Archive for the ‘Sound Money’ Category
by Ron Paul
Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan's excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble's collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve's balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?
What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.
Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury's program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person's pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.
The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.
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by Mike Whitney
SilverBearCafe.com
(Editor's Note: In my estimation, fully 97% of the American population has already fallen victim, and succumb to the all pervasive, insidious misinformation campaign that has been waged on us for the past 100 years. This means all the energies you and I expend pleading with our family and friends to "wake up and open your eyes" is falling on deaf ears. I have finally realized that rather than wasting my time trying to wake them up, I need to concentrate my energies forging alliances with those of a like mind, a support group if you will. Given that 97% of the population is "in denial" and as a result have been rendered "mindless sheeple", we are left with 3%. That, happily, equates to 9,000,000 Americans who are searching for a support group as well. It is a hell of a lot more gratifying to discuss our plight with those who "get it" than those who not only don't, but to make matters worse, don't want to. If you don't know, that's ignorance. But you can fix ignorance. If your don't care, that's apathy. With a little nurturing that also can be fixed. If you don't want to know, however, that's stupid. And believe me, I have found that it is very hard to deal with stupid. - JSB)
Credit is not flowing. In fact, credit is contracting. That means things aren't getting better; they're getting worse. When credit contracts in a consumer-driven economy, bad things happen. Business investment drops, unemployment soars, earnings plunge, and GDP shrinks. The Fed has spent more than a trillion dollars trying to get consumers to start borrowing again, but without success. The country's credit engines are grinding to a halt.
Bernanke has increased excess reserves in the banking system by $800 billion, but lending is still slow. The banks are hoarding capital in order to deal with the losses from toxic assets, non performing loans, and a $3.5 trillion commercial real estate bubble that's following housing into the toilet. That's why the rate of bank failures is accelerating. 2010 will be even worse; the list is growing. It's a bloodbath.
The standards for conventional loans have gotten tougher while the pool of qualified credit-worthy borrowers has shrunk. That means less credit flowing into the system. The shadow banking system has been hobbled by the freeze in securitization and only provides a trifling portion of the credit needed to grow the economy. Bernanke's initiatives haven't made a bit of difference. Credit continues to shrivel.
The S&P 500 is up 50 percent from its March lows. The financials, retail, materials and industrials are leading the pack. It's a "Green Shoots" Bear market rally fueled by the Fed's Quantitative Easing (QE) which is forcing liquidity into the financial system and lifting equities. The same thing happened during the Great Depression. Stocks surged after 1929. Then the prevailing trend took hold and dragged the Dow down 89 percent from its earlier highs. The S&P's March lows will be tested before the recession is over. Systemwide deleveraging is ongoing. That won't change.
No one is fooled by the fireworks on Wall Street. Consumer confidence continues to plummet. Everyone knows things are bad. Everyone knows the media is lying. Credit is contracting; the economy's life's blood has slowed to a trickle. The economy is headed for a hard landing.
Bernanke has pulled out all the stops. He's lowered interest rates to zero, backstopped the entire financial system with $13 trillion, propped up insolvent financial institutions and monetized $1 trillion in mortgage-backed securities and US sovereign debt. Nothing has worked. Wages are falling, banks are cutting lines of credit, retirement savings have been slashed in half, and home equity losses continue to mount. Living standards can no longer be bandaged together with VISA or Diners Club cards. Household spending has to fit within one's salary. That's why retail, travel, home improvement, luxury items and hotels are all down double-digits. The easy money has dried up.
According to Bloomberg:
"Borrowing by U.S. consumers dropped in June for the fifth straight month as the unemployment rate rose, getting loans remained difficult and households put off major purchases. Consumer credit fell $10.3 billion, or 4.92 percent at an annual rate, to $2.5 trillion, according to a Federal Reserve report released today in Washington. Credit dropped by $5.38 billion in May, more than previously estimated. The series of declines is the longest since 1991.
A jobless rate near the highest in 26 years, stagnant wages and falling home values mean consumer spending... will take time to recover even as the recession eases. Incomes fell the most in four years in June as one-time transfer payments from the Obama administration’s stimulus plan dried up, and unemployment is forecast to exceed 10 percent next year before retreating." (Bloomberg)
What a mess. The Fed has assumed near-dictatorial powers to fight a monster of its own making, and achieved nothing. The real economy is still dead in the water. Bernanke is not getting any traction from his zero-percent interest rates. His monetization program (QE) is just scaring off foreign creditors. On Friday, Marketwatch reported:
"The Federal Reserve will probably allow its $300 billion Treasury-buying program to end over the next six weeks as signs of a housing recovery prompt the central bank to unwind one its most aggressive and unusual interventions into financial markets, big bond dealers say."
Right. Does anyone believe the housing market is recovering? If so, please check out this chart and keep in mind that, in the first 6 months of 2009, there have already been 1.9 million foreclosures.
The Fed is abandoning the printing presses (presumably) because China told Geithner to stop printing money or they'd sell their US Treasuries. It's a wake-up call to Bernanke that the power is shifting from Washington to Beijing.
That puts Bernanke in a pickle. If he stops printing; interest rates will skyrocket, stocks will crash and housing prices will tumble. But if he continues QE, China will dump their Treasuries and the greenback will vanish in a poof of ...
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Actually it’s a $2,000,000 ham. Today we discovered some very interesting items on the (Recovery.Gov) website.
Clougherty Packing LLC Actually received 2 contracts, well, 2 as far as we could find, perhaps there are more. But these to contracts are quite interesting:
HAM, WATER ADDED, COOKED, FROZEN, SLICED, 2-LB ($2,531,600)
2 POUND FROZEN HAM SLICED ($1,191,200)
Now when we first found these, we thought to ourselves, no way. So we initially concluded that:
a. The person, who authored these pages on the recovery.org website, just did not make clear, the terms of these contracts. E.g.: 2 pounds, of frozen ham, vs. 760,000 - 2 lb packages of ham.
b. The money was actually spent on 2 lbs of ham. Would it be so outlandish to think that this is possible? No, not really, considering what has transpired within the government the last 12 months.
Either way we have to question this spending. Is this really helping to spark a recovery?
The Department Of Agriculture released this Office Communication on July 20 2009: A small note, this was authored by none other than Monsanto crony, Thomas Vilsack (See Article)
Release from Dept. Agriculture:
Response to Drudge Item on Recovery Act Funding
Statement from Agriculture Secretary Tom Vilsack
"Through the Recovery Act, the U.S. Department of Agriculture has made $100 million available to the states for The Emergency Food Assistance Program (TEFAP), which acquires food that is distributed to local organizations that assist the needy – including food banks, food pantries, and soup kitchens.
The Recovery Act funds referenced in press reports allowed states to purchase ham, cheese and dairy products for these food banks, soup kitchens and food pantries that provide assistance to people who otherwise do not have access to food. This program will help reduce hunger of those hardest hit by the current economic recession.
The references to "2 pound frozen ham sliced" are to the sizes of the packaging. Press reports suggesting that the Recovery Act spent $1.191 million to buy "2 pounds of ham" are wrong. In fact, the contract in question purchased 760,000 pounds of ham for $1.191m, at a cost of approximately $1.50 per pound. In terms of the dairy purchase referenced, USDA's Farm Service Agency (FSA) purchased 837,936 pounds of mozzarella cheese and 4,039,200 pounds of processed cheese.
While the principal purpose of these expenditures is to provide food to those hardest hit by these tough times, the purchases also provide a modest economic benefit of benefiting Americans working at food retailers, manufacturers and transportation companies as well as the farmers and ranchers who produce our food supply."
OK perhaps Mr. Vilsack is telling the truth, and someone over at recovery .org just is not clear at all when posting these contract details.
But it gets even more interesting.
Mr. Vilsack perhaps you could elaborate on these?
Note: This says (“Repair Door, singular”)
Recipient Name: AFCO TECHNOLOGIES, INC
Project Description : REPAIR DOOR BLDG 5112
Available Funds :$1,444,100
Project Location : DYESS, OK
Recipient Name :VGC
Project Description :CONSTRUCTION PROJ 603-08-222 REPLACE SEWER LINES IN SUB-BASEMENT BLDG 1 AT VAMC LOUISVILLE, KY
Available Funds :$335,056
Project Location : LOUISVILLE, KY
Recipient Name :ACCESS CONTROL SYSTEMS LLC
Project Description :RECOVERY, CIM-0860-1, UPGRADE TO EXISTING SWING GATE OPERATORS AT, LAND BETWEEN THE LAKES, ELK & BISON PRAIRIE, GOLDEN POND, KY.
Available Funds: $13,250
Project Location: CADIZ, KY
IS THIS 61 PRINTERS?
Recipient Name: LEXMARK INTERNATIONAL INC
Project Description :$102,777.
61 LEXMARK COLOR AND MONOCHROME NETWORK PRINTERS TO SUPPORT STATE DISABILITY DETERMINATION SITES (DDS) NATIONWIDE AND THE NATIONAL HEARING CENTER (NHC) IN BALTIMORE, MD.
Available Funds: $102,777
Project Location: LEXINGTON, KY
This must be one damn huge roof!!
Recipient Name :ABECO CONTRACTING INC.
Project Description :REPLACE THE ROOF AT B/801, WAREHOUSE
Available Funds :$6,652,480
Project Location : OKLAHOMA CITY, OK
Recipient Name :CHUGACH GOVERNMENT SERVICES INCORPORATED
Project Description :RECOVERY REPAIR FSD COOKING HOODS BUILDING 473
Available Funds :$237,781
Project Location : TINKER AFB, OK
Recipient Name :C & L CONSTRUCTION INC
Project Description :REPAIR BY REPLACEMENT ENGINE FOR FIRE PUMP B/4006
Available Funds :$860,000
Project Location : TINKER AFB, OK
Recipient Name: A.R.J.K ENTERPRISES LLC
Project Description :REPAIR BY RA - SXHT 06-1040, REPLACE WINDOWS & DOORS
Available Funds :$696,555
Project Location : PATRICK AFB, OK
Recipient Name :C W ROBERTS CONTRACTING INC
Project Description :CONSTRUCT PARKING LOT OAKHILL TRACK, EGLIN AFB, FL
Available Funds :$27,894,447
Project Location : EGLIN AFB, FL
What The hell is this?
Recipient Name :LAKESIDE FOODS INC
Project Description :CANNED PORK
Available Funds :$16,784,272
Project Location : PLAINVIEW, MN
Recipient Name :CADENCE CONTRACT SERVICES, LLC
Project Description :REPLACE DRAIN AT RESERVOIR (K WORK)
Available Funds :$12,219,384
Project Location : FORT DRUM, NY
Install Traffic Signal (singular)
Recipient Name :C & C ELECTRICAL CONTRACTOR, INC
Project Description :KNMD 03-1075, INSTALL TRAFFIC SIGNAL
Available Funds :$541,119
Project Location : HICKAM AFB, HI
I have to wonder what else is lurking in the shadows as far as frivolous spending. I posted this article for a few reasons.
To illustrate how wasteful the spending by this administration really is.
To point out that this is what happens when you elect the same unqualified buffoons into office.
We will be investigating this further to see how many of these companies are politically connected.
Here are 2 maps, which contains the details of recipients, if any of our readers would like to assist in this insane endeavor.
http://www.recovery.gov/?q=content/investment-award
http://www.recovery.gov/?q=content/investments-state
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Following is a copy of New York Attorney General Andrew Cuomo's letter to federal regulators and oversight committees regarding Bank of America Corp.'s acquisition of Merrill Lynch & Co. Inc.
The letter was sent to Christopher Dodd, chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs; Mary Schapiro, chairman of the Securities and Exchange Commission; Barney Frank, chairman of the House Financial Services Committee; and Elizabeth Warren, chair of the Congressional Oversight Panel.
April 23, 2009
Re: Bank of America-Merrill Lynch Merger Investigation
Dear Chairpersons Dodd, Frank, Schapiro and Warren:
I am writing regarding our investigation of the events surrounding Bank of America's merger with Merrill Lynch late last year.
Because you are the overseers and regulators of the Troubled Asset Relief Program ("TARP"), the banking industry, and the Treasury Department, we are informing you of certain results of our investigation. As you will see, while the investigation initially focused on huge fourth quarter bonus payouts, we have uncovered facts that raise questions about the transparency of the TARP program, as well as about corporate governance and disclosure practices at Bank of America.
Because some matters relating to our investigation involve federal agencies and high-ranking federal officials charged with managing the TARP program, we believe it is important to inform the relevant federal bodies of our current findings. We have attached relevant documents to this letter for your review.
On September 15, 2008, Merrill Lynch entered into a merger agreement with Bank of America. The merger was negotiated and due diligence was conducted over the course of a tumultuous September 13-14 weekend. Time was of the essence for Merrill Lynch, as the company was not likely to survive the following week without a merger. The merger was approved by shareholders on December 5, 2008, and became effective on January 1, 2009.
The week after the shareholder vote - and days after Merrill Lynch set its bonuses Merrill Lynch quickly and quietly booked billions of dollars of additional losses. Merrill Lynch's fourth quarter 2008 losses turned out to be $7 billion worse than it had projected prior to the merger vote and finalizing its bonuses. These additional losses, some of which had become known to Bank of America executives prior to the merger vote, were not disclosed to shareholders until mid-January 2009, two weeks after the merger had closed on January 1, 2009.
On Sunday, December 14, 2008, Bank of America's CFO advised Ken Lewis, Bank of America's CEO, that Merrill Lynch's financial condition had seriously deteriorated at an alarming rate. Indeed, Lewis was advised that Merrill Lynch had lost several billion dollars since December 8, 2008. In six days, Merrill Lynch's projected fourth quarter losses skyrocketed from $9 billion to $12 billion, and fourth quarter losses ultimately exceeded $15 billion.
Immediately after learning on December 14,2008 of what Lewis described as the "staggering amount of deterioration" at Merrill Lynch, Lewis conferred with counsel to determine if Bank of America had grounds to rescind the merger agreement by using a clause that allowed Bank of America to exit the deal if a material adverse event ("MAC") occurred. After a series of internal consultations and consultations with counsel, on December 17, 2008, Lewis informed then-Treasury Secretary Henry Paulson that Bank of America was seriously considering invoking the MAC clause. Paulson asked Lewis to come to Washington that evening to discuss the matter.
At a meeting that evening Secretary Paulson, Federal Reserve Chairman Ben Bernanke, Lewis, Bank of America's CFO, and other officials discussed the issues surrounding invocation of the MAC clause by Bank of America. The Federal officials asked Bank of America not to invoke the MAC until there was further consultation. There were follow-up calls with various Treasury and Federal Reserve officials, including with Treasury Secretary Paulson and Chairman Bernanke. During those meetings, the federal government officials pressured Bank of America not to seek to rescind the merger agreement.
We do not yet have a complete picture of the Federal Reserve's role in these matters because the Federal Reserve has invoked the bank examination privilege.
Bank of America's attempt to exit the merger came to a halt on December 21, 2008. That day, Lewis informed Secretary Paulson that Bank of America still wanted to exit the merger agreement. According to Lewis, Secretary Paulson then advised Lewis that, if Bank of America invoked the MAC, its management and Board would be replaced:
[W]e wanted to follow up and he said, 'I'm going to be very blunt, we're very supportive on Bank of America and we want to be of help, but' --as I recall him saying "the government," but that may or may not be the case - "does not feel it's in your best interest for you to call a MAC, and that we feel so strongly," --I can't recall if he said "we would remove the board and management if you called it" or if he said "we would do it if you intended to." I don't remember which one it was, before or after, and I said, "Hank, let's deescalate this for a while. Let me talk to our board." And the board's reaction was of "That threat, okay, do it. That would be systemic risk."
In an interview with this Office, Secretary Paulson largely corroborated Lewis's account. On the issue of terminating management and the Board, Secretary Paulson indicated that he told Lewis that if Bank of America were to back out of the Merrill Lynch deal, the government either could or would remove the Board and management. Secretary Paulson told Lewis a series of concerns, including that Bank of America's invocation of the MAC would create systemic risk and that Bank of America did not have a legal basis to invoke the MAC (though Secretary Paulson's basis for the opinion was entirely based on what he was told by Federal Reserve officials).
Secretary Paulson's threat swayed Lewis. According to Secretary Paulson, after he stated that the management and the Board could be removed, Lewis replied, "that makes it simple. Let's deescalate." Lewis admits that Secretary Paulson's threat changed his mind ...
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