Tuesday, February 08, 2005

Signs of the Economic Apocalypse 1-31-05

From Signs of the Times 1-31-05:

The US stock market rose last week for the first time in 2005. The Dow closed at 10,427.20, up 0.32% for the week, while the NASDAQ closed at 2035.83 or up 0.08%. The interest rate on a ten-year US Treasury bond closed at 4.15%, up slightly from last week’s 4.14%. The dollar closed at 0.768 euros up from last week’s 0.766, or 1.302 dollars a euro compared to last week’s 1.305. Oil closed at $47.15 (36.16 euros) a barrel on Friday down from last Friday’s $48.53 (37.17 euros) and it is poised to drop further Monday after the supposedly successful Iraq elections and some help from the OPEC meeting. Gold closed at $426.80 or 327.10 euros up 0.8% (in dollars) from last week’s 423.30 and 325.42 respectively. An ounce of gold on Friday would therefore buy 9.05 barrels of oil, up from last week’s 8.72.

In the markets, we are struck by the apparent normality and the lack of strong short-term trends in any direction. There remains a thin sheet of ice -- the illusion that things are going well -- covering an unsettled ocean. Perhaps alone in the world, the average person in the United States is clinging to that illusion. No doubt that, at least at first, the Iraq elections will be spun as a success to the public in the United States. The professional investors are reinforcing that by driving the price of oil down at the moment.

In such an environment we need to keep our eye on the elite for signs that they are jumping ship. They are. Here are some headlines in Bloomberg on January 30th: “Microsoft’s Gates Bets Against the Dollar. Calls Currency’s Status ‘Scary’” and “Soros Says Greenspan Lost Credibility With Positions on Rates, Tax Cuts

Here’s what Gates had to say:

Jan. 29 (Bloomberg) -- Bill Gates, whose net worth of $46.6 billion makes him the world's richest person, is betting against the U.S. dollar.

"I'm short the dollar,'' Gates, chairman of Microsoft Corp., told Charlie Rose in an
interview late yesterday at the World Economic Forum in Davos, Switzerland. "The
ol' dollar, it's gonna go down.''

"It is a bit scary,'' Gates said. "We're in uncharted territory when the world's reserve currency has so much outstanding debt.''

Gates reflected the views of his friend Warren Buffett, the billionaire investor who has bet against the dollar since 2002. Buffett said last week that the U.S. trade gap will probably further weaken the currency.

"Unless we have a major change in trade policies, I don't see how the dollar avoids going down,'' Buffett said in an interview with CNBC on Jan. 19.

Gates in December joined the board of Berkshire Hathaway Inc., the investment company that Buffett runs. Forbes magazine's list of billionaires ranks Gates, 49, No. 1. Buffett, 74, is second, with more than $30 billion. Almost all of it is in Berkshire stock.

Gates described China as a potential "change agent'' for the next two decades. "It's phenomenal,'' Gates said. "It's a brand new form of capitalism.'' Gates's $27 billion foundation in September received approval from China's foreign-currency regulator to invest as much as $100 million in the nation's yuan shares and bonds.

As for Soros:

George Soros, the billionaire investor, said Federal Reserve Chairman Alan Greenspan has lost credibility for driving the benchmark U.S. interest rate to a four-decade low and advocating tax cuts that Soros said caused the U.S. budget deficit to balloon.

Soros, chairman of the New York-based Soros Fund Management LLC, said Greenspan sought to help President George W. Bush win re-election.
Soros spent $26.5 million, more than any other individual donor or political
action committee, seeking to help Massachusetts Senator John Kerry defeat Bush in November's elections.

"Greenspan lost credibility with me when he became too political,'' said Soros, 74, in an interview today at the World Economic Forum in Davos, Switzerland. ``He tried to push interest rates further down in order to help the re-election campaign, and also reached out beyond his sphere of competence by advocating tax cuts which then led to the current deficit.''

The Fed cut interest rates six times in 2001 and 2002, bringing the overnight bank-lending rate to 1 percent from 6.5 percent. In 2001, Greenspan supported the first in a series of Bush-proposed tax cuts that ultimately reached $1.85 trillion.

The Dollar

Soros said he expected the U.S. currency to extend its three- year slide, as officials and executives from the U.S., Europe and Asia at Davos blamed the U.S. budget and current account deficits for causing a plunge in the dollar. Microsoft Corp. Chairman Bill Gates, the world's richest man, said yesterday that he's betting on a further slide in the dollar, calling the deficits "scary.''

The dollar has dropped 47 percent against the euro since 2001. The dollar was little changed at $1.3038 per euro in trading yesterday in New York. Federal Reserve spokeswoman Michelle Smith declined to comment on Soros's remarks.

While the dollar has fallen 2.8 percent against the currencies of its 30 major trading partners during the past year, it's fallen more against the euro, 4.8 percent, because many Asian countries link their currencies to the dollar, limiting changes in their value. The U.S. current account deficit will likely cause the euro to continue to gain against the dollar. Because Asian currencies are linked to the dollar,
their value won't change as much as the euro.

"Obviously, the dollar is already undervalued against the euro,'' Soros said. "It has every sign of getting more undervalued, because all the adjustment is between the dollar and the euro.''

So three of the richest, shrewdest people on the planet, Gates, Soros and Buffet have lost faith in the dollar. Up until recently, establishment types didn’t say this kind of thing in public.

Here’s another example. The investigative journalist, Seymour Hersh, who broke both the My Lai and Abu Ghraib stories, has never, to my knowledge, written about the economy. However, in a recent talk about Iraq and the takeover of the US government by the Neocon cult as reprinted in Signs of the Times for January 29, 2005 he said the following:

[The economy is] going to go very bad, folks. You know, if you have not sold your stocks and bought property in Italy, you better do it quick. And the third thing is Europe -- Europe is not going to tolerate us much longer. The rage there is enormous. I'm talking about our old-fashioned allies. We could see something there, collective action against us. Certainly, nobody -- it's going to be an awful lot of dancing on our graves as the dollar goes bad and everybody stops buying our bonds, our credit -- our -- we're spending $2 billion a day to float the debt, and one of these days, the Japanese and the Russians, everybody is going to start buying oil in Euros instead of dollars. We're going to see enormous panic here. But [Bush] could get through that. That will be another year, and the damage he's going to do between then and now is enormous. We're going to have some very bad months ahead.

Hersh is a mainstream journalist who spends his time talking to four-star generals, CIA analysts and parents of soldiers killed in Iraq. Right now, we don’t need an economist to know which way the wind is blowing. Hersh’s words are so shocking not because we didn’t already know they were true but because someone like him is saying them publicly. The enormity of the failure in Iraq creates a situation like the building of seismic pressure before an earthquake. On the surface, everything appears normal until the moment when the pressure releases and the earth cracks and shifts below our feet.

In other words, even though last week’s Economic Commentary went through some of the economic factors that will most likely lead to a collapse, political events seem to be moving much more quickly, with the Bush Neocons perhaps realizing they don’t have much time and therefore trying a last, desperate roll of the dice by attacking Iran, Syria and perhaps even Venezuela as well. In one interesting tidbit that came to light last week, crude oil imports to China increased 35% last year, as the Chinese economy grew at a rapid rate. China needs lots of oil in order to complete its plan to become the top economic and political power in the world. In another tidbit, a wire service report on the weekend’s OPEC meeting noted that the Venezuelan oil minister was not there because the Chinese vice-president was visiting Caracas. No wonder Bush gang wants to grab all the oil it can before the empire collapses and they are all thrown in prison for treason and war crimes.

As Kurt Nimmo wrote:

If we were not caught in a Bushzarro reality warp, Douglas Feith—and Richard Perle, Paul Wolfowitz, David Wurmser, William Kristol, Charles Krauthammer, Elliott Abrams, to name but a few of the more prominent Strausscons—would be arrested and packed off to the Hague to face prosecution for war crimes and crimes against humanity.

Unfortunately, Douglas Feith will likely end up writing policy papers and giving speeches for one of a handful of Strausscon “think tanks” in Washington, pulling down a handsome salary. So it is in America, where war criminals such as Henry Kissinger—and former presidents such as Bill Clinton and Bush Senior—are allowedto walk free, considered “elder statesmen,” create law firms and consulting services, write best selling books, are interviewed and pampered, and have libraries built in their names.

If excusing and ignoring these crimes—indeed, often celebrating themdemonstrates
anything, it is that America is suffering from a dangerous and what will likely sooner or later prove to be fatal pathology. For as Germany learned, sooner or later the rest of the world will respond to this murderous pathology and put and end to it for good, more than likely economically since the United States military, at least in a conventional warfare sense, is unbeatable, mostly due to its fearsome stockpile of nukes and other marvels of high-tech mass murder and destruction.

Of course, this will also mean the destruction of the tiny outlaw state of Israel, since it cannot exist without remaining a dependent suckling parasitically fleecing the American taxpayer.

It is interesting that Seymour Hersh advised fleeing to Europe instead of buying gold and waiting out the depression in the US. What else does he know? Could the following by Al Martin be a clue?

The current regime in the United States continues to change from a “democracy” to a dictatorship, according to already established historical precedents. There are several political regimes of the past whose political, economic, social and military policies have been the same as we see transpiring in the United States.

It should be noted that the USA Patriot I Act is extremely similar, even in the language, as a matter of fact, to some of the language that was seemingly “borrowed” from what could be called the German Homeland Security Acts of August 1934 and July 1936.

The Patriot II Act, as we have mentioned before, is transcribed almost verbatim from the Soviet Internal Security Enhancement Act of 1965, which was enacted when the Soviet Union was moving to tighten control even more within its own borders and particularly within its Eastern European satellite countries, in order to quell any further dissent because they knew that such dissent was brewing. This has a direct parallel to current conditions in the USA.

The similarities in Patriot I and these two German security acts that we’ve mentioned, were effectively used to increase the power of the President, and in the German case, of the German Chancellor to absolute power, which has now happened in the United States. Presidential power has now been changed so that previous legislative consent and judicial review has been removed from the War Powers Act, thus effectively making Presidential authority absolute in terms of all key positions, most importantly of which are the decisions that the President could make, unfettered by Congress or the Supreme Court, to permanently cancel elections. This then effectively changes the country from democracy into a dictatorship. The further enhancement in power, without Congress and the Judiciary, comes in the expansion of the War Powers Act under Patriot I, allowing the President to dissolve opposition political parties and simply turn the United States into a unicameral dictatorship.

There are certain parallels in economic policies as well. Economic legislation, including economic powers contained in the Patriot Acts, are very similar to the German Currency Stabilization Act of 1938, wherein Germany, like the Bush-Cheney regime, acted to diminish the ability of German citizens to hold gold, to transfer that gold out of the country, to limit the amount of German marks that could be taken out of the country and to ultimately limit the convertibility of those marks outside of Germany.

These are all measures which the Bush Cheney regime has either already undertaken or, according to Treasury Secretary Snow, has on the drawing board. It would be accomplished in this country through the actual re-institution of the Gold Confiscation Act of 1933 and also the imposition of currency restrictions, similar to what Nixon did in 1971.

It seems that the purely economic factors pointing to a collapse are dwarfed by geopolitical factors. Notice the wording of the German Deputy Finance Minister in Davos last week. In the article about Bill Gates on Bloomberg quoted above, he said that the US budget deficit is the number one problem facing the global economy “disregarding geopolitical risks.” Nowadays that’s a lot to disregard! Even when we focus on the geopolitical risks, is there something even worse looming? With all the news of climate change, meterorites, earthquakes and possible flu epidemics, it may be that “natural” disasters may be an even bigger threat to the global economy. It all seems to be coming to a head at once.


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