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Shut Down the Fed (Part II)

Ambrose Evans-Pritchard

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.

We now learn from last week’s minutes that the Fed is willing “to provide additional accommodation if needed to … return inflation, over time, to levels consistent with its mandate.”

NO, NO, NO, this cannot possibly be true.

Ben Bernanke has not only refused to abandon his idee fixe of an “inflation target”, a key cause of the global central banking catastrophe of the last twenty years (because it can and did allow asset booms to run amok, and let credit levels reach dangerous extremes).

Worse still, he seems determined to print trillions of emergency stimulus without commensurate emergency justification to test his Princeton theories, which by the way are as old as the hills. Keynes ridiculed the “tyranny of the general price level” in the early 1930s, and quite rightly so. Bernanke is reviving a doctrine that was already shown to be bunk eighty years ago.

So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.

The sophisticates at banking conferences in London, Frankfurt, and New York who aplogized for this primitive monetary creationsim – as I did – are the ones who lost the plot.

My apologies. Mercy, for I have sinned against sound money, and therefore against sound politics.

Inflation targeting: is Bernanke the new Von Havenstein, head of the Weimar Reichsbank?
Inflation targeting: is Bernanke the new Von Havenstein, head of the Weimar Reichsbank?

I stick to my view that Friedmanite QE ‘a l’outrance‘ is legitimate to prevent a collapse of the M3 broad money supply, and to prevent outright deflation in economies with total debt levels near or above 300pc of GDP. Not in any circumstances, but where necessary, and where conducted properly by purchasing bonds outside the banking system (not the same as Bernanke “creditism”).

The dangers of tipping into a debt compound trap – as described by Irving Fisher in Debt-Deflation Theory of Great Depresssions in 1933 – outweigh the risk of an expanded money stock catching fire and setting off an inflation surge later. Debt deflation is a toxic process that can and does destroy societies as well as economies. You do not trifle with it.

But deliberately creating inflation “consistent” with the Fed’s mandate – implicitly to erode debt – is another matter. Nor can this be justified at this particular juncture. M3 has been leveling out. M2 has begun to rise briskly. The velocity of money has picked up. The M1 monetary mulitplier has jumped.

We have a very odd world. The IMF has doubled its global growth forecast to 4.5pc this year, and authorities everywhere have ruled out a serious risk of a double dip recession.

Yet at the same time the Bank of Japan has embarked on unsterilised currency intervention, which amounts to stimulus, and both the Fed and the Bank of England are signalling fresh QE.

You can’t have it both ways. If the US is not in deep trouble, the Fed should not be thinking of extra QE. It should step back and let the economy heal itself, if necessary enduring several years of poor growth to purge excess leverage.

Yes, U6 unemployment is 16.7pc. But as dissenters at the Minneapolis Fed remind us, you cannot solve a structural unemployment crisis with loose money.

Fed is trying to conjure away the hangover from the last binge (which Greenspan/Bernanke caused, let us not forget), as if to vindicate its prior claim that you can always clean up painlessly after asset bubbles.

Are the Chinese right? Are the Americans and the British now so decadent that they will refuse to take their punishment, opting to default on their debts by stealth?

Sooner or later we may learn what the Fed’s hawkish bloc of Fisher, Lacker, Plosser, Hoenig, Warsh, and Kocherlakota really think about this latest lurch into monetary la la land, with all that it implies for moral hazard and debt contracts.

If I have written harsh words about these heroic resisters, I apologise for that too.


The Real Inequality Scandal: Rich, Poor and MSM Gang Up On American Middle Class

Steve Sailer

Economic inequality has been much in the press lately. For example, Timothy Noah wrote a ten-part series for Slate trying to explain the growth in inequality. Greatly to Noah’s credit, he dared consider the role of immigration in his Part 3: Did Immigration Create the Great Divergence? (albeit inadequately, as Ed Rubenstein has pointed out).

But, generally, the discussion about inequality has been missing half of the puzzle.

On the one hand, it’s safe to say that over recent decades, the very rich have gotten very much richer.

The farther up the pyramid you are, the faster the growth has been. The rise in income has been slower for the top ten percent than for the top one percent, and the top one percent has lagged behind the top 0.1 percent.

And when the statistical equivalent of an electron microscope comes along, we’ll probably see that the top 0.1 percent have had good cause to rue how slowly their wealth has mounted compared to the skyrocketing fortunes of the top 0.01 percent.

On the other hand, for most American and above all the poor, incomes have stagnated in inflation-adjusted terms – and for significant numbers, actually fallen. The influx of poor, unskilled immigrants from abroad has certainly swelled the number of people at the bottom of society and exacerbated competition for jobs and housing among them.

Additionally, it’s notable that the rich have learned how to use the poor as symbols to rationalize whatever they want to get away with.

An example well-worth savoring: the 2003 Harvard lecture, The American Dream of Homeownership, by Angelo Mozilo, CEO of Countrywide Financial, announcing that he would lend $600 billion to minority and lower income borrowers, in return for which he wanted mortgage regulators to lift those racially discriminatory demands for down payments and documents – thus helping precipitate the Minority Mortgage Meltdown.

Most public discussions of inequality have been of limited utility because the fundamental measure is not income or wealth, but long-term standard of living. And that has two halves: how much you have to spend and how much whatever you spend it on costs.

Few commentators have thought systematically about the second half of the equation – the cost of living – even though we all obsess over it in our own lives.

For instance, wages for high school dropouts are similar in California, which has the highest percentage of immigrants, to wages in states with fewer immigrants.

But that doesn’t prove that immigration has little impact on the standard of living among our less fortunate fellow citizens. The cost of living in California is 48 percent higher than in, say, Tennessee, a state with few immigrants. A key factor: the cost of housing in California is 138 percent higher than Tennessee. Land prices are driven by supply and demand. Therefore, when the population goes up due to immigration, the price of land goes up.

In this article, I focus on the impact of the growing inequality at the top and bottom of society on the cost of middle class life.

Let’s look at three major cost components of middle class life: medical care, housing, and education.

Medical Care

What is the impact of increasing economic inequality getting on the cost of medicine? Are the ultrarich rapaciously bidding up the price of, say, chemotherapy the same way they have bid up the price of Gustav Klimt paintings?

Nah, not really. Chemotherapy is not something anybody wants to want to hoard all for himself. Trust me.

In fact, plastic surgery, notoriously the most discretionary item in medicine, has gone up less in price than most everything else has.


How about the cost of housing? Are the filthy rich monopolizing more and more land, as in olde England or in Mexico before the 1910 Revolution?

Some – but not all that much. In 21st Century America, the superrich generally don’t like to live like William Randolph Hearst in Hearst Castle, each on their own lonely mountains. They tend to crowd in near others of their rarefied ilk. Hence, they often take up less space than you might imagine.

In Manhattan, the rich stack themselves on top of each other. In Los Angeles, the median celebrity whose home buying or selling is deemed worthy of the Los Angeles Times’ Hot Property real estate porn column lives on roughly one or two Southland acres.

Consider, for example, Cher. That energetic and enterprising veteran celebrity recently offered her ocean-view house in Malibu for sale at $41 million. How much bluff-top land do you get for $41 million? One point seven acres.

The rich do often own huge vacation and investment properties in scenic locations. Yet, those are typically too remote from jobs, too laden with environmental restrictions, or in too precipitous locations to be easily subdividable into middle class neighborhoods.


Finally, what about education? Do the fantastically wealthy crowd out the middle class?

To some extent, yes. I have been informed by several reliable sources that a discreet donation of $5 million to Harvard can go a long way toward moving one’s scion from the admissions waiting list to the accepted list. Likewise, in Manhattan, a sizable gift can help get your kid into a fashionable kindergarten.

Of course, we all know that if you want to play the social climbing game, there’s no end to how much you can pay. But what if you don’t particularly care about climbing up – you just don’t want your kids to be dragged down? In that case, the rich don’t matter as much. Do middle class parents have to pull their kids out of the schools that, say, James Cameron‘s kids attend so they can learn? Do roving gangs of Bill Gates’s kids keep your kid from shooting baskets at the local park?

Probably not.

Now, think about the costs imposed on the middle class by the bottom of society – a bottom that has been greatly inflated in relative numbers by immigration policy.

Medical Care

Do poor people not get chemotherapy when they get cancer? Of course they do. We don’t live in some fictional Ayn Rand society. Poor people generally get cheaper, lousier health care than rich people, but they still get it. The overall cost of health care to the economy is more proportional to the number of people within the borders than to their ability to pay.

Under whatever system of health finance that eventually evolves, those who can afford to pay will, one way or another, subsidize the medical care of those who can’t, just as they do now. Currently, that shows up as taxpayer subsidies to the Emergency Rooms that the indigent poor use as a primary health care supplier, higher insurance premiums as hospitals pass through unreimbursed costs, and/or outright closure of Emergency Rooms and even hospitals.

The bulk of taxes are paid by the bulk of people i.e. the middle class. And it is middle class communities, and their hospitals, that are the first to experience immigrant invasion.


What about housing? Do poor people take up space? Yes, in fact, more than you would think. The essential problem with being poor in 21st Century America is less that you can’t buy enough stuff and more that you can’t afford to get away from other poor people. Those who can afford to move away from the poor, do, driving up housing costs elsewhere. That sections of Detroit are reverting to forest, while the Detroit suburbs are booming, is only the most extreme example of the centrifugal impact of the poor. In Memphis, tearing down downtown housing projects and giving the poor Section 8 rental vouchers made downtown safe for the affluent, but simply drove crime into the inner suburbs.

Moreover, it has been national policy for many years to disperse the poor from the inner cities. In California in the last decade, easy credit from Countrywide and the like generated a rolling exodus outward from South Central Los Angeles into the exurbs and even into Arizona and Nevada, as zero down payment mortgages gave countless people hope that they could get their kids into a school district away from kids like … their kids.


Unfortunately, as Buckaroo Banzai pointed out, “No matter where you go, there you are”. When people with no money started buying en masse into exurban Southern California neighborhoods with homes “worth” a half million dollars because of their “good schools”, those schools were suddenly not quite so good anymore. And, very suddenly, those homes weren’t worth a half million dollars anymore, contributing to the financial crash of 2008.

All of which does not mean, however, that the rich have no share in the blame for the costs the poor impose upon the middle class.

As Rawlie Thorpe tells Sherman McCoy in Tom Wolfe’s novel Bonfire of the Vanities, “If you want to live in New York … you’ve got to insulate, insulate, insulate.” The increase in income and wealth inequality means the rich are both more insulated from the problems of ordinary Americans. And, oddly, they are more influential over the media.

The latter is most noticeable in the decline in skepticism about the rich among journalists. For example, it ought to be completely obvious to even the most naïve newshound that the enthusiasm among the rich for mass immigration is not financially disinterested. Yet, the concept of conflict of interest is fading away among today’s journalists.

In the mid-20th Century, the press was more skeptical of the plutocrats because the class conflict was so apparent in how they dressed, spoke, and behaved. In the His Girl Friday era, the rich put on pompous upper class manners, while reporters indulged in the cynicism of the socially marginal. Ben Hecht, a Chicago reporter turned Hollywood screenwriter, described his first view of a newsroom in 1910: “hats tilted, feet up on top of typewriters, faces breathing out liquor fumes like dragons”. Hecht summarized the reporters of his youth:

“They sat, grown and abuzz, outside an adult civilization, intent on breaking windows. There was, I am sure, neither worldliness nor cunning enough among the lot of us to run a successful candy store. But we had a vantage point. We were not inside the routines of human greed or social pretenses. We were without politeness. … Our noses were full of the odors of chicanery and human fatuousness.”

Journalists today, though, tend to be sober, respectable, elite-educated, professional, conformist establishmentarians – more offended by uncouth opinions than by the self-interested hypocrisy of the upper class

Both the rich and the reporters have the same upper middle class casual manners. The rich don’t dress for dinner in boiled shirts, dickies, and watch chains anymore, while reporters don’t wear hats indoors., Everybody affects an easy equality – so it’s simple for the billionaires to seduce the media by graciously treating them, during interviews or at the annual Davos conference for plutocrats and pundits, as equals.

Of course, they aren’t equal. But this flattery that the zillionaires direct at the journalists, this pretense that we’re all in the same social class – the educated enlightened – makes it easier for the media to endorse the agenda of the rich.

Thus in Waiting for Superman, the new documentary about school reform that has been widely celebrated in the elite media, the conventional wisdom about the necessity of spending vastly more on fixing bad schools is espoused onscreen by various journalists, educators, and Bill Gates. A Rip Van Winkle who had been asleep from 1935 wouldn’t be able to tell from dress or speech which of the many interviewees clad in Dockers khakis is(or rather was)the world’s richest man.

Not surprisingly, the documentarian, Davis Guggenheim, shows no cynicism whatsoever about the altruistic purity of Gates’s motivations. In fact, Guggenheim is happy to relate Gates’ excuse for why Microsoft hired all those H-1B visa programmers from India instead of hiring Americans. You see, Gates just had to import foreigners because American schools were so bad that there weren’t any programmers left in America. He had to!

In a Ben Hecht-scripted movie, a reporter would have whispered out of the side of his mouth to another reporter that, sure, Gates had to hire cheap labor from abroad to boost his net worth from $49 billion to $50 billion.

But, that kind of cold-eyed realism toward the rich on the part of the press has largely given way to warm, fuzzy feelings of class solidarity – the assumption that we elites are all working to help the poor, unlike those horrible bigots in the middle.

In a famous formulation, Yale economist William Graham Sumner described modern social policy as a process whereby “A and B put their heads together to decide what C shall be made to do for D.” He described C as “;The Forgotten Man.” The American middle class continues to be forgotten. But what’s new here is that B is our supposedly independent Main Stream Media.

Economic Collapse Update: Acceleration In Autumn

Giordano Bruno

Our current economy is a shell game. A grand fraud designed to siphon more and more tangible wealth (not fiat wealth) from the average person and transport it post-haste into the silk lined pockets of a corporate banking minority. The goal? To reduce the self sufficiency of American citizens to the point of total fiscal and social dependence on the top 1% richest men in the world. Conspiracy theory? Not in the slightest. Just a cold hard fact of history. “Feudalism” is, sadly, rampant in the annals of human culture. Anyone who believes that our modern era is somehow different is simply fooling themselves. Elitists seek power over others, they always have and they always will, and, the most efficient way to gain control over the lives of the masses is through engineered imbalances in economy.

Every time you hear the term “bailout”, or “quantitative easing”, just think “wealth transference”. Every dollar that is printed from thin air by the private Federal Reserve and handed to a globalist entity like Goldman Sachs or AIG through our Treasury represents yet another dollar of debt (and another percentage of interest) that you, the U.S. taxpayer, and your children, are expected to eventually pay for without ever seeing any benefits. Right now, at this very moment, you and your descendents for generations to come are being enslaved by forcefully imposed usury. Our country has been “volunteered” for a financial debasement on a scale that dwarfs the Great Depression or even the Weimar catastrophe. We ignore this reality at our peril.

Since the initial meltdown began in 2008, we have seen two and a half years of stall tactics and skewed statistics designed to prolong total collapse while central banks position themselves for optimal gain. Simultaneously, the concrete underlying factors of our economy, including employment and purchasing power, have gone down the tubes. True, the system was an illusion long before its many flaws were openly revealed, and it needs to be dissolved, but should it be dissolved to the advantage of the elites who designed its flaws in the first place, and to the detriment of the rest of us? I think not…

Today, as Autumn 2010 begins to settle upon us, many notable and even dire trends are beginning to break the surface of the water and circle the sinking wreckage of our financial system. I believe these factors signal an extreme acceleration in the possibility of “trigger events”, which we have discussed in previous articles, and herald a new dynamic, a process that will directly contribute to a final breakdown of the present system. Let’s examine these trends now…

Dow Bubble Until November Elections?

If you look back at the history of economic collapses across the world, you’ll find a strange and ironic constant preceding most breakdowns; the disproportionate values of stocks and securities when compared to actual profits and consumer activity. The Great Depression saw record breaking rallies in the Dow and relentless financial propaganda claiming recovery was imminent just before total derailment. In many cases, investor confidence seems to be most heightened just before a brutal plunge. Perhaps it’s the power of reactionary denial, or maybe it’s the increase in false data supplied by establishment economic goon squads.

September has seen a very uncharacteristic stock rally, especially considering the fact that U.S. poverty levels are now at a 15 year high:


Food Stamp usage has hit a record high every month for the past 18 months:


The income gap between the very rich and the very poor has hit a record high:


Consumers have cut back on their credit use for 23 consecutive months:


Median household incomes fell in 34 states last year, the worst income depletion since the Great Depression, according to Census data released this month:


Stock Market volume has been dismal, down in some cases by 50% (which would explain how the Dow has been so easily pumped up):


The Federal Government has now had to bailout three large credit unions, making the American taxpayer responsible for the backing over $30 billion in bonds while at the same time managing $50 billion worth of troubled assets inherited from the same institutions:


Moody’s has (finally) lowered the Illinois debt rating from stable to negative, and California is now asking Wall Street banks like Goldman Sachs and JP Morgan for $5 billion dollars in cash just so their state government can continue to operate for the rest of the year:



Most disturbing is new Federal Reserve data revealing that foreign central banks are dumping record levels of U.S. Agency debt. Agency Bonds support government funded organizations like Fannie Mae, Freddie Mac, Sallie Mae, etc. This means that this autumn there will be an even more pronounced destabilization of the mortgage giants, and we will have to foot an even greater bill as the Treasury continues their endless bailout with increasing amounts of fiat capital. Foreign banks recently dumped $57 billion worth of Agency debt all at once! Some analysts, like Jim Sinclair, believe this heralds a major proliferation in quantitative easing by the Fed (more than they have openly forecast), and a severe debasement of the dollar in the near term. I tend to agree…


With all of these factors and hundreds more widely visible to anyone who wants to see them, how is it possible for the Dow to sustain its current upward trend? Witchcraft? The point is, when there is such an incomprehensible discrepancy between real market data and illogical market behavior, it is often a sign of a bubble; one that is dangerously close to failure.

Some believe that the market is being propped up by elements of the Treasury and the Fed until the end of November elections. The Dow is definitely being manipulated this month, but I’m not so sure it will last until November. An economic panic could serve several purposes so close to voting time, including easier promotion of scapegoats in order to rush otherwise ill conceived legislation. The move towards trade conflict with China is a good example…

Trade War With China?

Well, we’ve been warning about this since 2008, and now its here. Open economic animosity between the U.S. and China to the point of trade decoupling. Six months ago this still seemed for many like a remote if not impossible scenario. This month, it is now a stark reality. The speed at which elements of our government are implementing trade and currency legislation against China, and the rate at which China has begun to meld into ASEAN to counter U.S. import duties, is astonishing, even to me:


The House Ways and Means Committee has already approved a bill which could lead to trade penalties on Chinese goods if it meets equal success in the Senate, which is quite possible in the looming shadow of November elections:


The bill, however, appears mainly for show, especially in light of the fact that the U.S. is already slapping duties on an increasing number of Chinese goods, like copper tubing and steel pipe, without “committee approval”:


Chinese credit rating agency, Dagong Global, has also been denied status as a Nationally Recognized Statistical Rating Organization (NRSRO) by the SEC on thin grounds:


The Chinese have accused the SEC of bias, which is understandable. Apparently, the SEC is content to have agencies like Moody’s continue to give the AAA stamp to every security in the U.S. no matter how toxic and worthless, and would rather not have a third party around to gum up the works.

The trade war has already commenced while mainstream economists are still hoping out loud that America will be saved by increasing its exports to China! The disconnection between what the media reports and what is obviously happening is absolutely incredible!

A trade war with China, though, is in fact far preferable to the next likely step in this volatile process; a currency war.

The justification presented by the Obama Administration for the sudden increase in hairy chest beating on the trade deficit with China has been the now widely debated Yuan appreciation issue. China has recently de-pegged its currency from the dollar and appreciation has occurred, however, a substantial trade imbalance persists. Some analysts and government officials claim that a minimum 20% valuation of the Yuan is necessary in order to bring greater import/export equilibrium with the West. The Chinese have been accused of deliberately undervaluing their currency to the detriment of the rest of the world in order to prop up their own economy during the height of the global credit crisis. They have even been accused of direct responsibility for the financial meltdown itself. At least, that’s the official story. Here’s the REAL story…

The Yuan has been undervalued on the world market for a long time, this is no secret. The Chinese have indeed enjoyed an incredible export advantage over the U.S.; also no secret. However, who was it that initiated this trade advantage in the first place? It was not the Chinese, but corporate globalist interests in the U.S. and Europe that encouraged the freezing of the Yuan and outsourcing of American industry into cheap labor markets in order to increase profit margins while at the same time weakening U.S. infrastructure. Wage slaves making cheap Nikes and Levis sold for incredible markups across the Pacific to label obsessed Americans; does no one remember the 80’s and 90’s?

Our trade deficit has surged non-stop from 1990 to the present day, and all of a sudden our government is concerned? Why did they not slap China with broader trade duties ten years ago? Or even three years ago? Why is it so urgent that the Yuan appreciate over 20% now? Is it just a coincidence that we are bringing the anvil down on China only after they have positioned themselves to effectively flush our currency without looking back?

Interestingly, the exponential spike in our export imbalance starting around 1991-1992 coincided almost exactly with the Federal Reserve interest rate cut from 1990 to 1994.

This bar was lowered even further in 2001-2003 when the Fed cut rates to an insane 1%, which led to the infamous mortgage and derivatives bubble. While trade deficits and a 70% consumer based system rotted the American economy from the outside-in, the housing market collapse and resulting credit crisis rotted it from the inside-out. What this means is, either the U.S. has somehow been subject to a “perfect storm” of fiscal debacles that have positioned us for an amazingly thorough collapse, or, corporate interests and the Federal Reserve (same difference) deliberately took actions which gutted our country. As we have shown in many previous articles, the evidence dictates that the latter cause is most viable.

Where does a currency war with China play into all this? Yuan appreciation is the end game. In 2007, China publicly suggested that U.S. trade pressure will result in retaliation, up to and including a devastating dump of their Treasury Reserves that would result in the collapse of the Greenback:


That was back before the recession/depression had even hit full steam, and rhetoric against the Yuan was minimal. Today, the downturn is rolling ahead full bore and the rhetoric against the Yuan is nearing fever pitch! Chinese Premier Wen Jiabao stated this past week that a 20% Yuan devaluation would trigger severe job losses and social instability, putting his country at risk. That is to say, the Chinese are presenting this (falsely) as a matter of life and death for them, a situation that requires an extreme response if escalation occurs:


Some U.S. business leaders have spoken out against pressure on the Yuan, pointing out that China holds all the cards if a currency war is initiated:


This is absolutely true. The problem is that the elites in our government fueling this conflict are well aware that China can and likely will begin a T-bond dump that will implode our currency. They know that China has absolutely no incentive to increase imports from the United States while it holds all the industrial capability necessary to supply itself with needed goods and a solidified ASEAN trading bloc to support its expansion. They also know full well that tariffs and trade embargos in the midst of economic meltdown tend to inflame retaliation and lead to even greater collapse, just as the Smoot – Hawley Tariff Act did in 1930, right before the Great Depression spiraled out of control.

A trade/currency war is EXACTLY what global banks want, in order to remove the dollar as the world reserve currency, create panic and desperation in the American populace, and to introduce the SDR (along with a stronger Yuan as a component) as the only workable security capable of holding together international commerce.

America: The Villain?

Are the Chinese aware of this plan? I believe that elements of the Chinese government and its central bank have been clued in all along. Why else would China, an export based economy for decades, abruptly decide to drastically reposition itself as a consumer hub at the center of an Asian trading bloc, all in the span of three years? I don’t think many mainstream analysts realize how radical this Chinese metamorphosis has been, and how significant it really is. The move seems unprecedented and almost irrational, unless you are a Chinese financial official cognizant of a plan to unseat American primacy. Then, a rush to detach from the U.S. makes perfect sense.

Remember, China began cross-border Yuan exchange programs as well as “Yuan Bond” programs in 2007/2008, meaning they intended to revalue their currency before the severity of the crisis was fully known to most of the world. The Chinese have been preparing for a move away from the dollar all along. Why else would they do this unless they knew the U.S. consumer would not recover, that their exports would continue to suffer far into the future, and that the Federal Reserve would continue to create Everest sized mountains of fiat money from thin air?

If banking elements of China are working in concert with other central banks to force the U.S. into “global harmonization” under the IMF, it means this entire trade war state of affairs, all the accusations and cross-accusations, all the talking points and debates, every facet of the issue that has burgeoned so far this season, is one fantastic charade!

What’s the point? While China is being built up as the villain of our American economic collapse fairy tail instead of the global banks, America is being built up as the villain for the rest of the world. Already, China is feeding talking points into the mainstream that paint the U.S. as a kind of stampeding single minded monster trying to dominate at the expense of logic (take special note that ASEAN is being overtly used as a collective moniker in this article, similar to the EU):


The problem is, there is some root truth to the indictment. What this new political fulcrum leaves out though is that America is not the culprit, at least not in the traditional sense. It is the big stick used by the culprit (central bankers) to beat the rest of the planet into submission. The lies of tomorrow’s history books are being written today, as American “excess”, capitalism, hegemony, selfishness, and sovereignty are quietly being introduced as the cause of all sorrows overseas.

Most of Europe under the G20 has opted out of any involvement in the U.S./China currency dispute, and with good reason. The EU will not associate itself with the trigger event that will lead to the end of the dollar and the chaos that will follow in global markets:


That is an honor reserved for America alone. What better way to destroy the concept of sovereignty than to tarnish and villainize forever the image of the one country in the world universally symbolic as the “land of the free”?

Gold Is Money Again…Must Be Time For A Collapse…

Finally, we get to the biggest development this fall; the so far unstoppable juggernaut of gold and silver.

Gold is breaking records weekly, sometimes daily, now rushing past the $1300 an ounce mark without batting an eye. Not long ago I predicted gold would hit the $1350 to $1400 mark by this winter, but it seems I may have underestimated the precious metal. $1500 is not out of the question in the next three months, especially if trade laws are passed against China before elections.

Silver has passed the $21 an ounce mark but is still highly undervalued in my opinion. I suspect that we could see a rapid increase in physical silver, akin to a “short squeeze”, before the year is out.

What is driving the new gold rush? MSM economists are apparently at a loss for words (which is rare). Gold criticism and uneducated skepticism has fallen silent lately. It’s hard to argue with the $1300 an ounce gold. Pundits are still bewildered at gold’s success, especially since they rely on disingenuous CPI and inflation data from the Federal Reserve and the government to make their deductions. This has led them to assume that an excessive sense of “fear” has pervaded markets and created a bubble in gold. They can’t seem to grasp that the bubble is not in gold, but in fiat currencies and the stock market, and this is why gold is on the rise.

Central Banks, primarily in Asia, are snatching up gold weekly. We all know about China’s unparalleled gold buying, but there are many other countries turning to PM’s as well. Thailand has apparently been buying gold in large quantities under the radar, improving their reserves by as much as 20%:


South Korea has been “under pressure” to diversify into gold because of their lack of defense against global devaluation in top currencies:


Bangladesh recently bought 10 tons of the hedge metal. Nepal has announced a revamping of gold reserves, and, most importantly, they have publicized a desire to use their new gold reserves to back their currency!


So gold is money again? I would be ecstatic about this, if it weren’t for the proposition that a Treasury dump is in the wings. The dollar index has plummeted over the past week, and the Yen and Euro have gained considerably in opposition. I doubt that we will ever see another upward correction in the dollar like the one we saw this summer. Temporary increases in the Greenback’s value seem to have little effect on gold’s rise, however, and a full decoupling appears close at hand. Even the wild gyrations of the Dow lately have had little consequence on PM’s, yet another sign that the world is turning towards commodities as the only solid protection for savings.

Reports are coming in from the EU that banks are halting gold sales that have been operating for over a decade:


That means sources of physical gold are beginning to dry up. This is becoming evident in the disconnection between physical gold values, and gold stocks. Physical values have far surpassed those of their paper counterparts. As demand grows and supply wanes, we could even see a complete decoupling of ETF values versus physical. This is already happening in some countries, like Vietnam, where the national currency and even the dollar are no longer trusted, and physical is trading at prices hundreds of dollars above set market value, something that could just as easily happen in the U.S.

One ember of stability in all this disaster is the strength of gold and silver as alternative currencies. In my recent article ‘Real World Solutions To Economic Tyranny’, I talked about the possibility of an “alternative economy” based on PM’s and created one community at a time, independent from our current fraudulent system, which could protect the Liberty Movement from collapse. Luckily, it seems others have had the same idea! Here is an article and video featuring G. Edward Griffin discussing the Idaho State Silver Gem Act, introduced by Representative Phil Hart, which would promote the use of silver as a designated alternative currency in the state (special thanks to Cassandra Anderson for sending me this link):


The Fall Setup

If I was to compare the movements of the economic collapse to a chess game, I would say that the pieces are now in place this fall for a checkmate maneuver. Watch for increased tensions with China in October and November, followed by actual legislation sparking detrimental retaliatory actions. Also keep an eye on the dollar as it continues what looks to be its final decline.

Will we see a trigger event before the end of 2010? I predicted this much last year. My hope is that I was mistaken and that 2010 only represents a staging period for the inevitable deterioration further down the road, giving as many people as possible the extra time to prepare. As you can see though from the available information, this winter could be very unsettling. Hold fast, keep educating family and friends, continue preparations, and try to become as independent from this diseased economy as possible. Build meaningful community around you. Provide for yourself and others what the corrupt system will not, and remain free. It doesn’t sound like much, but it is truly one of the greatest contributions you can make towards a better tomorrow.

The Proof Is In The Numbers: America Is Getting Poorer

The Economic Collapse
Sept 30, 2010

How in the world can anyone claim that things are getting better?  Sometimes the numbers are so clear that they simply cannot be denied.  According to the U.S. Census Bureau, median household income in the United States fell from $51,726 in 2008 to $50,221 in 2009.  That was the second yearly decline in median household income in a row.  In other words, America is getting poorer.  Just let that statistic above sink in for a little bit.  In 2009, American families had roughly $1,500 less coming in than the year before.  Not that the cost of living has gone down either.  Have you been to the supermarket lately?  Things are getting ridiculous out there.  In fact, middle class American families are being squeezed as never before.  More mothers and fathers are scrambling to find second and third jobs just to pay the mortgage and to keep the lights on and to put food on the table.  This is not a time of prosperity in America.  We are in a state of serious decline and it is time to wake up and admit it.

When you stop and analyze the new Census data, something jumps out at you right away.  You quickly realize that these income declines are not limited to just a few regions of the country – they are literally happening from coast to coast.

The U.S. economy is in deep, deep trouble and the proof is in the numbers.  The following are 12 statistics that reveal just how far the standard of living in America is declining….

1According to the Census Bureau, median household income dropped in 34 U.S. states in 2009, and the only state where median household income actually increased was in North Dakota.

2 – The Census Bureau data also revealed that of the 52 largest metro areas in America, only the city of San Antonio did not see a decline in median household income in 2009.

3 – 35 percent of all U.S. households now live on $35,000 or less.

4 – According to the Census Bureau, the percentage of Americans living below the poverty line is the highest it has been in 15 years.

5 – The number of Americans enrolled in the food stamp program passed the 41 million mark for the first time ever in June.

6 – The number of Americans in the food stamp program increased a staggering 55 percent from December 2007 to June 2010.

7One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government.

8 – Nearly 10 million Americans now receive unemployment insurance, which is almost four times as many that were receiving it back in 2007.

9 – In 2009, U.S. consumer spending experienced the biggest decline since 1942.

10 – As millions of young Americans struggled just to survive, marriages fell to a record low in 2009.  Today, only 52% of Americans 18 years or older are married.

11 – The only group that saw their household income increase in 2009 was those making $180,000 or more.

12– According to the Huffington Post, the gap between the richest and poorest Americans grew in 2009 to its largest margin ever….

The top-earning 20 percent of Americans – those making more than $100,000 each year – received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent made by the bottom 20 percent of earners, those who fell below the poverty line, according to the new figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

Not that it is a bad thing to make money.

Contrary to what our socialist friends may think, it is actually a very good thing to work hard and make money.

The point is that the game is rigged and the bottom 80 percent of us are being left behind.

The middle class is being systematically destroyed.  At the rate we are going, we will eventually have a very small group of ultra-wealthy Americans and a gigantic mountain of very poor Americans that are barely able to survive.

The answer to this is not a “redistribution of wealth”.

What middle class Americans actually need are good jobs with good benefits.

You know, the kind of jobs that the U.S. economy used to produce.

For the vast majority of Americans, all they have to offer in the marketplace is their labor.  If they cannot get someone to hire them for a wage that will enable them to take care of their families then they simply cannot make it without government assistance.

But what our leaders have done in the name of “globalism” is that they have essentially merged our economy with the economies of nations such as China where blue collar workers are paid about a dollar an hour to do the same jobs that American workers get paid 15 to 20 dollars an hour to do.

As a result, jobs and factories are fleeing the United States so rapidly it is hard to even describe.  The deindustrialization of America is happening right in front of our eyes, but the American people have become so dumbed down that most of them don’t even seem to have the capacity to understand what is going on.

Quite a few advocates of “free trade” (which is not “free” or “fair” at all under our current system) have left comments on my columns telling me that the American people better just suck it up because this is how it is now and the world isn’t going back.  These advocates of the globalist system say that the American people just need to toughen up and learn to compete and need to just accept that the standard of living for workers across the globe is going to be equalized and that is all there is to it.

So are you ready to have the same standard of living as a Chinese sweatshop worker who works 12 hours a day for one dollar an hour?

That is where we are headed.

But things did not have to be this way.  We did not have to merge our economy with communist China and allow them to keep their currency devalued 40 percent lower than it should be so that they could dump massive amounts of cheap goods on our shores.  We did not have to elect politicians that believe that “globalism” is the answer to all of our problems.  We did not have to sign on to the WTO, NAFTA and all the other “free trade” agreements that are destroying the American middle class.

Labor is now a global commodity.  American workers are now part of the global labor force.  The bargaining power of the average American worker has dropped through the floor.  Now the monolithic predator corporations that dominate our economy don’t even have to deal with American workers if they don’t want to.

Very few of our politicians admitted that merging us into a one world economy would mean a dramatic decline in the standard of living of middle class Americans.

But that is exactly what is happening.

Meanwhile, the federal government, our state governments and our local governments keep going into massive amounts of new debt in an effort to keep paying the bills.

There are some state governments, like Illinois, that are basically flat broke.  In fact, Illinois doesn’t even bother to pay many of their bills anymore.

Of course the federal government is the worst offender of them all.  The U.S. national debt is rapidly approaching 14 trillion dollars, and most of us have gotten so accustomed to it that we don’t even talk about it much anymore.

That is how bizarre things have gotten.

As America keeps getting poorer, and as U.S. taxpayers see their incomes continue to decline, how in the world are U.S. government finances going to turn around?

The truth is that our leaders should be in full blown crisis mode in an attempt to fix this thing.  Pieces of the U.S. economy are literally falling off all around us and our leaders are pushing the debt accelerator to the floor as we head toward a giant cliff.

But instead our politicians are prancing about the countryside telling us that everything is going to be just great as long as we cast our votes for them in the fall.

And the mainstream media keeps telling us that the “recession” is over and that soon the U.S. economy will be better than ever.

Is it any wonder that faith in the mainstream media is now at an all-time low?

According to a new poll just released by Gallup, the number of Americans that have little to no trust in the mass media (57%) is at an all-time high.

A significant percentage of the American people is starting to wake up.

What about you?

Are you awake yet?

Like A Thief In The Night

Submitted by Davos Sherman Okst on Sun, 26 Sep 2010

Gold – Currency status since 2600 BC

To date, the crime syndicate has struck 3,800 times. At the bottom of this article you will find a partial list of the mob hits that have been made by the organized crime syndicate many refer to as: La Cosa Nos(Cen)tra(l) Banksters. The families of the diseased are large – entire nations. They made the unfortunate and common mistake of trusting their late, and once rich Uncle Currency with safeguarding the value stored in their life savings. Those that didn’t take out a life insurance plan suffered. Many, like the little children of Argentina, actually starved to death.

The modus operandi is identical in every case. The loot is taken first, the heist ends with a rub on the mark.

like a thief in the night

Let’s look at the above crime scene. Germany lost World War I. They were saddled with war debt and forced to pay reparation. The French took over Germany’s industrial base when the Germans got behind on their payments. Without the industry revenues the German government began printing to cover their debt and avoid default.

  • ‘Gave up its industrial base’.
  • “…government began printing to cover their debt and avoid default.”

Sound familiar?

It should. Globalization off-shored the bulk of our industrial base. In 1959, manufacturing accounted for 30%+/- of U.S. economic output. In 2008, it was 11%+/-. The United States lost 32% of its manufacturing jobs since 2000. Manufacturing employment in the U.S. computer industry is now lower today than it was in 1975. Asia produces 84% of all printed circuit boards. The United States has lost 42,000+/- factories since 2001. In 2008, 1.2 billion cellphones were sold, none were made here.

An out of control deficit has left Ben-Willy-Nilly-Bernanke printing. The formula for what we print is this: (Tax revenues taken in + What Communist China et al will loan us) – (What we owe out) = Counterfeit / print the difference.

I hate gold – but I’m not stupid. I’m a realist. I know what Enron fraud smells like. I know that we have 13 trillion dollars of federal debt, add the GSE (Freddie/Fannie) debt to that and our Federal Debt is really over 18 trillion. Pile on the unfunded liabilities hidden off balance sheet on the government’s cooked books:

Liability Unfunded (read: looted) Liability
Social Security 14.6 trillion
Prescription Drugs 19.2 trillion
Medicare 76 trillion
Total 109,800,000,000,000.00

109.8 trillion + 18 trillion = 127.8 trillion dollars.

Then we have the most disastrous deficit of all: The leadership deficit who continually make the absolute worst and totally incorrect economic decisions. With that in mind, gold for me is a life insurance policy against Uncle Buck.

Super guy our Uncle Buck is – but he’s a marked man. Street rules for dealing with marked men, two words; total avoidance. Willy-Nilly and his crew are going to do what made men have done for centuries – a loot-job followed by a hit-job.

Back to the German Job: The inflation alarm sounded in 1921 when gold spiked from 1,349 to 2,175. I bet a lot of Germans didn’t purchase an insurance plan then. I say this because of of a conversation I had with a friend of mine that I hadn’t seen in a month. When I saw him again, I asked, “Bought any gold?” “No, I looked at the [gold] chart (see current price chart below) and saw that in 1980 it was at $840.00 [an ounce] and in 1982 it fell to $290.00 [an ounce]”, he answered.
gold london pm fix 1975

My hunch is that in Germany a lot of folks looked to the 1920 drop from 1,340 to 1,201 and thought deflation, or that things were under control. Just like my friend let this current retracement frighten him out of his purchase of life insurance.

The Germans were robbed and it came like a thief in the night. A year later their marked Mark was dead, rubbed out Central Bankster mob style. Their entire savings had been looted. Look at the table at the bottom of the page. You do not have to be a rocket scientist to understand what an overextended county’s M.O. is.

Recently gold has been “going up” (most of us know the basket of Fiats are going down and the price of gold just appears to be going up, when in fact it is just storing the value of “yesteryears” wealth / purchasing power).

Lets do a simple exercise: “If” gold were to go up to $2,175.00 an ounce within the next 12 months – how many Americans:

  1. Would buy gold (take out life insurance against Uncle Buck) at $2,175.00 an ounce?
  2. Would listen to the deflationists saying that gold will crash (I don’t think they see the 128 trillion pound debt gorilla)?
  3. Would listen to the chart technicians calling for technical retracements?
  4. Or, would they listen to CNBS’s guests who missed the housing bubble, the biggest bubble of the century (well save for the coming bond bubble)?

Please see the 44 second point, listen to the sarcasm in her voice.

“If” Gold then ‘shoots up’ to $3,976.00 an ounce a few months later how many would buy then?

And finally, if gold jumped to $30,381.00 an ounce weeks after – how many could even afford to buy it? My point is that “if” this happens, that will be the precise point at which they are priced out of the market.

Hope they can afford silver then. Plan B.

A lot of really smart people have affixed $5,000.00 or $11,000.00 price ceilings to gold. Their merits are actually quite excellent. I won’t argue them on those merits. But, I sincerely don’t think they take into account how stupid our government is or how inept our financial wizards are. We are talking colossally inept, totally incompetent economic imbeciles here. I am not being mean – these morons have repeatedly demonstrated destructive financial tendencies. Take Summers: He helped blow away Glass-Steagall with Congressman Phil Gramm, then he helped Greenspan, Congress, the banking criminals and Wall Street derivative mob muzzle Brooksley Born (then Chairperson of the Commodity Future Trading Commission) when she tried to regulate the derivatives which would years later blow up the economy. Summers, up until recently was Obama’s number one economic advisor. Frontline did a wonderful piece on this, if you haven’t seen “Warning” it is well worth the watch. Video. Podcast. Audio.

Going back in history we count 3,800 Fiat currencies that have been whacked by the Central Bank / Government Mob. I’m amazed at how many people I encounter think that we have some special bullet proof Kevlar paper that our currency is printed on. They believe that because our dollar is backed by the full faith and credit of our great country that Uncle Buck will never get whacked. We have no more faith and our credit is running out. We take in less than we owe. We borrow more to try to bridge the gap between what we take in and what we owe. And, when we can’t make ends meet – we counterfeit the difference so we don’t default. Full faith in having a date with Miss. Certain Disaster. One meeting can replace Uncle Buck with a newly elected reserve currency. And as they say in the city where I was born: “Whaddya gonna do bout it? Huh?”.

Here are some of the 3,800 Fiats that have been rubbed out. When I read this list I try to put my feet in the other citizens’ shoes and wonder what life would have been like without an insurance policy when thousands of zeros get added to the price of gas or food. What would it have been like when they tell you that it takes 1 million old dollars to get 1 new dollar. Most of all, I wonder how many of them regret not having a golden insurance policy or a silver bridge to preserve the value of their accumulated wealth.

Conspicuously missing from deceased list is the barbarous relic we call gold. I know a lot of us categorically categorize gold as a commodity. Oddly, the realization that it is listed on many currency exchanges gives credence to the fact that gold is also a currency. And, so far as I know, the only currency that dates back to 2600 BC when the Egyptians established it as a standard for trade. Seems that gold acts as a true barometer as to what the value of any currency is – or isn’t.

There is a lot of speculation that we are going to see a major change in Quantitative Easing. Released in the minutes of one of the near future FRB FOMC – perhaps even as early as the November 3, 2010 – the Fed is expected to announce the beginning of direct monetization (buying bonds directly from Turbo-Tax-Cheating-Timmy-Geithner. No longer using the Primary Dealers as middlemen). The balance sheet is set to explode. We’re talking another 1.5 – 3 trillion here.

From ZeroHedge:

One of the main problems facing the Fed in indirectly monetizing US Treasurys (keep in mind the proper definition of monetization is the Fed buying bonds directly from the Treasury, as opposed to using Primary Dealer middlemen, which is how it operates currently), is that there simply are not enough bonds in circulation to be bid, under its current regime of operation! Readers will recall that as part of existing SOMA guidelines, the Fed is limited to holding at most 35% of any specific marketable CUSIP. Furthermore, applying the SOMA limit to the $2 trillion in upcoming next twelve month issuance, means that in the interplay of the prepayment feedback loop coupled with collapsing rates, the Fed will need to either change the cap on the SOMA 35% limit, or the Treasury will need to issue far more debt to keep up with the sudden expansion in the Fed’s outright, and not just marginal, capacity for incremental debt.

…(and in fact we believe this is merely the first step to an outright monetary collapse also known in some textbooks as hyperinflation)

“If” this happens, where do you think Uncle Buck will wind up? Uncle Buck will NOT be taking to the mattress in my house! Total avoidance.

In Summary: My faith in the 5Gs: (G*(religious edit)d, Gold, Guns, Grub & The Government Will Continue to Screw It Up) remain really, really, really strong.

Country Year Old Dollars Needed To Buy New Dollars
Angola 1991-1999 1 New Kwanza = 1,000,000,000 1991 Kwanzas
Argentina 1975-1991 1 New Peso = 100,000,000,000 1983 Pesos
Belarus 1994-2002 50,000 = 100,000,000 2000 Rublei
Brazil 1986-1994 1 Real = 2,700,000,000,000,000,000 1930 Reis
Bosnia-Herzegovina 1993 Massive hyperinflation
Bulgaria 1991-1997 Defaulted on its debt, food shortages, reduced the number of zeros that were added to its currency.
Chile 1971-1973 500%+ Inflation military overthrew the democracy.
China 1939-1950 1937 3.4 Yuan traded $1.00 USD. By May 1949, $1.00 USD = 23,280,000 Yuan
Ecuador 2000 Pegged to USD after 70-80% drop in its dollar
England 1100s
1100s silver in coins fell.
Coins were clipped.
Henry VIII debased the coins to raise money
Greece 1944-1953 1 1953 Drachma = 50,000,000,000,000 1944 Drachmai
France 1789-1797 Death sentence on anyone selling the notes at a discount to gold and silver livres. 1795 a new currency was issued, the mandat, which promptly lost 97% of its value. 1797, both paper currencies recalled new monetary system backed by gold.
Georgia 1995 1 new lari = 1,000,000 laris.
Germany 1923-1924
See chart above.
Hungary 1944-1946 Forint 400,000,000,000,000,000,000,000,000,000 = 4 × 1029 Pengõ
Israel 1979-1985 Price freezes
Japan 1944-1948 5,000%++ Inflation. Issued military currency, anyone caught with Honk Kong currency was tortured.
Krajina 1993 Country folded became part of Croatia.
Madagascar 2004 1 Ariary = Madagascan Francs – Riots persisted.
Mexico 1993-1994 Defaulted 1982. 1 Nuevo Peso = 1,000 Old Pesos.
Nicaragua 1987-1990 1 Gold Cordoba = 5,000,000,000 1987 Cordobas.
Peru 1984-1990 1 Nuevo Sol = 1,000,000,000 1985 Soles de Oro.
Poland 1990-1993 1 new Zloty.10,000 old Zlotych
Romania 2000-2005 1 new Leu = 10,000 old Lei
Ancient Rome 270AD +/- Took the Romans 300 years to do what the Fed did in 84 years – debase the currency by 95%. The Roman empire fell, they welcomed the Barbarians.
Russia 1992-1994 100 Rubels = 1 USD 1991 30,000 Rubels = 1 USD 1999.
Taiwan 1940-1950 1 New Taiwan Dollar = 40,000 old Taiwan yuan.
Turkey 1990-2005 1 New Turkish Lira;= 1,000,000 old Lira.
Ukraine 1993-1995 1 Hryvnya =100,000 Karbovantsivi
United States 1812-1814 Continental Currency – Failed
United States 1861-1865 Confederation Notes – Failed
Vietnam 1981-1988 Gold trading was outlawed.
Yugoslavia 1989-1994 1 Novi Dinar = 1,300,000,000,000,000,000,000,000,000 Dinars.
Zimbabwe 1999 – 2010 Ongoing mess.

Age of Censorship and Internet Trade Wars

Francis Anthony Govia
Activist Post
Sept 28, 2010

New U.S. legislation will impact every user of the Internet.  The “Combating Online Infringement and Counterfeits Act” would empower the U.S. Department of Justice to shut down, or block access to, websites found to be dedicated to infringing activities.  The bill also contains provisions to block sites with domain names and Top-Level Domains (TLDs) that are maintained by overseas companies, which exist outside the U.S. legal jurisdiction and enforcement mechanism. The Justice Department would obtain court orders directing United States-based Internet Service Providers to stop resolving the IP addresses that allow customers in the United States to access the infringing websites. As a result, the sites will be inaccessible to U.S.-based Web users who do not use some sort of proxy service. The bill was read twice and referred to the Committee on the Judiciary last Monday; it is sponsored by Senators Hatch, Leahy, Klobuchar, Whitehouse, Schumer, Kohl, Specter, Durbin, Bayh, Voinovich, and Feinstein.

The legislation is expected to have strong support in Hollywood, labor unions and manufacturers, but in some circles — namely grassroots political organizations, alternative press, and Internet start-ups — the response has been lukewarm, and even questioning. They are concerned that the “other purposes” of the legislation include censorship and, if made law, will employ the Justice Department to police the Internet, eventually resulting in the disruption of the free flow of information and trade globally.

To some extent, their concerns are formed by experience. There have been examples of business censorship, and government legislation to curtail what is viewed on the Internet.  Infowars reported recently that “London’s St. Pancras International, one of the biggest transport hubs in the West,” implemented “stringent filters that block users of their Wi-Fi service from accessing even mildly political websites.” Sites like prisonplanet.com and thinkprogress.org were not available to customers in some areas. There are plans in Australia to promulgate legislation to institute a “mandatory, countrywide filtering system,” which supporters say is “designed to keep out child abuse content, but which blocks a much wider variety of content and topics.” And recently when media reported about an Iranian website with cartoons denying the Holocaust, some viewers in the U.S. discovered that access to the site was blocked.

Granted, there is recognition in Washington that the Internet is the new frontier for global enterprise, but some perceive that Washington still views the world through the lens of a bygone era.  A critic of the bill told me that many nations, including the United States, legislate for businesses founded in a brick-and-mortar world; and attempts to regulate the Internet would be like turning back the clock.

“Nations will act independently and this will be detrimental to customers that use the Internet near and far,” advised the critic.

A similar sentiment was echoed by former Italian Prime Minister, Romano Prodi, in a speech at the Foreign Ministry Faculty of International Relations in Tehran. Mr. Prodi suggested that Italy within Europe must play a greater role in matters of global importance, and that may entail Europe’s acting with greater independence of the United States.  The message, though given on a different topic, is not one that instills confidence to those who see governments encroaching on their privacy, and would prefer unrestricted use, or less regulation, of the services for which they pay.

The U.S. legislation for infringement is written to tackle many concerns, and is certainly not archaic in regard to lawmakers’ ambition to affect what goes on well beyond the scope of U.S. jurisdiction.

For infringing sites outside the United States, it provides for in rem action in the District of Columbia to prevent the importation into the United States of goods and services directed to U.S. residents. The effect of this “importation” must be that the owner or operator of the infringing site must harm intellectual property rights holders that are residents of the United States.

The Justice Department will be granted power to serve court orders upon the registry where the domain name registrar is not located in the United States, and upon receipt of such an order, the domain registry must suspend operations of, and lock, the domain name of the infringing site.

During the action intended to “lock the domain name,” a court may determine, at a minimum threshold, that an Internet site is not conducting business to residents in the United States if the Internet site “states that it is not intended, and has measures to prevent, infringing materials from being accessed in or delivered to the United States,” including other provisions in subsection (d)(2)(B). The owner or operator of the “infringing site” shall also have recourse to petition the Justice Department to remove his domain name from an offending list, or petition the court to modify, suspend, or vacate the order in accordance with subsection (h)(1)(B).

The bill has an immunity clause which protects any entity from a cause of action in U.S. courts or administration agency for any action reasonably calculated to comply with an action intended to prevent the infringing site from continuing to do business with U.S.-based customers, receive financial transactions, and other matters under subsection (e)(3).

The U.S. legislation does not appear to put the onus on any businesses, such as Internet Service Providers, to stop known infringement from occurring. This is an interesting stance. In February, an Australian ISP won a precedent-setting copyright infringement lawsuit (Down Under) against the Motion Picture Industry.  The bill sponsors may be cognizant of this ruling.

Softpedia reported that 34 U.S. movie studios and broadcasters filed a lawsuit in Australia against iiNet after the ISP refused to send warning letters to its customers who illegally downloaded movies using BitTorrent. The Australian Justice, Dennis Cowdrey, ruled that while iiNet had knowledge of infringements occurring, and did not act to stop them, such findings do not necessitate a finding that the ISP authorized the infringing activities. Possibly, Hollywood supporters of the U.S. infringement legislation now agree with Cowdrey’s ruling that to ask ISPs to police the Internet would “open them any number of legal claims for anything that might happen over their pipes,” and that would engender strong opposition to the legislation among ISPs in the United States. However, to take on the responsibility of policing the Internet may not seem a burden to Obama’s Justice Department.

Certainly, Hollywood will welcome any new infringement legislation aimed at stemming the loss of royalties through piracy and copyright violation in the digital age. Infringers often meet efforts to protect intellectual property with resilient and thought-out action to thwart the law.  As a law intern in Thailand I learned, for example, that illegal duplication facilities for CDs and DVDs existed in mobile transportation.  Persons engaged in copyright violations avoided the ability of local enforcement to easily locate them and shut them down.  It is a sure bet that those engaged in infringing activities overseas will find ways and new technology to evade laws promulgated by a foreign government (like the U.S.) that will have no jurisdiction over them.

The Obama Justice Department, which tapped Hollywood lawyers, may be charged to police Intellectual Property — an assignment to which attorneys for President George W. Bush were “strongly opposed.”  The Republican President threatened to veto a previous version of the bill sponsored by the same Sens. Patrick Leahy and Arlen Specter.

In correspondence to the Senators, attorneys for President Bush wrote that they “strongly opposed” expanding the powers of the Justice Department. Doing so, they said, could undermine the Department’s prosecution of criminal cases and transform it into an office “serving as pro bono lawyers for private copyright holders.”

It is obvious during this era when citizens’ rights are curtailed and infringed upon, with the bipartisan sponsorship of the bill and the composition of the current administration, that the infringement legislation has a better chance of becoming law.  But will it open a Pandora’s Box? Will it do exactly what critics suspect it is intended to do: censor more of the Internet, create bottlenecks that will allow governments to intrude on the flow of information and services around the world, and do possible damage to a wider spectrum of businesses (other than those it is intended to protect)?

Many of the dynamic economies that U.S. businesses now compete against were born out of things other than a free market; and other economies are driven, or manipulated by State controls, as is the case of China.  Foreign nations may follow the U.S. lead in writing laws to regulate the Internet and address their concerns, but not with the results U.S. legislators necessarily hope to engender.

Through retaliation, or even pretext, governments may decide to regulate, or shut down legitimate Internet traffic and services to violate human rights, hinder trade, and to engage in industry espionage.  We already have examples of these developments with China’s efforts to regulate Google, and the recent firestorm when India and other nations, acting within their security concerns, decided to take action to regulate Blackberry and gain access to users’ encrypted corporate e-mails and messages. The offices of Sen. Byron L Dorgan and Rep. Sander M. Levin of the Congressional-Executive Commission on China undertook a hearing in March to investigate if China’s efforts to regulate the Internet contravene free trade and human rights. Delegates to the hearing cited that:

China’s Internet users remain subject to the arbitrary dictates of state censorship. More than a dozen agencies are involved in implementing a host of laws, regulations, and other tools to try to keep information and ideas from the Chinese people . . .

China’s censorship practices and control of the Internet have had a terrible impact on human rights advocates. These include ordinary people who promote political freedoms or try to organize online . . .  attempting to share information about ongoing government repression.

Internet censorship and regulation in China have serious economic implications for many U.S. companies . . .  [and] often run against basic international trade principles of nondiscrimination and maintaining a level playing field.

To these charges, China responded that it laws regarding the Internet are not much different than those of the West, and that critics are applying a double standard.

Perhaps U.S. lawmakers have forgotten a cause it often champions: that respect for human rights, deregulation, and open trade are important to a dynamic and properly functioning global community. As ownership of patents, trademarks, and copyrights becomes a contested grey area, nations may block business occurring over the Internet through the guise of copyright infringement.  Only the rich and powerful will have the resources to go through the legal hurdles at home and/or abroad to clear their domains of actions to lock them, and resume operations.  Damage would be done to a business during the course of a legal action brought against it; its customers may simply believe that the domain ceases to exist, with transactions lost forever.

Small businesses could be shut out of that presumptuous dream of going global and becoming rich, while the elite, big businesses and powerful governments can dominate cyberspace.  Many micro-states and individuals could be harmed, and educational pursuits stifled through this world of more legislation, regulation, and censorship.

Why should we be concerned about this future for the Internet?

Well, because the Internet is now everyone’s classroom; and perhaps more-so it has become individuals’ business personality. A properly set up website for a Mom-and-Pop enterprise can look as good as that of a billion dollar company’s front-store. The ramifications of more regulation will result in the free and booming frontier of cyberspace, now functioning as the gold rush for enterprise, ceasing to exist.

The U.S. may find it useful to confer with trading partners in the North and the South, and come to an understanding that perhaps unilateral action is not the way to address concerns in regard to a frontier in which everyone has an interest. President George W. Bush may have gotten it right when his attorneys writing on his behalf to Sens. Leahy and Specter implied, when taken altogether, that U.S. law already provides owners of Intellectual Property with effective legal tools to protect their rights.  It need not go in the direction proposed by the Senators.

No one wants Washington’s efforts to backfire and force us to return to a world where we have to resort domestically to find the goods and services that we need, such as cheap medicine.  Or, to have to wait on someone in a dusty library to find a book or paper we once could have accessed readily over the Internet.   Or, in some far corner of  the world men will cower in fear of infringing before they cite links as sources of information.  A Big Brother that will censor access to the latest celebrity sex videos, or certain religious texts or even Osama bin Laden’s latest rant (however misguided they may be).  The result of this could be that owners of presumed “infringing sites” must raise ungodly sums of money to hire attorneys to clear their domain names, while good sites like WikiLeaks (which make governments accountable for their actions) are shut down or blocked here and abroad through a pretext; and Mom-and-Pop operating a start-up Internet business within the cornfields of America are locked out through action suggested by a smooth operator with deep pockets who knows how to play the system and use it against his competitor, blocking sites because somebody with power did not like the owner’s point of view.

Francis Anthony Govia received a Bachelor’s degree in International Relations at Boston University where he studied U.S. National Security and Foreign Policy with teachers who inspired him, such as General Fred F. Woerner (Ret.), Ambassador Stephen R. Lyne (Ret.), and Joseph Fewsmith. He received a law degree at the University of Wisconsin-Madison, and is a contributor to Activist Post.

Is The Federal Reserve Out Of Control? Markets Across The Globe Brace For Impact As The Federal Reserve Powers Up The Printing Presses

What in the world is going on over at the Federal Reserve?    Has it gotten to the point where the Federal Reserve is completely and totally out of control?  There is increasing speculation in the financial community that the Federal Reserve is on the verge of unleashing another round of quantitative easing.  In fact, at their September meeting, Federal Reserve officials hinted very strongly that quantitative easing is very much on their minds when they stated that the Federal Open Market Committee “is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”  You might want to reread that quote a couple of times just to let it sink in.  Do you see what the Fed is saying there?  The Fed is actually saying that it has a mandate to maintain a certain level of inflation.  Not that this is a secret to anyone that has seriously studied the Federal Reserve.  Since 1913, inflation has constantly gone up, U.S. government debt has increased exponentially and the U.S. dollar has lost over 96 percent of its value.  But for Federal Reserve officials to openly state that a certain amount of inflation is part of their mandate is absolutely stunning.

Even though the U.S. economy is still in pretty decent shape at this point (for the moment at least), the Federal Reserve still seems obsessed with trying to stimulate it.

In the past, the Federal Reserve would just cut interest rates whenever the economy needed a bit of a boost, but at this point the Fed has cut rates to nearly zero.  There just isn’t any more room to cut rates.

So what else can the Federal Reserve do?

Well, it can create money out of thin air and use it to buy U.S. Treasuries, mortgage-backed securities and other assets.  This is known as quantitative easing, and many analysts fear that it is quickly becoming more than just an emergency measure.

Back in March 2009, the Federal Reserve announced that it would purchase $1.7 trillion worth of U.S. Treasuries and mortgage-backed securities over the next 6 to 9 months.  That was the first round of quantitative easing and Fed officials believe that it helped the U.S. economy avoid an even worse downturn.

But now Federal Reserve officials are talking about making quantitative easing a regular thing.  An article in the Wall Street Journal recently described the current thinking inside the Fed….

Rather than announce massive bond purchases with a finite end, as they did in 2009 to shock the U.S. financial system back to life, Fed officials are weighing a more open-ended, smaller-scale program that they could adjust as the recovery unfolds.

Quantitative easing that is open-ended?

What kind of insanity is this?

Is quantitative easing going to become a permanent part of our financial system?

And what does “smaller-scale” actually mean?

Well, according to James Bullard, the president of the St. Louis Federal Reserve Bank, “small-scale” is actually pretty darn large.  According to the Wall Street Journal, a “small-scale” quantitative easing program would be somewhere in the neighborhood of $100 billion a month….

Under a small-scale approach, Mr. Bullard says, the Fed might announce some still-undecided target for bond buying—say $100 billion or less per month. It would then make a judgment at each meeting whether continued action was needed.

If the Fed injected $100 billion a month into the economy through quantitative easing, that would mean that by the end of the year over 1 trillion dollars would have been created.

That does not sound like “small-scale” to me.

In fact, if the Federal Reserve purchased $1 trillion in U.S. Treasuries next year that would be an amount nearly equal to the total amount of new debt that the U.S. government plans to issue during the year.

Can anyone say Ponzi scheme?

When we get to the point where the Federal Reserve is “buying” a large percentage of new U.S. debt with money that is created out of thin air there is simply no denying the fact that the Fed is running a massive Ponzi scheme.

But the truth is that the U.S. government is in so much debt and the U.S. economy is in so much trouble that something must be done.  It is really tempting to “inflate away” the debt and to pump up GDP figures with a flood of paper money, and Helicopter Ben Bernanke has certainly shown that he is not shy about pulling the trigger.

Of course more debt, more paper money and more inflation will only make our long-term economic problems even worse.

But right now Federal Reserve officials appear to be absolutely obsessed with the short-term.

And without a doubt world financial markets are certainly expecting a new round of quantitative easing to begin soon.

CNBC recently polled 67 economists, strategists and fund managers about what they think is going to happen.  The following is a summary of what CNBC found….

The Federal Reserve will boost its balance sheet by about half a trillion dollars over a six-month period beginning in November and keep it inflated for up to a year, according to a survey of leading markets participants by CNBC.

But many analysts believe that the Fed will take even more substantial action than that.  According to the Wall Street Journal, economists at Goldman Sachs are projecting that the Federal Reserve will end up buying at least another $1 trillion in assets during this next round of quantitative easing.

Stephen Stanley of Pierpont Securities in convinced that it will be even worse than that.  Stanley believes that the Fed will add another $3 trillion to its balance sheet by next August.  The following is what he recently told CNBC….

“If the Fed pulls the trigger, they will go big.”

In an interview with the Economic Times of India, Marc Faber painted an even bleaker picture….

“I believe that if the S&P in the US drops 15-20% to around 900-950, the Fed would come out not with this quantitative easing No. 2, but with quantitative easing No. 2, 3, 4, 5, 6, 7, 8, 9, 10 until the asset markets go up again. They are going to print and print and print.”

It seems like almost everyone is anticipating that the Federal Reserve is going to fire up the printing presses.

Now, even some of the Federal Reserve’s staunchest defenders are now abandoning them.

Ambrose Evans-Pritchard, perhaps the most respected financial columnist in the U.K., recently penned an article entitled “Shut Down the Fed (Part II)” in which he absolutely lambasted Bernanke and other Federal Reserve officials for considering another round of quantitative easing….

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

In fact, Ambrose Evans-Pritchard is now openly accusing the Federal Reserve of being out of control….

So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.

On behalf of those who believe that the Federal Reserve is “a hyperinflating establishment cabal”, I accept Ambrose Evans-Pritchard’s apology.

The truth is that the Federal Reserve is out of control.

The Federal Reserve system was designed to get the U.S. government into a perpetually expanding spiral of debt.  Wealth is slowly but surely transferred from the American people to the U.S. government (when we pay taxes) and ultimately into the hands of those who own U.S. government debt.

As long as the Federal Reserve system exists, U.S. government debt will keep going up, the value of the U.S. dollar will keep going down and wealth will be slowly transferred into the hands of the ultra-wealthy.

And why in the world would the American people allow an unelected, privately-owned central bank to run the U.S. economy, control the money supply, set interest rates and print all U.S. currency?

It simply does not make any sense.

The Federal Reserve has not been shy about declaring that it is “not an agency” of the U.S. government and not directly accountable to the American people.

So why do the American people put up with this kind of nonsense?

The truth is that the Federal Reserve has become far too powerful.  U.S. Representative Ron Paul recently told MSNBC that he believes that the Federal Reserve is actually more powerful than Congress…..

“The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress.”

The truth is that the U.S. economy will never be fundamentally “fixed” simply by electing another “Bush” or another “Obama”.  Something needs to be done about the Federal Reserve system, but right now our politicians in Washington can’t even muster enough support to pass a bill to audit the Fed.

So what do you think about the Federal Reserve?  Please feel free to leave a comment with your thoughts….