A bankrupt BP is worse for the financial world than Lehman

Jim’s Mailbox

Posted: Jun 22 2010 By: Jim Sinclair Post Edited: June 22, 2010 at 12:55 pm

Filed under: Jim's Mailbox

Dear CIGAs,

A bankrupt BP is worse for the financial world than Lehman Brothers was for exactly the same reason.

Pedro’s credentials in energy exceed by orders of magnitude those talking heads giving daily BP opinions. In fact, Pedro’s credentials might just be better than all of them added together.

Please read this article closely, and share it with others. It is just that important.

Regards, Jim

Dear Jim,

The BP crisis in the Gulf of Mexico has rightfully been analysed from the ecological perspective. People’s lives and livelihoods are in grave danger. But that focus has equally masked something very serious from a financial perspective, in my opinion, that could lead to an acceleration of the crisis brought about by the Lehman implosion.

People are seriously underestimating how much liquidity in the global financial world is dependent on a solvent BP. BP extends credit – through trading and finance. They extend the amounts, quality and duration of credit a bank could only dream of. The Gold community should think about the financial muscle behind a company with 100+ years of proven oil and gas reserves. Think about that in comparison with what a bank, with few tangible assets, (truly, not allegedly) possesses (no wonder they all started trading for a living!). Then think about what happens if BP goes under. This is no bank. With proven reserves and wells in the ground, equity in fields all over the planet, in terms of credit quality and credit provision – nothing can match an oil major. God only knows how many assets around the planet are dependent on credit and finance extended from BP. It is likely to dwarf any banking entity in multiples.

And at the heart of it all are those dreadful OTC derivatives again! Banks try and lean on major oil companies because they have exactly the kind of credit-worthiness that they themselves lack. In fact, major oil companies, conversely, spend large amounts of time both denying Banks credit and trying to get Bank risk off of their books in their trading operations. Oil companies have always mistrusted bank creditworthiness and have largely considered the banking industry a bad financial joke. Banks plead with oil companies to let them trade beyond one year in duration. Banks even used to do losing trades with oil companies simply to get them on their trading register… a foot in the door so that they could subsequently beg for an extension in credit size and duration. For the banks, all trading was based on what the early derivatives giant, Bankers Trust, named their trading system: RAROC – or, Risk Adjusted Return on Credit. Trading is a function of credit bequeathed, mixed with the risk of the (trading) position. As trading and credit are intertwined, we might do well to remember what might happen to global liquidity and markets if BP suffers what many believe to be its deserved fate of bankruptcy. The Intercontinental Exchange (ICE) has already been and will be further undermined by BP’s distress. They are one of the only “hard asset” entities backing up this so-called exchange.

If BP does go bust (regardless of whether it is deserved), and even if it is just badly wounded and the US entity is allowed to fail, the long-term OTC derivatives in the oil, refined products and natural gas markets that get nullified could be catastrophic. These will kick-back into the banking system. BP is the primary player on the long-end of the energy curve. How exposed are Goldman sub J. Aron, Morgan Stanley and JPM? Probably hugely. Now credit has been cut to BP. Counter-parties will not accept their name beyond one year in duration. This is unheard of. A giant is on the ropes. If he falls, the very earth may shake as he hits the ground.

As we are beginning to see, the Western pension structure, financial trading and global credit are all inter-twined. BP is central to this, as a massive supplier of what many believe(d) to be AAA credit. So while we see banks roll over and die, and sovereign entities begin to falter… we now have a major oil company on the verge of going under. Another leg of the global economic “chair” is being viciously kicked out from under us. Ecological damage is not just an eco-event on its isolated own. It has been added to the list of man-made disasters jeopardizing the world economy. The price tag and resultant knock-on effects of a BP failure could easily be equal to that of a Lehman, if not more. It is surely, at the very least, Enron x10.

All the counter-party risk associated with the current BP situation means the term curve of the global oil trade has likely shut down. Here we have yet another credit-based event causing a lock-up in markets that will now impede trade and commerce. It looks like an exact replication of the 2008 credit market seizure could ensue all over again – and it could probably be a lot worse. The world is in a far more delicate state now.

Although never really discussed, the world is highly reliant on BPs provision of long-term credit to many core industries. Who makes good on all the outstanding paper that so many smaller oil, gas and electricity companies, airlines, shipping companies, local bus, railway and transportation networks that rely on BPs creditworthiness and performance for? It doesn’t take a genius to figure out how this could all unwind. If BP has to be bailed-out, like a bank, the system will have to print even more unimaginable amounts of money.

The market, intellectually lazy and slow to realization, as it often is, probably has not woken up to it yet – but the BP crisis could unleash damage similar to the banking crisis. A BP failure through bankruptcy could make Lehman look small in comparison, and shake the financial house of cards we live in even more severely. If the implicit danger of the possibilities imbedded in such an event doesn’t make an individual now turn towards Gold at full speed, it is likely that nothing will.

Respectfully yours, CIGA Pedro

Jim Sinclair’s Commentary

No surprise where the Cando is concerned for you.

Canada’s economy is suddenly the envy of the world CIGA Eric

Canada Inc will be reflected in the exchange rate of the Canadian Dollar (Loonie). Par or better with the U.S. dollar is coming.

The 20 world leaders at an economic summit in Toronto next weekend will find themselves in a country that has avoided a banking crisis where others have floundered, and whose economy grew at a 6.1 percent annual rate in the first three months of this year. The housing market is hot and three-quarters of the 400,000 jobs lost during the recession have been recovered.

Source: news.yahoo.com

More…

The Slow Decay of a Healthy Economy

Bill Bonner

Today, we boldly announce a NEW THEORY about the way the world works.

Yes, dear reader, you are the first to hear it.

But before we get to that, let's talk about what's going on in the markets.

Stocks continued shuffling along like zombies...the Dow rose 24 points. But gold shot up to $1,248 - a new record.

Makes you wonder. Inflation is no threat to anyone...at least, not now. The economy is recovering - at least, that's what everyone says. So why is gold hitting a record high? Something must be wrong.

Something is wrong.

Gold buyers are probably just like us. They're not sure exactly what is wrong. But they know something is rotten in the state of Denmark. And Greece. And Spain. And New York. And California. In Washington, DC. And in the Gulf of Mexico.

We just had the biggest financial crack-up of all time. Even under ideal conditions, it will take people a long time to rebuild lost savings...to get rid of houses they can't afford...and to restructure debt they can't pay. While this restructuring and adjustment is going on, you'd expect the markets to be a little punky.

But instead of letting people get on with it, the zombies have moved in. At first, you hardly notice. An arm here. A leg there. Pretty soon, you're dead!

The percentage of the economy controlled, guaranteed, or paid for by the government is increasing. Since the feds were already deeply in debt themselves, the only way they could spend more money was by borrowing more. You can't cure a debt problem by borrowing more money. Net debt is going up. So, there's something wrong. The economy isn't recovering... It's just not possible.

Which brings us back to our new theory...

Many are the ideas about how the world rumbles and trundles along. Most have some sort of dialectic at the center of them...some tension between one thing and another that causes them to oscillate to and fro...some yin and yang of opposing forces, constantly battling it out for control.

Good vs. Evil. Progress vs. Backsliding. The proletariat against the bourgeoisie. The moneyed elite vs. the people. Democracy vs. Totalitarianism. Freedom vs. Slavery.

Here we offer a new and improved theory with a dynamic of its own: the producers vs. the parasites.

Yesterday, we read in the local Washington newspaper that the parasites gained more ground in suburban Maryland. It was a minor issue on a minor page of a minor section of the paper. But that's the way the parasites work. Little by little...an arm here...a leg there.

In the present instance, people who live in trailer parks can now feed on the people who own the ground beneath their feet. The state government has added a term to their contracts that neither party agreed to. Henceforth, if the trailer park owner wishes to close down his business, he cannot merely honor the terms of his contract with his lessees. He must also pay them off according to a formula decreed by the legislature. Trailer park residents have been zombified.

A bigger illustration can be found on the front page of yesterday's paper.

BP has agreed to provide the zombies with $20 billion dollars of raw meat:

"BP backs $20 billion spill fund," says The Financial Times.

BP is a producer. It makes something valuable. In fact, it makes the thing that is the pentagon's most valuable and most important resource - liquid energy. It does so at a profit, also rewarding all the little old ladies, lonely orphans and rich sons-of-a-gun who own its shares. BP normally pays dividends; those dividends are currently suspended, as BP diverts cash to the spill fund.

Yes, it also makes mistakes, for which it must pay.

But circling BP today is an army of parasites. Zombies who toil not. Neither do they spin. Instead, they file lawsuits and try to get something from the producers without paying for it. BP's Gulf disaster is a godsend for them. Like a busload of plump English tourists delivered to a bad neighborhood...

The Democrats have always been the recipients of big donations from tort lawyers. Many lawmakers of both parties are lawyers, which is to say they were probably parasites even before they entered public service. It is not surprising that their instincts are the same - to leech onto productive businesses.

Remember the giant tobacco settlement? In 1998, the tobacco companies lay down and opened their veins. A quarter of a trillion dollars was paid out in a huge class action settlement. The money was supposed to go to redress the damage done by smoking. But $19 out of every $20 found its way, instead, into the pockets of the lawyers, the activists, and the bureaucrats. That is to say - the zombies got it.

Will the oil settlement be any different? Not likely. The zombies will take most of it. Much of the rest will be used to turn honest working people into zombies. Instead of finding new work in new areas, for example, Gulf-area residents will be encouraged to stay put and collect checks. If they take up new work, the measure of their 'damages' will go down!

Here is our theory: in the beginning, an economy, a business, a nation...or even a family budget...is fresh, clean and dynamic. Over time, little by little, the parasites encrust themselves -like barnacles on a ship. Then, they grow. Eventually, they become as fat as ticks on a hound in the summertime...

At first, they are just nuisances. The economy can support them.

'The masses want bread? Sure why not. Give them a circus too. And give my lazy brother-in-law a sinecure.'

Gradually, more and more people get their teeth into it. An unnecessary department in a thriving business. A subsidy to one group. A special favor to another. A make-work job...a handout...a bailout... An expense here. An extravagance there...

When things go well, the parasites take more blood. Heck, the economy can afford it. When they go badly, they grab the weakened host and pull it down in a feeding frenzy. BP, are you ready?

They succeed because in most cases it is generally cheaper to go along than to fight.

Without hardly noticing, the living become cooperative zombies too. The cigarette companies become tax collectors for the feds. The oil companies too. Doctors go along with nationalized health care. Teachers get their lifetime tenure. Ordinary citizens stand in line to be inspected at airports, counted by census takers, interrogated by tax collectors. Soon, the whole nation is zombified.

The zombies win. And then...there is collapse, war, revolution, bankruptcy... The zombies are killed off...new life begins.

That's why the feds fight so hard to prevent a financial collapse. The last thing they want is a fresh, new, healthy economy...

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning.

http://dailyreckoning.com/

Central Banks Buy Gold - $1300 Gold Next Week?

Lear Capital

As is typical of me, I saw gold making a significant move today so I tuned in to the Financial News channels to see what all the geniuses were saying about gold. One commentator suggested gold was more than a safe haven now, it's a currency play, as the world's currencies all seem to be teetering on the brink of debasement. Another said the technicals on Gold suggest it will hit $1300 as early as next week. And still another reporter chimed in and said but today's volume is low so be careful. Higher prices on lower volume can be dangerous to buy into. Then as if the floodgates of gold news have opened, I also read two articles on gold. One says Central Banks are now buying Gold and another states that gold still has a long way to rise. Ho Hum! This is all old news to our loyal readers but you know I have to comment. As far as gold being a currency play, of course as world currencies falter, investors move out of currencies and into something they deem safe. Of late, investors have been escaping the Euro and into gold, U.S. Treasuries and maybe even the dollar as now the dollar is seen as one of the world's least weak of many other currencies. To the comment that we could see gold at $1300 as early as next week, we at Lear Capital have been saying for months, that we are in the gold-at-$1500-by-the-end-of-the-year camp. Being it is half way through the year, it's about the right time to hit $1300, considering gold's propensity for a steady climb. Here's my favorite one. "Gold is trading on low volume today so be careful." (I paraphrased a little) Low volume is often attributed to lack of buyers. But given gold supply has notably run out a couple times in the last year or so, I say low volume can just as easily be attributed to lack of sellers. Do you want to sell your gold today? I submit, people who own gold today do not own it so they can make a few points of return. They own gold it because they are uncertain about the future of the world's economies. Make no mistake, gold demand is on the rise. The article today that finally acknowledges Central Bank demand, is indicative of my point. I think the article is a little after-the-fact, myself, as much of what is talked about in the article occurred months ago. Ok, so a couple new buyers were added to the list, I hardly think purchases by Kazakhstan and the Phillipines is more newsworthy than China, India and Russia all adding to their reserves months ago. The bottom line is there are many reasons to own gold in today's world of uncertainty. Yes, gold is still a safe haven in times of market volatility. Yes, gold is still an inflation hedge. Yes, people buy gold coins because deficits are at record levels and debt is reaching the point of no return. Other than that there are no real good reasons to own gold.

http://uk.ibtimes.com

US Dollar: The Mother of All Bubbles

Jesse's Café Américain

A bubble is a significant increase in valuation supported by a set of artificial, inexplicable, and otherwise unsustainable conditions. The 'increase in valuation' can be nominal as in a price that goes 'higher' without a corresponding increase in value, or a decline in the value underlying the asset while the price remains nominally the same. (note 1) True bubbles almost always involve some element of secrecy, a cover up, and some dispensation from common knowledge and experience. There are almost always dissenters, voices of warning, that are ignored and even ostracized. "It's different this time..." without there being an identifiable difference, only the self referential rationale. Stocks are not a bubble because they are going higher and the market is infallible. Housing cannot be a bubble because the housing market is so geographically diverse. You get the point. Not all things that increase in price are a bubble, but this does not mean that bubbles cannot be identified. They can, but when they serve some greater end, the voices of dissent are overwhelmed. Almost all bubbles involve control frauds and the corruption of the media, the analysts, and the regulators, to some degree, through benefits and intimidation. When the artificial conditions are removed the valuation of the bubble 'reverts to the mean, ' a more normal valuation based on the fundamentals, unadjusted and undistorted supply and demand. An asset bubble often involves a fraudulent design taking advantage of and even perpetuating a corresponding foolishness. In other words, the fraud is father to the folly. The duration of a bubble does not make it valid or 'the new normal.' Like most chronic conditions it just means that the adjustment will be all the more difficult. The US dollar as the world's reserve currency, and the unusual period of US prosperity, is an historical artifact of the post World War II era that will not continue indefinitely. When the reversion to the mean occurs, it is likely that the dollar will have to be reissued as 'the new dollar' similar to the rouble in the post-Soviet adjustment. I can think of few better examples of what the US faces than the collapse of the former Soviet Union. For the UK, it looks like Argentina, or Iceland writ large, but with the sharp edge of a police state. This is my fundamental currency thesis that I have been following since 1997, and it appears to be valid so far. I do not see the resolution in hyperinflation per se, but I do think the new dollar will have a value of about 10% of the current dollar. I think a hyperinflation requires a loss of confidence against some external standard. So the object is to weaken any that might appear. At some point they will merely knock a zero off the current dollar and demand their surrender for new dollars. That should play havoc with those holding large bundles of 'cash.' For example, if you have $100,000 in savings, and it will afterwards be worth 10,000 in new dollars. Eliminating 90% of its foreign debt obligations will certainly help to repair the US Balance Sheet. It is possible that this is accomplished in inflation, rather than a more formal evaluation, and over a long period of time, say twenty years or so. If this seems impossible to you, then you are not aware perhaps that the same thing was accomplished from 1933 to 2000, or 67 years, and should avoid looking at the last chart. The Fed was merely squandering the nation's wealth, without the advantages of modern financial engineering and deregulation. The next leg down will probably be about three times more efficient, under the leadership of Zimbabwe Ben. Chart from the latest ScotiaCapital FX Presentation

"Facts do not cease to exist because they are ignored." - Aldous Huxley

Wouldn't it be convenient for the oligarchs if their think tanks could somehow concoct a story, some plausible sounding theory, to persuade a portion of the world's population to hold dollars, expecting them to GAIN in value, even in the face of significant defaults and credit failures and a deteriorating return in GDP growth per marginal dollar debt? Or even better, getting them to remain fully invested in a series of artificially contrived dollar denominated financial assets that could be selectively 'pulled down' while keeping the overall scheme intact and running. Bernays would be proud. But the trick is to convince the non-sleepwalking portion of the public to ignore the signs of a failing economy and an approaching currency collapse. This is the sort of black is white brainwashing exercise that occupied quite a few of the whiz kids for the latter part of the twentieth century. It might take a lot of work, and some high level financial engineering, raw determination to play the long game, public relations professionals engaging invoking slogans and prejudices, and a suite of new financial instruments that would have to be protected even when it was suspected they were fraudulent, but it would be a useful tool for the Ãœbermenschen to have in their toolbox. Nothing works better than to convince a free people to willingly enslave themselves.

Advice for far too many economic forecasters and precious metals analysts. You know who you are. Stay thirsty, my friends.

Note 1: The latter case is the most difficult phenomenon to understand, but is behind much of the financial crisis which we are experiencing today. Inflation can occur even if money supply is flat and declining, because it is the level of demand for the money that could be dropping even while supply is constant. A example of this would be Europe in the aftermath of the Black Death, in which case the 'wealth' remained constant but the number of people demanding it were reduced dramatically and precipitously. If the value, the productivity of a country is all that stands behind a fiat currency, if that productive capability is in decline, to be replaced by 'service,' then in fact an inflation can occur even while the nominal money supply is flat or decreasing. One has to consider what is 'backing' the money from an external perspective. It might be easier to understand if you imagine that a country is on a gold standard, with a constant money supply, but covertly gives away all of its gold. That country will experience a significant inflation which will come upon it seemingly overnight once the confidence, the backing, in the currency is dissipated. This argues strongly against the monetarists who are pure relativists. Their relativism lead inevitably to central planning and a command economy, ideally a one world government. The need for great and greater control is necessary of the continuation of their fraud. This is why Wall Street banks always seem to be entranced with fascism, or more properly, statism, and why the robber barons chose to build slums rather than vibrant cities. And why the Chinese government fears to stimulate domestic prosperity under market discipline. Its a matter of control. Their end is not an increase in general prosperity, but rather the maintenance and increase of the power of the few over the many, relatively speaking as a close ended system. Your weakness increases my strength. I will leave the discussion of value for another time, but let it suffice to say that it involves the determination of efficient markets. An efficient market is one that is free of fraud, all information being available to all participants at the same time, with full transparency. Any limitation or even worse, monopolization of information detracts from market efficiency. Transactions are relatively frictionless, and there are strict limits on the use of size and leverage to distort the determination of value. Obviously there are no perfectly efficient markets in this world, but it is useful to have a measure to understand how imperfect that are, and whether a rule or a change makes them better or worse.

jessescrossroadscafe.blogspot.com

U.S. Debt and the Greece Analogy
by Alan Greenspan
Friday, June 18, 2010
provided by


Don't be fooled by today's low interest rates. The government could very quickly discover the limits of its borrowing capacity.

More from WSJ.com:

An urgency to rein in budget deficits seems to be gaining some traction among American lawmakers. If so, it is none too soon. Perceptions of a large U.S. borrowing capacity are misleading.

Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.

The roots of the apparent debt market calm are clear enough. The financial crisis, triggered by the unexpected default of Lehman Brothers in September 2008, created a collapse in global demand that engendered a high degree of deflationary slack in our economy. The very large contraction of private financing demand freed private saving to finance the explosion of federal debt. Although our financial institutions have recovered perceptibly and returned to a degree of solvency, banks, pending a significant increase in capital, remain reluctant to lend.

More from Yahoo! Finance:

• Countries with the Most Millionaires

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Visit the Banking & Budgeting Center
Beneath the calm, there are market signals that do not bode well for the future. For generations there had been a large buffer between the borrowing capacity of the U.S. government and the level of its debt to the public. But in the aftermath of the Lehman Brothers collapse, that gap began to narrow rapidly. Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008. How much borrowing leeway at current interest rates remains for U.S. Treasury financing is highly uncertain.

The U.S. government can create dollars at will to meet any obligation, and it will doubtless continue to do so. U.S. Treasurys are thus free of credit risk. But they are not free of interest rate risk. If Treasury net debt issuance were to double overnight, for example, newly issued Treasury securities would continue free of credit risk, but the Treasury would have to pay much higher interest rates to market its newly issued securities.

In the wake of recent massive budget deficits, the difference between the 10-year swap rate and 10-year Treasury note yield (the swap spread) declined to an unprecedented negative 13 basis points this March from a positive 77 basis points in September 2008. This indicated that investors were requiring the U.S. Treasury to pay an interest rate higher than rates that prevailed on comparable maturity private swaps.

(A private swap rate is the fixed interest rate required of a private bank or corporation to be exchanged for a series of cash flow payments, based on floating interest rates, for a particular length of time. A dollar swap spread is the swap rate less the interest rate on U.S. Treasury debt of the same maturity.)

At the height of budget surplus euphoria in 2000, the Office of Management and Budget, the Congressional Budget Office and the Federal Reserve foresaw an elimination of marketable federal debt securities outstanding. The 10-year swap spread in August 2000 reached a record 130 basis points. As the projected surplus disappeared and deficits mounted, the 10-year swap spread progressively declined, turning negative this March, and continued to deteriorate until the unexpected euro-zone crisis granted a reprieve to the U.S.

The 10-year swap spread quickly regained positive territory and by June 14 stood at a plus 12 basis points. The sharp decline in the euro-dollar exchange rate since March reflects a large, but temporary, swing in the intermediate demand for U.S. Treasury securities at the expense of euro issues.

The 10-year swap spread understandably has emerged as a sensitive proxy of Treasury borrowing capacity: a so-called canary in the coal mine.

I grant that low long-term interest rates could continue for months, or even well into next year. But just as easily, long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose almost four percentage points.

In the 1950s, as I remember them, U.S. federal budget deficits were no more politically acceptable than households spending beyond their means. Regrettably, that now quaint notion gave way over the decades, such that today it is the rare politician who doesn't run on seemingly costless spending increases or tax cuts with borrowed money. A low tax burden is essential to maintain America's global competitiveness. But tax cuts need to be funded by permanent outlay reductions.

The current federal debt explosion is being driven by an inability to stem new spending initiatives. Having appropriated hundreds of billions of dollars on new programs in the last year and a half, it is very difficult for Congress to deny an additional one or two billion dollars for programs that significant constituencies perceive as urgent. The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms. This is not new. For at least a quarter century analysts have been aware of the pending surge in baby boomer retirees.

We cannot grow out of these fiscal pressures. The modest-sized post-baby-boom labor force, if history is any guide, will not be able to consistently increase output per hour by more than 3% annually. The product of a slowly growing labor force and limited productivity growth will not provide the real resources necessary to meet existing commitments. (We must avoid persistent borrowing from abroad. We cannot count on foreigners to finance our current account deficit indefinitely.)

Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits, or significant inflation, can close the deficit. I rule out large tax increases that would sap economic growth (and the tax base) and accordingly achieve little added revenues.

With huge deficits currently having no evident effect on either inflation or long-term interest rates, the budget constraints of the past are missing. It is little comfort that the dollar is still the least worst of the major fiat currencies. But the inexorable rise in the price of gold indicates a large number of investors are seeking a safe haven beyond fiat currencies.

The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy. Incremental change will not be adequate. In the past decade the U.S. has been unable to cut any federal spending programs of significance.

I believe the fears of budget contraction inducing a renewed decline of economic activity are misplaced. The current spending momentum is so pressing that it is highly unlikely that any politically feasible fiscal constraint will unleash new deflationary forces. I do not believe that our lawmakers or others are aware of the degree of impairment of our fiscal brakes. If we contained the amount of issuance of Treasury securities, pressures on private capital markets would be eased.

Fortunately, the very severity of the pending crisis and growing analogies to Greece set the stage for a serious response. That response needs to recognize that the range of error of long-term U.S. budget forecasts (especially of Medicare) is, in historic perspective, exceptionally wide. Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis. Our policy focus must therefore err significantly on the side of restraint.

Mr. Greenspan, former chairman of the Federal Reserve, is president of Greenspan Associates LLC and author of "The Age of Turbulence: Adventures in a New World" (Penguin, 2007).

Checkmate

Dmitry Orlov

In all of the descriptions of perilous situations that I have studied, arising during adventures on the high seas or in the high mountains, or during armed conflict, a single mistake rarely proves fatal. More often than not, death comes as a result of a sequence of bad choices which reinforce each other. These choices may not appear bad at the time - but they certainly do in retrospect! The end result is a situation in which no further steps can be taken that would not be either harmful or futile. This is the essence of checkmate: no moves left. At that point, none of the previous moves can be undone. Nor do they even exist, really: they have gone off to an imaginary universe populated by the regretful ghosts of those who didn't make it.

As one should expect from a natural phenomenon, failure is fractal - observable at every scale. The same pattern of maladaptive strategy leading to untimely demise constantly replays itself at the level of viruses and bacteria, and all the way to individual plants and animals, populations, societies, countries and civilizations. Nature moves forward by canceling its unsuccessful experiments, which far outnumber its successes. Most people have come to terms with the theory of natural selection, and can understand individual and group failure. But over the last few decades - quite recently, in fact - it has become unacceptable to speak of accepting the failure of very large corporations, societies and countries as a terminal state. They are always considered to be in need of bail-out, reorganization, aid, reform, reconstruction, development and so forth. Perpetual degradation and decay followed by a headlong plunge into merciful oblivion is simply not on offer. Haiti will one day be prosperous, Somalia a model democracy, and perhaps even low-lying coastal and island nations can have a bright though wet future, provided the people there are fitted with snorkels to help them cope with rising ocean levels. When attempting to come to terms with the regularly observable demise of civilizations, and the forthcoming demise of this one, our failure to cope is complete: ancient pagan archetypes take over our thinking, our unconscious mind takes over, and we are transported to a realm of second-rate fantasy films. All reasonable people agree that the future is either Mad Max or Waterworld; take your pick, end of discussion.

The concept of strategy, and of games of strategy, is a useful one, although when applying it to serious matters (instead of childish distractions like sports) our thinking tends to be distorted by the bad habits that sports instill in us. We tend to think of games as enjoyable learning experiences that teach us to play better the next time. The idea that there always has to be the next time is insidious. The vast majority of the games we can observe being played out, both in nature and in society, are played specifically to determine whether there should be a next time. "But I have learned my lessons and the next time we play I will win!" says the defeated champion. "That won't be necessary," says Death. "We must hurry. There is a horny old man who's dying to meet you. He'll be your personal trainer for the rest of eternity." But even this ageless little narrative has a flaw, for Death is rarely in much of a hurry, and the leading edge of eternity is quite fuzzy. Defeat overlaps decay, which overlaps demise. We continue playing far beyond the point at which our defeat would have become clear to us in retrospect. In the meantime, we come to accept our personal trainer as the devil that we know, and might even delude ourselves into thinking that we are winning.

It is a serious matter that much of life has been recast in terms of sport. We are all supposed to be good sports, team players, when we fail we pick ourselves up and try again, or fall into a safety net. When we get into trouble we can always call for rescue. When someone dies, it is always the result of an accident, never the inevitable result of bad judgment. People who fail repeatedly yet always try again are lauded for their persistence, never mind that they are serial failures. This isn't necessarily bad; people should and do safeguard each other. What's worse is that the higher in society one goes, the more dilute the consequences of failure tend to become, until we rise up to those exalted places whose existence is safeguarded by the magic incantation "too big to fail." This incantation is quite effective: many people are hypnotized by it. It prevents them from seeing something quite obvious: when serial failures are continually rescued, this allows them to bloat up until they are too large for the rescuers to deal with, at which point they become too big to not fail. When any one of them can no longer be rescued, the result is a cascaded failure that overwhelms the rest, and failure becomes crippling. Past that point, nobody gets to try much of anything ever again: society has checkmated itself.

What happens after that point bears a striking resemblance to what came before. After all, there were many insoluble problems before, and many degenerative cultural trends could be observed. It's just that there are more of them afterward, and they are more severe, but there may not be an obvious qualitative difference. It may not be immediately apparent that checkmate has arrived, and the specific point in time can become visible only in retrospect, if at all. Emergencies come and go, and people get used to the fact that the beaches are black and sometimes catch fire and burn for weeks, or that there is a ravine running through the center of town where the riverfront used to be, or that electricity is only on for a couple of hours a day. Dogs and children turn feral, but nobody remembers when that started happening, so everyone assumes that that's the way it's always been. Nor does anyone remember when it became fashionable to tattoo corporate logos on one's scalp, or to proudly display one's naked buttocks in public. An expatriate who leaves and later comes back might think that this now is a completely different country, but those who stay would be at pains to detect the difference because for them changes were too slow to rise above the threshold of perception.

The population can dwindle quite rapidly, but this too is often imperceptible. Large swaths of the landscape become depopulated, but that is not noticed by anyone because nobody goes there any more. When births exceed deaths, population increases exponentially. When deaths exceed births, population declines exponentially. There are always some maternities, and there are always some funerals; the change in the ratio of the two is not something that can be directly perceived. Societal extinction doesn't make any noise when it finally happens. Survivors simply move on. Non-survivors might as well have not existed, and the more gullible survivors come to believe the extravagant ruins they left behind to have been the work of extraterrestrials.

How does a society go about checkmating itself? There is no shortage of real-world examples, but real life is complicated, so here is a simple allegory. Let's suppose that there is a tribe called the Merkanoids, which remains quite ordinary for most of its history, but which at some point undergoes a strange cultural mutation. An accidental synergy between atmospheric electricity and chemicals in the water produces a strange effect on their minds that causes them to decamp from the towns and villages wherein they had hitherto happily dwelt, and take up residence in little huts scattered throughout the surrounding pasture, fields and woods. They then proceed to move around and switch huts a lot, until few of them know or trust their neighbors. This makes them feel rather unsafe, and the way the Merkanoids decide to make themselves feel safer is by burying land mines about their property and posting signs that read "No trespassing! Land mines!"

This makes them feel a whole lot safer while in fact making them much less so: the social predators among them become reasonably good at avoiding land mines, while the rest of the population generally does not, producing a large subclass of people whose legs have been blown off. These, being relatively immobile and defenseless, present an even more desirable target to the social predators, and naturally compensate by acquiring more and bigger land mines. This cycle repeats a few times, until two-legged people become the minority. Since people who are missing a lower limb or two are somewhat less productive than two-legged ones, in due course the Merkanoid economy can no longer produce the surplus necessary to invest in anything beyond more land mines (which they now find it cheaper to import from China on credit than to manufacture themselves). As debt service swallows up more and more of the Merkanoids income, their disposable income plummets. As a consequence, crutches, wheelchairs and prosthetic limbs became luxury items which fewer and fewer of them can afford. Without these devices the ever more numerous legless people can no longer move around, making it more difficult for them to remain productive members of the Merkanoid economy, causing economic output to plunge even faster.

When this vicious circle becomes too obvious for any half-intelligent Merkanoid to ignore, a reform movement springs up. Activists organize community de-mining activities and promote the idea of an annual "land mine-free week." Entrepreneurs work to develop "green mines" which stun people instead of maiming them, but these come to be regarded as less effective and therefore unsafe. Some political extremists take the radical step of de-mining their own properties. A lot of them then find their huts repeatedly burgled and quietly put the land mines back in. At one point a brilliant Merkanoid visionary has an epiphany and exclaims: "It's not the land-minds that are killing us! It's the huts!" Everyone thinks that he had gone off the deep end: how can anyone not live in one's own private hut? It's the Merkanoid way of life!

In the meantime, small groups of as yet two-legged people begin to band together on the margins of Merkanoid society. Instead of living in widely dispersed huts, they live compactly in tents, moving about the non-mined parts of the landscape. They eschew land mines and defend themselves (and each other) by keeping a sharp look-out at all times, and, if necessary, with pointed sticks. They also spontaneously develop a sort of crazy talk that turns out to be highly disruptive to the mainstream Merkanoid mentality. So disruptive is this effect that Merkanoid society, having no energy to oppose these outside groups, is forced to strenuously deny their existence. In turn, the outsiders happily ignore much of Merkanoid society, patiently waiting for it to fade from view, which, in due course, it does.

I hope that the meaning of my little parable is clear. A society takes a series of bad turns (which may not seem bad at the time). Once that happens, it's all over but for the waiting. The turns are irreversible, and attempting to make a society undo them is futile. In this situation, the only adaptive thing any of us can do is to learn to live as if these turns had never been made in the first place. This, of course, is very difficult and, should you succeed, will make you unpopular, so you should definitely consider the alternative: do nothing. In the timeless words of the I Ching, "Perseverance does not further. No blame."

www.energybulletin.net

Copper/Gold Ratio Predicts Lower Stock Prices

Trading, Natural Resources

Earlier in the year we looked at an indicator that had a 95% correlation with the S&P 500 index. While at first it may seem bizarre, the indicator was simply the copper to gold ratio.

While the copper/gold ratio and the S&P 500 had enjoyed a remarkably parallel trajectory, one was beginning to outrun the other. Since then, this pattern has only continued. As you can see from the chart below, while the equity markets continued to make new highs, the copper gold ratio spent about 9 months going sideways (from August 2009 to April 2010).

Most recently, while the S&P 500 index managed to maintain itself above the February correction, the copper gold ratio fell significantly below it.

There are several explanations. The first is that the relationship between the two is simply breaking down. I don’t think that is the case since the connection between the two is based on a tangential relationship. After all, copper is the most ubiquitous metal and is known as “Dr. Copper” for its ability to predict economic activity.

The other is that the relationship continues but one will eventually realign itself with the other. In that case, the lower price of copper is either signaling an upcoming economic contraction (with a decline in stock prices) or the other way around; that the copper gold ratio or copper (priced in gold) increases as economic activity continues and realigns itself with the higher stock prices.

Either way, I think we simply return to the battle royale between fundamental indicators and technical indicators.

http://www.tradersnarrative.com

Who Died And Made BP King Of The Gulf Of Mexico?

The Economic Collapse

There is one question that I would really like an answer to. Who died and made BP king of the Gulf of Mexico? In recent weeks, BP has almost seemed more interested in keeping the American people away from the oil spill than in actually cleaning it up. Journalists are being pushed around and denied access, disaster workers are being intimidated and abused and now BP has even go so far as to hire an army of private mercenaries to enforce their will along the Gulf coast. Are we suddenly living in occupied Iraq? How in the world did a foreign oil company get the right to start pointing guns at the American people? The last time I checked, BP did not own the Gulf of Mexico and did not have the right to tell the American people where they can and cannot go. The truth is that BP could have avoided all of this by running an open, honest and transparent operation from the start. They could have welcomed help from all sources, they could have tried to be open with the media, and they could have tried to be fair with the volunteers and rescue workers. But instead BP has been conducting this whole thing as if we are living in a totalitarian dictatorship and they are the dictators.

Over the last several weeks, members of the mainstream media attempting to cover the oil spill in the Gulf of Mexico have been yelled at, harassed, kicked off public beaches and threatened with arrest. The Obama administration keeps promising "to improve media access", but so far their promises haven't seemed to make much difference. In fact, a recent AP report detailed several recent highly disturbing incidents of journalist intimidation....

• On June 5, sheriff's deputies in Grand Isle threatened an AP photographer with arrest for criminal trespassing after he spoke to BP employees and took pictures of cleanup workers on a public beach.
• On June 6, an AP reporter was in a boat near an island in Barataria Bay when a man in another boat identifying himself as a U.S. Fish and Wildlife employee ordered the reporter to leave the area. When the reporter asked to see identification, the man refused, saying "My name doesn't matter, you need to go."
• According to a June 10 CNN video, one of the network's news crews was told by a bird rescue worker that he signed a contract with BP stating that he would not talk to the media. The crew was also turned away by BP contractors working at a bird triage area -- despite having permission from the U.S. Fish and Wildlife Service to enter the facility.
• On June 11 and 12, private security guards patrolling in the Grand Isle area attempted repeatedly to prevent a crew from New Orleans television station WDSU from walking on a public beach and speaking with cleanup workers.

But it is not just the media that are being pushed around. The Louisiana Environmental Action Network is reporting that BP is actually threatening to fire fishermen hired to help with the oil spill cleanup for using respirators and other safety equipment that wasn't provided by the company.

Seriously.

The workers say that they are only using their own safety equipment because BP has not provided what they need. It is a fact that a large number of rescue workers have already gotten sick enough to be admitted to the hospital, so it certainly makes sense that those working to clean up the oil would want to do whatever they can to stay safe.

But no, BP has to be a bunch of jerks about the whole thing.

Even the EPA says that workers need to be careful. Hugh Kaufman, a senior policy analyst at the EPA's office of solid waste and emergency response, made the following statement during an interview on Thursday....

"There's no way you can be working in that toxic soup without getting exposures."

It's not just the oil that is the problem. The chemical dispersants that BP is using in the Gulf are even more toxic than the oil. In fact, because it is so extremely toxic, the UK's Marine Management Organization has completely banned Corexit 9500, so if there was a major oil spill in the North Sea, BP would not be able to use it.

But the Obama administration has allowed BP to dump over a million gallons of Corexit 9500, Corexit 9527 and other highly toxic dispersants into the Gulf of Mexico.

Apparently the truth is that BP would rather disperse the oil so that the spill doesn't look so bad even if it means creating an ecological disaster of nightmarish proportions.

You see, these days BP does what it wants, and anyone who doesn't like it gets pushed out of the way.

Monique Harden, the co-director and attorney at the New Orleans-based Advocates for Environmental Human Rights, is so outraged over BP's behavior that she recently made the following statement....

"BP should not be running the Gulf region like a prison warden, and we've got to stop that."

But rather than becoming more open and taking responsibility for their actions, BP has now hired private security contractors to keep the American people away from the oil cleanup sites.

In other words, BP has brought in a horde of private mercenaries (just like the U.S. uses in Iraq and Afghanistan) to muscle the American people around.

Yeah, we are really going to appreciate that.

Doesn't BP understand that the American people do not respond well to this kind of nonsense?

In fact, it is being alleged that BP has actually attempted to manipulate the search results on sites like Google and Yahoo.

They seem absolutely obsessed with controlling what we see and think.

Perhaps what BP should be obsessed with is stopping the oil from shooting out of the ground.

Meanwhile, BP execs are busy testifying in front of Congress and making half-hearted apologies.

Carl-Henric Svanberg, the BP chairman, has even apologized for referring to those affected by the Gulf of Mexico oil spill as "small people".

Isn't that nice of him?

While all of this is going on, BP is already trying to ensure that things go their way legally. Back in May, BP requested that one particular judge be assigned to preside over all lawsuits related to the spill. Well, it turns out that this particular judge gets tens of thousands of dollars a year in oil royalties and is paid travel expenses to attend oil industry conferences.

Isn't that convenient?

But that is how the game is played these days.

Meanwhile, the "oil volcano" on the bottom of the Gulf of Mexico continues to pump out a nightmarish amount of oil every single day. BP is even admitting that oil is escaping from the leak at such high pressure that if they try to cap it the entire well may blow.

So this crisis may keep getting worse for months.

By the time this is over, will anything in the Gulf be left alive?

Even now, hordes of dolphins, fish, sharks, crabs, rays and other sea creatures find themselves trapped between the rapidly advancing oil and the shore. Unprecedented numbers are showing up just off the Gulf coast in an attempt to escape certain death, but once the oil reaches shore there will be nowhere else for them to go. The tragedy will be unspeakable.

Things did not have to turn out this way. BP and the Obama administration could have done things much differently. But they didn't.

Now we all have to live with the results.

theeconomiccollapseblog.com

The Street: Silver's History of Suppression

Jeff Nielson

Sophisticated precious metals investors are well-aware of the rampant manipulation of the gold and silver markets. They are also generally aware of the reason for such manipulation. A rapid rise in the price of gold and silver is like an economic "warning siren" - alerting savers that their wealth (i.e. the purchasing power of their currency) is being rapidly eroded by the monetary depravity of bankers.

At the same time that the bankers were trying to prop-up the U.S. dollar while on the gold standard, these same bankers (and their allies in government) were making their first efforts to defuse a "silver supply crisis" - caused by pricing silver at only a fraction of its true worth. In the 1960's, the U.S. government had kept the price of silver frozen at $1.29/oz. However, whenever an asset is under-priced, there will always be a group of investors who will identify such an under-priced asset - and then accumulate it. Thus, the U.S. (and other governments) were rapidly squandering their entire stockpiles of silver, as they had to dump ever-increasing amounts onto the market to maintain the artificially low price.

Ultimately, the bankers capitulated, and the U.S. government ceased its efforts to keep the price of silver frozen at $1.29. However, as is usually the case with any illegitimate scheme, every time the schemers take action to deal with one flaw in their plans, that produces unintended (and undesirable) consequences - which then require further acts of manipulation.

Once the price of silver was allowed to rise, very quickly the actual value of the silver contained in our small denomination coins (primarily the 10-cent and 25-cent pieces) greatly exceeded their face-value as legal tender. This created a huge incentive to melt-down these coins and make a very profitable arbitrage trade of "buying" these coins at their face value, and then selling them for their metal-content.

The U.S. government responded in two ways (and was quickly copied by the Canadian government). First, it changed the composition of all newly-issued coins - removing all their silver content. U.S. dimes had 90% silver-content up until 1964, while Canadian dimes contained just over 80% silver. Meanwhile, the U.S.'s 1965 Coinage Act made it a crime to melt-down any legal tender coins (in order to profit on their metal-content), and a duplicate measure was passed in Canada. Consider the true dynamics of this measure.

First the bankers abolish the gold standard, to allow them to rapidly accelerate the speed at which they steal from us through currency-dilution. This, in turn, requires them to (illegally) manipulate the gold and silver markets - in order to hide the true value of these metals from being expressed in the bankers' diluted paper. The government then makes it a "crime" for its own citizens to make a profit on their own money. In the bankers' scam of money-dilution, only the bankers are allowed to profit on their crimes.

It was at this point in history that the bankers were able to largely forget about manipulating the silver market (for many years), and to focus their energies on gold-manipulation - because basic market fundamentals created conditions which depressed the price of silver, with only minimal "assistance" from the bankers (and their servants in government).

Clearly the price of silver has been driven in recent decades mostly by its industrial demand. And it is this industrial demand which (with a little help from the bankers) kept the price of silver well below its true value for more than thirty years (until early in this decade).

This leads us to a fundamental "truth" in the precious metals sector: investment demand (i.e. "speculative" demand) does not stimulate mine production (except in a very belated manner - only after inventories have been exhausted), while industrial demand does stimulate higher levels of mine production, because the bankers will finance new mine-production based upon that level of industrial use. As an aside, it was because gold is not used to a great degree "industrially" that the bankers had to "persuade" the world's largest gold miners to enter into vast "hedging agreements" - which simulated the same market conditions for gold: maximizing production at the lowest, possible price.

In a true "equilibrium", this industrial production and demand would not cause silver to trade at a price well below its fair-market (equilibrium) value. However, the bankers ensured that the silver market could never reach such an equilibrium by continuing to dump their waning stockpiles of silver onto the market.

As I have pointed out on many occasions, between 1990 and 2005, official silver inventories plummeted by approximately 90%. It is simple economics that any good which is grossly under-priced will be grossly over-consumed. Faced with the abrupt end to their silver-manipulation (which would make it much more difficult to continue to manipulate the gold market), the bankers fell back upon their oldest and most-favorite swindle: they sold paper to people, and pretended that the paper represented actual silver - and thus "SLV" was born.

This is such an obvious sham that I simply lack the space to go until all of the clearly fraudulent implications of this fund, so I will restrict myself to just a couple of facets. From 2005 to the end of 2008, after silver inventories plummeted by 90% in just 15 years (due to being grossly under-priced), we are supposed to believe that inventories suddenly 'made a U-turn' - and tripled over the course of just four years.

Regular readers will be familiar with the following chart, which shows the progression of "official" silver inventories - along with the small caveat attached to the graph. These official inventories include every ounce of ETF-silver, and SLV (by far the largest silver-ETF) was created at the beginning of 2006. As of the beginning of 2009, ETF-holdings represented roughly 2/3 of total "official inventories".

Anyone with even a slight understanding of markets should recognize the obvious sham here. An "inventory" is the amount of a particular good warehoused and ready-for-sale. Conversely, the units of SLV (and all other bullion-ETF's) represent privately-owned silver which has obviously been taken off the market. As a matter of elementary logic, it is impossible for even one ounce of silver to be both an "inventory" and an "ETF". It can be one (silver-for-sale) or the other (privately-owned) but not both. Thus, at the end of 2008, two-thirds of official, global inventories of silver were nothing but an obvious paper-sham.

Making this massive fraud potentially much more egregious, the supposed "custodian" for most of this silver is JP Morgan, which holds the world's largest "short" position in silver, the most-concentrated position in the history of commodities markets. In what is obviously not a "coincidence" the total size of the global short position has stayed roughly equal to the (supposed) total holdings of "bullion-ETF's". However, those massive short positions are never audited, meaning that JP Morgan (and the other bullion-banks) have never been able to show they have more than half the silver necessary to cover both their short-positions and "custodian agreements" with the ETF's.

What this directly implies is that as of 2009, as much as 2/3 of total global inventories of "silver" was literally nothing but banker-paper - and we can only assume that their massive fraud has expanded in the time that has since elapsed. While industrial demand for silver helped the banksters in their nefarious (and illegal) schemes for many years, it is now industrial demand which is certain to destroy the bullion-banks.

While a gold-investor might be capable of being duped into buying banker-paper, and mistakenly believe that the banker-paper is "as good as gold", you can't use banker-paper to make silver bearings, or silver mirrors, or silver batteries, or silver solar cells, or silver anti-bacterial products. The bankers market-manipulation has progressed from merely dumping the silver which they held, to the much more fraudulent practice of passing off their worthless paper as "bullion".

In doing so, they have eliminated the possibility of the price of silver merely "correcting". What has become totally inevitable after 50 years of constant manipulation of the silver market is that this market is poised for the most spectacular default in the history of commodities markets - even more so than in the gold market. Companies which require silver to continue the existence of their businesses will be ready to bid-up the price of the commodity to multiples many times greater than an investor merely making a discretionary purchase.

www.bullionbullscanada.com

The Federal Reserve is Evil

Jonathon Schooner

The first misconception that most people have is that the Federal Reserve Bank is a branch of the US government. IT IS NOT. THE FEDERAL RESERVE BANK IS A PRIVATE COMPANY. Most people believe it is as American as the Constitution. THE FACT IS THE CONSTITUTION FORBIDS IT'S EXISTENCE. Article 1, Section 8 of the Constitution states that Congress shall have the power to create money and regulate the value thereof, NOT A BUNCH OF INTERNATIONAL BANKERS! Today the FED controls and profits by printing WORTHLESS PAPER, called money, through the Treasury, regulating its value, AND THE BIGGEST OUTRAGE OF ALL, COLLECTING INTEREST ON IT! (THE SO-CALLED NATIONAL DEBT). The FED began with approximately 300 people or banks that became owners, stockholders purchasing stock at $100 per share - the stock is not publicly traded) in the Federal Reserve Banking System. They make up an international banking cartel of wealth beyond comparison. The FED banking system collects billions of dollars in interest annually and distributes the profits to its shareholders. The Congress illegally gave the FED the right to print money through the Treasury at no interest to the FED.

The FED creates money from nothing, and loans it back to us through banks, and charges interest on our currency. The FED also buys Government debt with money printed on a printing press and charges U.S. taxpayers interest. Many Congressmen and Presidents say this is fraud. Who actually owns the Federal Reserve Central Banks? The ownership of the 12 Central banks, a very well kept secret, has been revealed: 1. Rothschild Bank of London 2. Warburg Bank of Hamburg 3. Rothschild Bank of Berlin 4. Lehman Brothers of New York 5. Lazard Brothers of Paris 6. Kuhn Loeb Bank of New York 7. Israel Moses Seif Banks of Italy 8. Goldman, Sachs of New York 9. Warburg Bank of Amsterdam 10. Chase Manhattan Bank of New York.

These bankers are connected to London Banking Houses which ultimately control the FED. When England lost the Revolutionary War with America where our forefathers were fighting their own government, they planned to control us by controlling our banking system, the printing of our money, and our debt. The individuals listed below owned banks which in turn owned shares in the FED. The banks listed below have significant control over the New York FED District, which controls the other 11 FED Districts. These banks also are partly foreign owned and control the New York FED District Bank: First National Bank of New York, James Stillman National City Bank, New York, Mary W. Harnman, National Bank of Commerce, New York, A.D. Jiullard Hanover, National Bank, New York, Jacob Schiff, Chase National Bank, New York, Thomas F. Ryan, Paul Warburg, William Rockefeller, Levi P. Morton, M.T. Pyne, George F. Baker, Percy Pyne, Mrs. G.F. St. George, J.W. Sterling, Katherine St. George, H.P. Davidson, J.P. Morgan (Equitable Life/Mutual Life), Edith Brevour, T. Baker.

How did it happen? After previous attempts to push the Federal Reserve Act through Congress, a group of bankers funded and staffed Woodrow Wilson's campaign for President. He had committed to sign this act. In 1913, a Senator, Nelson Aldrich, maternal grandfather to the Rockefellers, pushed the Federal Reserve Act through Congress just before Christmas when much of Congress was on vacation. When elected, Wilson passed the FED. Later, Wilson remorsefully replied, referring to the FED, "I have unwittingly ruined my country". Now the banks financially back sympathetic candidates. Not surprisingly, most of these candidates are elected.

The bankers employ members of the Congress on weekends (nickname T&T club -out Thursday...in Tuesday with lucrative salaries. Additionally, the FED started buying up the media in the 1930's and now owns or significantly influences most of it. Presidents Lincoln, Jackson, and Kennedy tried to stop this family of bankers by printing U.S. dollars without charging the taxpayers interest. Today, if the government runs a deficit, the FED prints dollars through the U.S. Treasury, buys the debt, and the dollars are circulated into the economy. In 1992, taxpayers paid the FED banking system $286 billion in interest on debt the FED purchased by printing money virtually cost free. Forty percent of our personal federal income taxes goes to pay this interest. The FED's books are not open to the public. Congress has yet to audit it. Congressman Wright Patman was Chairman of the House of Representatives Committee on Banking and Currency for 40 years. For 20 of those years, he introduced legislation to repeal the Federal Reserve Banking Act of 1913. Congressman Henry Gonzales, Chairman of a banking committee, introduced legislation to repeal the Federal Reserve Banking Act of 1913 almost every year. It's always defeated, the media remains silent, and the public never learns the truth. The same bankers who own the FED control the media and give huge political contributions to sympathetic members of Congress.

THE FED FEARS THE POPULATION WILL BECOME AWARE OF THIS FRAUD AND DEMAND CHANGE. We, the People, are at fault for being passive and allowing this to continue. THE FEDERAL RESERVE BOARD, A GOVERNMENT BOARD, HAS CHEATED THE GOVERNMENT OF THE UNITED STATES AND THE PEOPLE OF THE UNITED STATES OUT OF ENOUGH MONEY TO PAY THE NATIONAL DEBT SEVERAL TIMES OVER. The depredations and the iniquities of the Federal Reserve Board and the Federal Reserve banks acting together have cost this country dearly.

They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; the rich and predatory money lenders. This is an era of economic misery and for the reasons that caused that misery, the Federal Reserve Board and the Federal Reserve banks are fully liable. Half a million dollars was spent on one part of propaganda organized by those same European bankers for the purpose of misleading public opinion in regard to the Federal Reserve Bank.

WHAT MONEY LOOKED LIKE WHEN IT WAS STILL BACKED BY SOMETHING

Every effort has been made by the Federal Reserve Board to conceal its power but the truth is the Federal Reserve Board has USURPED THE GOVERNMENT OF THE UNITED STATES. IT CONTROLS EVERYTHING HERE AND IT CONTROLS ALL OUR FOREIGN RELATIONS. IT MAKES AND BREAKS GOVERNMENTS AT WILL. No man and no body of men is more entrenched in power than the arrogant credit monopoly which operates the Federal Reserve Board and the Federal Reserve banks. These evil-doers have robbed this country. What the Government has permitted the Federal Reserve Board to steal from the people should now be restored to the people.

Our people's money to the extent of $1,200,000,000 has within the last few months been shipped abroad to redeem Federal Reserve Notes and to pay other gambling debts of the traitorous Federal Reserve Board and the Federal Reserve banks. The greater part of our monetary stock has been shipped to foreigners. Why should we promise to pay the debts of foreigners to foreigners? Why should American Farmers and wage earners add millions of foreigners to the number of their dependents? Why should the Federal Reserve Board and the Federal Reserve banks be permitted to finance our competitors in all parts of the world? The Federal Reserve Act should be repealed and the Federal Reserve banks, having violated their charters, should be liquidated immediately. FAITHLESS GOVERNMENT OFFICERS WHO HAVE VIOLATED THEIR OATHS SHOULD BE IMPEACHED AND BROUGHT TO TRIAL.

If the media is unbiased, independent and completely thorough, why haven't they discussed the FED? Currently, half the states have at least a grass roots movement in action to abolish the FED, but there's no press coverage. In July, 1968, the House Banking Subcommittee reported that Rockefeller, through Chase Manhattan Bank, controlled 5.9% of the stock in CBS. Furthermore, the bank had gained interlocking directorates with ABC.

In 1974, Congress issued a report stating that the Chase Manhattan Bank's stake in CBS rose to 14.1% and NBC to 4.5%. The same report said that the Chase Manhattan Bank held stock in 28 broadcasting firms. After this report, the Chase Manhattan Bank obtained 6.7% of ABC, and today the percentage is most likely much greater. It only requires 5% ownership to significantly influence the media . This is only one of 300 wealthy shareholders of the FED. It is believed other FED owners have similar holdings in the media. To control the media, FED bankers call in their loans if the media disagrees with them.

Rockefeller also controls the Council on Foreign Relations (CFR), the sole purpose of which is to aid in stimulating greater interest in foreign affairs and a one world government. Nearly every major newscaster belongs to the Council on Foreign Relations. The Council on Foreign Relations controls many major newspapers and magazines. Additionally, major corporations owned by FED shareholders are the source of huge advertising revenues which surely would influence the media.

Every day I hear people complaining about what they don't like about our government and media, but not one of them are willing to put forth an effort to try and change it, especially when it comes to their personal lives. We are as much a slave on a personal level, as our government is to the international bankers. We keep right on using the tool they put out here to control us, credit cards, and we are imprisoned by it. We are no longer willing to save up to buy something, we have to have it right now, so the Government has made it easy to have what you want without the having to save for it, (CREDIT). Don't you think it funny that in a land with so much wealth, only 2 PERCENT of the people own their homes? (CREDIT). Do you know 60 PERCENT of Americans have at least 3 Credit cards used to it's maximum? (CREDIT). Do you know that only 1 PERCENT of the people have their car paid for? (CREDIT). To be free, you must throw away your credit cards, and NEVER buy anything that you cannot afford at the moment of purchase. We will never be a free people until we rid ourselves of the burden placed here to control us, and when we stop renting from the powers, the power will cease to exist.