Nothing Ventured, NOTHING GAINED

With out a doubt, the biggest load of Bullshit we have been asked to swallow by our Orwellian National Leadership arrived steaming and full of stench at 8:30AM est Friday morning.

Falling unemployment rate signals economic turning point
Kansas City Star

Why the July Jobs Report Signals Hope
U.S. News & World Report

Jobs! Jobs! Jobs!
TIME

Recession improving: unemployment meltdown lessening
Examiner.com

Where there are jobs there is hope
Examiner.com

You can't help laughing at the insinuation that "The Recovery" is at hand because America lost ONLY 247,000 jobs in the month of July. Jobs? There were no "new" jobs. 247,000 jobs were LOST! The recession is not improving, it is getting worse. Hope? Hope is the reason the recession is getting, and will continue to get, worse. Until ALL hope is dashed, there can be no bottom, no recovery.

Can it get any more absurd? Well, sure it can...and it most certainly will. But seriously, the country lost ONE QUARTER OF A MILLION JOBS in July and Wall Street and the ever bullish financial media get out the party hats? There should be outrage. This is in NO WAY a "positive" for Wall Street, the economy, or the country. This is a travesty! We cannot argue that the "pace" of job losses has slowed, ...for now. Perhaps business is running out of people to lay-off. I see no headlines touting "jobs creation". There will be no economic recovery with out substantial jobs creation. For those that have lost count, America has LOST jobs for 19 months in a row now.

LOL! Recovery...

There was a lot of truth hidden in Friday's Jobs Report. That is if you can handle the truth:

If The Economy Lost 247,000 Jobs, How Did The Unemployment Rate Go Down?
The government reported Friday morning that the unemployment rate declined one-tenth of a percentage point to 9.4 percent after the economy shed 247,000 jobs in July. But if that many people lost their jobs, how could the unemployment rate go down instead of up?

The answer is that size of the labor force shrank by over 400,000 people. In June, the Labor Department estimated there were 154.9 million workers in the civilian labor force. In July, that number shrank to 154.5 million.

When the labor force shrinks even more rapidly than the job market, the unemployment rate goes down.

"That entirely explains the decline," Shierholz told the Huffington Post. "When you see a decline in the labor force in a market as crappy as this one, the bulk of what's happened is people are looking around saying, 'I've knocked on every door ten times. I'm just not looking anymore until things get better.'"

All of which means that there is nothing really to celebrate in the unemployment rate going down. The cold reality is that another quarter million jobs were lost.
http://www.huffingtonpost.com/2009/08/07/if-the-economy-lost-24700_n_254216.html

Cloud over U.S. payrolls: job hunters take summer off
U.S. employers shed 247,000 jobs in July, far fewer than the 320,000 forecast and the 467,000 eliminated in June. The unemployment rate unexpectedly fell to 9.4 percent from 9.5 percent, the Labor Department said.

Helping to drive the unemployment rate lower, however, was a decline in the labor force participation rate by 0.2 percentage points to 65 percent. About 422,000 people stopped looking for work.

Meanwhile, the number of long-term unemployed, defined as those jobless for more than six months, rose by 584,000 to a to a record 4.97 million. More than one-third of those counted as unemployed have now been without work for six months, the highest level since the government started keeping these statistics in 1948.
http://www.reuters.com/article/businessNews/idUSTRE5765FG20090807

So let's try and understand this. People that did not have a job, stopped looking for a job, so now they are no longer unemployed...even though they still don't have a job. LOL! ONLY in America.

Meltdown 101: Unemployment by the Numbers
WASHINGTON — Employers are laying off fewer workers, the government reported Friday, but widespread cuts are still happening — only about 30 percent of industries are adding jobs or holding steady.

That's up from 20 percent in March, at the depth of the recession, but it still means that 70 percent of the 271 industries tracked by the Labor Department are cutting jobs, according to the department's July employment report.

"We're still a long way from where we would be in an expansion," said Mark Vitner, senior economist at Wells Fargo Securities. "Job losses continue to be extremely broad-based."
http://www.google.com/hostednews/ap/article/ALeqM5j3e2rim1TitfmyIGc2-4kuVNp70AD99U9T181

...but recovery is right around the bend.

THE EMPLOYMENT SITUATION – JULY 2009[from the horse's mouth]
U.S. Bureau of Labor Statistics
Nonfarm payroll employment continued to decline in July (-247,000), and the unemployment rate was little changed at 9.4 percent, the U.S. Bureau of Labor Statistics reported today. The average monthly job loss for May through July (-331,000) was about half the average decline for November through April (-645,000). In July, job losses continued in many of the major industry sectors.
http://www.bls.gov/news.release/pdf/empsit.pdf

Guess What? Unemployment's Really at 16.3 Percent
FOXNews.com
The announcement today that the unemployment rate declined slightly to 9.4 percent in July while only 247,000 additional jobs were lost has been greeted as good news. The change in the unemployment rate puts the rate at what it was in May. Yet, even a rough look at the numbers indicates that the true unemployment rate has been getting significantly worse over the last few months.

How is it possible for the unemployment rate to essentially remain unchanged when 247,000 jobs have been lost? The reason is simple -- the number of people who stopped looking for work rose dramatically. Six hundred thirty-seven thousand additional people no longer consider themselves looking for work. This is by far the largest drop in the number of people who consider themselves in the labor force during the last year. -- It is almost twice the 358,000 increase in the people who left the labor force during June and almost four times the average monthly increase of 167,333 over the last year. Jobs are sufficiently scarce and the prospects of people finding them at wages that they are willing to work for so low that many individuals don't think that it is worth their time to even look for a job.

Part of the drop in unemployment is also due to the fact that some people are running out of unemployment benefits and taking part-time jobs. There is usually a big increase in the rate that people find jobs during the last few weeks that they have unemployment benefits. In July 102,670 people saw their unemployment benefits run out. That number rose to 141,538 in August and is expected to soar to 486,049 in September. It will keep on rising each month hitting 1.5 million in just December alone. This past Sunday on ABC's "This Week" Treasury Secretary Tim Geithner only promised "to look very carefully at [these lost benefits] as we get closer to the end of this year." Larry Summers, President Obama's chief economic advisor, was similarly noncommittal when he was interviewed that same day on CBS's "Face the Nation."

If we include the normally counted number of unemployed as well as those who have recently given up looking for work and those who have taken a part-time low paying job because they can't find full-time work, the implication is that the unemployment rate for July would be at 16.3 percent These discouraged workers will again look for work once the economy starts to improve, but this 6.9 percentage point gap between publicly discussed unemployment rate and these discouraged workers is unusually large.
http://www.foxnews.com/opinion/2009/08/07/john-lott-unemployment/

Ah, some truth. But the Truth often hurts. The Truth can dash hopes. American can't handle the Truth. America would rather continue living a lie, then accept the Truth. America must accept the Truth before ANY economic recovery can begin.

Many Could Lose Unemployment Benefits
(CBS) It's becoming a painful routine for the millions of Americans out of work - lining up first outside job fairs, then asking for help at unemployment offices.

"It's very humbling," said Donald Mayes, now unemployed after a 19-year job. "I've never had to do this."

What's more, unless Congress acts to extend unemployment benefits, an estimated half million people will see their unemployment checks run out by the end of next month - almost a million and a half by the end of the year, reports CBS News correspondent Cynthia Bowers.

More than half a million more workers joined the line for unemployment benefits last week, falling in behind more than 6 million already collecting.
http://www.cbsnews.com/stories/2009/08/06/eveningnews/main5221564.shtml

Current Economic Downturn Is Worst Since Great Depression
John WilliamsShadow Government Statistics
U.S. Economy Is in a Multiple-Dip Depression. The grand benchmark revision of the national income accounts on July 31, 2009 confirmed that the U.S. economy is in its worst economic contraction since the first downleg of the Great Depression, which was a double-dip depression. The current economic downturn increasingly will be referred to as a depression, and it is far from over. There will be intermittent blips of new activity, such as the current cash-for-clunkers automobile giveaway program that appears to be generating a one-time spike in auto sales. Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly nonresponsive to traditional stimuli.
http://www.321gold.com/editorials/williams/williams080509.html

But wasn't the recession just declared over on Friday morning?

Dear Friend of GATA and Gold:

Financial market blogger Chris Martenson today reported that the Federal Reserve this week surreptitiously bought almost half the seven-year U.S. Treasury bonds that were auctioned last week. While this is the sort of debt monetization that Fed officials said would not happen, it is probably not the first debt monetization that has taken place recently, just the first monetization the Fed has been caught at. The Fed’s attempt to conceal its actions is far more objectionable and should be remembered whenever there are official denials of intervention in the gold market.

Martenson’s report can be found at his Internet site here:

http://www.chrismartenson.com/blog/fed-buys-last-weeks-treasury-auction/…

Market analyst Karl Denninger elaborates on Martenson’s disclosure at his own Internet site, the Market Ticker, here:

http://market-ticker.denninger.net/archives/1304-BLATANT-Monetization-Un…
It’s a fair assumption that the U.S. government’s surreptitious market intervention is nearing desperation levels.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Ah, nothing like a spritz of the Truth to wipeout the stench of bullshit...

Bye-bye Miss American Pie

US Income Tumbles In June By Most In Four Years
WASHINGTON -(Dow Jones)- The income of Americans took the largest tumble in four years during June, reflecting the rising unemployment that is challenging the economy as it struggles out of recession.

Personal income decreased at a seasonally adjusted rate of 1.3% compared to the month before, the Commerce Department said Tuesday. Wages and salaries and transfer payments both fell.

The drop, the biggest since 2.3% in January 2005, was a payback for May income increasing 1.3%. Federal government stimulus of the economy had driven the surge, involving a large sum of transfer payments, including temporary benefits for older people. The 1.3% gain marked a revision down from an originally reported 1.4%.

Consumer spending in June climbed, but the gain seems to have been driven by rising gasoline prices. Spending increased 0.4% compared to the prior month. Adjusting for inflation, though, spending dipped by 0.1%. U.S. Energy Department data show retail gas hit a 2009 peak, at $2.69 a gallon, the week ended June 22. The last time inflation-adjusted spending rose was in February, up 0.1%, echoing recent reports on lackluster spending by consumers.
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=09e4ed6f-09ea-475a-adb0-6641f56cc27e

Fort Knox, Fort Hocks or Fort Shocks: Three United States Gold Scenarios [MUST READ]
By Stewart Dougherty
For 72 years, the building at the intersection of Bullion Boulevard and Gold Vault Road in Fort Knox, Kentucky has symbolized the financial strength of the United States of America. The United States Bullion Depository, better known as Fort Knox, is said to contain 147.3 million troy ounces of gold, over half the nation’s total reported gold bullion holdings of 261.5 million troy ounces. The remaining 114 million ounces are said to be stored at the Denver and Philadelphia Mints, the West Point Bullion Depository, and the San Francisco Assay Office. Assuming a price of $1,000 / ounce, the nation’s gold is worth $261.5 billion. If the metal is actually there, it represents the largest sovereign stockpile of gold bullion in the world.

However, the gold holdings of the U.S. have not been audited in more than 50 years. One reason given for the lack of an audit is that it would be “too expensive” to conduct one. An audit would cost a few million dollars, at most, so using cost as a reason for not performing it strains belief when placed in the context of the country’s Fiscal Year 2009 deficit of $2,000,000,000,000.00+, and federal debt of $11,600,000,000,000.00+. It is curious that one of the few places within the government where costs appear to be of concern relates to an audit of the one, true monetary asset possessed by the American people.

Even the Treasury Department’s clandestine $50 billion Exchange Stabilization Fund (ESF), which is only one-fifth the value of America’s reported gold holdings, undergoes an annual audit. For fiscal year 2008, this audit was conducted by KPMG, a well-known, independent CPA firm. KPMG’s 2008 ESF audit uncovered “significant deficiencies,” “material weaknesses,” a “weak control environment,” and “several control deficiencies.” If a Treasury organization subject to annual audits could fail its recent exam as broadly as that, what are we to assume about the safety and security of the people’s gold supply, which, like the national money geyser, the Federal Reserve Bank is never audited? And if the ESF is audited each year, what legitimate rationale can there be for not auditing the nation’s gold supply? Something isn’t adding up. In such a situation, inferential analysis can provide value, which you will see as this article progresses.
http://news.goldseek.com/GoldSeek/1248373722.php

Cenbank sales under gold pact well below limit: WGC
LONDON (Reuters) - Official sector gold sales under the Central Bank Gold Agreement (CBGA) have totalled only 140 tonnes so far in the pact's final year, well short of the maximum 500 tonnes allowed, the World Gold Council said.

France and Sweden are the two principal remaining sellers, the WGC said in an emailed statement on Wednesday, although the possibility exists for a further sale by the European Central Bank.

The 15 signatories of the pact, which also include the central banks of Spain, Germany and Italy, agreed in 2004 to limit gold sales to the market to 500 tonnes in any one year.

"With 140 tonnes of sales, according to our numbers, it looks like we have had over 100 tonnes less than was sold over the same period of last year," said Barclays Capital analyst Suki Cooper.

"Given the current pace, it is likely this is going to be the lowest annual sales-per-quota year since the start of the very first agreement."
http://af.reuters.com/article/investingNews/idAFJOE56S0CJ20090729?feedType=RSS&feedName=investingNews

Curious. If central bank Gold selling has been a leading source of Gold price suppression over the past 8 years, why hasn't a slowing in sales resulted in a much higher Gold price? Well of course, REAL Gold must be being substituted with PAPER Gold on the CRIMEX in an effort to give the appearance of a large overhead supply of Gold. This is called a scam...

Upside Down and Backwards: Is Central Banking on Death’s Door Step?
By: Rob Kirby
Federal Reserve Chairman, Benedict Benjamin ǝʞuɐuɹǝq appeared before lawmakers to give sworn testimony about the state of the nation’s monetary policy. In one of his most telling pieces of testimony, Sir Benedict attempted to explain to Congressman Alan Grayson [D- Fla.] the significance of ½ TRILLION in currency swaps which recently appeared on the Fed’s balance sheet:

http://www.youtube.com/watch?v=00ECLxK2YTs&eurl=http%3A%2F%2Fwww%2Evoy%2Ecom%2F64855%2F&feature=player_embedded

In his concluding remarks, Grayson asks Mr. ǝʞuɐuɹǝq if he felt the creation of these “currency swaps” had anything to do with the $U.S. Dollar’s strengthening immediately after or whether this temporary strengthening in the Dollar was coincidental?

ǝʞuɐuɹǝq responded that it was his opinion that the Dollar strengthening [at the time] was just a coincidence.

The questioning concludes with Congressman Grayson laughing in s,ǝʞuɐuɹǝq face.

Under oath, you can listen to Benedict Benjamin ǝʞuɐuɹǝq make the claim that these currency swaps were made for the benefit of ‘customers’ of foreign Central Banks.

Well, let’s take a look at this.
http://news.goldseek.com/GoldSeek/1248718634.php

USGovt Yuan Bond Threat
By: Jim Willie CB, GoldenJackass.com
The tables are fast turning against the deeply indebted USGovt officials. USA Inc is in deep trouble. Its productive engines in both finance and industry are either wrecked or sputtering, even as its debt burden grows exponentially. Debt default litters the landscape. Next its sovereign bonds will be have to be sold to some extent outside the US$ Sphere, which will put at great risk its stock, namely the USDollar itself. Let’s call them USGovt Dragon Bonds. The custodians desperately seek creditors to supply much needed capital in order to fund the gigantic and growing USGovt debts, which by the way are grossly understated. The last resort is to monetize the USTreasury Bond issuance, a process well along. With the aid of the USDollar Swap Facility, the USFed has been able to secretly bid on USTBonds from foreign soil, have it appear like foreign bids, and conceal the continued and broadening monetization initiative. The United States is boldly defying the creditor nations, printing money, and buying its own debt. When more fully revealed, the USDollar will suffer the consequences. A sense of betrayal will surely come, much like discovery that the CIA has been flooding the globe with counterfeit $100 bills, or Wall Street has been flooding the globe with counterfeit Fannie Mae Bonds. Closer to home, it is akin to selling lemonade has been secretly watered down, or putting lawn mower clippings into the reefer batch before sale.

Andy Xie is a former colleague of Stephen Roach at Morgan Stanley, and now a board member of Rosetta Stone Advisors. He is an Asian financial expert. He believes the USFed is locked in a tight corner, while the investment community suffers from a massive blind spot. He wrote, “The United States has no way out but to print money. Dollar weakness reflects the market’s wavering confidence in the Fed. If the wavering continues, it could lead to a dollar collapse. Markets are trading on imagination. The world is setting up for a big crash, again.” Contrast with a comment made by Jeffrey Immelt, the CEO of General Electric. He believes the US should take a cue from the Chinese, who are growing fast, invest in industry, and make things. Wow, what wisdom! So the great financial engineering movement promoted by Greenspan and Wall Street mainly produced big bond fees and a wrecked banking system. Yes, without any equivocation or doubt, tragically. The financial engineering devices were based upon innovation in leverage and fraud without benefit of tangible production, serving as the vast illusory machinery atop a gigantic system totally dependent upon inflation. It imploded. Another alternative exists, beyond Xie’s radar. In addition to hidden monetization will come issuance of USGovt bonds outside the US$ Sphere. When the news breaks, it will hit like a tsunami.

USGOVT YUAN BONDS
The concept can be described in very simple terms. The vehicle is devastating in its effects and consequences. What are they exactly? The USGovt might soon issue bonds, except not in US$ denomination, but rather in Yuan currency. Out of the gate (with debt signposts), the USGovt must purchase gigantic swaths of Yuan and pay with USDollars. The result is a quantum decline in the US$ exchange rate relative to everything holding the Yuan together. The Chinese decided in 2005 to tie their Yuan currency to a basket of currencies, led by the US$, the Euro, the Yen, the British Pound, and a small additional group. So the direct purchase of Yuan by the Untied States, the newest upcoming member of the Third World, will have numerous profound effects to lift other currencies.

The direct consequences of USGovt Yuan Bonds would be vast, visible, lethal:

-The USDollar exchange rate would fall with each debt issuance

-The loan balance in USGovt debt would rise with a declining USDollar

-The Yuan currency would be further established as a global reserve alternative

-Continued trade settlement in Yuan terms would be enabled

-Rise in entire cost structure to the USEconomy from commodity pricing

-The risk of USTreasury Bond default grows with each passing new issuance

The Chinese want protection and assurance against the falling USDollar and even the growing principal risk of USTreasurys. Higher bond yields mean principal bond loss. Both currency and bond loss mean a powerful combined loss. Beijing wants protection and security in exchange for continued debt support. A Yuan-based bond issuance by the USDept Treasury, sold by the USFed would accomplish this to some degree.
http://news.goldseek.com/GoldenJackass/1248898104.php

Rearranging Deck Chairs On The U$$ Titanic
America’s paper empire is slowly sinking into the sea, and all the powers that be can do about it is rearrange the deck chairs for a while as they wait for the inevitable. Increasingly, more and more people are comparing the US to Japan, and it’s 20-plus year bear market / economic doldrums, realizing try as they might, the prognosis for American is a match. This is of course why the stock market trading patterns are a match, because once you bubblize the real estate market (Japan peaked in 1990) it’s all over, as this assures a structural high in credit creation that cannot be fixed as easily as floating a new CDO, or throwing a trillion or two at the bond market. Nope – once you play that card, as Sir Allen did back in 2002 to counter the negative effects of the tech wreck, yet another bubble he inspired, there’s nothing left to do but inflate with abandon and hope nobody notices.

Why don’t the powers that be increase monetary debasement rates even more if that’s all it takes to bail out the economy again? Answer: Because although it may not appear they have much going for them in this department, they do know what inflation really is (their currency printing); and, they also know what would happen if they stepped up printing press speeds even more. And US officials are getting regular warnings from their (creditor) trading partners now reminding them that the days of US Dollar ($) hegemony dominance are numbered due to such policy, where again, the faster they print, the faster the end shall come. So this is why the US bureaucracy is creating new agencies and generally doing anything they can to distract attention away from such activities (shuffling deck chairs) in order to buy time. http://news.goldseek.com/CaptainHook/1248717181.php

MoneyNews: Doug Casey - America has died
“As the Obama administration has taken over the car industry, the banking industry, and the insurance industry, some experts now believe that American style capitalism is dead. Doug Casey, a free market capitalist and founder and chairman of Casey Research, is one of them.

“‘Unfortunately, the idea of America has died and it’s been replaced by another political entity called the United States, which in essence is no different from the 200 other countries spread across the globe,’ he says.

“In an exclusive interview with Dan Mangru of Newsmax TV and Moneynews.com, Casey tells why he sees American capitalism on the decline and why other countries such as China will eclipse the United States.

“‘The average entrepreneur in China has a lot more freedom than the average entrepreneur does in the United States. He pays a lot less taxes … he’s got a lot less regulation,’ says Casey.

“Casey goes on to tell Mangru that Communism is a ’scam’ and is designed to cheat workers.

“Casey also believes that the United States has not seen the worst of the economic crisis. ‘We’re just starting to see the beginning of what’s going to happen,’ Casey says.

“The United States has already entered what Casey calls the Greater Depression, one that will be much more serious than the 1930s. ‘This depression can be as long and as deep as you can possibly imagine,’ he says.

“The reason most people don’t realize this is that the majority of those giving economic opinions aren’t economists describing how the world actually works but political apologists describing how they think it ought to work, Casey notes.

“‘Everyone’s looking to the government for a solution, but all the government does is tax and regulate and inflate the currency,’ Casey says.

“Trillions of dollars of phony inflationary capital people believed were real assets have disappeared, says Casey. That’s going to continue to deplete the value of the dollar and guarantee catastrophic inflation in the future.

“‘If you’re relying on the US dollar, you’re relying on a figment of the US government’s imagination,’ says Casey. ‘To me, holding US dollars for the long term is about the most stupid thing you can do. Gold is the only financial asset that isn’t someone else’s liability.’”
MoneyNews, July 29, 2009.

What's The Holdup?

Bernanke said this on-camera: "The public does not want Congress to set monetary policy." If that really is the case, then it is odd what the United States Constitution says about this. Consider Article 1.

Section 1. All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.

Then Article 8 spells out the powers of Congress. These include:

To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

To provide for the punishment of counterfeiting the securities and current coin of the United States.

That surely appears as though Congress does have lawful power over money. That in turn seems as though the public can ask Congress to fulfill its duties. That seems as though Congress has the legal right to audit or set policy for the private agency – the Federal Reserve Bank of New York – that executes the monetary policy of the government agency, the Board of Governors of the Federal Reserve System.



As we view the sham hearings of the CFTC and position limits on oil in particular, we are reminded that the hearings are a political cover for higher prices. Constituents are complaining of higher gasoline prices and government is more than willing to respond. What the insiders behind the scenes want to do is suppress oil prices not only to assuage the citizens, but also to keep gold from rising as oil rises. Today suppressing oil prices is truly an awesome task given the composition of sources of supply and demand. Exploration is at a low and that can only eventually bring higher prices.
International Forecaster August 2009 (#1) - Gold, Silver, Economy + More

CFTC Conceals the Real Problem, the Infinite Dollar
Notice that the concern of the CFTC is only why oil went up last year. The commission has no concern as to why oil fell so abruptly from $147 down to $35 even though Don Coxe was widely quoted at the time as saying the government had instigated a massive takedown. The commission's focus is on commodities of "finite supply" and preventing speculation.

History shows that when monetary inflation starts to be evident in the prices of real goods, the first thing governments do is impose price controls. Here we have exactly that in a new way. The CFTC is trying to find a way to disadvantage those on the buy side of commodities of "finite supply." In effect the commission is trying to control prices in the guise of preventing excessive speculation.

The very term "finite supply" means there is a supply crisis in commodities. If these commodities were in abundance, the free market would deal with speculators automatically, because as they drive the price up, the producers produce more and the price comes down and the speculators lose their shirts. What the government would likes to happen is that, as the speculators drive up prices, instead of the producers producing more, the anti-commodity cartel produces more paper promises of more production so that speculators lose their shirts. When the buyers are not speculators but buyers who want delivery, the game ends.

The implication of the CFTC's hearings is that this is the end of the game and the start of a super-bull market in commodities. The problem is not speculators. The problem is the commodity of infinite supply -- the U.S. dollar. Trillions are being created and are chasing commodities of finite supply. Economics tells us what the result will be with or without the King Canute policies of the CFTC.
http://news.goldseek.com/GoldSeek/1248847500.php

CFTC: The Key to Market Manipulation
Many expert commentators believe that prices in various markets, especially at the futures exchanges, are being increasingly manipulated. The Commodities Futures Trading Commission (CFTC) has recently begun to hold hearings, ostensibly to consider imposing position limits on bank-based speculators who are falsely posing as commercial hedgers. Position limits were imposed many years ago, in order to stop speculators from gaining enough control over a market to dictate the price.

Big banks, however, have managed to use their influence to get special exemptions and exceptions in order to avoid the limits.

The fact that big banks issue over-the-counter derivatives whose price is set to follow the alleged "market price" of various commodities does not make them dealers in those commodities. Position limits will correctly prevent banks from taking as many positions as they choose, long or short, based solely upon imaginary commodity stockpiles that are really just OTC derivatives. Some commodity prices will rise, and others will fall, as a result of the removal of these exemptions, but the price, whatever it moves to, will more accurately reflect true supply and demand in the real world market.

To utilize deep pockets to successfully manipulate markets, one must first consolidate control over the market. When you want to lower prices, it helps a lot if you can create supplies of the commodity from “thin air” by creating paper derivatives posing as a commodity investment.

When you want to raise prices, it helps a lot if you can use your deep pockets to either stop or slow the issuance of new paper commodities or buy an overwhelming number of long positions, thereby creating an artificial shortage on your own timetable.As the rest of the market panics from your overwhelming manipulation of concentrated positions, you can buy or sell at a profit.

The genesis of the current Commodities Act is found in the Commodity Reform Act of 1922, which represented the first major Congressional attempt to rein in manipulation of grain markets. Futures dealers opposed the 1922 Act vociferously, to the point of bringing the matter to the Supreme Court. But, the high Court rejected their challenge, writing:

...The act in § 4 forbids all persons to use mails or interstate telephone, telegraphic, wireless, or other communication, in offering or accepting sales of grain for future delivery or to disseminate prices or quotations thereof, excepting the man who holds the grain he is offering for sale…and under such conditions as to reflect the general value of grain and its different grades, and which have been designated by the Secretary of Agriculture as "contract markets."…[ii]

Thus, the Supreme Court has made it clear that the true intent of all these Commodities Acts is to rein in manipulation by forcing a tight relationship between the markets and the real world’s supply and demand. That relationship has been thwarted by the fact that CFTC has been playing “footsie” with the big investment banks.

A true hedger is a dealer or producer relying on the cash market to carry on a business in a commodity. Sometimes, to “insure” the safety of his finances, one of these businesses may resort to futures market. That is when it becomes a “hedger”.

A bank makes its money, not by buying or selling the commodity, but, rather, by trading on the futures market. There is no real compelling need to hedge because they don't have inventories of the commodity.

The bottom line is that CFTC has erroneously allowed hedging against hedges. Translated, they have allowed hedges against speculation, not production. This has become a toxic poison which corrupted the futures markets from their intended purpose.

“Hedging against a hedge” is the ultimate manipulative activity, because it allows the creator of speculative instruments (derivatives) to create unlimited quantities of an imaginary commodity stockpile, taking real supply and demand out of the equation.

More frightening is the fact that, when a firm hedges against a derivative, they will be leveraged on both sides of the transaction, while not being in possession of the real commodity. No rational bank, or other person, can consistently earn a profit, on such risk, especially where a futures contract is subject to a possible delivery demands, unless they are able to manipulate the market up and down.

In spite of all the chatter from CFTC about “reform”, their current concern seems limited to helping derivatives dealers to head off serious limits on speculative activity imposed directly by Congress. Were Congress to enact such limits, derivatives dealers, like Goldman Sachs, would find it impossible to use CFTC staffers to circumvent position limits.

The current hearings are fixated on upside price manipulation of the type that caused oil to soar beyond the fundamentals, back in the first half of 2008. Downside manipulation, of the type that is regularly practiced in the gold and silver markets is being generally ignored, in spite of Commissioner Bart Chilton’s valiant effort to put that subject on the agenda.

Countering the hope that we may have in Bart Chilton is the fact that the new CFTC Chairman is Gary Gensler, who is yet another Goldman Sachs man in government. His firm is a primary beneficiary of the present system. They were the first to metamorphose from speculators into fake “hedgers”.
http://seekingalpha.com/article/152438-cftc-the-key-to-market-manipulation?source=email

Open Letter to CFTC Chairman Gensler Regarding "Excessive Commodity Speculation"
30 July 2009
Dear Chairman Gensler
I’m an investor in mining and mineral exploration companies. Recently in the financial media, the theme of rising commodity prices from “excessive speculation” has been discussed. From listening to these discussions, it’s apparent that within certain circles, rising commodity prices are prima facie evidence of “excess speculation.” I disagree. There are other causes for rising commodity prices. The most likely cause of future increases in the price of commodities is also the one reason never discussed by politicians, regulators or journalists: monetary inflation.
http://www.gold-speculator.com/mark-lundeen/8592-open-letter-cftc-chairman-gensler-regarding-excessive-commodity-speculation.html

Congressman Grayson demands Fed accountability
The Constitution grants to Congress power over the currency and power over the public purse strings for a reason - because we are accountable to ordinary citizens through the ballot box. The Federal Open Market Committee isn't.

$500,000,000,000 is ten times the size of the entire State Department budget. Publicly elected lawmakers proposed and debated over 100 amendments to the much-smaller State department budget. Thatís how democracy is supposed to work -- not through secret deliberations in which 12 unelected bankers trample on Congressís Constitutional authority to appropriate funds, approve treaties, and coin money.
http://www.nakedcapitalism.com/2009/07/guest-post-representative-alan-grayson.html

Why Bernanke Is in Panic Mode
For the first time since 1914, there is a public debate in Congress over the Federal Reserve's power. Never before has a majority of the House of Representatives called for what should always have existed: Congressional scrutiny over the FED's money. Bernanke says that Ron Paul's bill to audit the Federal Reserve is a bill to audit Federal Reserve policy. Yet the bill says nothing about auditing policy. So, what is he talking about?

What has Bernanke panicked is this: the Federal Reserve has bailed out the biggest banks and has let almost 100 little ones die. This is crony capitalism at its most notorious.

The threat is that Congress will discover what should be obvious: the biggest banks last October almost went bankrupt. Bernanke and Paulson admitted this to Congressional leaders. This is how they got the leaders to authorize the Treasury bailout. This is why the FED swapped marketable Treasury debt for unmarketable toxic debt at face value with the biggest banks.

Which banks? The FED refuses to say.

This is the heart of the matter. This is what has Bernanke in a panic. If Congress compels a full audit – a real audit, not a FED-controlled audit – individual members of Congress will discover that the American financial system is a house of cards. A few of them will release the results of the audit to the public. This will include Website publishers, who will go over the audit, line by line. The mainstream media will face being scooped by newsletter writers, so they will try to publish first.

The public will find out which banks are not safe. This is what has Bernanke in panic mode.

The public will pull deposits out of the biggest, least safe banks and open new accounts at banks that look safer. That will bust some very big banks.

There is no way that the FDIC could cover the losses of even one of these giant banks. It is down to $12 billion in assets, mostly T-bills. It would have to come to Congress for the line of credit that Congress has extended: $500 billion.

The banking cartel would face a breakdown. Why? Because the public would finally learn which big banks got how much money, how much Treasury debt for toxic assets, and on what terms.

Bernanke says this bill is all about criticizing Federal Reserve policy. Not really. It is all about exposing policy to the public, and letting them decide where to deposit their money.

This thought of depositors finding out which banks are at risk is what the Federal Reserve was created in 1913 to prevent. The banking cartel must prevent bank runs from spreading. If the public had explicit information on what the FED did and why, the public would be in a position to pull their money out of illiquid, economically insolvent large banks.

Bernanke feigns a fear of Congress setting policy. What he is afraid of is depositors setting policy. He does not want depositors to see which banks are at risk.

Ron Paul's bill is the first bill ever to gain widespread support in the House to transfer the right to audit the FED to Congress. This is the first time since 1914 that any Congressman has persuaded a majority of his colleagues to assert the legal sovereignty that the Constitution delegates to Congress with respect to money. This is why Bernanke is in panic mode.
http://news.goldseek.com/LewRockwell/1249244807.php

Wall Street profits from trades with Fed
Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”
http://www.ft.com/cms/s/0/e84383dc-7f8c-11de-85dc-00144feabdc0.html

GDP: STILL NO GROWTH

Obama credits stimulus for economy's progress
WASHINGTON — President Barack Obama says the $787 billion economic stimulus program he enacted within weeks of taking office is helping the economy begin to pull itself out of the recession.

The Commerce Department reported Friday that the economy contracted at a pace of just 1 percent in the second quarter. The showing was better than economists expected and the strongest signal yet that the recession is winding down.

Obama told reporters that some of that progress is "directly attributable" to the stimulus program. He says that and other "difficult but important steps" his administration has taken over the last six months have helped "put the brakes on the recession."
http://www.google.com/hostednews/ap/article/ALeqM5gWifx4pzOPIWhSx1Xff9H1vua02AD99PIOO83

Stimulus has yet to really boost GDP
NEW YORK (CNNMoney.com) -- The nation's economy is starting to rebound, but the Obama administration's massive stimulus package had little to do with it.

The gross domestic product contracted at an annual rate of 1%, a significantly slower decline than the past two quarters. Economists had expected a drop of 1.5%.

While government spending at all levels increased in the second quarter, only a small amount of the $787 billion stimulus package had trickled out by June 30.

As of July 3, only $60.4 billion of recovery funds had been distributed, the largest chunk of which went to help states cope with rising Medicaid costs. Much of the $43 billion in stimulus tax relief -- which includes the Making Work Pay tax credit for individuals -- also kicked in during the quarter.

"I don't think the effect of stimulus has been very large," said Edward Lazear, an economics professor at Stanford's Graduate School of Business who advised former President George W. Bush. "Very little has gone out."
http://money.cnn.com/2009/07/31/news/economy/stimulus_GDP/?postversion=2009073115

LOL! I guess you can't blame the guy for trying to take the credit for a "less bad" GDP number. FOLKS! The economy STILL shrank last quarter. THERE WAS ZERO GROWTH. I don't know if I'd rush to take any credit for a NO GROWTH economy. And let's face this fact: Private industry, and American consumers, did little if anything to "improve" the nations GDP. It was all a pipe dream paid for by "government spending", though not necessarily government spending associated with the ill-begotten Obama Stimulus Plan...the Obama Stimulus Plan that promised unemployment would NOT go over 8% and is today staring 9.6% unemployment in the face 5 months after it was passed into existence.

While we are on the subject of government spending, doesn't it strike you a bit funny that the government is paying people to give up a bought and paid for automobile to "finance a new one" with their "Cash For Clunkers" program? Does encouraging Americans to take on more debt really make a damn bit of sense here? Debt caused our NATIONAL economic crisis, please explain to me how more debt is going to fix it...

The good-bad news in second-quarter GDP
The bad news in yesterday’s second-quarter GDP is that the recession was even deeper than previously thought. Or should we say that is the good-bad news. Because that pain is now largely past, the very steepness of the decline means that the economy is now poised for a sharper rebound, or at least it should be if the history of recessions is any guide.

The economy contracted by only 1% at an annual rate in the quarter, but the Bureau of Economic Analysis report was even more interesting for its growth revisions in previous quarters. Last year’s third quarter was revised downward by a remarkable 2.2-percentage points, to a negative 2.7% rate. This means the recession began in earnest in July and August, which follows the spike to $145-a-barrel oil and the collapse of Fannie Mae and Freddie Mac, and it accelerated in September with the fall of Lehman Brothers and its aftermath.

What didn’t seem to make much difference is the “stimulus.” Transfer payments did climb sharply by 7.4% in the quarter, reflecting the likes of jobless insurance. These payments offset declines in worker compensation, but they didn’t do much for consumer spending, which declined by 1.2% in the quarter. In any event, these transfer payments are temporary and thus do nothing to promote the investment and risk-taking that are the only way back to steady growth and prosperity.

With a recovery on the way, the real question is whether we’ve laid the groundwork for such a durable expansion. Having been down so long, the economy should be in for a nice, long ride up. Even the Great Depression was followed by a notable rebound—until the bill for its government excesses came due in the mid- and later 1930s.

In this recession, Washington has reflated the economy with record spending and monetary easing that couldn’t help but spur some recovery. The issue is what happens when the price of that reflation comes due in higher taxes and higher interest rates.
http://online.wsj.com/article/SB10001424052970204619004574322614087959016.html?mod=googlenews_wsj

Government's rescue money underwrote monstrous bonuses for bankers
NEW YORK (Reuters) - Bonuses paid to executives at nine banks that received U.S. government bailout money in 2008 were greater than net income at some of the banks, the office of New York Attorney General Andrew Cuomo said on Thursday.

Cuomo, in a report on months of investigation into compensation paid by the banks, said employee pay "has become unmoored from the banks' financial performance."

Representatives of the banks either declined comment on the report or could not comment immediately.

Even in one of Wall Street's worst years on record, at least 4,793 bankers and traders received more than $1 million in bonus payments, according to the report.

The report said bonuses for Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & Co were "substantially greater" than the banks' net income.

Goldman earned $2.3 billion, paid out $4.8 billion in bonuses and received $10 billion in TARP funding, the report said.

Morgan Stanley earned $1.7 billion, paid $4.475 billion in bonuses and received $10 billion in TARP funding, while JP Morgan Chase earned $5.6 billion, paid $8.69 billion in bonuses and received $25 billion in TARP funding.

The latter bank paid out 1,626 bonuses of $1 million or more, the most of all the banks studied in the report, while Goldman, which had the highest average compensation per employee, paid out 953 bonuses of $1 million or more.

Cuomo said his office studied historical financial filings and found that at many banks compensation increased in the 2003-2006 bull market years, but stayed at those levels as the mortgage crisis and recession hit.

"Thus, when the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well.
http://www.reuters.com/article/newsOne/idUSTRE56T4MI20090730

WHERE IS THE OUTRAGE?

Happy Days Aren’t Here Again
By: Peter Schiff, Euro Pacific Capital, Inc.
Have you heard the great news? The recession is over! It’s true; I saw it on TV. Why fret about growing unemployment lines when banks are paying big-time bonuses again?

Proof of the turn was apparently revealed by the 2nd quarter GDP figures that showed that the economy declined by only 1%. After four consecutive quarters of negative GDP, the green shoots now assume that growth will resume over the summer. But before we pop the corks, it may be worthwhile to ask, “what really has changed, and what is responsible for our new lease on life?”

In truth, because of the continued profligacy of the government and Federal Reserve, the imbalances that caused the current recession have actually worsened. We are now in an even deeper hole than when the crisis began. Rather than wrapping up a recession, we are actually sinking into a depression. If things look better now, it’s just because we are in the eye of the storm.
http://news.goldseek.com/EuroCapital/1249066543.php

Welcome to the Eye of the Storm
by John Galt
Welcome to the eye of the storm. And that storm, as displayed above, is Hurricane Wilma, the most intense storm in recorded history. That storm is getting ready to move again and the most powerful part of the eyewall is about to slam into our economic fantasy land at full force.

Without going into great detail, let me try to outline in brief the series of events which will be swirling like the eye wall storms with 200 mph gusts and record low pressure. Duck if you see one of those buildings coming at you, it’s probably a foreclosed home being wiped off the books.

- The banking system is still extremely unstable. Despite saving those deemed “too large to fail” now there is too many to save.

- The U.S. Dollar is losing steam and the threats made by the BRIC nations to create separate trading blocs that do not use the USD is becoming reality.

- Unemployment is deteriorating at a faster and deeper level than any projections. According to numbers produced from various sources unemployment really ranges from 18.2% to over 20.6% which matches some of the estimated 1893 and 1930’s depression levels.

- Derivatives: From Martin Weiss July 10th: The Giant Accumulation of High-Risk Debts and Bets Called “Derivatives”

- Bankruptcies - Personal and Corporate bankruptcies are accelerating and as we head into the fiscal year end for many corporations, Chapter 11 could be a viable option.

- The P/E ration for the S&P 500 is an absurd 15.74 on forward earnings and the NASDAQ an even more absurd 19.22. Traditional recession level ratios are between 5 and 8 (Source WSJ, 7/21).

- Manufacturing is not recovering and with little evidence that the automotive sector will come back to life and new single family home construction trailing levels unseen since before 1958 there is no logical reason to think the recovery has begun.

- Real Estate Reality - Despite a mass move of foreclosed homes, the banksters are still sitting on numerous months of inventory which have not but put up for bid or worse, have postponed foreclosure action to prevent further market price deterioration. Add in the CRE disaster which is starting to pile up and the projected delinquency rates in the 8K’s for the real commercial banks (not Goldman) and you can see that any improvement is seasonal only and will begin a steep deterioration in the fall.
http://johngaltfla.com/blog2/2009/07/21/welcome-to-the-eye-of-the-storm/

75% Favor Auditing The Fed
So much for the ongoing secrecy of the nation’s independent central banking system. A new Rasmussen Reports national telephone survey finds that 75% of Americans favor auditing the Federal Reserve and making the results available to the public.

Just nine percent (9%) of adults think that’s a bad idea and oppose it. Fifteen percent (15%) aren’t sure.Over half the members of the House now support a bill giving the Government Accounting Office, Congress’ investigative agency, the authorization to audit the books of the Federal Reserve Board.

Fed Chairman Ben Bernanke in a town forum filmed on Sunday which is airing this week on PBS stations said he is strongly opposed to the audit legislation. “I don’t think the American people want Congress running monetary policy,” he said. Howard Rich addressed this issue in a recent commentary and concluded it was important to locate the “trillions of dollars” the Fed has spent over the last year-and-a-half.

The new survey finds that an overwhelming majority of Americans in every demographic category – including age, gender, political affiliation, race and income – disagree with Bernanke and favor auditing the Fed to make its secretive deliberations public.
http://www.rasmussenreports.com/public_content/business/general_business/july_2009/75_favor_auditing_the_fed

Hold the Fed Accountable Now! [VIDEO]
The fact that this was aired on the mainstream news media is very encouraging. One can only hope that enough Americans will wake up to this reality and support the efforts now in Congress (led by Ron Paul), to expose the Fed for what they really represent.

If more citizens could only grasp these simple truths we may even have a chance to abolish this Fedzilla monster. There is nothing in my opinion that could be done that would have a greater immediate impact on the well being of America than ridding ourselves of this evil disgrace of an organization that was perpetrated on the American people back in 1913.

So much of what divides America could be solved more easily if the Federal Reserve was abolished and sound money principles were once again practiced in the United States.

All Americans should be supporting the efforts in Congress to audit the Fed and halt their ability to gain even more power and control that they are seeking right now. If the Fed were truly audited, their fraud would be exposed for all Americans to see.

Please send this video link to as many people you know that may be willing to listen and learn. http://news.goldseek.com/GregMcCoach/1248982065.php

Lynch Mob Wanted

Gallup Poll: Americans Turning Against Federal Reserve
As momentum builds for Ron Paul's efforts to audit the Fed, a new Gallup poll shows that Americans are turning against the Federal Reserve, with just 30 per cent saying the agency is doing a good job.

35 per cent rate the job the Fed is doing as "only fair" and 22 per cent say it is doing a "poor" job.
The contrast compared with when the question was last asked in 2003 is clear. Six years ago, just 5 per cent thought the Fed was doing a "poor" job, while 53% thought it was doing a "good/excellent" job.

According to Gallup editor in chief Dr. Frank Newport, "Americans are blaming to some degree the actions or inactions of the Federal Reserve board" for the economic turmoil.

Increasing skepticism towards the role of the Federal Reserve arrives alongside efforts on behalf of Congressman Ron Paul to audit the Fed with his widely supported H.R.1207 bill.

The legislation would amend existing law to allow the Comptroller General to audit the Federal Reserve Board and its member banks.

Fed Chairman Ben Bernanke seems frightened to death at what might be revealed if the Federal Reserve were forced to open its books and has been busy scuttling around lying about the bill in order to try and shoot it down.

During an appearance on PBS NewsHour which will be aired later this week, Bernanke claims that the bill will hand Congress the power to run monetary policy in the United States.

However, as CBS News' Declan McCullagh points out, it does nothing of the sort.

"This is an odd claim," writes McCullagh. "If you read the bill (H.R.1207), it simply amends existing law to say "under regulations of the Comptroller General, the Comptroller General shall audit" the Federal Reserve Board and its member banks."

Bernanke has proven that he will stoop to any level in order to try and sink the bill, which has the support of over half of the U.S. House of Representatives, even committing an act of economic terrorism last month when he threatened a collapse of the dollar and the entire financial system if the bill was passed.
http://www.propagandamatrix.com/articles/july2009/072809_turning_against.htm

No escape for Fed
By Hossein Askari and Noureddine Krichene
In contrast to Federal Reserve chairman Ben Bernanke’s testimony last week, we cannot see a safe "exit strategy" for the Fed from its current loose monetary policy. Bernanke’s ambivalent testimony of a safe exit strategy can only heighten uncertainty and exacerbate instabilities. Let’s explain.

In his recent testimony on July 21 before the Committee on Financial Services of the House of Representatives, Bernanke was felicitous that aggressive money policy had averted the collapse of the financial system. However, he omitted to say that the same policy had failed to avert a collapse of real gross domestic product (GDP) and private investment and rising unemployment.
The economic recession continues despite interest rates being near-zero, money supply rising at 22% a year, unprecedented stimuli packages, and record fiscal deficits reaching 13% of GDP in 2009. Bernanke and President Barack Obama’s team had clearly believed that a combination of aggressive money and fiscal policies would secure the return to full-employment and quickly. After all, Larry Summers had predicted the unemployment cresting at about 8%. These expectations were standard Keynesian predictions that have proven to be substantially off the mark.

As clearly implied by Bernanke himself, this policy has so far been self-defeating: "Aggressive policy actions taken around the world last fall may well have averted the collapse of the global financial system, an event that would have had extremely adverse and protracted consequences for the world economy. Even so, the financial shocks that hit the global economy in September and October were the worst since the 1930s, and they helped push the global economy into the deepest recession since World War II.

"The US economy contracted sharply in the fourth quarter of last year and the first quarter of this year. More recently, the pace of decline appears to have slowed significantly, and final demand and production have shown tentative signs of stabilization. The labor market, however, has continued to weaken."

Aggressive policies might have saved bankrupt banks through massive liquidity injections and bailouts and even turned them into profit-making institutions, but these same policies have only shifted the losses to the government and taxpayers, increased the potential of an inflation tax, and could bankrupt the government itself. They have also caused economic losses in form of millions of joblessness and falling economic growth.

In his recent testimony, Bernanke sent conflicting messages describing an "exit strategy" from the unprecedented monetary expansion while reassuring the political establishment that such exit is not immediately in the offing and near-zero interest rates and abundant liquidity would be maintained for some time to come: "The Federal Open Market Committee anticipates that economic conditions are likely to warrant maintaining the federal funds rate at exceptionally low levels for an extended period."

Bernanke noted that many instruments are available to a central bank for draining reserves; however "the most important such tool is the authority that the Congress granted the Federal Reserve last fall to pay interest on balances held at the Fed by depository institutions. Raising the rate of interest paid on reserve balances will give us substantial leverage over the federal funds rate and other short-term market interest rates, because banks generally will not supply funds to the market at an interest rate significantly lower than they can earn risk free by holding balances at the Federal Reserve.”

Past experience showed that any slightest attempt to drain reserves could easily send interest rates to two-digit levels. Would the Fed pay high interest rates on reserves, say at 19%, which was the federal funds rate in 1981 when the Fed slightly drained banks reserves, compared with 0.25% it is paying now? If it would, that would entail huge subsidies to banks, at the expense of the US Treasury, with serious implications for financing the US budget deficits.

Bernanke's ambivalent exit strategy can only heighten uncertainty and exacerbate instabilities. Continued fiscal and monetary expansion may widen US external deficits and end-up creating employment elsewhere in the world. Speculation will continue to be fueled by near-zero interest rates, affording speculators huge arbitrage potentials, or free lunches, between money and non-money assets. Rising public debt could weigh on future economic growth.

Bernanke and the Obama team wanted a short-term miracle of full employment through a narrow mix of unorthodox money and fiscal policies, the consequences of which, namely inflation and violent business cycles, are very well known, and they have ignored supply-oriented policies that could remove distortions, lessen foreign dependence, and restore stable growth.

Most disturbing is that exit from unorthodox monetary policies can only come at the cost of a deep recession, much higher interest rates and effectively placing the exit strategy burden on the Congress and on fiscal policy.

We must emphasize that the prediction of large deficits for the next 10 years by the Congressional Budget Office will do more than unnerve financial markets. The latest prediction, that the deficit will only be $1.2 trillion by 2019, leaves it at a still unmanageable deficit level on the order of 5.5% of GDP. How can the Fed have a safe exit strategy when the higher interest rates of a "safe strategy" would blow what are already unprecedented deficits out of the ballpark?
http://www.atimes.com/atimes/Global_Economy/KG31Dj02.html

Opinion: Let's Break Up the Fed
provided by The Wall Street Journal
The Obama administration's plan to increase the powers of the Federal Reserve, says one critic, is like giving a teenager "a bigger, faster car right after he crashed the family station wagon." Treasury Secretary Timothy Geithner disagrees. He argues that the Fed is "best positioned" to oversee key financial companies, and that the Obama plan would give the Fed only "modest additional authority."

Mr. Geithner is right about one thing: The Fed's power is already vast. But it wasn't even well-positioned to supervise the likes of Citicorp. Broadening the Fed's responsibilities won't help. Instead, we should think of how best to dismantle an overextended Fed.

In principle, an exceptionally talented theorist might capably run a Fed focused just on monetary policy. Setting the discount rate and regulating the money supply are centralized, top-down activities that do not require much administrative capacity. But without deep managerial experience and considerable industry knowledge, effective chairmanship of a Fed that relies on far-flung staff to regulate financial institutions and practices is almost unimaginable. The vast territory the Fed covers would challenge the most exceptional and experienced executives.

As it happens, the Fed has been led for more than 20 years by chairmen who had no senior management experience. Prior to running the Fed, Alan Greenspan started a small consulting firm and Ben Bernanke was head of Princeton's economics department. Given their understandable preoccupation with monetary and macroeconomic matters, how much attention could they be expected to devote to mastering and managing the plumbing side of the Fed? While the record of the Fed's monetary policy has been mixed, its supervision of financial institutions has been a predictable and comprehensive failure.

At the very least we should split the monetary policy and regulatory functions of the Fed, as was done through the Maastricht Treaty that established the European Central Bank. What we need now is a debate about how to break up the Fed -- and some of the sprawling financial institutions it supervises -- in order to make both the regulator and the regulated more manageable and accountable.
http://finance.yahoo.com/banking-budgeting/article/107433/opinion-lets-break-up-the-fed.html?mod=banking-budgeting&sec=topStories&pos=5&asset=&ccode

Bernanke Sidesteps the Three Big Questions, Again
By: Gary North
In a recent international Bloomberg poll, Bernanke was rated by investors as the greatest central banker, the man who saved the world's economy.

All it took was a doubling of the monetary base and $3 trillion – as of today – of government bailout money.

The FED still faces three problems. (1) If it deflates, the financial markets will collapse. (2) If it does nothing, there will be mass price inflation if banks start lending, making use of the FED's doubling of the monetary base. (3) If banks don't start lending, the recovery will not appear. The FED wants to avoid all three.

How?
http://news.goldseek.com/LewRockwell/1248357678.php

You Say You Want a Revolution?
Americans should have been in the streets to reclaim the country long ago. Patrick Henry and his fellow patriots are turning over in their graves about the present day USA. The savvy folks I talk to on a regular basis are exceedingly pessimistic that our blessed republic can pull out of this present financial, economic and political tailspin. The US as we have known it is on the ropes.

Our third President and signer of the Declaration of Independence, Thomas Jefferson, long ago stated …”Banking establishments are more dangerous than standing armies”.

He also declared …“If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless.”

Hello.

A second American Revolution is now at least as necessary as the first one was though few citizens have an overall understanding of the problems we face. Anything short of a complete house cleaning will be mostly a waste of time and effort. The elitist banking entities running and ruining this country must be shown the highway. Nothing less will suffice!

Who exactly am I talking about? The Federal Reserve is exhibit one. Their partners in financial crime like Goldman Sachs (NYSE:GS), JP Morgan Chase (NYSE:JPM), et al absolutely must be excised like the cancer they are.

America’s biggest exports over the last decade have been toxic and fraudulent financial products. The creators of this crap are the ones who have brought us to the present disaster – yet they remain in charge of sweeping changes designed to perpetuate their power and imprison us.

All of these Wall Street entities and the lackey politicians who support them must hit the road. Those behind the scenes pulling the strings have to be stripped of their illicit power.

Concerned Americans have a critical choice. We can rid the system of all the parasites and malignancies or just stay home and continue to get our reality through television.
http://www.contrarianprofits.com/articles/you-say-you-want-a-revolution/19353

Goldman Sachs: Gambling With Your Money?
Goldman Sachs is using its new taxpayer-subsidized status to bring increased risk to the financial system, a group of House members charged Monday. They want to know why the Federal Reserve is allowing it.

The group on Monday sent a letter to the Fed asking for an explanation of why Goldman Sachs is being allowed to speculate wildly even while officially redesignating itself a bank holding company, which theoretically means stricter regulation. The bank designation gives Goldman access to dirt-cheap Federal Reserve loans.

Goldman initially applied for the new designation last fall, so that it could access bailout funds (since paid back). Because bank holding companies, unlike investment banks, have access to a host of valuable taxpayer subsidies, they are required to reduce the risk associated with their investment activity. But Goldman then applied to the Federal Reserve for an exemption to the rules, saying that it takes time to alter a business model. The exemption was granted in February -- and Goldman went on to take even greater risks. Its Value-at-Risk model, a widely used measure of the risk of loss, recently showed potential trading losses at $245 million a day; in May 2008, it was $184 million a day.

The bets paid off in the most recent quarter as the market rose and Goldman posted stellar earnings. Morgan Stanley, meanwhile, was similarly given an exemption by the Fed but did what it said it would do and reduced its risk. The company lost money, largely as a result of that decision.

The likely result: Other players on Wall Street will follow Goldman back toward the cliff they dangled over just months ago. In announcing its lousy earnings, Morgan Stanley assured that it will increase the risk it takes in the future. Citigroup is racing to increase its exposure, too, handing another billion dollars worth of chips to its riskiest traders, bringing its hedge fund operations to close to $2 billion. On the brink of collapse, it had scaled such investing down to around $800 million.

Lucas van Praag, a Goldman spokesman, declined to respond directly to the charges in the letter, but said that the firm is working to reduce its exposure.

"We're very cognizant of risks inherent in risk taking. We have one of the highest capitalizations of any bank," said van Praag. He said that the Value-at-Risk numbers, while the only publicly released measure of risk, are only one metric and that internal measures show the bank has reduced its exposure over the past year.

He also took a dig at other Wall Street players who have avoided using mark-to-market accounting in an effort to fluff their balance sheets. Earlier this spring, banks lobbied Congress and the Financial Accounting Standards Board to soften mark-to-market rules. The new rule allowed banks to inflate their balance sheets by claiming that an asset was worth more than it could fetch on the market because the market was frozen. Goldman Sach, said van Praag, doesn't use that slight of hand, so its balance sheet is an honest reflection of its exposure.

"We have dramatically reduced our leverage and as a mark-to-market firm--we aggressively mark our assets to market--our leverage ratio is a true reflection of risk," said van Praag.

Nevertheless, as Wall Street follows Goldman, overall systemic risk is ramped up. Meanwhile, Congress is debating whether to give the Fed authority to regulate systemic risk throughout the economy. The congressional letter puts the Fed on the spot, demanding that it explain why it's allowing Goldman to use taxpayer dollars to increase systemic risk.

"The only difference between Goldman Sachs today and Goldman Sachs last year is that today, the company is officially gambling with government money. This is the very definition of 'heads we win, tails the taxpayers lose,'" reads the letter.

Read the full letter:
http://www.huffingtonpost.com/2009/07/27/goldman-sachs-gambling-wi_n_245566.html

Skating on Thin Ice
John Browne
Posted Jul 23, 2009
In combination with reassuring remarks by senior administration officials and retail investors' wish not to be left behind, money has started to move back into American equities. The resultant rally in stocks seems to have validated the preceding optimism.

Among these desperate green-shootniks, the smoking gun of recovery can be found in the exceptional earnings reported last week by Goldman Sachs and JPMorgan Chase, both of which surpassed estimates by healthy margins. These reports may have led to a general market rally, which even bad news about CIT failed to defuse.

In looking realistically beneath the Wall Street and political hype, seven fundamental points emerge which investors should note carefully:

First, much of last week's rise was based on small ‘up' volume. This indicates that the surprisingly good earnings reports led the ‘shorts' to cover in near panic.

Second, we cannot forget that the banks in receipt of TARP funds, including Goldman and JPMorgan, have been able to invest these surplus tens of billions of dollars in the markets, allowing them to capitalize on the great run-up of the last few months. But this is a temporary phenomenon.

Third, some of the major banks, such as Citi and Bank of America, appear to be falling behind government demands for recovery plans. This, combined with the massive exposure of U.S. banks to the declining value of commercial real estate, raises the possibility of another round of bank bailouts.

Fourth, statewide budget crises, such as the one that is coming to light in California, are likely to hit every state with a big city, save perhaps Texas.

Fifth, many investors have become shell-shocked by the 40 percent erosion in their portfolios. They can be forgiven for not jumping back into the equity market action for awhile.

Sixth, the recent spate of federal deficit spending has placed an enormous strain on Treasury debt markets. The United States now faces a sharp interest rate hike, or a loss of its prized Triple-A credit rating.

Finally, while the U.S. stock markets may be rising, the economic picture is far from promising. It is becoming increasingly apparent that short-term recovery is unlikely to occur without significant increases in consumer spending. With unemployment still rising at about 500,000 workers a month, this is unlikely.

Most importantly, long term recovery is impossible without significant structural changes in the economy. Such movements are nowhere to be seen.
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