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Daily Digest - Dec 24

Wednesday, December 24, 2008, 8:08 AM
  • Japan Should Scrap U.S. Debt; Dollar May Plummet, Mikuni Says
  • Protectionist dominoes are beginning to tumble across the world 
  • MIT's Thesis Advisor to Bernanke Take
  • States set to impose bevy of new taxes 
  • Feinberg Despised in Wisconsin Where Cerberus Lives Up to Name
  • U.S. falls deeper into recession
  • Legitimacy Dwindles
  • "Mean Markets and Lizard Brains" FSN Newshour Book Interview
  • Laissez-Faire Capitalism Should Be as Dead as Soviet Communism 
  • U.S. Home Resales Fall; Prices Drop by Record 13.2% 

Economy

Japan Should Scrap U.S. Debt; Dollar May Plummet, Mikuni Says 

Dec.
24 (Bloomberg) -- Japan should write-off its holdings of Treasuries
because the U.S. government will struggle to finance increasing debt
levels needed to dig the economy out of recession, said Akio Mikuni,
president of credit ratings agency Mikuni & Co. 

The dollar
may lose as much as 40 percent of its value to 50 yen or 60 yen from
the current spot rate of 90.40 today in Tokyo unless Japan takes
"drastic measures" to help bail out the U.S. economy, Mikuni said.
Treasury yields, which are near record lows, may fall further without
debt relief, making it difficult for the U.S. to borrow elsewhere,
Mikuni said.

"It's difficult for the U.S. to borrow its way out
of this problem," Mikuni, 69, said in an interview with Bloomberg
Television broadcast today. "Japan can help by extending debt
cancellations." 

Protectionist dominoes are beginning to tumble across the world  

Greece has been in turmoil for 11 days. The mood seems to have turned "pre-insurrectionary" in parts of Athens - to borrow from the Marxist handbook. 

This is a foretaste of what the world may face as the "crisis of capitalism" - another Marxist phase making a comeback - starts to turn two hundred million lives upside down.

We are advancing to the political stage of this global train wreck. Regimes are being tested. Those relying on perma-boom to mask a lack of democratic or ancestral legitimacy may try to gain time by the usual methods: trade barriers, saber-rattling, and barbed wire.

Dominique Strauss-Kahn, the head of the International Monetary Fund, is worried enough to ditch a half-century of IMF orthodoxy, calling for a fiscal boost worth 2pc of world GDP to "prevent global depression".

"If we are not able to do that, then social unrest may happen in many countries, including advanced economies. We are facing an unprecedented decline in output. All around the planet, the people have reacted with feelings going from surprise to anger, and from anger to fear," he said.
Russia has begun to shut down trade as it adjusts to the shock of Urals oil below $40 a barrel. It has imposed import tariffs of 30pc on cars, 15pc on farm kit, and 95pc on poultry (above quota levels). "It is possible during the financial crisis to support domestic producers by raising customs duties," said Premier Vladimir Putin.

Russia is not alone. India and Vietnam have imposed steel tariffs. Indonesia is resorting to special "licenses" to choke off imports. 

MIT's Thesis Advisor to Bernanke Take:

States set to impose bevy of new taxes  

Governors want to levy higher taxes next year on clothes, soft drinks, gasoline, auto licenses and other items that likely will hit low- and middle-income families struggling to make ends meet in a deepening recession the hardest. 

Officials say they are required by law to balance budgets and that tax increases are necessary as state governments face sharply declining tax revenues, but fiscal analysts say raising these taxes during an economic downturn will only worsen local economies and prolong the recession. 

Feinberg Despised in Wisconsin Where Cerberus Lives Up to Name 

Dan Sawall, a 30-year mill veteran, said he had watched Chrysler Chief Executive Officer Robert Nardelli on television "with those granny glasses at the end of his nose," Sawall said, telling Congress the automaker needed billions in taxpayer money to stay afloat. 

"How ironic is that? You're taking people's lives and ripping them apart and now you want those same people to bail you out?" Sawall said. "If I don't have a job to pay my taxes, how am I supposed to bail you out? Personally, I don't know how those guys sleep at night."

Karl Hooyman shook his head. He calculated that $54 from his weekly unemployment compensation of $355 would go to taxes that might be funneled to the Chrysler loan. 

U.S. falls deeper into recession 

WASHINGTON - The United States has fallen deeper into recession, data showed on Wednesday, with the number of people filing unemployment claims reaching a 26-year high and consumers cutting spending for the fifth successive month.

Governments across the world have tried to boost expenditure to ease a recession ushered in by a credit crisis in the United States, with Japan and Germany becoming the two latest countries to unveil new spending programs.

Japan's government approved an 88.5 trillion yen ($980.6 billion) budget, its biggest-ever, to cover a 12 trillion yen fiscal stimulus program and Germany pegged its second spending package at 25 billion euros ($34.97 billion).

But some economists have said increased spending so far has failed to boost confidence among consumers, markets and investors.

In the United States, consumers cut spending for a fifth successive month during November and their incomes shrank, according to a Commerce Department report that pointed to deepening recessionary pressures.

It said spending contracted by 0.6 per cent after falling even more steeply by 1 per cent in October. Incomes contracted by 0.2 per cent after a slight 0.1 per cent gain in October.

New U.S. orders for long-lasting manufactured goods fell 1 per cent in November, a less severe drop than anticipated.

The number of U.S. workers filing new claims for jobless benefits jumped by 30,000 to a 26-year peak last week. Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 586,000 in the week to Dec. 20 from a revised 556,000 the prior week, the Labor Department said.

 

New jobless claims jump; consumer spending down 

WASHINGTON (AP) -- New claims for unemployment benefits rose more than expected last week, the government said Wednesday, as layoffs spread throughout the economy, more evidence the labor market is weakening as the recession deepens.

The Labor Department reported that initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.

That's also the highest level of claims since November 1982, though the work force has grown by about half since then.

Separately, consumers cut spending for the fifth straight month in November, a report by the Commerce Department showed. The 0.6 percent drop in consumer spending last month followed an even larger 1 percent fall in October. the steep plunge in gasoline prices, which is good news for consumers, made the declines look worse.

Excluding price changes, consumer spending would have dropped by 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.

 

Long Term Mortgage Rates Hit All-Time Low

Mortgage rates fell for the 8th straight week in the week ended December 24, establishing a new low for Freddie Mac's Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage (FRM) averaged 5.14 percent with 0.8 point, down from last week when it averaged 5.19 percent with 0.7 point in fees. This is 98 basis points lower than the rate during the same week in 2007 and the lowest rate recorded since Freddie Mac first conducted the survey in 1971.

The 15-year FRM had an average contract interest rate of 4.91 percent, down a single basis point from last week. Fees and points were unchanged at 0.7. This was the lowest rate for the 15-year FRM since April 1, 2004 when it was 4.84 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) had an average interest rate of 5.49 percent with 0.6 point. One week ago it averaged 5.60 percent with 0.6 point.

 

LEGITIMACY DWINDLES 

What seems to spook people now is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system. Not even the the legions of Obama are immune as his reliance on Wall Street capos Robert Rubin, Tim Geithner, and Larry Summers seem tainted by the same reckless thinking that brought on the fiasco. His pick last week for chief of the SEC, Mary Shapiro, is already being dissed as a shill for the Big Bank status quo. In a few days we'll discover what kind of bonuses are being ladled out by the remaining Wall Street banks with TARP money and a new chorus of howls will ring out. 

This is very dangerous territory. In dollar terms, the numbers being applied to the various problems are so colossal -- trillions! -- that the death of our currency seems assured. And in defiance of congress's express intentions, none of the TARP "money" has been applied to its targeted purpose of buying up "toxic" (i.e. fraudulent) securities hidden in the vaults of banks, pension funds, and municipal portfolios.

George W, Bush's personal bailout of General Motors and Chrysler is designed solely to postpone their bankruptcy and mass job layoffs until after the holidays. Otherwise, the $17.4 billion will probably be used by the companies to underwrite the extensive legal work required for the moment they must declare bankruptcy -- when Mr. Obama is in the White House. Meanwhile, the President-elect has ramped up his job-creation target overnight from two to three million, and some observers are catching a whiff of Soviet-style economic engineering ("...we pretend to work and they pretend to pay us....").

 

Mean Markets and Lizard Brains: FSN Interview

Windows Media

 

Laissez-Faire Capitalism Should Be as Dead as Soviet Communism 

But most Republicans are still refusing to see what's right in front of them. Especially Bush, our CEO president, who lays the blame not on the failures of the marketplace but on past administrations and corporate greed. "Wall Street got drunk," he says. Maybe so, but who made the last 8 years Happy Hour, and kept serving up the drinks?

 

U.S. Home Resales Fall; Prices Drop by Record 13.2%  

Dec. 23 (Bloomberg) -- Sales prices for existing U.S. homes fell the most on record in November, tearing a deeper hole into households' already tattered finances.
The median resale price fell 13 percent from a year before, to $181,300, "probably the largest price decline since the Great Depression," National Association of Realtors Chief Economist Lawrence Yun said in Washington. Sales slid to an annual rate of 4.49 million, lower than forecast. 

Sliding property values mean more Americans will be under water on their mortgages, likely leading to a further increase in already record foreclosure rates. Along with the wealth destruction from slumping stock portfolios, they also undermine consumers' purchasing power.

"November sales just collapsed," said Chris Low, chief economist at FTN Financial in New York. "Price declines are accelerating. As bad as this is, it's going to be considerably worse in a month's time."

Separately, the Commerce Department reported today that new- home sales fell 2.9 percent last month to a 17-year low. The median sales price declined 11.5 percent from a year earlier.

U.S. household wealth already fell in the third quarter by the most on record, Federal Reserve figures showed earlier this month. Net worth for households and non-profit groups decreased by $2.81 trillion, the most since the Fed's data began in 1952.

 

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17 Comments

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Dec 24

santa-clause-rally.png

RussB's picture
RussB
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 101
Re: Daily Digest - Dec 24

 

Regarding the story on the now-evident bankruptcy of capitalism as currently practiced:
I still see the assertion everywhere that government doesn't know how to run industry. This may be true.
<em>But</em>, we now have incontrovertible, empirical, dispositive evidence that private enterprise doesn't know how to run it either.
So it's unanimous - nobody knows how to run anything of any significant size.
This affords two clear conclusions:
1. If no one is "qualified" to make the decisions, we're left with the moral fact that when you beg for money, it's the giver whose money it is who gets to make the decisions. So that should settle it - from here on, public interests must decide.
2. We anarchists have been proven overwhelmingly right - size and interdependence are evil in themselves, regardless of the motivations of cadres within them (though these are usually malevolent as well).
The "too big to fail" and "too interconnected to fail" ideology militates one conclusion: size has to be dismantled, and interconnection has to be unwound. Two examples: the only possible solution for the auto companies is to break them up into several much smaller, sleeker outfits, some of which might actually be able to survive for a little while; Glass-Steagal type regulations (but much more rigorous) must be reinstituted to wall off different sectors of finance from one another. And here too, they have to be cut down to size. 
Of course, true to form, TPTB are everywhere headed in exactly the wrong direction, wanting greater size, greater concentration, greater interdependence.  
   
Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - Dec 24

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - Dec 24

"I wrote earlier about the famine potential we face due to the
underfertilization of the wheat crop. Wheat that gets enough ammonia is
14% protein, if it is unfertilized closer to 8%, and that 43% reduction
in total plant protein is going to cause unimaginable suffering in
places like Egypt, where half of the population gets subsidized bread.
Global end of season per capita wheat stocks have been about seventy
pounds my entire life, except the last three years where they've
dropped to only forty pounds. One mistake in this area and one of the
four horsemen gets loose, certainly dragging his brothers along behind.
That mistake may already have been made in the lack of wheat
fertilization this fall." (article below)

http://www.dailykos.com/storyonly/2008/11/27/11143/168/114/667032

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - Dec 24

THE SOLARI REPORT

YEAR END WRAP-UP: 2008

December 26, 2008

Bye-Bye Bubble

The global financial bubble
burst in 2008 — and that’s a good thing. It means that the bubble
economy will no longer make it attractive to ignore our problems and drain the
real economy. Instead of investing our capital in fraudulent mortgage
securities, complex derivatives, and companies running black-box Ponzi schemes,
perhaps we will see the merits of financing real people crafting real solutions
to the problems before us. In 2008, the incentives grew to understand the real
world and address real issues.

Alas, like the bubble, the
bubble burst was engineered. The nature of the “pump and dump”
financial model on planet earth is that the most powerful people on the planet
will make more on the dump then they did on the pump. In 2008, a strong dollar
combined with global drops in commodities and equity prices created more buying
opportunities for insiders who exited the bubble in time or enjoyed the
largesse of bailouts. Thousands of bankers and executives who engineered the
bubble were unprepared for the events of 2008. They were left scrambling in a
game of global musical chairs. The moral of the story is as old as the hills:
there are a lot more people who think they are “insiders” during
the “pump” than during the “dump.” The dump is when you
find out who is really in and who is out and who your real friends are.

 

This cycle will be different.
This is not just another bubble burst like 1988-89. This is a  fundamental
reengineering of the governance system – the culmination of a financial
coup d’etat. I often quote the story of Clarence Dillon, the head of my
old firm, Dillon, Read & Co. Inc., in 1929 at the beginning of the Great
Depression:

 

Driving through New
Jersey , Nitze [asked] Dillon if he thought the market

decline an omen of hard times ahead . . . Dillon thought for
a few minutes

and replied, “I think it presages the end of an
era.” By this Dillon meant

that what lay ahead was not merely a period of retrenchment,
after which

affairs would be conducted as before. Rather, the world was
in for a major

overhauling of institutions.

—Clarence Dillon and
Paul Nitze in 1929

 

We are not at the end of
history. We are, however, at the end of the notion that the people in control
want anything less than total control of everything.

How do we integrate powerful
new technology in a manner that is human and civilized? How do we address
population growth and align our economy and lifestyles with the health of our
natural environment? How do we create and sustain community in the face of
invisible powers? Is a war economy the only kind of economy we can imagine? The
urgency of these conversations grows as the bubble evaporates.

 

Where’s
the Money?

The big question of 2008 is
“Where is the money?” It just keeps disappearing. There was $4
trillion plus that disappeared from the
US government between 1998 and 2002
along with trillions more with the pump-and-dump of the Internet and telecom
stocks, Enron and other financial frauds. Since then and into 2008, funds keep
disappearing into the Afghanistan
and Iraq
campaigns.

 

Now we have $700 billion in
bailouts and $7 trillion plus in loans by the Fed, not to mention the $5
trillion in mortgage market liabilities assumed by the Federal government with
the passage of the Housing and Economic Recovery Act of 2008. The fraud in the
US mortgage
bubble was clearly enormous. But, where did all the money go? What financial
appetites keep demanding this much money and what, if anything, will ever
satisfy them?

 

This of course leads us back
to “Cui Bono?” – “Who benefits?” This, in turn,
leads us to wonder who is really at the top of this pyramid scheme. What is the
end-game for global governance? What is its purpose?

 

Dollar Up,
Gold Down

To recapitalize the
US banking
system, we needed the dollar up and gold down. Sure enough, that is what
happened.

 

The ability of the
"plunge protection team" (formally known as the President's Working
Group on Financial Markets) and their agents to intervene in markets and
suppress the gold price continued to surprise knowledgeable commentators.

We still do not adequately
understand how the 'management" of markets is engineered.

 

Put this on the list of things
it would be wonderful to figure out in 2009.

Interestingly enough, by year-end
the precious metals market was tracking both the
London spot price and premiums paid for gold
coins on E-Bay, as the paper market and the physical market diverged.

 

The Slow Burn

The global financial meltdown
that some market pundits predicted hasn’t happened. Instead, the
“Slow Burn” continues albeit at a more rapid, scarier pace. But,
investor losses have been significant. After quite a run-up, the commodities
markets crashed, the Dow dropped by 34% and global stock markets were down across
the board. Financial institutions throughout Europe and Asia were hammered by
losses and fraud in the US
mortgage and derivatives markets.

 

The world divided even more
between those with access to cash, credits and bailouts and a growing number of
people losing business, jobs, savings, homes, health and lives. The division
had little to do with talent or productivity. The personal pain is great and
will grow greater. It is made greater by the realization of betrayal by
country, media and community.

 

The amount of human talent
being drained and destroyed throughout North America
and around the globe is incalculable. Supporting rather than destroying this
talent remains our greatest but invisible opportunity that calls for a
financial system which can generate financial profit from the education and
well being of families and communities and the reduction of wasteful
consumption.

 

The Freezing
Up of the Global Banking System

As financial losses grew
throughout 2008, an outbreak of healthy distrust has resulted in the freezing
up of the global banking system. This is the evidence of markets working; not,
as reported, markets failing. Banks don’t trust each other, nor their
accountants or lawyers and for very good reason. Who can price an asset when
the parties are potentially lying and regulators and courts will not uphold the
law?

 

The Pension
Fund Time Bomb

Because pension funds are not
leveraged, reports on pension fund losses have been relatively quiet. Look for
reports regarding pension fund performance and the resulting demands on public
and private budgets as unfunded liabilities soar to have a profound impact in
2009.

 

Unfunded pension liabilities
will hit hard on state and local government. Indeed,

municipalities are getting hit
on all sides as tax revenues fall with the drop in real estate values and
transactions and cost of capital rises.

The dependence of state and
local government on central government is hidden, not widely appreciated. Real
trouble with the US dollar, the integrity of tax systems, or the federal credit
in 2009 could spell serious hardship for local government, leaving the economy
even more dependent on bailouts and military and enforcement spending as the
infrastructure of control grows.

 

The $1 Billion
Candidate

The American elections
captured a great deal of attention this year, with the victorious candidate,
Barack Obama, raising almost $1 billion. As the American economy centralizes
with companies, states and municipalities, universities, health care and the
various aspects of life becoming increasingly dependent on the federal budget,
the business of buying the White House and congressional seats becomes ever
more expensive. We are not just electing representatives. We are electing the
managers of the "markets," including an ever-greater percentage of
private income and profits.

 

While some say President-Elect
Obama is the face of hope and some say he is the face of

the Rockefellers, I say he is
a Harvard lawyer turned politician who is a prisoner of the red button problem,
like all the rest of us. So far his economic team includes the original
engineers of the strong dollar policy and its component parts -- the housing
bubble and the gold suppression scheme. Let’s face it. If engineering a
financial coup d’etat is the goal, these guys are the victors.

Obama has announced a massive
infrastructure program. Infrastructure is potentially better for the economy
than housing bubbles. The devil, however, is in the details. The scariest idea?
A centralized medical record database. We will talk about that more in 2009. Given
the state of the economy and the intelligence of the Obama team, it should be possible
to manage the program design and the contracting of a massive government investment
such that the infrastructure created is cost competitive and creates net value
in the economy, including contributing to, rather than destroying, the value of
labor and communities.

So let's see what comes out of
the other side of the Washington
sausage maker after the inauguration. My expectations are minimal, yet I am
willing to be surprised. This is, after all, the seasons of miracles and the
system is full of decent people who would like to see things work and are
willing to work hard to make it so.

 

Russia, China ,
and the Middle East Rising

Of the many challenges facing
the new Administration next year, none will be more pressing than managing
rising power bases and younger populations throughout the Middle East, in
China and
Russia . Perhaps the implosion of
the commodities markets will make doing so easier, but our bet is that the
shift from a financial bubble to the rise of the power of real assets will
continue.

 

The Anglo-American alliance
stuck the world with massive losses from financial fraud. Now we are taking
advantage of these losses by enjoying another global buying opportunity. In the
process, we have vastly increased the incentives for competitors globally to
collaborate in protecting themselves from us. Mr. Putin has said so publicly and
one of his advisors has reiterated it in chilling detail privately to me.

 

The Internet
Inspires

Throughout 2008, the Internet
provided an alternative to the continuing censorship of numerous stories that
we need to know. These included not just stories that impact our finances but
about manipulations harmful to our health, including chemtrails, the efforts to
control the food and seed supply, and the ongoing suppression of energy
technology.

 

Watch for the failure of
traditional media in 2009 due to loss of market share to the internet. One of
the few good investment categories in 2008 was building personal and local
selfsufficiency.

From the success of the
Financial Permaculture conference in Hohenwald ,
Tennessee , to the spread of Transition Towns from the
UK , participatory budgeting from
Latin America , and community currency and barter systems
around the globe, efforts by entrepreneurs and communities to re-localize and
network are encouraging.

 

The logical response to
uneconomic centralization is to look for ways to decentralize. Despite all the
difficulties in the economy, entrepreneurs doing and teaching natural home
building, farmers markets, starting farms, installing solar energy and
weatherizing homes enjoyed a market moving their way. These efforts will
continue to grow well beyond any shakeout, particularly if commodity prices
head north again. The great mystery is what will be unleashed as the awakening
continues in the face of continued reports of institutional corruption and
failures? We think this awakening will have a very positive impact spiritually,
culturally and economically in 2009.

 

The Shakeout
Moves into 2009

We have started to hear that
the shakeout is over and now is a good time to invest in the stock market.
Don't believe it. The shakeout in the
US is far from over. A lot has been
held together through the election and the inauguration.

Numerous companies and
investors have disclosure obligations in the form of annual reports due in
March. Many corporate taxes are due in March and individual taxes are due in
April. Let’s see what emerges during the disclosure and tax period and
how the housing market responds in the spring and summer.

If we are lucky,
Washington will produce
real plans for real infrastructure investment that will have a positive total
economic return. If luck is not with us, Obama will play Pharaoh presiding over
the allocation of rigged profits financed with inflation and force.

 

The real economy will continue
to die as productive enterprises are starved of the capital for no reason other
than that they are not politically connected.

Can diverse networks of
citizens switch their remaining capital in time to protect the productive
enterprises that generate jobs and wealth and offer real solutions? We hope and
pray that we can. Our prediction? If you thought 2008 was wild, hold on to your
seat. We ain't seen nothing yet.

 

Plenty of
Opportunities

In our audio seminar, Positioning Your Assets for Growth in Uncertain Times,
we

identified eight areas of
opportunities. Here is a recap of how they did in 2008 and some thoughts on
what we can expect in 2009.

 

Opportunity #1: Personal Self-sufficiency

The after tax yields on
stockpiling household non perishables was typically better than money markets
in 2008. Investing to reduce your expenses or build a business that would generate
income sure looked better than leaving money in the stock market. Expect the same
in 2009.

Opportunity #2: Family, Community, and Network Self-sufficiency

Collaborating with others can
be more time consuming and complicated, but the

opportunities in this area
continue to grow. Expect this trend to continue for the

foreseeable future. Big
challenge in 2009? How do we find like-minded people who will respect our time
and contribution?

 

Opportunity #3: Banking Intimate

The desire to find a bank one
could trust was still overshadowed by the belief that big banks were safer
because of massive Fed support. As the appalling behavior of the large banks
becomes ever more apparent, let’s hope that withdrawing to healthier
local institutions accelerates.

 

Opportunity #4: Precious Metals

Despite great expectations,
gold and silver prices were flat in US dollars for the year. Starting at $840
per oz, the price of gold rose above $1,000 until the Bear Stearns assassination,
and then dropped to a low of $700 in October before rising back to the $840
levels before Christmas. While disappointing for gold bugs, it is worth noting
that precious metals performance was strong relative to oil and other
commodities and when measured in other currencies, making the case that gold
and silver would perform well in a deflation marked by untrustworthy fiat
currencies. Perhaps most notable was the divergence of the spot price from the
coin markets, with dealers and E-Bay reporting rising premiums above spot on
coin purchases and serious shortages in getting inventory. This divergence
bears close attention in early 2009. Despite the managed nature of these
markets, the outlook is strong for precious metals in

2009.

 

Opportunity #5: Natural Resources

Commodities had a bad year.
Oil down. Agricultural commodities down. Don’t be

fooled. De-leveraging can
bring prices down a lot in a bubble economy. However, we still have 6 billion
plus people (and growing) competing for limited natural resources. Look for
natural resources to grow more valuable over the long term.

My bet is the smart money is
taking advantage of the credit crunch and the strong dollar to buy up strategic
resources around the globe – farmland, water, oil and gas. Is this where
some of the bubble profits and bailout money is going? To buy up your land at
low cost? I believe so.

 

Opportunity #6: Countries with a Strong Popsicle Index

Place matters. As the yields
on sovereign bonds approached 0% this year, it was

interesting to watch who
approached 0% first. Sure enough, it was typically countries with a strong
Popsicle Index combined with a reputation for prudent financial management.

 

Opportunity #7: Enterprises that own/are excellent at:

* Serving
high-Popsicle-Index places

* Precious
metals

* Natural
resources

*
Infrastructure and essential services

* “No
waste” new technology/real solutions

 

Ultimately, equity in
enterprises that add value is the source of much financial wealth. This area
will be the greatest opportunity over the next decade. However, it is still
early to move into equity. A few exceptions include your own or family
companies as well as local and network investment that build up local capacity
critical to your strategic needs. If you have not already, start learning about
these areas now. However, Let the shakeout move through the market before
investing. And even then, beware the pump and dump of “green
investing” and other potentially fashionable investment trends.

 

Opportunity #8: Cash and Cash Equivalents in Strong Currencies

Looking for a strong currency
in 2008 was like the search for the Holy Grail. If anything, our experience
proved that there were no strong currencies left. That means that community
currencies are looking more and more viable. At the end of the Great Depression,
there were more than 3,000 community currencies operating in
America . To put
that number in perspective, America
currently has approximately 3,100 counties and county-equivalents.

 

The dollar soared, thanks to
intervention and the flight to safety and to pay off dollar debts. For a large
part of the year, the dollar was one of the few places to be. This, despite the
fact that the St. Louis Federal Reserve reported in November that the aggregate
monetary base was growing at an annualized rate of 785%. The inter-dependency
of the global economy during 2008 seems to say that there is no de-coupling
from the US
economy and no diversifying from the dollar into other currencies. Other
central banks are printing like crazy too. It would appear that safety comes
from shifting from fiat currencies to precious metals and tangible things.

 

That said we all have expenses
and debts in fiat currencies, so we need to hedge. For US citizens, where do we
put our cash reserves? With money markets headed toward 0% yields and showing
signs of credit problems, insured CD’s at strong local banks, credit unions
and savings banks still looked like a better bet. Paying down debts and
lowering overhead continues to be practical ways to reduce the need to invest
for yield and to lower risk in an uncertain world. The dollar is headed back
down. The question is how slow or fast and how many other currencies will go
with it.

 

A Word on
Philanthropy

If you have money to donate,
please shift it into activities that build local food and

economic self-sufficiency.
There is no better philanthropic opportunity today than local venture capital
that creates lasting jobs and skills or the education that supports them.

 

In Closing

For many years, I was teased
about how sentimental a notion the Popsicle Index was. As our sense of personal
safety diminishes, perhaps the possibility of living among people who care
about and lift up the people around them will come back into fashion. Avoiding
and putting as many degrees of separation between you and institutions who do not
behave honorably is not pie-in-the-sky ethics. It is dangerous to share your
money and your data with people who cannot be trusted. Surely, the events of
2008 underscored this lesson.

 

Before making your New Year
resolutions, why not sit down and make a list of who and what causes your
Popsicle Index to go up and down. Estimate their contribution mathematically.
Now look at how you invest your time. Are you giving time, money and energy to
the people and activities that cause your Popsicle Index to go up? Or to those who
cause it to go down? Get ruthless about giving energy to those who give energy
to you. The way to build a new financial system supportive of human capital is
to start with each person. You are the asset. So let’s get your Popsicle
Index rising. My goal for The Solari Report in 2009 is to help you do so.

 


Catherine Austin Fitts

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Damnthematrix
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Re: Daily Digest - Dec 24

When will this recession end?

Economic Growth When
will this recession end? Are we really in a depression ? (an extended
recession)? When will we get back to good times? These are questions
that are on the minds of most people today, as we near the start of
2009. If you remember a year or even six months ago, many main stream
economists were in denial. Many said that we should be out of this
downturn by the end of 2008 or first half of 2009. It's not happening.

The Globe and Mail newspaper in Toronto two days ago featured a story called Taming the unwelcomed beast.  In
it, they included the following chart -A history of bear markets in US
stocks (don't know why they missed 1980-81?, anyway, using their data
you immediately notice a few interesting patterns. The two rows that I
highlighted in red are considered Great Depressions)

A history of bear markets in U.S. stocks

Based on monthly U.S. dollar returns.

 

    Peak-trough Months to Months to
Start End decline trough recovery
March 1876 Feb. 1879 - 33.11% 15 20
Sept. 1882 Nov. 1885 - 20.76% 21 17
Jan. 1893 Aug. 1897 - 25.12% 4 48
Sept. 1902 Nov. 1904 - 25.79% 13 13
Sept. 1906 Dec. 1908 - 33.97% 14 13
Nov. 1916 May 1919 - 27.98% 13 17
Oct. 1919 Apr. 1922 - 22.78% 22 10
Aug. 1929 Jan. 1945 - 83.41% 33 151
Nov. 1947 Oct. 1949 - 21.76% 6 35
June 1962 Apr. 1963 - 22.28% 6 10
Dec. 1968 Jan. 1972 - 31.45% 19 19
Jan. 1973 Sept. 1976 - 43.34% 21 24
Sept. 1987 July 89 - 30.21% 3 20
Sept. 2000 March 06 - 43.26% 25 42
Oct. 2007 ? ? ? ?
AVERAGE   - 33.23% 15 31

Note: All returns assume full reinvestment of dividends.

DOUGLAS COULL/THE GLOBE AND MAIL // SOURCES: PROFESSOR ROBERT SCHILLER, WWW.INDEXFUNDS.COM (2001) AND S&P/CITIGROUP.

In almost every case (except for 1906) the months to trough (the
bottom from the previous peak) was a lot quicker then the leg back up.
Months to trough range from 6 months in 1962 to 33 months in 1939.

The loss in stock value today (over 50% in S&P 500)  has already
outperformed each of the above bear markets except 1929, which saw a
83% drop in value and took 15 years to recover

I'd say we are closer to the 1929 example because we have a number of consecutive leveraged bubbles (close to 15 by my count)
still to burst.. the next most dramatic being the commercial mortgage
crisis bubble in 2009 and the start of a number of US state
governments going bankrupt-watch for California to lead the pack.

The longer it drags out, the less we'll be able to deal with some of
our more pressing societal problems, such as energy security, switch to
alternatives, peak oii and peak gas, climate change in the form of global cooling (not global  warming) and "strategic materials" and water shortages in the next 2 decades....On the upside, the recession / depression may  force us to adjust and live in  a zero growth sustainable economy...but I digress...back to the analysis.

On the way up, we see that the months to recovery (bottom back to
the pevious peak) could stretch from 10 months to 151 months (or 15
years and 4 months as we saw during World War 2.

If you add up the two columns(months to trough + months to recovery
) you get some indication of the range of when we could be out of a
recession / depression (R/D) (pick your label)

Assuming that the downturn started in Oct 2007 in the USA, a 1962
like (R/D) recovery will take 16 months out from Oct 2007 or Feb 2009
(that's defintely not happening)

A mild 1906-like (R/D) recovery will take 27 months or Jan 2010

The averge for the chart was 46 months or 3 years and 10 months. That  put us into Aug 2011

A more extreme (R/D) will stretch us out 53 months to Feb 2o12 like
the recession of 1893 did or 77 months like the 2000 (R) to March 2014,
just to the point where NASA says we may be feeling our first bout of
global cooling due the low sun spot projections. Great ..hit us while
we're down !!!

At the worst case scenario, we could mirror the 1929 depression
(punctuated by the World War),which lasted 184 months or 15 years and 4
months putting us one and a half decades away, topping out in Feb 2023
( the start of the next solar sun spot  cycle minimum) 

Notice that bear markets tend to cluster and get progessively worse
(longer time for recovery). ie the 3 bear markets at the end of the
1800's lasted 35, 38 and 52 months respectively. The 5 bear markets
before 1929 lasted 26, 27, 30, 32  and 184 months. The pre-oil shock
bear markets lasted 16, 38 and 46 months and the post 73 bear markets
were 23 and 77 months long.

How long will it take todays' dozen or so  over-extended credit
bubbles to burst and de-leverage? Your guess is as good as mine, but it
won't be soon. Prepare for the long haul and watch/anticipate opportunties arising out of crisis.
The best case, as far as I can see, will be a long anemic decade of no
or limited GDP growth (in the US and a few more percent in China or
India), financed by your individual savings or what you earn (like in
my parent''s days) and not unbriddled credit (natural 100 year credit
expansion/contraction cycle).

Walter Derzko

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Re: Daily Digest - Dec 24

Something to think about.... 

http://www.oilempire.us/peak-money.html 

The only surprise about the global financial crash is that it took this long for it to start, since something that is “unsustainable” is not merely a bad idea, but unable to continue indefinitely. Most media reports on money problems ignore the root causes and avoid even approaching needed solutions.

Our monetary system is based on debt and compound interest, which results in an ever expanding amount of “money” chasing dwindling natural resources on our finite planet.

The geologist M. King Hubbert, who invented the methods to model the rise and fall of fossil fuels, wrote eloquently about how sincerely sustainable solutions would require money that was no longer based on debt and instead used natural resources as the basis for a steady state economic system. This would be considerably more sophisticated than the old gold standard.

Many well-meaning environmentalists promote the concept of the “triple bottom line,” an effort to include social justice and ecology into economic decisions. But the environment is not a co-equal concept - energy creates money, not the other way around. Former World Bank economist Herman Daly has written eloquently about how “sustainable growth” is an oxymoron, and a steady state economic model would be needed for genuine sustainability.

As collapse becomes more obvious, there has been an increase in distracting greenwash to confuse concerned citizens -- “sustainabullshit.”

Exponential growth cannot continue forever on a finite planet:
A steady state economy is needed for sustainability
, since a money supply cannot expand forever.

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Re:legitimacy Dwindles

Only Kunster to say it now but is this the second penny to fall of the two predicted by Jurgen Habermass?

http://media.pfeiffer.edu/lridener/courses/LEGITCRI.HTML

His thesis was the subject of our course work for a masters paper in Social Anthropology about 30 years ago but it seems very relevant today. Basically he predicted that capitalism would fail because the government would behave in ways which make no sense to the populace and that they (the populace) would then withdraw legitimation. The first penny fell when governments began printing money and distributing it to those entities who had best failed at what they were doing. Which is something very few people find rational. Now there is some suggestion of the second penny. Is this how the end game will go?

Don

________________________________________________________________

Anyone can trade for what they want but only fools trade for what they need.

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Re: Daily Digest - Dec 24

His thesis was the subject of our course work for a masters paper in Social Anthropology about 30 years ago but it seems very relevant today. Basically he predicted that capitalism would fail because the government would behave in ways which make no sense to the populace and that they (the populace) would then withdraw legitimation.

This sounds alot like stage one of Orlov's Five Stages of Collapse - financial collapse, one of whose core elements would be loss of faith in the financial system (and we all know how important faith is there especially).

Indeed Orlov thinks loss of faith is a key component in each of the stages of collapse - financial, commercial, political, social, cultural - that critical matters are: what do you believe is going to happen; what do you think, as a political/spiritual/moral/aesthetic matter, should happen; where are you willing to draw a line, to prepare and fight, to stop the collapse at a certain point?

(This is similar though not identical to the What Is To Be Done chapter of the Crash Course.)

An excellent epitome of Orlov's presentation is here:

http://energybulletin.net/node/47157

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Re: Daily Digest - Dec 24

(Can't tell why my html tags didn't work. Oh well.)

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pir8don
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Posts: 456
Re: Loss of Legitimacy

Demitry Orlov has provided a conceptual framework derived from his study of collapse. In the wider context, Daniel Quinn has writen much to elucidate human social models and points out that just as whales live in pods, monkeys in troops and wolves in packs we have for millions of years found tribes to be our way of living. In this context civilisation is the anomaly and all previous attempts have been abandoned by the participants. While there are various attributes of our own that lead us to believe that it is unique and somehow sustainable, it seems that our only future is likely to be in some sort of a return to tribal living.

Don

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admin
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Re: Daily Digest - Dec 24
RussB wrote:

(Can't tell why my html tags didn't work. Oh well.)

Russ,

No need to use HTML tags ... just highlight your text and use one of the icons at the top of the editor to make your text bold, italicized, underlined, etc.  Since we use a rich text editor to make things easier, all the HTML is masked. Thanks.

Ron

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Re: Daily Digest - Dec 24

Thanks, Ron. I think I get it now.

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Re: Daily Digest - Dec 24

Russ,

 

Dmitri's book, "Reinventing collapse", is the only "Crash" book that kept me awake that night after reading it. A thoughtful, if scary, perspective on collapse of contemporary society, with interesting comparisons of U.S. and Russian society that are worth reading.

 

SG

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pir8don
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Posts: 456
Re: Daily Digest - Dec 24

Russ,

I had read Dimitri's earlier work but not this latest untill today. In his earlier work it seemed that the Soviet experience may not have too many parallels with the Western but in his "five stages of collapse" he has drawn the links not so easily made (at elast by me) previously. I was struck by his point about eye contact with others in society. And by his identification of the shallowness of our Western way of life when our only mix is sport, religion or commercial.

Is there a well of human fellow feeling which remains dormant just waiting for our doom to bring it forth? or will it be totally submerged by self interest as our doom progresses?

 

Don

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Denny Johnson
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Re: Daily Digest - Dec 24

Thanks Russ, a great read.

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RussB
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Posts: 101
Re: Daily Digest - Dec 24

Hi Denny - you're welcome.

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