Introduction
Extraordinary times of economic crises are upon us and--as
the rate of change of historical processes is exponentially
increasing and the global economy becomes more and more
interdependent--these crises are coming sooner and harder
and more system-wide than most would anticipate, especially
citizens of goodwill for whom this report is intended. The
present crisis is fueled, as is the case in most of recorded
history, by the still unresolved collective psychological
phenomena of ignorance-based greed, fear and ambition, which
emotions have been craftily amplified and manipulated by
corporations, the international financial-monetary complex,
think tanks and semisecret organizations. And these overlapping
groups have amplified and manipulated these tendencies into
individual actions and national policies that for most people
and nations are self-defeating in the long-term, but very
profitable for this small layer of the international power
elite and its cadre of corrupt politicians, Orwellian intellectuals,
economic hitmen and other agents of deception and enforcement.
This little report intends to give 1) a sense of the precarious
state of the international economy and informed speculation
of what is to come, 2) some advise for personal preparedness,
3) warnings about the way the power elite will use the ensuing
economic and political distress to further its own dangerous
agenda, which same agenda brought about the crisis in the
first place, and 4) inspiration for some clear-headed thinking
about possible solutions by dipping into the mind and spirit
that originally moved the founding fathers of the Swiss,
Dutch and American republics into political action and revolution.
Crises, besides being quite painful, are also opportunities
to address and correct underlying structural imbalances.
Quotes
For a sense of the economic dangers we are in, just read
the following recent quotes from reputable sources, starting
with some warnings from financial analysts for the possible
crises that are now upon us.
"Housing bubbles heavily entangle banks and the whole
financial system as lenders. For this reason, as a matter
of fact, property bubbles have historically been the regular
main cause of major financial crises." The
Richebacher Letter (June 2005)
"The implosion of subprime will only be the beginning
of the process. We don't even believe the fallout will be
contained in the mortgage lending market, let alone subprime.
Risks pervade the entire financial system." Markets
at a Glance (March 2007)
"The Bank for International Settlements, the world's
most prestigious financial body, has warned that years of
loose monetary policy has fueled a dangerous credit bubble,
leaving the global economy more vulnerable to another 1930s-style
slump than generally understood." The
Sunday Telegraph (UK), 6/25/07
"Ameriquest Mortgage Co., once the nation's largest
subprime lender, will close with barely a whimper, after
the other assets of its parent company were sold Friday
to Citigroup Inc." Associated Press 9/1/07
"At current rates so far this year, RealtyTrac expects
foreclosure filings to hit two million in 2007, or roughly
one per 62 American households - a rate approaching heights
not seen since the Great Depression." New York Times
9/1/07
"The belief that Europe would somehow be insulated
has been tested over the last two weeks. Two German banks
have required bailouts on subprime bets - Sachsen LB for
Eu 17.3bn [$23.400.000.000], IKB for Eu 8.1bn." The
Sunday Telegraph (UK) 8/23/07
"The current turmoil in the financial markets has
all the characteristics of a classic banking crisis, but
one that is taking place outside the traditional banking
sector, Axel Weber, president of the Bundesbank, said at
the weekend [of the Fed's yearly meeting at Jackson Hole,
Wyoming]. … Some Federal Reserve policymakers also
privately see comparisons between the current distress in
credit markets and the bank runs of the 19th century, in
which savers lost confidence in banks and demanded their
money back, creating a spiraling liquidity crisis for institutions
that had invested this money in longer-term assets."
Financial
Times 9/2/07
"We are at an end of an era, living through the worst
financial panic in many decades. Now begins global financial
instability. It is impossible to speculate how long today's
turmoil will last--but there now exists an uncertainty and
lack of confidence that has been unparalleled since the
1930s--and this ignorance and fear is itself a crucial factor.
The moment of reckoning for bankers and bosses has arrived."
Gabriel
Kolko, 8/29/07
"Running through this whole drama is a larger theme,
one that nobody is talking about and that can't be cured
by fiddling with interest rates or throwing liquidity at
banks making too-risky loans. The reason the modern central
banking system is prone to periodic crises and market failures
is that it is a Ponzi scheme, one that is basically a fraud
on the people. Like all Ponzi schemes, it can go on only
so long before it reaches its mathematical limits; and there
is good evidence that we are there now." Ellen
Brown 9/3/07
What is to come?
Well, look for other imbalances in the economy and figure
out how they might suddenly adjust. In other words, look
for bubbles and expect them to pop in their own peculiar
way. For example many of the high-risk hedge funds--the
preferred unregulated investment vehicles of the super-rich--are
going belly up left and right as they have been investing
in asset bubbles that are popping. With them might go the
415 trillion dollars derivatives market, which is probably
the biggest and most dangerous bubble of all, for it is
at least 8 times the entire world economy. For understanding
the workings and dangers of this market the following metaphor
might be very apt:
"But, the real answer to what a derivative is, is
to look at it in terms of a dog and fleas. During the 1980s,
you had the creation of a huge financial bubble. This was
the miracle, the Reagan-Bush economic miracle. And, you
could look at that as fleas who set up a trading empire
on a dog. And they're trading more and more -- they build
up their trading empires. They start pumping more and more
blood out of the dog to support their trading, and then
at a certain point, the amount of blood that they're trading
exceeds what they can pump from the dog, without killing
the dog. The dog begins to get very sick. So being clever
little critters, what they do, is they switch to trading
in blood futures. And since there's no connection -- they
break the connection between the blood available and the
amount you can trade, then you can have a real explosion
of trading, and that's what the derivatives market represents.
And so now you've had this explosion of trading in blood
futures which is going right up to the point that now the
dog is on the verge of dying. And that's essentially what
the derivatives market is. It's the last gasp of a financial
bubble." [Interview of John Hoefle, "Hedge Fund
Rescue, and What to Do with the Blow Out of the Bubble?,"
EIR Talks (October 2, 1998); Ellen Brown, Web of Debt]
Besides the housing bubble, derivatives bubble and hedge-fund
bubble there are some more that are ripe to pop. For example
the overvalued dollar--overvalued because of the chronic
U.S. trade deficit, which in 2006 was $758 billion--might
decline to yet unanticipated depths in order to adjust the
enormous import-export imbalance. This might be good for
the US economy in the medium term, for it has to manufacture
again the items that are now made in foreign countries.
But for the short term it will mean that returning dollars
will be used for purchasing US assets and it might trigger
a sharp decline in consumption, because prices of imported
goods have gone up too high and domestically manufactured
substitutes are not yet available. The other bubble to pop
is the "carry trade" bubble, in which massive
amounts of money are borrowed at low short-term rates (mostly
Japanese currency) to fund higher yielding long-term investments
(mostly US bonds). If the short-term rates go up, as is
happening, the yield will go down, and, in the end, the
investors will have to liquidate their long-term positions.
The trigger for the unraveling of this unsustainable speculative
frenzy in these different bubbles might be in the way the
USA futures and options markets influence the stock markets
worldwide during the so-called quadruple-witching-hour when
many of these bets on stocks expire every third Friday of
March, June, September and December. When preceded by a
period of erratic fluctuations (like in September-October
1987) and now increasing uncertainties about the real value
of assets like houses, stocks, the dollar and all derivative
contracts derived from their, now very uncertain, underlying
value, we might see on the third Friday of this September,
the 21st, stock prices going downhill in rapid tempo and
have another crash on our hands. If this scenario will play
out is anybody's guess as the most important factor will
be the unpredictable psychology of big and small investors.
Will they panic or will government agencies and central
banks--the lenders of last resort--reassure them again,
when they step in to bail out the overstretched players?
If the latter be the case inflation will increase and new
bubbles will appear and the system will be saved for another
season till the new bubbles go pop. If the market crashes
we'll have to see how far and deep the crisis might develop
with possible runs on banks, stores and large-scale disruptions
in the economy. Again, this is only a highly plausible scenario.
Other events might pull the trigger too, like another false
flag terrorist attack, or an other financial time bomb that
might go off like the recently
identified one in the European short-term money market.
Individual Preparedness
Given the above facts and possibilities, and mixed with
a good dose of caution and healthy paranoia, the following
advise is pretty common sense.
1) Have three weeks of food provisions at hand, because
severe disruptions at the level of grocery retailers might
happen when financial instruments regulating the flow of
goods might get temporarily in disarray, or if, besides
runs on the banks, there might also be runs on stores, which
will take time for them to recover from.
2) Withdraw a good amount of cash from your bank accounts.
Dollars at home are to keep financing daily purchases, pay
bills or even pay rent or mortgage in case banks close down
(which will be only temporarily, though not sure for how
long). In case banks close, immediately re-negotiate rent
or mortgages to a minimum. Keep some money in the bank to
keep paying bills etc. in usual way when banks stay open,
and to convince creditors, in case of bank closure, that
you do have money, but that you can't get at it.
3) Transfer some of that money into gold and silver. This
to park money in real wealth as a hedge against inflation,
which is already happening at a higher rate then the massaged
government numbers are telling us. Silver, especially small
coins (pre-1964), is also good for smaller transactions
when the crisis deepens and gold and silver will become
more acceptable as ways of payment.
4) Change investment-portfolio into an ultra-conservative
one and maybe get out of the stock market altogether.
5) Be very careful about taking out home-equity loans. With
house prices falling you might end up without any equity
in your home. Have a lawyer also read over the contract
carefully, because, apparently, those who have taken out
such loans have less protection against re-possessors than
those who didn't and only owe a traditional mortgage.
6) Read, study and act on the article "Emergency
Preparedness" for more tips on preparedness.
7) Meanwhile pray for the following:
· The best possible course of deflation of the speculative
housing bubble, stock market bubble, derivatives bubble
and all other imbalances in the economy
· The protection of responsible home-owners from
foreclosure
· The protection of responsible community banks from
bankruptcy
Opportunities for and by the Powers That Be
When the situation worsens count on the fact that government
commissions, think tanks and intellectuals of all stripes
will offer their solutions to the crises. Expect more government
intervention and more cheap money to solve the problems,
like Bush's recent offer to help the sub-prime mess by having
Freddie Mac and Fannie Mae step in with their own lines
of credit and by suspending certain tax liabilities. For
many homeowners and investors this might be a welcome, though
temporary, relief, but for the economy in general it will
mean more inflation, a larger federal deficit and another
delay in the necessary structural overhaul of the basics
of the economy and banking system. Sure, Bush wants some
reform of the mortgage market by proposing more transparency,
accountability and education, but these measures are calibrated
more for the benefit of the system itself than to have people
start thinking about its questionable fundamentals and demand
a real structural change.
Other policies that might be promoted by the power elite
when an economic downturn happens are the following:
· From the left we might expect the revival of New
Deal policies like public credit and infrastructure projects,
maybe also "a citizens' basic income guarantee and
a National Dividend" as proposed by Richard Cook in
an article
at globalresearch.com.
· From the right, expect policy proposals that will
fork over money from taxpayers to bail out the irresponsible
lenders and borrowers and their devalued assets.
· Internationalists will promote the IMF to step
in to stabilize the dollar and solve the US trade deficit.
This "help" will come with conditions that will
place many aspects of the US economy under the control of
this international ministry of economic affairs.
· A more far-fetched, but not implausible, scenario
would be the further promotion of a North American Union
of the United States, Canada and Mexico with its own currency,
the Amero. Many steps have been taken into that direction
already under the Security and Prosperity Partnership organization.
Of course, collectivist policies will have a chance of
success as long as people don't start thinking for themselves
and demand federal and state government to intervene.
Opportunities for and by the People
Though the power elite might be better positioned to take
advantage of the crisis and promote its own agenda, at the
same time there will be also a great opportunity for the
people to wake up, educate itself and develop sound proposals
for an economy that is for, by and of the people and not
its nemesis, the international financial-monetary complex.
As the battle over monetary policies between the constitutionalist
faction and the oligarchic faction has a deep and not very
well known history it will be good to start with some history
lessons, before we, as the proverb goes, repeat history's
mistakes. In that light it would be advantageous to have
studied the following material:
· "The
Money Masters" Outstanding documentary directed
and narrated by Bill Still.
· Tragedy and Hope: A History of the World in
our Time by Carroll Quigely. Review
· The War on Gold: How to Profit from the Gold
Crisis by Anthony C. Sutton
· "The
Capitalist Conspiracy: An Inside view of international Banking"
Documentary written and narrated by G. Edward Griffin.
· "The
Relationship Between Liberty And Economy" Some
pertinent quotes from Gary Jacobucci
Based on the above research the following investigations
and policy proposals will hopefully make some sense:
· Further investigation of the Federal Reserve System
and those financial institutions devising and trading exotic
loans and derivatives.
· The development and implementation of sound monetary
policies by the US Congress.
· Calling for an in-depth audit, structural reformation
or possible closing down of the Federal Reserve System by
the US Congress on behalf of the American people.
· Possible re-instatement of an asset-based currency
like the gold standard, but not before a thorough reformation
of the banking business and the retiring of the national
debt through an act of Congress.
· Outlawing hedge-funds and exotic lending practices.
· Congressional investigation of the mega-foundations
and think-tanks, especially the Council of Foreign Relations
and the groups for which it is doing most of the heavy work
in long-term policy planning, like the Bilderberg conferences
and the Trilateral Commission.
Much more could be added to refine and underpin this report,
but for now, being confident that a clear enough picture
has been presented, educate yourself, prepare, communicate
with fellow citizens, pray, sit tight, don't panic and contemplate
political action.
Sources and Articles
The
Daily Reckoning
Daily perceptions of the economy by a bunch of skeptics
The
Richebächer Letter
Foremost analyst of the libertarian Austrian school of economics.
Unfortunately Dr. Kurt Richebächer just deceased. The
letter will continue and hopefully his book will be finished
and published soon. For an in-depth, but shorter analysis
of the American economy read his "Doomsday
for the Dollar: Why the Dollar Will Crash and How You Can
Profit"
The
August Review / Global Elite Research Centre
Web site of Patrick Wood, former co-worker of the late Prof.
Anthony C. Sutton.
The
London Bullion Market Association
Daily statistics on the prices of gold and silver
============================
Article: War Drags the Dollar Down
Author: Ann Berg
Source: Antiwar.com 3/15/07
URL: http://antiwar.com/orig/berga.php?articleid=10671
Excerpt: See the faint jet plumes overhead? Once soaring
high through the celestial sphere of finance, the dollar
is starting to lose orbit - tugged by the drag of war.
But this time it's different. It's different because war
is being waged in a monetary climate that has no precedent:
an inflationary fiat monetary system, a derivatives bubble,
a pesky PATRIOT Act, and a bulging trade deficit with China.
The confluence of the four spells trouble for the dollarized
system, a system that broke away from the gold-backed Bretton
Woods arrangement in 1973.
============================
Article: Housing Bubble: A Rude Investigation / A Daily
Reckoning Whitepaper Report
Author: Eric J. Fry, Executive Editor - The Rude Awakening
Source: The Daily Reckoning
URL: http://www.dailyreckoning.com/rpt/Housing-Bubble.html
Excerpt: There comes a time in every man's life when he
seeks to become the lord of his own castle…rather than
the tenant of another lord's castle. There comes a time
when he wants to break free of the tyranny of landlords
and rent checks…to own his own home.
Let's ignore the fact that he is merely transferring his
indentured servitude from a landlord to a mortgage lender,
he FEELS that he "owns his own home."
So what happens when the security of this lifetime investment
is threatened? What happens when the housing bubble hisses
and finally bursts, when his castle comes under siege? With
his back against the wall, Mr. Homeowner must face some
hard facts.
============================
Article: Emergency Preparedness
Author: The Hearts Center Emergency Prepteam
Source: The Hearts Center
URL: http://www.tucsonheartscenter.com/
EmergencyPreparedness.html
Excerpt: Every area in the country is vulnerable in some
way even if it's a power outage or being snowed in, it's
nice to be prepared with flashlights, canned food, battery
operated radios, etc.. The Mormons have been preparing like
this for a long time. They find that preparedness also helps
in times of economic hardship such as the loss of a job.
Even if they are not affected by a disaster they are able
to assist their brothers and sisters who have been affected
by sharing out of their stored supplies. Another benefit
of emergency preparedness is the savings on food by buying
quantities on sale or buying in bulk.
============================
Article: Greenspan on Euphoria, Bubbles and Fear
Author: Greg Ip
Source: Wall Street Journal, September 7, 2007
URL: http://blogs.wsj.com/economics/2007/09/07/
greenspan-on-euphoria-bubbles-and-fear/
Excerpt: Through his career at both the Council of Economic
Advisers under President Ford and Fed chairman from 1987
to 2006, he learned "the best of models don't work
all that well [because] the underlying structure that we're
endeavoring to model is continuing to morph into something
else all the time. There's something we don't model appropriately,
which is a profoundly important statistic, and that is the
unchanging, innate character of human nature. The behavior
of what we are observing in the last seven weeks is identical
to what we saw in 1998, what we saw in the stock market
crash of 1987, I suspect what we saw in the land boom collapse
of 1837, an certainly 1907," when a major bank panic
was only stopped by the intervention of J.P. Morgan.
============================
Article: It's Official: The Crash of the U.S. Economy has
begun
Author: Richard C. Cook
Source: Global Research, June 14, 2007
URL: http://www.globalresearch.ca/
index.php?context=va&aid=5964
Excerpt: It's official. Mark your calendars. The crash
of the U.S. economy has begun. It was announced the morning
of Wednesday, June 13, 2007, by economic writers Steven
Pearlstein and Robert Samuelson in the pages of the Washington
Post, one of the foremost house organs of the U.S. monetary
elite. … The fact that the crash is now being announced
by the Post shows that it is a done deal. The Bilderbergers,
or whomever it is that the Post reports to, have decided.
It lets everyone know loud and clear that it's time to batten
down the hatches, run for cover, lay in two years of canned
food, shield your assets, whatever.
Those left holding the bag will be the ordinary people whose
assets are loaded with debt, such as tens of millions of
mortgagees, millions of young people with student loans
that can never be written off due to the "reformed"
2005 bankruptcy law, or vast numbers of workers with 401(k)s
or other pension plans that are locked into the stock market.
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