Common Cents

China lends us a lot of money.  China is going through growing pains at the same time the FED raised interest rates, ever so gently.  But even a gentle raise ripples through strong economies, and can damage weaker ones.

Stocks over a medium term and bonds over a short but precipitous term react badly to interest rate hikes, especially on the heels of the Feds quadrupling of the money supply via Quantitative Easing.  Yup that’s quantitative alright.  The prayer here is that all these extra dollars in float STAY in M2 meaning stay invested in stocks and bonds and real estate.  If not, and some folks sell stocks to buy other things (rental properties, land, gold, silver, platinum, fancy cars, more houses), then it leaks back into the M1 supply and real live inflation is guaranteed, with the hope it doesn’t go to 700% a year a la South American countries at times.

Top this off with wars that cost at LEAST $250 million per DAY plus over a million non combatants dead, plus the expansion to 8 countries in the Middle East from Bush’s 3 (will give Pakistan to Bush, but Obama has done the largest damage there, and for what?  Did it stop Isis?  No! It did cause 4.5 million refugees so far). and the gnarly $18,000,000,000,000+ national debt, and you have a case for eminent “collapse” or “recession” if the world’s central bankers are not adept at squeezing more life out of this house of cards called “Build An Economy Via Debt.”

So, with downward pressure on the US stock market coming from three prongs: no more massive cash flow into wall street from Washington (quantitative easing) plus higher interest rates, plus global economies showing signs of deterioration, and it appears 2016 could be a LULU.

Duck and take cover in non traditional investments that can provide income or at least capital retention.

 

Enjoy!

Doug

 

PS, ISIS would be the wet dream of a tyrant like Henry “Nobel Peace Prize” Kissinger.  You see, by pulling out, Obama, AND EVERYONE at the Pentagon, General Dynamics, Raytheon, and all other defense contractors KNEW that the Sunni Shia divide we had created by switching sides from Sunni (who we favored form the 70s until Saddam Hussein killed the Curds (on behalf of Turkey who requested it, and the US Government that brokered the chemical weapons from Germany that were used to exterminate) to Shia, by ousting the Baathists, and putting in a weak Shia government in Iraq.

These same shenanigans (strategies is too kind a word) worked in Vietnam, when China and Russia had more than three boarder skirmishes of THEIR OWN countries, after we pulled out of Vietnam.  Hence the Kissinger reference.  Pull out of the middle east, and follow along on the newsreels (carefully orchestrated by Armed Forces Television) as we see Shia and Sunni battle it out for “King of the Oilfields.”  Maybe someone can develop a game that will be based on exactly this, with the USA only firing form a distance, or bombing or droning which ever side gets a little lead.  Obama had SOME NERVE saying “we can’t afford a continual ground war in the middle east.”  Jesus, he’s right, but he’s the captain of the 7 out of our 14+ years there, with ONE MORE YEAR TO GO, for God’s sake.  he may be impotent in front of the US Congress, but watch his missiles soar without their approval asked for or needed.  Oh Patriot Act must die.

So now it’s Saudi Arabia versus Iran — guess they felt left of of this conflagration, so  they may enter it more directly now.  I pray we are ALL THE WAY out when this one cranks up, but isn’t USA foreign policy the devil on a hover board?  Wait, no, Silver Surfer’s board with full doo daddery.Our foreign policy is far more dangerous than just “Obama doesn’t know what he’s doing,” indeed, the Freemason Barack knows exactly what he’s doing and will leave behind the most dangerous situation the world has ever known, and who better than an Eastern Star lady to pick up where he left off: Hillary Rodham Clinton, and her money-grubbing, chief fundraising, labor-crushing, NAFTA, GATT 2 and World Trade Organization founding, environment trashing, world wage-slave creating husband Bill Clinton, sitting in as “adviser?” (And these folks are characterized as LEFT WINGERS!?!?!?)

 

#Chapelhill is About Peace (and brotherhood movement)= CHAPS

Deah with, from left, his wife, Yusor Mohammad Abu-Salha, and her sister Razan Mohammad Abu-Salha

in a Facebook image.

Let’s all be chaps. I mean friends,not some division of the underpaying, overcharging Ralph Lauren Polo products. First, another prayer (we all pray to the same God ok?) for Yusor Mohammad Abu-Salha, 21; her husband, Mr. Barakat, 23; and her sister, Razan Mohammad Abu-Salha, 19.

The real enemies, if anyone at all, are those decimating the earth, getting a major profit from the hard work of underpaid labor in Asia, South America, and, um the USA, not to mention India and the Middle East in Specific.

People of all denominations and spiritual beliefs need to come together to save the earth, demand a living wage, replace the hogs at the top of the status quo, and use democracy (when available) to change the laws to create a system of social safety nets and RESOURCE PRESERVATIION everywhere from the Amazon rain forests to the entire oceans of the world.

Why not take the world’s massive underemployed and unemployed population and have them scoop plastic out of the ocean.

Why not ban plastic, not just plastic bags?  What’s wrong with glass?

The chance now, to not just honor the lives of the victims, but to use this to unite EVERYONE on the planet in a movement to save the planet and create *peace* for everyone not just the gated community people.

For international reader: There is no place better than Chapel Hill to start an NGO, to start an activist movement, to take back the planet for everyone.

Massive changes of laws must occur for this to work out. GATT 2, GATT 1,NAFTA and almost any other free trade agreement is set up to profit from cheap labor.

Labor unions which brought us the best pay and best working conditions and best lives possible, are now powerless as any strike can be met with “ok then we will just move the entire line of manufacturing abroad.”  No More strike ,and no more jobs at all in the USA.

Everyone except the shareho0lder class has been hurt by these pernicious WTO rules which supplant national sovereignty with “all-the-money-to-the-rich” schemes that resemble feudalism.

Fundamentalsim is scary in the Christian world and not exactly helpful anywhere else.  Fundamentalism means “my way or the hiway” or “my way or death to infidels” but that means perpetual war, and the USA has attacked 91 times since World War II, notably in Korea, Vietnam, Nicaragua, Serbia, Iraq (1,2,3) Afghanistan, Pakistan, (where next, Ukraine or Korea again?)

As an American I’m willing to give up my time to prove that as human beings we are as nice as anyone else, and that it is our GOVERNMENT that smells out loud.

This is true for everyone I’ve met either on the International Peace Walk in Russia in 1987 and again in the USA in 1989 or in my work in South Korea, or in the 31 other countries I’ve been in.

But this is about the movement, that should be larger than Occupy because the goals are even more radical in the face of this divided world.  DO NOT LET THE BIG WIGS AT THE TOP DIVIDE US ANY LONGER!

It’s our PLANET, God help us make CHAPS a reality.

Genocide, Slavery, Greed

We cry for the slavery that led to such wealth,

This is not just  the land of the free.

We witness genocide all over this earth.

What can we do to end greed?

We cry for the land, full of modified crops

We must work to save human life.

What will our grandchildren have to live through

Since our appetite causes such strife?

The oil wars that started a decade ago

Have moved toward the Caspian Sea.

We are the dissidents, loud, without fear,

Even if we are cut at the knees.

We cry for the news they keep off TV,

The grapevine could snap any day.

Disinformation is the age we live in,

So who’s going to show us the way?

The answer is simple, we grow as a team,

A new brotherhood in the light.

We must build the village, invite all your friends,

This is no time to give up the fight!

They have all the bombs, the juntas abound,

Monsanto is spraying the poor.

We must dig our hands into arable land

Or genetics will foul every spore.

Profit mongers have sucked the earth dry,

We must reclaim all that we can.

Industrial China, the last frontier,

Soon money will own every man.

The kids on the streets are locked-down together,

Push a bike, and you could get ten years!

All this is forced because we stopped caring,

Yet some offer blood, sweat and tears.

We couldn’t stop bosses from shipping our jobs,

The replacement is for-profit jails.

Our schools are rotting, so teach if you can,

Where it counts, not Harvard or Yale.

The time is upon us, united as friends

We can make anything grow.

Come join the party, sing and dance all the day,

Tomorrow we get out the vote.

We cry for the genocide, slavery, greed

That persists after thousands of years.

It’s late, but there’s time, if we really work hard

We can stop the torrent of tears.

Seoul Rumination 2

My friend is right, she says the world has to raise the level of love. It has to be that this is done under the governmental level and by something akin to a show of hands. So who is with it? Who says if we all love each other we can end this stupid run of resource grabbing for profit, of 2% owning nearly everything, of hard workers ending up in debt, of university tuition enough to bankrupt a millionaire, of multiple wars at the same time, of a country with 5% of the people sucking up nearly 30% of the resources, of of non responsive governments, of wage slavery, of pollution royale, of violence-promoting PC games, movies, tv shows, novels, tv news. I mean 120 gun deaths a day no longer means jack diddly do to most Americans. OK so we all love each other. Jesus would be proud. WWJD Uh HUH, Jesus would not have been in favor of George W. Bush, or Barack Obama’s wars. not at all. Yet, many “Christian” churches all but beg their parishioners to vote Republican. HUH? Repeat: Who else could piss of left and right at the same time so completely as Obama? The idea that he’s too far left is scary. I mean drone attacks, wars or mini wars in Pakistan, Tunisia, Libya, now backing the Fascist pigs in Ukraine…war games coming in Poland in July (look on a map friends, this is nuts).. Go into archives and dig up “US Role In Globalization” for more on this.

Barf Bag Poem #15

Barf Bag Poem #15

Smith’s diamonds and water,
Now proofed in reverse, splatter
onto boulders, jutting bedrock,
strewn remains of the era soon
to be known as the age of
consumption. Persistent rabbit
sniffs, paws and rejects the booty.
Even water, now spoiled by man,
no longer attracts migrations. Algae
flourishes, geese do not. One Korean
trudges up to boulder knoll, pregnant,
she stops painting, but worries what
type of earth will provide her children.
Dwindling energy means a life with
less. Once abundant wildlife has
already relearned most basic realities.
Can we adapt quickly enough? She
smiles, confident we will figure it out.

Copyright, Doug Stuber, 2005. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given, and with appropriate and specific direction to the original content.

How America Was Packaged and Sold

I never reblog, this is a first. I kinda like this one too much though.

The Story of How America Was Packaged and Sold
By Porter Stansberry
Friday, October 25, 2013
A building – One Chase Plaza – was sold last Thursday in New York for $750 million.

Not surprisingly, the building was bought by a Chinese asset-management firm, Fosun.

Today’s essay is about this deal… and the massive economic forces that lie behind it. The story of One Chase Plaza is the story of how America was sold to its bankers. It’s the story of how inflation plundered our wages. It’s the story of how credit, rather than savings, came to dominate our economy and transform our way of life.

It’s the story of how America was packaged and sold to our foreign creditors – mostly the Chinese…

Since 1996, the Chinese have made 51 major acquisitions in America, including deals to own or control iconic U.S. assets like computer giant IBM, carmaker GM, meat producer Smithfield Foods, U.S. power company AES Corp., major airplane lessor International Lease Finance Corp., investment bank Morgan Stanley, and private-equity firm Blackstone Group. They’ve also bought trophy real estate around the U.S., like the GM Tower.

These deals didn’t happen by accident. They happened because the U.S. continues to consume far more than it produces. We finance this consumption with debt that’s owned in large measure by foreign creditors. Take the U.S. Treasury debt, for example. At nearly $17 trillion, this is the world’s largest pile of obligations. If you exclude Treasury obligations held by the U.S. government and the Federal Reserve, 54% of the remaining obligations are held by foreign creditors. And these foreign debts continue to grow rapidly – at about $500 billion annually.

Debt service on these obligations allows our foreign creditors to continually buy America’s best assets. Today, foreign creditors directly own and control U.S. assets worth more than $25 trillion. That’s roughly a third of all the wealth in America. And that’s far more than what Americans own overseas: Americans only own about $20 trillion of foreign assets.

Every year that goes by, our foreign rivals will earn more on their American assets than we’re able to earn on our foreign investments. They will grow wealthier and wealthier… while we become poorer and poorer in comparison.

As Warren Buffett famously said about this situation 10 years ago: “We have entered the world of negative compounding – goodbye pleasure, hello pain.”

How did this happen? Why is it continuing? And why is it almost certain to lead to an enormous currency crisis? The story starts with One Chase Plaza…

In 1957, America was the most powerful country in the world. We controlled roughly 75% of all of the world’s economic activity, and we owned the three most important corporations in the world: General Motors, Exxon (Standard Oil), and Chase Bank (the Rockefeller Bank). Our country’s products – like the ’57 Chevy – were the finest available in the world. We dominated every foreign competitor in manufacturing, energy, banking, and just about every other industry, too.

At the time, you might recall, our dollar was literally as good as gold: By international agreement, our foreign creditors could exchange their dollars for gold for $35 per ounce at the Federal Reserve Bank of New York. This firm limit on the value of the dollar protected the middle class in America, guaranteeing that every wage-earner in the economy would share in gains from increased productivity. As productivity increased, the dollar bought more goods and services. As a result, real after-tax income increased. What was good for GM actually was good for America, too.

The firm value of the U.S. dollar also protected America from the temptation of credit. By linking the dollar to gold, expansion of credit required an increase in gold reserves. Under these rules, the supply of additional gold bullion (through new production or trade) limited the banks’ ability to create new credit.

This made credit expensive (in real terms) and encouraged savings. Those savings then powered stable investment into our economy. Thus, the U.S. government debt actually declined in 1957, falling by $2.2 billion. Surely, no sane person in 1957 imagined that would be the last time the total debt of the U.S. government would ever again decline on an annual basis.

In 1957, work also began on the first modern skyscraper in lower Manhattan. Commissioned by legendary banker David Rockefeller, One Chase Plaza featured space-age materials (anodized aluminum panels) and soared 60 stories high. Covered in glass, it reflected light, unlike the older sandstone buildings around it that absorbed light. The building would serve as a glowing new headquarters for Chase Bank. It was a towering statement proclaiming the bank’s growing influence around the world.

Even today, One Chase Plaza is a signature piece of New York real estate. It remains the 15th-tallest building in Manhattan. Surrounded by Pine, Liberty, and Nassau streets, it offers tenants a direct connection to the Nos. 2 and 3 subway trains. It is even thought of as a key part of the infrastructure of the United States – housing the largest privately owned bullion vault, five stories underground.

Winston Churchill remarked that “we shape our buildings; thereafter they shape us.” Just 10 years after the completion of Rockefeller’s global banking trophy at One Chase Plaza (construction was completed in 1961)… the link between the dollar and gold would be permanently broken.

Richard Nixon closed the gold-exchange window in 1971. America reneged on its debts to foreign creditors. Even more important, banks no longer had to back up their loans with reserves linked to gold. Now, all public and private credit would be backed by “Federal Reserve notes” – so-called “fiat,” or paper, money.

As a result, banks no longer faced any physical limit to how much credit they could extend. And the U.S. dollar no longer had any firm value. Nothing guaranteed the real value of wages. Nothing linked increases in productivity to increases in wages. Nothing protected the middle class from the rising tide of inflation… or the soaring power of the banks.

You can see how the change is destroying the middle class. Today, gains in productivity benefit our creditors… not our wage earners. Take a look at this chart, based on one originally published by the Economic Policy Institute think tank. Based on Bureau of Labor Statistics figures, the chart shows the cumulative growth in hourly productivity for the total economy compared with cumulative growth in inflation-adjusted hourly compensation…

These changes transformed our economy and the nature of capitalism itself. No longer would our economy be driven by investments fueled by savings. Instead, our economy is funded by debt.

Debt of every kind has soared. Measured in inflation-adjusted dollars, America’s total debt has increased from $5 trillion in 1957 to more than $60 trillion today – a 12-fold increase. Meanwhile, our gross domestic product has only increased from $2.5 trillion to $16 trillion, a six-fold increase. As a nation, we’ve mistaken credit-fueled booms for true prosperity.

But there is a major difference, of course. Credit must be repaid. While real prosperity leads to greater abundances, increasing debt produces greater burdens. The cost of servicing our debts has become so large that our creditors now routinely buy our country’s best assets using the debt-service payments we send abroad. Ironically… the “butcher’s bill” of servicing our debts now includes the iconic building that launched America’s credit bubble.

On August 16, the New York Times broke the story that One Chase Plaza was for sale. JPMorgan Chase & Co., the successor entity to David Rockefeller’s bank, was shopping the building through CBRE, the international commercial realty firm. Speculation at the time was that the building might be converted into condominiums and fetch $1 billion. Last Thursday, news broke that Fosun bought the building for $750 million.

And so… America has become just a little bit poorer. Our ability to generate wealth has been marginally decreased. One of Manhattan’s most valuable buildings has been sold. The rents will now be sent overseas to China. The real earning power of our currency has declined just a bit.

For now, the changes seem small and have such a minor impact that hardly anyone notices. But the compounding nature of this shift in wealth is incredibly powerful and very, very hard to stop. Over time… real wages will continue to fall. Over time… our ability to service our debts without additional inflation will erode. (That’s why the Fed can’t stop its bond-buying program of quantitative easing.)

One day, no one knows when, the world will simply decide that we’re not creditworthy anymore. We will have burned too much of the family furniture trying to keep our house warm.

On that day, you won’t want to be holding U.S. dollars or Treasury bonds… or be dependent on the U.S. government. When that day comes, people will look back on the sale of One Chase Plaza and realize… it was one of the last, most obvious warnings, that something had gone badly wrong with America.

Regards,

Porter Stansberry