Pacific Free Press was launched in March 2007 by Dutch-Canadian Richard
Kastelein of V.O.F. Expathos, in the Netherlands along with Chris Cook- CFUV radio journalist and Editor in Chief of Pacific Free Press. Cook is based in , Victoria, British Columbia.
The mission of Pacific Free Press is simple: to dig out nuggets of truth from
the slag-heap of lies, ignorance and witless diversion that has buried
public discourse today. Pacific Free Press provides a new venue for
disseminating hard news and insightful, fact-based analysis of the
harsh realities too often ignored or distorted by the mainstream press.
Bush’s Chernobyl Economy; hard times are on the way
In the next few months, a financial crisis will arise somewhere in the world which will jolt the American economy and trigger a swift and precipitous decline in the value of the dollar.
This is not speculation; it will happen and there is nothing that the Bush administration can do to stop it.
All of the traditional supports for the dollar have been removed by a shrinking economy, a massive $800 billion account deficit, dramatic increases in the money supply, and the reckless manipulation of interest rates.
Now, the noose is tightening. Our foreign trade partners can see that we are bobbing in an ocean of red ink and are refusing to buy back our debt in the form of US Treasuries. This is a death sentence for the dollar. It means that in a matter of months the once-mighty greenback will crash through the floor andfree-fallthrough open space.
Mike Swanson of the WallStreetWindow explains the worrisome details related to last month’s trade deficit:
“Just a few days ago the US Treasury rported that the net capital inflows from the rest of the world into the US fell for a 6th month in a row. Private from abroad fell to $34.7 billion in August and from $72.9 billion in July. Asian central banks made up for the shortfall. If they hadn’t the current account deficit would have exploded. The NY Times quoted Ashraf Laidi, a currency analyst at MG Financial Group as saying, “foreign central banks saved the dollar from disaster. The stability of the bond market is at thee mercy of Asian purchases of US Treasuries.”
Swanson poses an interesting theory, but it can’t be verified since we
the Fed stopped printing the M-3 which would provide the relevant facts
aboutthe currentcash inflows.
Jim Willie of GoldenJackass.com, offers an entirely different theory in
his recent article “Spent Dollar Momentum”. Willie opines:
“Behind the scenes are the many illicit London-based firms
busily buying US Treasury Bonds with freshly-printed money from the
Dept of the Treasury. Their tracks are covered by the blackout on the
money supply statistic. (M-3) An isolated US government with a
well-oiled printing press as the primary support device makes for a
dangerous currency situation.”
Willie’s theory jives nicely with the US Treasury’s figures on the
“Foreign Financing of US Government Debt” (June 2006) Surprisingly,
between 2005 and 2006 our friends in the United Kingdom purchased
another $142 billion of USD bringing their stockpile of dollars to
$201.4?!?
Why?
Why would UK investors suddenly stock up on dollar assets when everyone
else in the currency market is moaning about the greenback’s systemic
problems?
Could it be that banks in the UK are just hiding the paper trail for
friends in America who want to forestall a collapse in the dollar until
after the election?
Of course there is another explanation for the irregular activity in
cash inflows, (purchase of US Treasuries) that is, that we’re still
living in a "faith-based"Wonderland where foreign trading partners are
only too happy to buy an endless supply of worthless paper from a
well-meaning giant who is busy spreading democracy to the "great
unwashed" in developing world.
Of course, that is an utter fiction. The world is backing away from the
dollar and dollar-based assetswhile the Federal Reserveattempts to
conceal thedetails until we get through the election-cycle. It's that
simple.
There is nothing accidental about the crisis we'll soon be facing. The
officials at the Federal Reserve and the US Treasury are fully aware of
the devastating effects of massive trade deficits, increasing the money
supply, and interest rates. They have set the country on the path to
ruin as part of a broader scheme for remaking the global-system
according to well-known precedents. In truth, the plan to modify the
present system has a long history; going back to the 1980s when many of
the same actors in government today were in positions of power in the
Reagan administration. For the last 6 years they have been patching
together their strategy; producing record deficits, unfunded tax cuts,
mammoth government expansion, and doubling the money supply.
Who can possibly argue that they did notunderstand theimplications of their actions?
Did Greenspanknow that by lowering interest rates in 2001 to 1.5% that
he would sluice trillions of dollars into the real estate market
producing the largest equity bubble in history? And, if he didn't know,
thenhow is it that the Fedprovides the statistics which actually tell
how large thehousing bubble is?
Can’t Greenspan read the charts and graphs his own organization puts out?
And why did Greenspan support the “no down payment”, “interest-only”
loans and ARMs which allowed “high-risk” people to qualify for
mortgages when the Fed knew, according to their own figures, that if
interest rates went up, foreclosures would skyrocket?
Of course he knew; they all knew. How could they NOT know? They produce
the facts and figures themselves!It’s all part of a madcap scheme to
shift wealth to the top 1% and drive a wooden stake into the heart of
the middle class. When Greenspan saw that doomsday was approaching, he
got “cold feet” and bailed out. Now the scholarly Bernancke is left to
supervise the economic meltdown and face the public scorn.
Trouble Ahead
Currently, the U.S. economy is held together by the slimmest of
threads; literally duct-taped together by massaging all of the crucial
economic numbers,pumping as much cheap fiat-currency into the system,
and by "increasingly-suspicious" maneuverings in the futures markets.
After the elections, they’ll be no reason to conceal the rot at the
heart of the system. After all, we are not facing an unforeseen
catastrophe, but a planned demolition intended to increase the
disparity between rich and poor to such an extent, that democracy, as
we know it, will no longer be possible.
Nothing is more repugnant to America’s ruling elite than the notion
that every man, however broke and insignificant, can participate in our
system of government.
The Federal Reserve's bloody fingerprintsare all over our present
dilemma. The privately-owned Fed has never operated in the public
interest. By doubling the money supply in the last 7 years and keeping
interest rates artificially low, the Fed has generated a $10 trillion
housing bubble while, at the same time, ignoring a $800 billion trade
deficit which is sucking up American assets and crushing American
industry at an unprecedented rate.
This massive expansion of debt has increased the
likelihood that an unexpected event, like a bank failure or a teetering
hedge fund,will cause a major disruption in the markets sending tremors
through the global system. Even if nothing explosive happens, the
faltering real estate market will continue to swoon, consumer spending
will dry up, and the fragile economy will crash to earth. In fact, this
is taking place right now; retail sales are anemic, residential housing
dropped a whopping 17% in the last 3 months, and economic growth shrunk
to a measly 1.6% in the third quarter. The only thing keeping the
economy from collapsing entirely is the sudden drop in oil prices which
“conveniently” coincided with the midterm balloting.
This won’t last. According to industry analyst Matthew Simmons the
world production of oil may have already peaked setting the stage for a
leveling-off period before the inevitable decline. Simmons has data to
show that “world supply of oil has declined to 83.98 million barrels
per day in the second quarter after hitting 84.35 million bpd in the
forth quarter of 2005.” Oil production is going backwards not forwards.
No one believes the price of oil is going down any time soon. As energy
prices rise and the housing market falls; consumer spending, which
added $825 billion from home equity into last year’s economy, will
continue shrivel. Thus, the Fed will have to make the tough-choice of
whether to loosen the purse strings and lower interest rates to keep
the economy sputtering along or ratchet up rates to attract more
foreign investment. (Keep in mind that the real estate market is
already in retreat, even though, the full force of the Fed’s interest
rate increases won’t be felt for up to 6 to 12 months after they have
been raised. The worst is yet to come)
Most economists believe that Fed Chairman Bernancke will be forced to
lower rates sometime in 2007 to try to stimulate the economy and to
affect a “soft landing” in the housing market, but don’t count on it.
I believe the Fed is more likely to either keep rates the same or raise
them to outpace the anticipated increases in Europe and Asia. The
reason for this is simple; it presently takes nearly $2.5 billion per
day to maintain our current account deficit. To continue to attract
foreign capital, US Treasuries must offer a higher rate of return than
their foreign competitors. Now that the economies in Europe and Asia
are growing; naturally their interest rates are going up
accordingly.(to slow inflation) That means that the only way that
America can continue to expand its debt, through the exchange of fiat
currency for resources and manufactured goods, is by raising the return
on Treasuries. And, that is probably what Bernanke will do, even though
it will skewer the struggling American worker and the US economy at the
same time.
The secret of running the global economic system is to control the
issuance of currency and thereby be in a position to expand one’s own
debt as one sees fit. The Federal Reserve must preserve its “dollar
hegemony” if it wants to maintain the greenback as the world’s “reserve
currency”. To accomplish that, the dollar must stay one step ahead of
its competitors (higher rates) and prove that it is on solid financial
footing. This is impossible now that the US economy is contracting, so
Washington has decided to do the next best thing; corner the oil
market. By controlling Middle East oil US policy-makers believe that
they can force foreign nations to accept the debt-plagued greenback
regardless of the faltering US economy. It is no different than any
other extortion racket.
If the plan succeeds the dollar will remain the de-facto international
currency. But it is difficult task and the escalating violence in Iraq
suggests that the results are far from certain.
Corporate Colonization
“Free Trade” is the Holy Grail of neoliberalism. It is essentially
a public relations scam intended to disguise the shifting of wealth,
jobs and resources from either the middle class or the public sector to
the corporate and banking establishments’. Despite the zealous
cheerleading of Thomas Friedman and his ilk; the basic facts have been
thoroughly examined and not in dispute. Free trade has been a dead loss
for everyone except the people for whom it was originally designed; the
wealthiest and most powerful men on the planet. It has served them
quite well.
For example, “since NAFTA went into effect in 1994, the US has lost
over $4 trillion to foreigners through its trade deficit”…”During that
11.5 year period , foreign ownership of US assets skyrocketed an
amazing 400% from $3 trillion to over $12 trillion”… “Foreign interests
now own 46% of US Treasury debt, 26% of corporate bonds, and 13% of US
corporate equities. Now nearly 100% of on-going borrowings by the
government are funded by foreign interests.”…”Foreign interests also
control a majority of US domestic industries such as movies, music,
publishing, metal ore mining, cement production, engine and power plant
production, rubber and plastics and are major owners of US industries
such as pharmaceuticals, chemical manufacturing, industrial machinery
manufacturing, motor vehicles, and electronic equipment and
components…In addition, the US has lost 3 million manufacturing jobs
over the last decade, real wage growth after inflation has been
essentially zero,” and personal debt has never been higher. (Data from
Thomas Heffner EconomyInCrisis.org)
Since 1980, 13,730 major companies have been sold to foreign
corporations. We no longer produce what we need to sustain ourselves.
These facts may have a mind-numbing affect on the reader, but they make
a point which is simple and unavoidable. The country is being colonized
by corporate predators and its main assets are being sold off to the
highest bidder. This rampant carpet-bagging is taking place in full
view of the American public which still clings to the spurious idea
that “free trade” is generally beneficial for all. It is not, and we
are about to experience its full-effects as America’s “straw-house”
economy topples from its loss of manufacturing-capacity and its
staggering account imbalances.
“Foreign investors now own 46% of US Treasury debt” over $3 trillion
dollars! The Federal Reserve and their corporate she-wolves are
planning to prolong the hemorrhaging of US wealth as long as possible
extracting every last farthing from the prostrate corpse of the waning
republic.
Now, we are at the brink. Energy prices will go higher after the
elections, manufacturing will continue to flag, and the housing
Zeppelin is drifting towards the high-tension wires. To make matters
worse, the American consumer; the “engine for global economic growth”,
is drowning in a sea of personal debt.
There’s no place to go but down.
Every part of this bleak picture was anticipated by its architects.
That’s why they hastily slapped together the requisite legislation for
a modern-day police state. After passing the Military Commissions Act
of 2006 (which allows the president the arrest whomever he chooses
without charges) and overturning the Posse Comitatus Act (the president
is now free to deploy the military within America against US citizens)
the Bush administration is as ready as they can be. Apparently, they
feel like they can manage the public shock and outrage with detention
camps and water cannons.
We’ll see.
In any event, the trap has been set and any minor disruption in the
hedge funds or derivatives markets will put the economy into a violent
tailspin forcing our "Decider” president to activate his plans forthe
new world order.
Battle Stations; Battle Stations
Last week an article by Ambrose Evans-Pritchard appeared in the UK Telegraph, where he stated:
“(Treasury Secretary) Paulson re-activated the secretive
support team to prevent markets meltdown. Judging by their body
language, the US authorities believe that the roaring bull-market is
just a sucker’s rally before the inevitable storm hits….the plunge
protection team is a shadowy body with powers to support stock-index,
currency, and credit futures in a crash. Otherwise known as the working
group on financial markets, it was created by Ronald Reagan to prevent
a repeat of the Wall Street meltdown in October 1987”….Paulson has set
up “a command center at the US Treasury that will track global markets
and serve as an operations base in the next crisis.” (Members include
the heads at Treasury, Federal Reserve and Securities and Exchange
Commission).
Evans-Pritchard adds:
“Mr. Paulson has asked the team to examine ‘systemic risk
posed by hedge funds and derivatives, and the government’s ability to
respond to a financial crisis…We need to be vigilant and make sure we
are thinking through all of the various risks and that we are being
very careful here. Do we have enough liquidity in the system?’”
And, finally, Evans-Pritchard queries:
"(Do) Mr. Paulson and Mr. Cox (SEC) know something that we
do not: whether other hedge funds are in the same sinking boat as
Amaranth Advisors and Vega Management, keel-hauled by bets on natural
gas and bonds? Or whether currency traders with record short positions
on the Japanese Yen and Swiss Franc are about to learn the perils of
the Carry Trade, a high-stakes game of chicken where you bet against
fundamentals with high leverage to make a quick profit. Everybody knows
it will blow up if the dollar goes into free fall”.
So what is Paulson anticipating?
Gabriel Kolko offers us a clue in a counterpunch article “Why a Global Economic Deluge Looms”:
“The entire global financial structure is becoming uncontrollable
in crucial ways its nominal leaders never expected. Instability is its
hallmark…Contradictions now wrack the world’s financial system, and if
we are to believe the institutions and personalities who have been in
the forefront of the defense of capitalism, it may well be on the verge
of serious crisis.”
Deregulation and reduced market transparency have created a
plethora of financial instruments which are relatively untested and
extraordinarily volatile. By eliminating the rules of the game
market-savvy investors have raked in the profits but reshaped the
economic landscape in a way that no one can predict what the ultimate
outcome will be. Hedge funds are now loaded with over-leveraged
debt-instruments that promise a generous return in an up-tempo market,
but certain doom in an economic downturn. Now, that all the arrows are
pointed towards recession the devastating effects of this new
“liberalized” system will be felt throughout the global economy.
No one knows what is in store for these high-risk hedge funds which
have only been in existence for a short time and which Americans have
dumped trillions of their hard-earned savings. As Kolko says, “The
credit derivative market was almost non-existent in 2001, grew fairly
slowly until 2004, and went into the stratosphere, reaching $17.3
trillion by the end of 2005.”
Is it any wonder why the main players at the Fed, the Treasury and the SEC are feeling a bit jittery?
Any shock to the markets could set off a system-wide catastrophe. Just
this week, for example, Taiwan was bracing for a stock market crash
following the surprise indictment of first-lady Wu Shu-chen. Even
relatively small incidents like this on the other side of the world
create the potential for contagion that can spread rapidly in this new
world of globalized markets. The danger is even greater when those
markets are built on a foundation of sand.
Hank Paulson was doubtless selected as Treasury Secretary as the
best possible “industry-insider” to oversee the unwinding of America’s
humongous account imbalances and flimsy “deregulated” markets. His job
is to ensure that, at the end of the day, US banking giants, the
Federal Reserve, and western elites still control the global economic
system and that the dollar reigns supreme. Whatever happens to the
American middle class in the process is of no consequence.
But Paulson faces an insurmountable task from this point on; fudging
the numbers only works for so long. So far, the greenback has benefited
from the manipulation of oil prices, but that will soon end. (Better
“fill ‘er up” now) The US economy is a shriveled shadow of its former
self; housing and manufacturing are in a shambles and growth depends
entirely on the expansion of debt. As GDP begins to nosedive, foreign
investment will dry up, capital will flee to more promising markets in
Asia and Europe, and the American people will totter into a barren
world ofsoaring unemployment,hyper-inflation, and 1930s-type
deprivation.
Unsurprisingly, the Bush administration still believes that their plan
to remake the world’s strongest economy into a corporate fiefdom is a
prudent way to meet the exigencies of the new century. Their
foolishness defies description.
The country is now facing a Chernobyl-type meltdown and there’s nothing
we can do to stop it. The foundation blocks for sound economic growth
and prosperity have been replaced by a misguided faith in military
adventurism and police state repression. The results are plain to see.
We are now more vulnerable to a seismic economic event than anytime
since the Great Depression. The corporatists and the money-lenders have
absconded with the nation’s wealth; gutting the manufacturing sector,
creating enormous equity bubbles, and raffling off our vital industries
to foreign predators. Theirunchecked avarice has left the country
teetering on the verge of ruin. At the same time, the Bush
administration has sown dragons-teeth across the world; leaving the US
with precious fewfriendswho willthrow us a lifeline when ship starts
listing.
Hard times are on the way; only this time it’ll be detention centers instead of soup kitchens.
Artificial Equity: Federal Reserve Deception written by arcticblueice,
November 09, 2006
Thank Mr. Whitney for taking the time to put such an awesome article together. I agree with you. America is on a course of destruction that could not have happened without the permission of the United States Federal Reserve. The Bubble economy has also passed the *point of no return* as you have written. Thanks again for the great read. Hang on, we are in for some hard financial times. arcticblueice
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Retired investor batting average 50% per month in Real Estate written by www.johnjasonchun.com,
November 09, 2006
Your comments reflect your occupation & education level. Landscaper & Liberal arts degree. I have about 100x your formal education & business experience! If you don't like the USA move to Canada or Mexico. I have visited & researched 65 countries. Did 500 real estate deals, jet skied 7 countries, read 15,000 pages of law, economics, real estate, per year! Vet of over 110+ lawsuits as a paralegal! You forgot that your feelings have no part in math, real estate, law, economics, taxes and global economics... Go back to Business School and get an MBA then start a blog like this!
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... written by Shawn Sanders,
November 09, 2006
John Jason Chun
I visited the urls you listed, what's the point in listing those urls, so we can see photos of you. If you have the answers to the topic at hand, or why the author of this article is out to lunch as you seem to figure. Well then lets hear it, what have you got to say, what's your take. There are all kinds of educated people with the same take as Mike Witney. We don't know what your opinions are, all we know is you claim to be educated, and you like having your picture taken and posting it on line. If your going to post urls, shouldn't they at least be relevant to the topic at hand, thanks for wasting my time.
Your "yahoo-powered" waste of cyberspace websites indicates you certainly have self-esteem issues. You are a glorified secretary with a chip on his soldier and a penchant for bragging while putting down others at the same time. Seek help. You need it.
Writings 
In the next few months, a financial crisis will arise somewhere in the world which will jolt the American economy and trigger a swift and precipitous decline in the value of the dollar. 
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Thanks again for the great read.
Hang on, we are in for some hard financial times.
arcticblueice