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Monetization of USTreasurys In Isolation
By: Jim Willie CB, GoldenJackass.com
Monetization of USTreasurys is occurring in a profound blatant fashion. Such action infuriates the Chinese creditors, while at the same time creates a huge rift between the US Federal Reserve and the USDept Treasury. The rift is political and will come to a head when Chairman Bernanke is due for renewal of his post in a few months. China exerts its constant pressure on the USFed to end the Quantitative Easing efforts. Like doctors, they wish to apply a tourniquet to a gaping leg wound that bleeds a red river onto the pavement. The term is a funny euphemism, a sophisticated economist term for Heavy Duty Money Printing that results in destruction of a currency if not kept under control. The USDollar stewards are NOT demonstrating control, discipline, or even anything remotely resembling honesty or integrity. The USDept Treasury wants to continue funding the federal deficit, and for yucks, add any and every conceivable new program onto the books while the federal insolvent bankruptcy makes marginal additions not so noticeable.

The USFed engages in almost immediately permanent operations to snag the primary dealer USTreasurys gatherings bid at auction, for a simple shell game shuffle. The USFed engages in a sneakier but still obvious hidden bidder game with foreign central banks. They use USDollar Swap Facilities (with gargantuan funds) and bid heavily on the USTreasurys, evidence being the ‘Indirect Bid’ component. If not for the USFed buying most of the USTreasurys issued, the long-term interest rates would be rising quickly and with alarm. If not for the USFed heavy buying, the USDollar would be doing a swan dive off a cliff into rough waters. As has been claimed in past work, the USGovt stewards of the wrecked buck can save the USTreasury or save the USDollar, but not both. Their monetization efforts here and abroad indicate a clear intention to save the USTreasury Bond. They put the USDollar at grave risk. The Weimar Territory lies directly ahead!

The USDollar remains firmly stuck at the cliff’s edge. It cannot recover, as the 80 level offers stiff resistance. The Powerz seem to prevent the breakdown but they cannot engineer a rally for recovery with any gusto. Two notable technical factors bear importance. The downtrendline is becoming clear, which worked to make the 80 level more stubborn. Also, the moving average crossover that occurred in early June still casts a dark cloud over the entire USDollar trading. The US$ DX index is stuck in a bear market, unable to bounce, and now is running out of time. Resolution is demanded. A key point must be mentioned. We are fast in the land of the non-linear, where discontinuous events occur, and disjointed price movements are highly likely. The ground from under the currency market is shifting in an unstable fashion. See the British Pound Sterling in the last week. It has jumped up and fallen down by 200 basis points in several days. Even the Euro has shown unstable movement. That is akin to a hanging lamp in your study, or a displayed chandelier in the living room, and see it shift to and fro in grand swings. Something big is coming and soon. All billboards scream it!!
http://news.goldseek.com/GoldenJackass/1250798400.php

One Last Shakeout, The Battle Royale

Central banks are NOT ordinary gold investors
Central banks run the world's biggest Ponzi scheme, issuing bits of paper that people will accept in return for real goods and services. If you enjoyed this privilege to the tune of a few trillion dollars that finance an empire, expending a few tonnes of gold to keep it going would be a no-brainer.

Central banks do not sell gold to get a few billion of their own fiat money in return, money they probably would throw on top of the stack of half a trillion freshly printed notes that rolled off their presses just that morning. No, central banks sell gold to make it appear that the paper stuff is more desirable than its true supply and demand fundamentals would allow. And when the game looks like it's coming to an end, the central banks can always buy back the gold.

It is not a problem to buy back the gold at even $50,000 per ounce when any amount of paper currency can be printed.

What is a big problem is if the currency loses its value so fast that no one will sell the central banks any gold for any amount of paper. (Try buying gold with Zimbabwean dollars.)

If that happens, the central banks lose and the people win, because when the music stops the people have the gold and the central banks are stuck with the depreciating paper.

Central banks have to use their gold to support their Ponzi paper creation, but they have to control the destruction of their currency's purchasing power so they can still buy their gold back with their own paper before the game ends and they have to start a new one.

When the paper currency has little purchasing power left but the central banks have bought back their gold, they can introduce a new currency and start the cycle all over again.

In this way they leverage their gold instead of having something honest like one-for-one backing in a classical gold standard. They have even found ways of having more leverage by selling paper promises for gold to make it look as if they have 10 or 20 times as much gold as they really have.

There is another problem. What if someone else with a large amount of worthless paper currency gets the idea to buy back your gold before you do?

Do you ever wonder why China kept so quiet about the 450-tonne increase in its gold reserve over the last five years? Clearly China would not want to tip off the Western central banks that it was going to beat them at their own game. If China has admitted to acquiring 450 tonnes of gold, it probably has a lot more than that.

This is all about world dominance. Whoever has the most gold is king.
http://gata.org/node/7697

Trade of the Century?
QB Asset Management
First, we tweaked the calculation of our Shadow Gold Price (SGP) from Federal Reserve Bank Liabilities divided by official gold holdings to Monetary Base (MB) divided by official gold holdings.

The change in our calculation produced a change in value of our Shadow Gold Price, yet we believe this new calculation is more robust and intellectually honest.

As the SGP implies, an ounce of gold would fetch almost $6,000 if we lived in a world characterized by disciplined money issuance. In effect, people and governments around the world would have been exchanging their Federal Reserve Notes for gold to the point that it would take 6000 bills to buy an ounce. The Shadow Gold Price solves for the price of an ounce of gold if the US dollar were still pegged to gold and its rise reflects the inflation of the Monetary Base. (Gold used to actually be the US Monetary Base prior to 1971, when the US and other governments abandoned the Bretton Woods Agreement that imposed monetary discipline on their money printing.)

Obviously this appears to be a crazy gold price within the context of the $900-plus price at which gold has been trading recently on global exchanges (though we do remember its rapid move from $35 to $880 the last time around). We are under no illusions that the price of Comex gold will rise to track what we see as its intrinsic value (not because it shouldn’t, but because we expect external market forces with great interests in protecting the sovereignty of fiat currencies to step in before that occurs, see "Potential Endgame – A Managed USD Devaluation" below).

Potential Endgame – A Managed USD Devaluation
As we first hypothesized last fall, we think there is a growing likelihood that policymakers will see the handwriting on the wall for the US dollar and act to preempt the utter economic chaos they will have wrought from copious money printing. The pragmatic solution would be to formally devalue, and peg, the US dollar to gold.

It would work like this: The Fed would monetize gold at a substantial premium to its current nominal price. As we quantified through the SGP, the gold price peg would have to approximate $6000/oz to remediate all past monetary inflation. We doubt this would occur. It would be more likely that the Fed would announce a public tender for privately held gold at, say, $3000/oz. Any gold tendered would be funded with the creation of new Federal Reserve Notes.

While this would be massively inflationary it would also be discrete in its application. In other words, once the Fed acquired enough gold from the free market at $3,000/oz, a gold price peg for the dollar could be established and maintained. The solvency of the banking system would be reestablished by such measures, as most assets would appreciate in nominal dollar terms to the point that loan books, etc. would once again be fully-secured. In addition to establishing a peg, far more stringent reserve requirements would likely (hopefully) be placed on the banking system. Clearly, the banks would not like this but at least they would live to fight (inflate) another day.

Will this actually happen? It is hard to say but it seems likelier with each passing day. We think formal recognition of true inflation is the only way out. To the extent that policymakers begin to understand this, they could either administer the drug in a willy-nilly fashion, which clearly risks hyperinflation at a time when all of society is woefully over-leveraged or take control of the situation and mandate inflation by decree as a one-time shock to the system. The latter solution would be politically expedient and make policymakers appear to save the day. Raising interest rates and contracting the Fed's balance sheet would indeed be the purest solution that would, eventually, right the ship and make the economy more sustainable. However that would engender a period of broad economic hardship, and so we place close to zero probability on its being pursued as a policy objective. We would now give better odds that there will be a managed US dollar devaluation vis-à-vis gold than a protracted tightening or draining of the monetary supply.
http://www.gata.org/files/QBAssetManagement-07-2009.pdf

Why Gold Will Break Above U.S. $1,000
By: Neil_Charnock
Currently the US shorts are at extreme levels and should be closed out by this time of year. They are usually safely closed out by now however they have not had a decent exit point to date this financial quarter and remain short at dangerous volume. If the POG shoots upwards soon as I suspect we will see a monumental short squeeze. This would not happen without a serious battle as both sides have deep pockets. There is risk we see down side initially before a blast off in the POG due to this factor.

We view gold and silver in historic inflation adjusted terms and they are very cheap – don’t be fooled by precious metal prices quoted in 2009 dollar terms. The upside potential is great from here, when gold breaks US$1,000 many people will be shocked. Savvy investors have accumulated metal and stocks on each pull back and near the end of each consolidation phase in this Gold Bull to date and I suggest you might consider joining them.
http://www.marketoracle.co.uk/Article12798.html

It's Inflation Stupid

What happened Monday in the Precious Metals Markets? Was the market gripped by fear, panic? Were frustrated Bulls flushed out of the market by a CRIMEX press of their huge short position? Or did US Dollar strength in the face of a global dump in the equity markets simply spook the Precious Metals into a sell-off?

I found it intensely amusing that the global sell-off in stocks Monday was blamed on "concerns" that US consumers are too skittish to sustain, let alone ignite, a global economic recovery. This was reported as news? LOL, doubts about any recovery have been numerous for weeks, and all ask the same question, who is going to drive this "recovery" the US Government persistently predicts "is coming"? US consumers are too focused on paying down debt, and keeping their jobs to spend more money they don't have. It should come as a shock to no one that US consumers are not going to pull the global economic recovery forward. In fact, the US consumer is going to ultimately get left behind if and when a global recovery takes root.

That being said, consider for a moment the real root of the current rally in stocks that began back in March. Endless lip service has been paid to the "green shoots of recovery" story that has supposedly lifted stocks off their lows and to recent yearly highs. Never mind the fact that these green shoots have been fertilized with pure manure, as in phony economic statistics conjured up to give the appearance of "growth" even though they just show that the pace of economic decline has slowed at best. The headline writers have convinced gullible global investors that everything is Hunky Dory. Happy Days will soon be here again. NOT!

Well then what has driven stock prices higher? It's Inflation Stupid. It's no coincidence that the current rally in stocks that began in March coincides exactly with the most recent top in the US Dollar. It is no secret that the Dollar has been falling weekly since the Fed announced their Quantitative Easing plans for this Summer back in the middle of March. The Fed is clearly debasing the nations money supply. A debased money supply equals Inflation. This Inflation is just beginning to gain traction in the asset markets. The green shoots of recovery are turning brown, withering and dying from a fertilizer overdose. We prefer to refer to this fertilizer as bullshit.

So what's your point? The point is simple. Yesterday's global sell-off was certainly sparked by the "realization" that the American consumer is in dire straits and will not be leading the next global economic recovery. But this revelation is unlikely to short circuit the current rally in stocks and commodities because Inflation is ALIVE AND WELL.

It is also worth considering that Monday's global stock sell-off had less to do with the American consumers sentiment and more to do with American bank failures. Bank failures across the country are beginning to accelerate, and the size of the banks failing is getting substantially larger. The bank failure story, and the dwindling insurance fund at the FDIC should be on every investors radar. Renewed fears of a banking crisis may be just the catalyst the Precious Metals Markets need to get them over the hump.

The CRIMEX is sitting in a very precarious position as the Precious Metals enter their season in the sun between September and January. Any catalyst that might spark a surge in the Precious Metals will catch the CRIMEX hugely on the wrong side of the market. The ensuing short squeeze could be legendary. Clearly the CRIMEX goons have made every effort to set up a wall to stifle the seasonal advance in the Precious Metals knowing that the seasonal effects on these markets will most certainly take Gold through $1000, even without any "fear catalyst" driving it forward. Today's CRIMEX bet is bigger than the one they made in 2005 to keep Gold bottled up below $450. That August 2005 CRIMEX bet is now a legendary failure as Gold subsequently rose 62% from $450 to $730 over the following eight months. Imagine a 62% rise in the Gold market should the CRIMEX fail in it's efforts to hold the market back here at $1000...

BB&T buys Colonial bank; 4 other banks fail
NEW YORK (CNNMoney.com) -- Troubled Colonial BancGroup will be bought by rival BB&T Friday, the government said after state regulators closed the bank whose assets had been frozen by a federal judge.

The Montgomery, Ala., bank, which has 346 branches spread across Florida, Alabama, Georgia, Nevada, and Texas, is the sixth largest bank failure in U.S. history and by far the largest failure of 2009.

With $25 billion in assets and $20 billion in deposits, Colonial is 100 times larger than the typical bank to have failed this year.
http://money.cnn.com/2009/08/14/news/companies/colonial_bancgroup/?postversion=2009081500

Regulators want Guaranty bids by Monday
NEW YORK (Reuters) - U.S. banking regulators have asked prospective buyers of struggling Texas bank Guaranty Financial Group to submit bids by Monday, the Financial Times reported, citing people familiar with the matter.

Guaranty is the second-largest publicly traded bank in Texas, with about $16 billion in assets, according to its website.

Last month, the lender said there was "substantial doubt" that it can continue as a going concern after loan losses and write-downs left it short of capital.
http://www.reuters.com/article/ousiv/idUSTRE57G01I20090817

CIT Group records $1.68 billion 2Q loss
NEW YORK (AP) -- Commercial lender CIT Group Inc. said Monday in a regulatory filing it lost $1.68 billion in the second quarter, and again warned it might have to file for bankruptcy protection if it fails to restructure its business.

Losses mounted in the quarter as the embattled New York-based lender as borrowing costs exceeded income from lending to customers, and as it set aside more money to protect against future loan losses.

In its quarterly report to the Securities and Exchange Commission, CIT said there is still "substantial doubt" about its ability to continue operating.

Just last month, CIT was bailed out with a $3 billion loan from some of its largest bondholders as it faced a cash crunch. It also launched an offer to repurchase $1 billion in outstanding debt that was successfully completed Monday, helping to stave off a potential bankruptcy filing.

Despite the completion of the tender offer, CIT is still facing some challenges. It could continue to struggle with liquidity issues as more debt is due to mature next year.
http://finance.yahoo.com/news/CIT-Group-records-168-billion-apf-4019451808.html?x=0&sec=topStories&pos=2&asset=&ccode

Coming Soon: Banking Crisis of Historic Proportions
We have a confluence of five factors that have the potential to create damage to banking not seen in 80 years, and that includes the Great Depression. We'll hit these factors one at a time.

First Factor: Banks Are Not Doing Enough Business

Commercial bank credit growth has dropped to 2%...

Now, it is a good thing that banks are conserving capital, since they need to increase capital to offset bad loans.

But, if asset valuations deteriorate (and that is quite possible), the banks need to increase earnings to "earn their way" out of their problem. Interest paid by the Fed for reserves on deposit there (by the commercial banks) are not producing nearly the same level of income as new credit issued commercially under our fractional reserve banking system with much higher interest .

If credit issuance does not increase year over year, banks can not improve their financial condition unless the quality of their existing loan portfolio improves.

Second Factor: Banks Are Failing at a Rate Not Anticipated Two Months Ago

...150 banks are in trouble. Some of these will be larger than many of the 77 (mostly community) banks that have gone under FDIC receivership so far in 2009.

Banks mentioned as being in trouble by Bloomberg (here) include Wisconsin’s Marshall & Ilsley Corp. (MI), Georgia’s Synovus Financial Corp. (SNV), Michigan’s Flagstar Bancorp (FBC), Chicago-based Corus Bankshares Inc. (CORS), Austin-based Guaranty Financial Group Inc (GFG), and Colonial BancGroup Inc. (CNB) in Montgomery, Alabama.

Third Factor: Defaults Are Going to Increase for Several More Quarters

With home mortgage foreclosure rates remaining very high (and possibly increasing) and with the bulk of the commercial real estate defaults yet to come, the failure rate of banks is likely to increase further in the next nine to twelve months, not decline. The situation will be compounded if commercial and industrial (C&I) loans also default at higher rates because of a weak or non-existent recovery.

Fourth Factor: The FDIC Is in Trouble

Rolfe Winkler (here) points out that the accelerating rate of bank failures may exhaust the Deposit Insurance Fund (DIF) at the FDIC, requiring that agency to draw on its credit line with the Fed. Rolfe calculates that the FDIC is currently on the hook for $8.3 trillion in insured deposits, had only $41.5 billion in reserves as of March 31 and has drawn that lower since.

Since only a small portion of deposits actually are paid out of DIF (failed banks have assets that cover most deposits), FDIC needs only a small fraction of covered deposits in reserve.

However, less than 0.05% is most likely several fold too small in a distressed banking system. The section title says the FDIC is in trouble. That is a polite way of saying they are bankrupt.

Fifth Factor: We May Be Going to Historic Lows in Bank Credit

Because we are approaching the one year anniversary of a growth spike in bank credit in September, 2008 (see the first graph in this article), there is likely to be continued pressure on the year-over-year growth rate. The year over year growth of credit may be driven much lower than the current 2% within the next couple months due to the negative effect on comparison due to the spike a year earlier.

Without a strong recovery, there is little hope of a good outcome for the non-oligarchy banks. With a return to recession, in 2010 (and possibly 2011 and 2012) there could be carnage in regional and local banks not seen since the early 1900s, and maybe even worse than what occurred then.
http://seekingalpha.com/article/156269-coming-soon-banking-crisis-of-historic-proportions?source=article_sb_popular

Gold and Why Gold Now
By Darryl Robert Schoon
Modern banking is essentially a Ponzi-scheme on a global scale. Bernard Madoff’s Ponzi-scheme was but a smaller, private version of the public model used in the world today. What people do not understand is that bankers loan money which doesn’t exist and then receive compounding interest and repayment of previously non-existent funds in return.

While this might be considered an abomination and nightmare, it is a wet-dream for bankers and those who profit from such a system. Charging interest on the loaning of gold and silver was believed to be a sin during the Middle Ages, but, today, the charging of interest on the loaning of money that didn’t previously exist and the receiving of the previously non-existent principal back plus interest is considered nothing less than a miracle—at least by the bankers who profit thereby.

The very birth of paper money was conceived in sin. In its genesis, central banking’s paper money was always a fraud. Believed to be backed by equal amounts of gold or silver, in actuality it was never so, no more than were the demand deposits of savers available upon demand in banks.

When US depositors rushed to the banks between 1930 and 1933 to withdraw their savings, they found the banks didn’t actually have their money and thousands of banks were forced to close.

This is what happened to Bernie Madoff’s clients when they requested their money en masse in 2008. This was Bernie Madoff’s nightmare. It is also the nightmare of all bankers because—just as with Bernie Madoff—the depositors’ money isn’t really there.

When the Great Depression alerted savers to the fact that the banks didn’t actually have their money, bankers and government decided something had to be done to prevent bank runs from occurring in the future.

So, they created the FDIC, the Federal Deposit Insurance Corporation, which would maintain a fund composed of bank insurance premiums that would protect depositors against any losses up to a certain proscribed amount.

But while Americans now believe their savings are backed by premiums paid into the FDIC fund, no such fund exists; and, although the FDIC regularly reports how much money is in the FDIC fund, the fund itself, like modern economics, is a fraud.

The following is an excerpt from an article, The Mythical FDIC Fund, by William M. Isaac, former Chairman of the FDIC. It should be titled:

WHAT BILL FOUND OUT WHEN HE WENT TO WASHINGTON DC

8/27/08

THE MYTHICAL FDIC FUND
By William M. Isaac

William Isaac, former Chairman of the Federal Deposit Insurance Corporation, (FDIC)

…When I became Chairman of the FDIC in 1981, the FDIC's financial statement showed a balance at the U.S. Treasury of some $11 billion. I decided it would be a real treat to see all of that money, so I placed a call to Treasury Secretary Don Regan:

Isaac: Don, I'd like to come over to look at the money.
Regan: What money?
Isaac: You know . . . the $11 billion the FDIC has in the vault at Treasury.
Regan: Uh, well you see Bill, ah, that's a bit of a problem.
Isaac: I know you're busy. I don't need to do it right away.
Regan: Well . . . it's not a question of timing . . . I don't know quite how to put this, but we don't have the money.
Isaac: Right . . . ha ha.
Regan: No, really. The banks have been paying money to the FDIC, the FDIC has been turning the money over to the Treasury, and the Treasury has been spending it on missiles, school lunches, water projects, and the like. The money's gone.
Isaac: But it says right here on this financial statement that we have over $11 billion at the Treasury.
Regan: In a sense, you do. You see, we owe that money to the FDIC, and we pay interest on it.
Isaac: I know this might sound pretty far-fetched, but what would happen if we should need a few billion to handle a bank failure?
Regan: That's easy - we'd go right out and borrow it. You'd have the money in no time . . . same day service most days.
Isaac: Let me see if I've got this straight. The money the banks thought they were storing up for the past half century - sort of saving it for a rainy day - is gone.
If a storm begins brewing and we need the money, Treasury will have to borrow it. Is that about it?
Regan: Yep.
Isaac: Just one more thing, while I've got you. Why do we bother pretending there's a fund?
Regan: I'm sorry, Bill, but the President's on the other line. I'll have to get back to you on that.
http://news.goldseek.com/GoldSeek/1250492400.php

You Call This A Recovery?

Regarding Jobless Benefits
More than 6.2 million Americans are receiving jobless benefits, the government said Thursday -- 140,000 fewer than the previous week. Counting people taking advantage of an unemployment benefits program enacted by Congress, 9.25 million people received unemployment compensation in the week that ended July 25, down about 100,000 from the week before, as new claims rose but some recipients ran out of benefits and fell off the rolls, economists said.

The nonprofit National Employment Law Project has calculated that 540,000 people will exhaust their emergency benefits without finding work by the end of September. And by the end of the year, it predicts 1.5 million will run out.

The Statistical Recovery
By: John Mauldin, Millennium Wave Advisors
What we can see is that we are down 6.7 million jobs since the beginning of 2008! We have roughly eliminated the job growth of the last five years. And that does not take into account the 150,000 new jobs that are needed each month just to maintain the employment rate because of the increase in population. It took 55 months once the 2001 recession was officially over to get back to the previous employment peak. That is 4.5 years, gentle reader, and we are further down now and faced with massive deleveraging. It is going to take a lot longer this time. Let's look at some of the reasons why.

By the middle of next year (2010), when I think we will finally hit an unemployment bottom, we will be down close to 8 million jobs, wiping out all the jobs created since the middle of 2004. Unemployment is likely to be more than 10%, unless they keep playing games with the number.

Assume that we will need 9 million jobs over the next five years (150, 000 jobs a month for 60 months) and add the 8 million lost jobs. That means we have to add 17 million jobs in the next five years to get back to the 4.5% unemployment of 2007, let alone the under-4% we saw in 2000.

That means we need to grow employment by about 12% over the next five years. But it's worse than that. What is known as U-6 unemployment is over 16%. There are another approximately 8.8 million people who are either working part-time but want full-time jobs...

Let's make the assumption that the part-time workers want to go to full-time (which they say they do). Typically employers will increase the hours of part-time employees before adding new workers. That will be a major drag on potential job growth. It is the equivalent of creating at least 4 million jobs, except that no new jobs are created. Plus, those who want jobs but are not looking will come back into the market if jobs are available. That adds another 2 million. Now we are seeing the need for 23 million new jobs in five years, to get back to the "Old Normal."

That is an increase of 15% total employment from today's levels over the next five years. That type of jobs growth will only happen with significant economic growth. Normally, you should expect the economy to rebound to at least 3% trend GDP growth. That is what has happened historically. But we are not in the Old Normal. We are entering the era of the New Normal, where looking back at historical trends will prove to be misleading at best.

On average, and VERY roughly, you would think you would need a minimum of 15% real GDP growth over five years to get us back to what we think of as acceptable levels of unemployment. Actually you would need more, as productivity growth lessens the need for more workers. Oh, and add in the Boomer-generation workers who are not going to retire because they now cannot afford to.
http://news.goldseek.com/MillenniumWaveAdvisors/1250458961.php

Hunky Dory
By James Howard Kunstler
A broad consensus has formed in the news media and among government mouthpieces and even some "bearish" investors on the street that "the worst is behind us" in this tortured economy. This view is completely crazy. It will only lead to massive disappointment a few weeks or months from now, and that disappointment might easily transmute to political trouble. One even might call the situation tragic, except a closer look at the sordid spectacle of what American culture has become -- a non-stop circus of the seven deadly sins -- suggests that we deserve to be punished by history.

The reason behind this mass delusion is not hard to find: it's based on wishing, especially the wish to retain all the comforts, conveniences, luxuries, and leisure that had become normal in American life. These are now ebbing away in big gobs for most of the population -- while a tiny fraction of the well-connected pile on ever larger heaps of swag, enjoying ever more privilege. Those in the broad bottom 95 percent were content as long as there was a chance that they, too, could become members of the top 5 percent -- by dint of car-dealing, or house-building, or mortgage-selling, or some other venture enabled by easy credit and a smile. Those days and those ways are now gone. The bottom 95 percent are now left with de-laminating houses they can't make payments on, no prospects for gainful work, re-po men hiding in the bushes to snatch the PT Cruiser, cut-off cable service, Kraft mac-and-cheese (if they're lucky), and Larry Summers telling them their troubles are over. (If I were Larry, I'd start thinking about a move to some place like the Canary Islands.)

Too many disastrous things are lined up in the months ahead to insure that we're entering a new phase of history: The Long Emergency.

Here, in the dog days of summer, it seems to me that the situation in the USA is so fundamentally bad, so unpromising, so booby-trapped for failure, that I wonder if there has ever been a society so badly deluded as ours. We're prisoners of our wishes, living in a strange dream-time, oblivious to the forces gathering at the margins of our vision, lost in a wilderness of our own making.
http://kunstler.com/blog/2009/08/hunky-dory.html

“Experts” Never Learn
By: Peter Schiff, Euro Pacific Capital, Inc.
There is an inexplicable, but somehow widely held, belief that stock market movements are predictive of economic conditions. As such, the current rally in U.S. stock prices has caused many people to conclude that the recession is nearing an end. The widespread optimism is not confined to Wall Street, as even Barack Obama has pointed to the bubbly markets to vindicate his economic policies. However, reality is clearly at odds with these optimistic assumptions.

Rising U.S. stock prices – particularly following a 50% decline – mean nothing regarding the health of the U.S. economy or the prospects for a recovery. In fact, relative to the meteoric rise of foreign stock markets over the past six months, U.S. stocks are standing still. If anything, it is the strength in overseas markets that is dragging U.S. stocks along for the ride.

In late 2008 and early 2009, the “experts” proclaimed that a strengthening U.S. dollar and the relative outperformance of U.S. stocks during the worldwide market sell-off meant that the U.S. would lead the global recovery. At the time, they argued that since we were the first economy to go into recession, we would be the first to come out. They claimed that as bad as things were domestically, they were even worse internationally, and that the bold and “stimulative” actions of our policymakers would lead to a far better outcome here than the much more “timid” responses pursued by other leading industrial economies.

At the time, I dismissed these claims as nonsensical. The data are once again proving my case. The brief period of relative outperformance by U.S. stocks in late 2008 has come to an end, and, after rising for most of last year, the dollar has resumed its long-term descent. If the U.S. economy really were improving, the dollar would be strengthening – not weakening. The economic data would also show greater improvement at home than abroad. Instead, foreign stocks have resumed the meteoric rise that has characterized their past decade. The rebound in global stocks reflects the global economic train decoupling from the American caboose, which the “experts” said was impossible.

Though the worst of the global financial crisis may have passed, the real impact of the much more fundamental U.S. economic crisis has yet to be fully felt. For America, genuine recovery will not begin until current government policies are mitigated.
http://news.goldseek.com/EuroCapital/1249671473.php

No More Giveaways; No More Recovery
By Bill Bonner
So, the feds aren’t taking any chances. Yesterday came news that the Fed would continue buying bonds at least through October. And they are not likely to raise rates either. The banks can borrow at practically zero interest…and use the money to buy Treasury bonds. The 10-year yields about 3.7%. In effect, they’re lending the money back to the people they got it from…and earning 3.7% for their trouble.

But, take away the stimulus spending…and the stimulating low interest rates…and what have you got? You’ve got is an economy entering a depression.

Oh, there’s the rub, isn’t it? If the feds hand out money so people can buy automobiles, people buy automobiles. If they don’t give out the money, people don’t buy automobiles. If they buy automobiles, of course, it looks like the economy is recovering. But take away the giveaways, and the recovery disappears.

Solution: keep giving away money!

Hold on…something wrong here. If you could generate economic prosperity by giving people money so they could buy things…why not give them money to buy everything? Why just autos?

So, the feds are encouraging people to buy autos. Set aside the fact that buying too many autos and other things is what got them into trouble…

…if giving people money so they could buy things actually made people prosperous, welfare recipients would be the richest people on the planet. Obviously, it doesn’t work that way. What makes people rich is the ability to earn money…not their ability to get handouts. And remember, too, the feds don’t really have any money to hand out. They can only get money by taking it from its rightful owners – either in taxation or loans. Or, they can print it up themselves. In any case, the money adds nothing real or extra to the economy. It merely distorts the economy…twists it…misleads it…and makes it a bigger mess than it was already.
http://dailyreckoning.com/no-more-giveaways-no-more-recovery/

A Grand Unified Theory of Market Manipulation[Fascinating]
Precision Capital Management LLC
The theory for which we have the greatest supporting evidence of manipulation surrounds the fact that the Federal Reserve Bank of New York (FRNY) began conducting permanent open market operations (POMO) on March 25, 2009 and has conducted 42 to date. Thanks to Thanassis Stathopoulos and Billy O’Nair for alerting us to the POMO Effect discovery and the development of associated trading edges. These auctions are conducted from about 10:30
am to 11:00 am on pre-announced days. In such auctions, the FRNY permanently purchases Treasury securities from selected dealers, with the total purchase amount for a day ranging from about $1.5 B to $7.5 B. These days are highly correlated with strong paint-the-tape closes, with the theory being that the large institutions that receive the capital injections are able to leverage this money by 100 to 500 times and then use it to ramp equities.
http://www.gata.org/files/PrecisionCapitalMarketManipulation-08-02-2009.pdf

Is This Statisitically Reasonable?
By Karl Denninger
Aug. 5 (Bloomberg) -- Goldman Sachs Group Inc. made more than $100 million in trading revenue on a record 46 separate days during the second quarter, or 71 percent of the time, breaking the previous high of 34 days in the prior three months.

Trading losses occurred on two days during the months of April, May and June, down from eight in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission. The company made at least $50 million on 58 of the 65 trading days during the quarter, or 89 percent of the time.

Just two days of losses in the entire quarter?

There are a lot of very good traders in the world, but nobody has that sort of record on any sort of consistent basis unless they've managed to rig the game.
http://www.321gold.com/editorials/denninger/denninger080609.html

U.S. banks to make $38 billion from overdraft fees: report
(Reuters) - Banks in the United States are poised to make $38.5 billion in customer overdraft fees this year, the Financial Times said, citing research by Moebs Services.

A large portion of the revenue is likely to come from the most financially stretched consumers, according to the paper.

It said the research showed that many banks have increased charges on overdrafts and credit cards in order to boost profits.

The median bank overdraft fee rose this year by one dollar to $26, the paper said, citing the Moebs data.

"Banks are returning to a fee-driven model and overdraft fees are the mother lode," Mike Moebs, the company's founder was quoted by the paper as saying.

Overdraft fees accounted for more than 75 percent of service fees charged on customer deposits, the paper cited Moebs as saying.
http://finance.yahoo.com/news/US-banks-to-make-38-billion-rb-1407366474.html?x=0&sec=topStories&pos=4&asset=&ccode

A Vote Of Confidence = A Kiss Of Death

Fed says economy leveling out; rates stay at lows
WASHINGTON (AP) -- The Federal Reserve delivered a vote of confidence in the economy Wednesday, saying it would slow the pace of an emergency rescue program and indicating the recession appears to be ending.

The central bank also held interest rates steady at record lows, with a closely watched bank lending rate near zero, and again pledged to keep them there for "an extended period" to nurture an anticipated recovery.

Fed Chairman Ben Bernanke and his colleagues said the economy appeared to be "leveling out" -- a considerable upgrade from their last meeting in June, when the Fed observed only that the economy's contraction was slowing.

The Fed said it would gradually slow the pace of its program to buy $300 billion worth of Treasury securities and shut it down at the end of October, a month later than previously scheduled.

It has bought $253 billion of the securities so far. The program is designed to force interest rates down for mortgages and other consumer debt and spur Americans to spend more money.

The Treasury-buying program's effectiveness has been questioned on both Wall Street and Capitol Hill, with critics saying it looks like the Fed is printing money to pay for Uncle Sam's spending binge.
http://finance.yahoo.com/news/Fed-says-economy-leveling-out-apf-1244800440.html?x=0&sec=topStories&pos=2&asset=&ccode=

The US Economy had a massive monetary stroke in 2007. The stroke caused a seizure that stopped the flow of credit throughout the economy. In it's aftermath, the fiat money doctors have propped up the perpetually deteriorating economy with massive infusions of Monopoly Money. The US Economy has effectively been on life-support for the last 18 months.

And now the grand and glorious Federal Reserve tells us they are confident the Economy will survive. They tell us ignorant spendthrifts that the Economy appears to be "leveling out". The last thing friends and loved ones of a stroke victim want to hear is that the patient is leveling out. A flatline usually signals the patient is dead.

The US Economy, as we have known it for years, is dead. Problem is, nobody wants to admit it, let alone accept the Truth. Vote of confidence? Isn't that what the owner gives the coach just before he fires him. A vote of confidence for the US Economy is a kiss of death.

Batten down the hatches folks, the backside of hurricane is about to make landfall.

Entering the Greatest Depression in History[MUST READ]
by Andrew Gavin Marshall
While there is much talk of a recovery on the horizon, commentators are forgetting some crucial aspects of the financial crisis. The crisis is not simply composed of one bubble, the housing real estate bubble, which has already burst. The crisis has many bubbles, all of which dwarf the housing bubble burst of 2008. Indicators show that the next possible burst is the commercial real estate bubble. However, the main event on the horizon is the “bailout bubble” and the general world debt bubble, which will plunge the world into a Great Depression the likes of which have never before been seen.

While the bailout, or the “stimulus package” as it is often referred to, is getting good coverage in terms of being portrayed as having revived the economy and is leading the way to the light at the end of the tunnel, key factors are again misrepresented in this situation.

At the end of March of 2009, Bloomberg reported that, “The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year.” This amount “works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.”

Gerald Celente, the head of the Trends Research Institute, the major trend-forecasting agency in the world, wrote in May of 2009 of the “bailout bubble.” Celente’s forecasts are not to be taken lightly, as he accurately predicted the 1987 stock market crash, the fall of the Soviet Union, the 1998 Russian economic collapse, the 1997 East Asian economic crisis, the 2000 Dot-Com bubble burst, the 2001 recession, the start of a recession in 2007 and the housing market collapse of 2008, among other things.

On May 13, 2009, Celente released a Trend Alert, reporting that, “The biggest financial bubble in history is being inflated in plain sight,” and that, “This is the Mother of All Bubbles, and when it explodes [...] it will signal the end to the boom/bust cycle that has characterized economic activity throughout the developed world.” Further, “This is much bigger than the Dot-com and Real Estate bubbles which hit speculators, investors and financiers the hardest. However destructive the effects of these busts on employment, savings and productivity, the Free Market Capitalist framework was left intact. But when the 'Bailout Bubble' explodes, the system goes with it.”

Celente further explained that, “Phantom dollars, printed out of thin air, backed by nothing ... and producing next to nothing ... defines the ‘Bailout Bubble.’ Just as with the other bubbles, so too will this one burst. But unlike Dot-com and Real Estate, when the "Bailout Bubble" pops, neither the President nor the Federal Reserve will have the fiscal fixes or monetary policies available to inflate another.” Celente elaborated, “Given the pattern of governments to parlay egregious failures into mega-failures, the classic trend they follow, when all else fails, is to take their nation to war,” and that, “While we cannot pinpoint precisely when the 'Bailout Bubble' will burst, we are certain it will. When it does, it should be understood that a major war could follow.”
http://www.globalresearch.ca/index.php?context=va&aid=14680


"The Royal Scam"[WHAT IF?]
The real magic of a good Con is not to get the money. It's to do it in such a way that the Mark thinks he knows what happened, thinks he saw the Con you're pulling, when in fact, the real Con is somewhere else. There's a saying: “Before the scam, you have the dream and they have the money; while afterwards, you have the money and they have the dream.” If you want to know the real Con, when it's all over, find out who walked away with the money. Before then, you won't know.
http://www.oftwominds.com/blogaug09/KaPoom2CHS.htm

Toxic assets still festering
WASHINGTON (CNNMoney.com) -- The economy may show signs of life, but so-called toxic assets are still a major threat to any recovery, a bailout watchdog group warned on Tuesday.

If the economy worsens and unemployment rises further, the troubled assets on bank balance sheets could lose even more value, according to the Congressional Oversight Panel, which keeps tabs on the $700 billion bailout of the financial sector.

The report reminds Congress that the bailout was initially pitched to help deal with troubled assets, hence the name: Troubled Asset Relief Program. Yet the TARP program has not relieved banks of their troubled loans.

The bailout money has instead been used to help banks boost their capital to withstand future losses. Capital injections help ease pressure and potentially free up money for lending -- but the toxic assets are still festering.

"If the economy worsens...then defaults will rise and the troubled assets will continue to deteriorate in value," the report says. "If the losses are severe enough, some financial institutions may be forced to cease operations."
http://money.cnn.com/2009/08/11/news/economy/TARP_report/?postversion=2009081103

We broke the bank!
The United States is functionally bankrupt. Our collective capacity to deal with this astonishing fact is seemingly nonexistent. Our national politics have become show business, exhibiting a complete refusal to strategically respond to this reality.

Let's look at the simple numbers of our national debt. Our on-the-books national debt is $11.6 trillion. But off-the-books federal debt, including Medicare and Social Security, is $107 trillion. This is not a made-up number; this is the money we should have in the bank, according to the federal government's own accountants, to pay for our current promises to our retirees and future retirees, and this doesn't include unfunded obligations that we have to the pensions and benefits promised to federal workers and veterans. Nor does it include huge unfunded pension and benefit obligations for other public employees at levels below the federal government.

But let's just add the $11 trillion to the $107 trillion, and we get $118 trillion. These are big numbers but still just fifth-grade math. Now our total annual national output, or gross domestic product (GDP), is about $14.3 trillion. Total federal receipts, or income if stated in business terms, are about $2.5 trillion. This means that our debt to federal income ratio is about 47, and that ratio assumes that the federal revenues are free to retire the obligations, which they are not. We must pay for defense and a myriad of other programs. Again, in business terms, there is no free cash flow to pay these massive obligations.

Our total national private net worth, according to the Federal Reserve Board, is about $51.5 trillion. That means our federal unfunded liabilities represent 2.3 times our collective net worth. That's pretty darn broke.
http://washingtontimes.com/news/2009/aug/11/we-broke-the-bank/