders said that the central bank interventions appeared to be aimed at controlling the pace at which the US dollar declines rather than solely to stop Asian currencies appreciating.

The Obama administration has not altered its refrain that it believes in a “strong dollar” but is seen as unlikely to intervene in currency markets, particularly as the US Treasury recognises the trade-weighted value is similar to where it was two years ago.
 
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Whodunit? Sneak attack on U.S. dollar
By EAMON JAVERS | 10/8/09 2:38 PM EDT

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With the U.S. economy on the ropes and America by far the world's biggest debtor, investors aren't feeling as secure about the dollar as they used to. Photo: AP

It’s the biggest mystery in global finance right now: Who conducted a sneak attack on the U.S. dollar this week?

It began with a thinly sourced but highly explosive report Monday in a British newspaper: Arab oil sheiks are conspiring with the Russians and Chinese to quit using the dollar to set the value of oil trades — a direct threat to the global supremacy of the greenback.

Is it true? Everyone from the head of the Saudi central bank to U.S. officials scrambled to undercut the story, but no matter.

With the U.S. economy on the ropes and America by far the world’s biggest debtor, investors aren’t feeling as secure about the dollar as they used to. And the notion of second-tier economies ganging up on Uncle Sam didn’t sound so far-fetched.

For American officials, the possibility of the dollar losing its long-term dominance in global commerce is a nightmare scenario because it would likely mean sharply higher interest rates at home and a declining ability to finance the U.S. debt. No one believes it could really happen right now, but stories like the British report this week make it seem incrementally more likely.

So the piece by Robert Fisk of the Independent shocked currency traders around the world and almost instantly sent the value of the U.S. dollar spiraling downward and the price of gold skyrocketing to an all-time high, as a hedge against a weakened dollar.

The website drudgereport.com quickly amplified the impact of the story with a headline atop the site: ARAB STATES LAUNCH SECRET MOVES WITH CHINA, RUSSIA, FRANCE TO STOP USING DOLLAR FOR OIL TRADING ...

“You read that story, and you do two things: You sell the hell out of dollars and you buy gold,” said Les Alperstein, president of the financial research firm Washington Analysis. “The story has a lot of credibility, with some caveats.”

So who wanted dollars diving and gold rising? In other words, who is Fisk’s source, and why did he or she want to tank the dollar? It’s the global currency version of the old Washington parlor game of speculating on the real identity of Deep Throat.

No one knows.

But one thing is for certain: With the price of gold jumping to $1,048.20 per ounce, traders who moved early enough stood to make millions.

So in government circles in Washington, speculation immediately centered on gold traders: With the skyrocketing price of gold, they’d be the biggest beneficiaries of the article.

Fisk’s story itself isn’t much help in solving the mystery — it is sourced vaguely to “Gulf Arab and Chinese banking sources in Hong Kong,” and it included one blind quote, attributed to “a prominent Hong Kong broker.” That doesn’t narrow down the pool very much.

The story doesn’t name any officials who had allegedly participated in the secret meetings involving the Arab states. It didn’t say where the meetings occurred or when. Other than saying the plan is to stop using the dollar by 2018, there was precious little detail to the account.

Around the world, traders turned to Wikipedia to find out more about Fisk himself. There, they learned that Fisk is a legendary British foreign correspondent who has been based in Beirut for more than 30 years and has won a slew of journalism awards. They also learned that he is one of only a few journalists to have interviewed Osama bin Laden (three times) and that he has expressed doubts that the United States has told the full story about the Sept. 11 attacks.

An analyst’s report from the Royal Bank of Scotland concluded, “Fisk is a veteran of the Middle East. ... he is also increasingly associated with more radical theories thus weakening the credibility of the story.”

Beyond the specifics of the story, the geopolitical implications of the report sent shudders from Riyadh to London to Washington: Has the long-dominant American economy been so humbled by the economic crisis that these nations would mount a frontal attack on the dollar, the underpinning of the world’s biggest economy?

That question is on the minds of global investors, who are keeping a skittish eye on the weakening dollar. And over the past several months there has been a steady drumbeat of Chinese, Russian and other officials who have talked openly about finding a replacement for the dollar as the global economy’s default currency. Any effort to do that would be fraught with difficulty. But however unlikely, the possibility represents a threat to the American economy, which has come to depend on the significant advantages it reaps from minting the currency most used around the world.

In another era, the dollar could shrug off such a vaguely sourced, thinly detailed story.

But not anymore.

The dollar is weak and vulnerable to rumor-mongering because many traders believe it will only get weaker. “The fundamental reason why this occurred is that after 9.8 percent unemployment on Friday, nobody can say with certainty that the recovery is sustainable,” said one analyst familiar with the situation.

“In years past, when the U.S. economic dominance was more pronounced and emerging markets were marginal players in the global economy,” noted an analyst’s report from HSBC, “the debate on pricing commodities in currencies other than the [U.S. dollar] typically came down to the lack of practicality. ... Today, emerging markets are clearly wielding much more influence in the global economy, and they want more, as will be borne out in this week’s IMF meetings.”

And that means U.S. officials whose job it is to defend the dollar may have their work cut out for them in the months to come.
 
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