Inflation, Deflation, Stagflation and the Credit Bubble

Observing the world bond markets in 2006, it is apparent that the Euro has surpassed the Dollar. Thus the “pool” which the dollars are dumped into is shrinking. On March 26, 2007 the Iranian Bourse is due to start selling oil in Euros. Saddam proposed this in 2000, and the US invaded to put a stop to the threat. If Russia joins Iran, the US may face a Sisyphusian task of trying to roll back the Euro’s takeover as the world’s reserve currency.

Inflation and deflation act the increase or decrease the size of credit bubble. Banks loan it out in the good times, and foreclose in the bad times. The question is given the unprecedented level of leverage represented by all the “structured finance” products in it’s myriad of forms, derivatives, credit-swaps, CDOs, etc. will the banking/insurance industry (one and the same) be able to swallow all the assets? With Chinese central banks holding nearly 1 trillion US dollars the natural answer is that we may all wake up with Chinese landlords.

Yesterday, January 24, 2007 the US dollar hit a 14 year low against the British pound, on the same day that the Dow Jones Industrial hit a new historical high. Simply put bond investors can get a better return investing in pounds, whereas stock investors feel that their best return is in US equities. To compete for bond borrowers the Federal Reserve, which is neither Federal nor does it have any reserves, will have to raise interest rates. Raising interest will put downward pressure on corporate profits, and have profound implications for the real estate bubble, inflated by a doubling of the money supply over the last seven years.

Ford just chalked up its worst quarterly loss in its 103 year history. Worldwide overproduction of vehicles has contributed to a deflationary environment. Worldwide overproduction of goods ultimately has trouble finding solvent customers among the masses drowning in a debt financed sea of liquidity. Currently the Inflation/Deflation battle appears to be headed for Stagflation, reduced demand growth in the face of price inflation.

Historically the “life cycle” of all fiat currency is:

Inflation -> Deflation -> Hyperinflation -> Martial Law

The Fed reserve is not the first Central Bank, but it’s fourth, the demise of the previous three all related to the excess printing of money. The huge fortunes in this country are made during the bad times not the good times. As an example, the Kennedys were involved in boot legging during Prohibition. Once Prohibition ended they laundered their profits by buying up mortgages for pennies on the dollar, reaping the rewards of WWII which contributed significantly to lift America out of the Depression. Another example is Anheuser-Busch, which after surviving Prohibition, which put most small brewers out of business, grew to dominate the industry. Inflation allows wealth to be eroded slowly; deflation allows it to be confiscated quickly.

When the Treasury approached the Federal Reserve in the midst of the Depression for a loan the Federal Reserve demanded collateral on the loan. The Treasury offered up the American public as that collateral. So anyway you cut it Americans are on the hook for what ever the Federal Reserve does monetarily. Monetary policy is like a rudder on a ship, as long as it is wielded in an inflationary pattern it can be used to steer the economy, but if deflation sets in, the rudder becomes useless. This simple fact is the unspoken credo of the Federal Reserve “INFLATE OR DIE”.

What Didn't Bush Say/ Lie/Think About?

I am unable to watch President without wondering about the subjects that he didn't speak about in the SOTU which was delivered in a tone so flat that one wonders whether the sound technicians in the hall had to pump in an "applause" track for the Congress to "palm sync" to.

After making so much out of the ISG recommendations, he didn't mention any regional talks amongst the various players in the Middle East, Iran, Syria, Saudi Arabia, Somalia, Lebanon to work toward a region-wide peace. Not to mention forcing a peace on the the Israel/Palestine conflict. Without which no success will ever come to Iraq, other than more profitability for the likes of Halliburton, Parsons and Becthel who have already "cut and run" after their contracts ran out. "Mission Accomplished" indeed.

Likewise the Torture in Chief neglected to address the worldwide condemnation of the extraordinary renditions, system of secret prisons, and detention of prisoners at Gitmo without rights of habeas corpus. The Spy in Chief also didn't address the domestic uproar about executive claims to monitor American's phone conversations, emails, and physical mail.

Also not mentioned is the ongoing travesty in New Orleans. Katrina victims would love to have a one billion dollar jobs program that he is proposing for Iraq. As it it they have been abandoned to duke it out in court with major insurers in an attempt to make them honor the policies they were sold, and paid for. So much for relief for American refugees.

But small minds have small ideas. So it is not surprising to see such a small bore mind come up with proposals that don't recognize the physical limitations posed by the real world. Specifically, the difficulty of boosting the entire US's production of corn by 25 percent to meet his alternative fuels goal for 2017 didn't occur to him. Mathematically it probably fits with his fantasy proposal to balance the budget by 2012 without raising taxes.

It also didn't occur to him that those Americans who are lowest on the ladder without health coverage probably don't pay enough income tax to be able to benefit from a tax cut designed to "help" them obtain health coverage. But after seven SOTUs the American's can't expect their Commander in Chief to be able to think his way out of a brown paper bag.

On Fatherland Security he made oblique references to “give employers the tools to verify the legal status of their workers.” What he didn't say is that he is paving the way for a National Identification Card. This should fit nicely with all those databases being put together by Admiral John Poindexter in the DARPA basement at the Pentagon under his latest version of the Total Information Awareness program, which transmogrified into the Terrorism Information Awareness program, and has subsequently gone underground as codename "Topsail" due to public outcry about government collected dossiers on law abiding American citizens.

It is nice to see that he still is a compassionate conservative when it comes to multinational oil companies. His proposed doubling of the Strategic Oil Reserve will require the purchase of three-quarters of a billion barrels of oil. At current spot prices that will pump a cool 40 billion dollars into the coffers of Exxon/Chevron/ARCO/BP to make up for 14 billion that Congress just pulled out of their voracious gullet.

My hunch is that the Strategic Petroleum Reserve will be built up and saved for the use of the US military, as they use a large percentage of available petroleum and they will need it for the coming expansion of the Global War on Terror. The GWOT that will go on until there is no more oil. Can't you can see the Superbowl ads for the Sunni-Shiite Civil War Oil Company? Bringing freedom to Exxon/Chevron/Arco/BP to pursue profits wherever there is oil that we need to take from someone else.

It took the Commander in Chief 32 minutes to the push the escalation of the Iraq war, which only merited 21 words. His plan to add 21,500 troops to the 130,000 in the arena (previously as high as 150,000). This number translates to roughly 12,000 soldiers with guns on the street. The remainder of the troops functioning to support the gunmen. Dividing the troops into three shifts, we are down to 4,000 additional troops in the streets of Baghdad, a city of 5 million people. This drop in the civil war bucket is the "plan" that he and the Congress are currently debating. Fiddling while Rome burns.

Apparently one of the President's speech writers thought it necessary to disturb the President's seven year slumber by inserting references to Darfur, Climate Change, and CAFE standards which haven't been adjusted in 20 years. Poor Bush, with his 28% approval rate, probably doesn't know where Darfur is, and was hoping that he could continue using the "acid rain" page out of Reagan's play book to ignore the enormity of the problem of Climate Change. Am I the last person to recall in a previous SOTU that Bush called for a national energy policy that encourages energy consumption?

Rip Van Winkle would envy Bush's ability to slumber through the real problems facing Medicare, Social Security, and the huge fiscal deficits that endanger the Americans and their financial health and security worldwide.

Blown Up by Blowback

“We have met the enemy and he is us” -Pogo.

Mussolini predicted the rise of the Fourth Reich when business and the state became indistinguishable. Lieutenant Milo Minderbinder was one of the first geniuses in privatization of war ordering a fleet of aircraft to bomb his own American camp in Joseph Heller's novel Catch 22. So I wasn't surprised to see the news this morning was reporting that an Army helicopter crash in Iraq was most likely the victim of a shoot down using a stinger missile. They found an expended tube near the crash.

For those of you with HDD (History Deficit Disorder) A stinger is an American weapon which the US transferred in quantity to Osama bin Laden and his Mujahideen when we wanted them to shoot down Russian helicopters in Afghanistan. The stinger proved to be deadly effective and served as the magic bullet that ultimately sent the Russians packing.

In the late summer of 1983 I found myself in one of the five camps that George H. Bush, head of the CIA recruited Osama to run near Torquam, in the company of two Afghani medical students. I witnessed a piece the massive hardware transfer from the largest CIA covert action in history in support of the Mujahideen described in George Crile’s book Charley Wilson’s War.

The vacuum left behind by the departure of the Russians was filled by the Taliban, who under the tutelage of the Pakistani ISI gratefully accepted $175 million dollars each over a period of seven years from the US government. Investments that helped train and fund our current enemy in Afghanistan.

Word from Afghanistan is that parts for the Unocal’s pipeline are being flown in on C-130s which land on new concrete in Kandahar in Kabul laid down by concrete plants jointly owned by the Bushes and the Bin Laden Group. Since poppy production was up 7000% year on year, the CIA is enjoying a bumper crop of profits filling the empty C130s with tons of heroin and shipping it worldwide. Who knows, maybe they are using the funds to fuel their Premier Executive Transport planes conducting extraordinary rendition worldwide. It looks like a win-win for business and government.

Hopefully this will provide them with the necessary funds to try to overturn the resource nationalists who were democratically elected in Bolivia, Venezuela, Ecuador, Palestine and anywhere else that we feel that the leadership isn’t sympathetic to the needs of the shareholders of our multinational corporations or our terrorist client state Israel.

Our support for the extremists has led to the confluence of the interests of the NeoCons, Zionists, and Mullahs which seem to trump the interests of the other 6 billion people on the planet.

My question is who fired the missile? Shi'ia? Sunni? Kurds? Iranians? Or perhaps a CIA/MI6/Mossad funded and trained former Mujahideen/Taliban figher.

The answer may be contained in Steve Coll's Ghost Wars: The CIA provided the Islamic warriors in Afghanistan with enough explosives to blow up half of New York (page 135), and with over 2000 Stinger missiles, 600 of which appear to remain in the hands of anti-US forces today, possibly including a number shipped to Iran for re-purposing. So maybe the shoot down was the result of a re-purposed stinger.

This question brings to mind a passage from Aeschylus:

So in the Libyan fable it is told

That once an eagle, stricken with a dart,

Said, when he saw the fashion of the shaft,

"With our own feathers, not by others' hands,

Are we now smitten."

In reviewing history there is little or no history of Islamic terrorism before the US, UK and Israelis undertook the task of arming and training the likes of the Mujahideen and Hamas. So if we don’t like terrorists, maybe it it time for us to stop arming and training them. But then what would we do the Global War on Terror? How could we fatten President Cheney's Halliburton stock options without it?

Huxley, Orwell and Vonnegut all warned my of our current circumstances. Historians compare the current Imperial US to Rome perhaps because comparisons to the British Empire is too close to home. In reality we are facing the eclipse of the Anglo/American Axis of Aggression which includes the U S's terrorist client state, Israel

Our current Energyo-fascism is indicative of the twilight of an arrogant, ignorant leadership deaf to the voice of the citizens, the congress and the bi-partisan ISG.

http://glenngreenwald.blogspot.com/2007/01/collapse-of-bush-presidency-poses.html

A very perceptive and chilling comment on the psychology of the current Presidency, if you have not already seen it.

“The reason Bush violated the law when eavesdropping is the same reason Lithwick cites to explain his other lawless and extremist measures — because he wanted purposely not to comply with the law in order to establish the general “principle” that he was not bound by the law, to show that he has the power to break the law, that he is more powerful than the law. This is a President and an administration that are obsessed first and foremost with their own power and with constant demonstrations of their own strength. Conversely, what they fear and hate the most is their own weakness and submission to limitations.

For that reason, the weaker and more besieged the administration feels, the more compelled they will feel to make a showing of their power. Lashing out in response to feelings of weakness is a temptation most human beings have, but it is more than a mere temptation for George Bush. It is one of the predominant dynamics that drives his behavior.” This is what wrought the likes of Gitmo and Abu Gharib.

Certainly there is good reason to compare the Anglo/American axis to Rome, however the Romans were not even aware of the existence of the Chinese. This is where our situation is different. Undeniably the Anglo/American Axis has exposed itself to unprecedented risk through it’s energy dependence and unsustainable borrowing from the rest of the world to prop up unsustainable consumption at home.

114 years of American regime change started on Jan. 17, 1893, when Hawaii’s monarchy was overthrown as a group of businessmen and sugar planters forced Queen Liliuokalani to abdicate. The British attempted to occupy Iraq in 1929 in order to control the oil resources, the occupation failed, and it crushed the pound as the world's reserve currency. One wonders if 77 years later American regime change will meet it's Waterloo in the sands of Iran.

The New Dark Ages will be dominated by competition for scarce resources, oil, water, uranium and food. This competition will certainly feature the baser aspects of human nature in a higher concentrations that we are currently displaying. Our challenge remains is how we are to work things out together in the face of Peak Oil, Peak Food, and Peak Humanity.

I don’t suspect that the transition from the unsustainable to the sustainable will be pretty, but I am fairly sure that it is unavoidable and will be the defining issue of our time. As the world’s largest consumers we can have the greatest impact by changing our own behavior, without which there will be no future for peace, justice or civilization. It is time to re-teach ourselves how to live, who should lead us on.

Surge or Purge?

Tonight we will receive the Word from On High, as Cheney/Bush try to convince the American public of the efficacy of his own leadership. As part of his spiel he will tell us of his "New Way Forward" in Iraq.

Breaking down the numbers is usually the way I try to look at problems. Today's problem? Cheney/Bush's proposed surge or escalation of their occupation of Iraq. With roughly 130,000 troops in the arena (previously as high as 150,000) Cheney/Bush propose adding another 21,500 troops. Given the structure of the Army my military contacts tell me that puts roughly 12,000 soldiers with guns on the streets. The remainder of the troops functioning to support the gunmen. Dividing the troops into three shifts, we are down to 4,000 additional troops in the streets of Baghdad, a city of 5 million people. A drop in the civil war bucket.

88 deaths were reported yesterday in Baghdad alone. Shiia and Sunnis are locked in a civil war that promises to spiral out of control. The US's puppet government headed by Malawki is unable to exercise control over Muqtada al-Sadr's Mahdi Army.

So this is the "plan" that the Demopublicans and the Cheney/Bush regime are fighting over. Much adieu about nothing? Or is it just a extension of the existing policy with the purpose of pushing through a hydrocarbon law opening up Iraq's oil deposits to exploitation by Exxon/Chevron/Arco/BP? We shall see, but breaking down the numbers yield little more than more targets for the Shiia and Sunnis to shoot at we they get bored of aiming at each other.

The cosmic joke here is that a surge of troop in Afghanistan might help stave off the return of the Taliban, but that is not what Cheney/Bush is offering up in their smörgåsbord's of disaster spawned by the most incompetent implementation of a foreign policy since the inception of America.

Gaming Scooter's Trial

Last October I was wishing for indictments for my birthday. That week saw Scooter Libby leave the White House in a black limo. That image signified the beginning of the end for Cheney/Bush.

The indictment says Mr. Libby learned about Mrs. Wilson first from a senior State Department official, then from a CIA officer, and then from Mr. Cheney himself, who learned her identity from George Tenet, the director of central intelligence at the time. At one point, according to the indictment, Mr. Libby accosted Mr. Cheney's CIA briefer to complain that CIA officials were making critical comments to the press about Mr. Cheney's office, and mentioned Mr. Wilson's trip to Niger and his wife. This deeply improper harassment occurred a month before Mr. Novak's column outing Plame appeared. Given Plame's status a Mid-East expert this entire stunt served to degrade our already meager intelligence capabilities.

When called to account for his actions, Mr. Libby pointed his finger at a group of reporters, according to the indictment, shifting attention from himself. That prompted Mr. Fitzgerald to subpoena those journalists, and began a yearlong fight over the protection of confidential sources. Today, the jury pool has been established with 16 jurors who will listen to Scooter's "I forgot" defense. The Jury is 80% white in a town where 62% of the residents are minority. Seems the lawyers for the defense weren't able to find enough minority citizens who are sympathetic to the plight of the Bush Administration whose well-documented lies have yet to catch up with them. The jury pool also includes a former Washington Post reporter who previously worked for Bob Woodward and is a neighbor of Tim Russert, both of whom are to be witnesses in the case. Also not mentioned is that one juror is the fiancee of one of Libby's defense lawyers. Opening statements from Fitzgerald featured an accusation that Libby destroyed a memorandum documenting Cheney's influence in the outing of Plame.

Word was that Patrick Fitzgerald has long one-on-one conversations with both Cheney and Bush before interviewing everyone else. It is my sincere hope that Patrick Fitzgerald has put an airtight case against Cheney/Bush and is ready to pull the string on the entire raft of lies that have characterized this Administration since Bush’s father’s Supreme Court nominees installed him as Commander in Chief. Ridding this country of Cheney/Bush before 2008 would go a long ways to help Americans regain their heritage, rights and security.

Some Thoughts about the State of the Union

The 23rd Qualm

(Written by a retired Methodist minister.)

Bush is my shepherd; I dwell in want.
He maketh logs to be cut down in national forests.
He leadeth trucks into the still wilderness.
He restoreth my fears.
He leadeth me in the paths of international disgrace for his ego's sake.
Yea, though I walk through the valley of pollution and war,
I will find no exit, for Bush art in office.
His tax cuts for the rich and his media control, they discomfort me.
He preparest an agenda of deception in the presence of his religion.
He anointest my head with foreign oil.
My health insurance runneth out.
Surely megalomania and false patriotism shall follow me all the days of his term,
And my jobless child shall dwell in my basement forever

Mission Statement

In the way of introduction, there's is someone who is wrong on every issue that we can discuss, and it it me. Doctor Wrong. With all the competition to be right, be it Christians or Republicrats, I figure that the pastures must be greener and less crowded on the wrong side of the fence. So in the coming daze, I will endeavor to present the wrong side of the issues, so that all those on the right side will be feel vindicated and be able to point out those who are wrong.

For all of you who have been in the wrong, have wrong ideas, wrong beliefs, wrong brains, I welcome you, and invite you to join me in venting our wrong points of view.