Tuesday, October 14, 2008

The final shoe on American consumerism is about to fall

The final shoe on American consumerism is about to fall

By Stanislav Mishin

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America's bedraggled, debt slave consumers are about to reap the final whirlwind which will finally unwind what is left of their consumer materialist society. This final shoe will come in the form of the cheaply made and cheap priced and often poisonous Chinese consumer goods. It is these very goods that not only have stuffed American households in a gluttony of soulless, Christless consumerism but have equally driven those same mindless consumers out of their middle class manufacturing jobs and into the lower class that make up the vast vast masses of service sector jobs. Of course the fact that a service economy is a natural by product of a manufacturing economy is lost on those whose education is now a deteriorating 3rd world joke with a 1st world price tag and who listen to the likes of the Communist News Network (CNN) or Faux News, both corporately owned by a small powerful and government aligned (both parties) oligarchs.Of course the fact that a service economy is a natural by product of a manufacturing economy is lost on those whose education is now a deteriorating 3rd world joke with a 1st world price tag and who listen to the likes of the Communist News Network (CNN) or Faux News, both corporately owned by a small powerful and government aligned (both parties) oligarchs.

But all that aside, and back to the subject. The Chinese are about to raise prices on consumer goods as they have already raised prices on metal industrial inputs. There are three reasons for this. First is the falling dollar. Turns out, all those pseudo calls to release the Yuan did just that and the Yuan, while still ballasted down not to rise to quickly, has risen 6% against the dollar. So that's 6% so far. Then we have the 9% inflation rate of today's China, which equally raises the prices of inputs (raw materials), work (ok, the Chinese slave wage is a joke so 10% more on a 25 cent per hour pay is still a joke at 27.5 cents) and overhead (paper pushers, electricity, energy in general, rent, etc). Finally, in order to combat an overheated economy, which is obvious from the high inflation rate, China has moved to cut back subsidies to it's industry (that's right all you Free Trade zealot fools, you're the only idiots playing that game, everyone else plays mercantilism...defending their economy). Seems that many of those cuts are up to 20% in nature and the suppliers have tacked that 20% right on to their prices.

So all told, so far, that's about a 30-36% rise in price.

Have not felt that yet? Do not worry, they are working their way up the manufacturing chain, as usual starting with basic inputs and propagating upwards. You will feel it soon enough.

What will an economy, the world's biggest debtor, already under strains of a 7-10% actual inflation rate (vs the 3% marked down liar rate of the Fed) and where consumerism alone makes up 70% of the economy, do?

Well the usual Fed policy of making more money sure as hell won't help the situation.

Good luck, you'll need it.

Big Banks Get $125 Billion Cash Going Away Gift

Big Banks Get $125 Billion Cash Going Away Gift

By Robert Wenzel

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Please sit down before you read this. If you have high blood pressure or heart trouble don't even try to read this, find a decent sports page instead, this is not for you.

Approximately half of the first $250 billion tranche of money approved by Congress for the mortgage crisis will end up in the hands of the "healthy" big banks.

"For the good of the American financial system," Treasury Secretary Paulson has told the big banks they must take his $125 billion (Give or take a billion or two) handout, reports NYT.

Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion each (plus an additional $5 billion for their recent acquisitions); Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York Mellon and State Street each receiving $2 to 3 billion. Wells Fargo will get $5 billion for its acquisition of Wachovia, and Bank of America the same for amount for its purchase of Merrill Lynch. So much for bailing out the mortgage market.

Here's the kicker: The shares will not be dilutive to current shareholders, a concern to banking chief executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. In other words, all current shareholders are protected, unlike Lehman, Bear Stearns, Fannie Mae and Freddie Mac shareholders.

No matter how they frame this,the truth is this is a roughly $125 Billion going away gift from the Bush Administration to Wall Streets elite.

UPDATE: The exact terms of the funding have been released by Treasury. For the first five years, the dividend on the preferred stock will be only 5%, not 10%. The full terms on the funding can be found here.

Michigan to combat claims of possible suppression of voters

Michigan to combat claims of possible suppression of voters


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Even as voter turnout in the Nov. 4 presidential election is expected to reach record levels, fear -- fed by rumor, innuendo and misinformation -- is running high that droves of eligible voters in Michigan and other battleground states could be turned away or tricked into not voting.

Suggestions of a massive Republican-led effort to suppress the Democratic vote -- mainly in urban areas of battleground states -- are rampant on liberal talk radio, the Internet and the streets of Detroit, Flint, Saginaw and Benton Harbor.

The Michigan Department of Civil Rights, which has been inundated with complaints and questions, will roll out a massive advertising campaign starting today and running until Election Day to inform voters of their rights and to try to dispel misinformation.

Among the myths on the streets: Voters will be turned away or ballots tossed out if they wear T-shirts supporting a candidate, have been convicted of a felony, foreclosed on their house, filed bankruptcy, owe child support, don't have valid photo identification, or have outstanding warrants or unpaid parking tickets.

None of these are true.

Civil rights department officials say they are alarmed because Democratic nominee Sen. Barack Obama's campaign and its surrogates attracted and registered record numbers of new, inexperienced and minority voters before the Oct. 6 deadline.

"There seems to be an extreme amount of confusion too close to this election," said Trevor Coleman, spokesman for the department. "We also expect there to be some serious challenging at the polls, and we want people to know what their rights are."

Republicans say there's good reason to challenge some voters. They say they believe many new voters may be ineligible, citing investigations in several states into questionable registration efforts by the community activist organization ACORN.

Democratic officials are concerned that the challenge process could intimidate some voters and discourage others by slowing down long voting lines.

This could be the first year that 5 million Michiganders vote in an election. In the 2004 presidential election, 4.9 million voted -- a record number, but at 64.7%, it's far below the 72.7% who voted in the 1960 presidential election.

The state had 7.2 million registered voters at the end of July. Officials have not finished counting the new voters registered the last few months.

Republicans sent more than 4,000 challengers to 1,800 polling places across the state in 2004 and are expected to head a similar effort this year.

Michigan GOP spokesman Bill Nowling, said the party isn't planning to specifically challenge ACORN-registered voters because there isn't an efficient way to determine which organization registered each voter.

But in cities with large minority populations, such as Detroit and Southfield, where GOP challengers are most prevalent, clerks have said that legitimate challenges of voters are rare.

"I have worked very closely with challengers in Southfield," Southfield Clerk Nancy Banks said. "And I've always told them, if they intimidate the voter or cause disruption in the precincts or create any type of uncomfortable situation, we will call the police."

Perhaps the most persistent rumor of the election season has been that Republican challengers will use foreclosure lists to attempt to challenge whether voters are casting ballots in the precinct where they live. The Republican Party has repeatedly denied any such plans, which were first reported by a liberal blog.

Banks said she got a call from a distressed woman in Bloomfield Hills whose home was in foreclosure, but she was still in her home. She said she was terrified that she would be pulled out of line at the polls and embarrassed in front of neighbors.

"I told her that there is no such law that if a house is foreclosed that you cannot vote," she said. "But I also told her that if you are in that situation and want to avoid any potential conflict at the polls to vote absentee."

The Obama campaign and Democratic National Committee has filed a lawsuit to prohibit the use of foreclosure lists, and GOP nominee Sen. John McCain has condemned the practice.

"Gov. Palin and I absolutely reject any plan to challenge voter eligibility based on lists of foreclosed homes," McCain wrote in a letter to U.S. Rep. John Conyers, D-Detroit, the House Judiciary Committee chairman who had raised concerns about the issue. "I do not believe there is any credible evidence any such plan ever existed in Michigan or elsewhere."

State election director Chris Thomas said last week that a foreclosure list alone does not provide sufficient evidence for partisan challengers to question voters' eligibility on Election Day.

The state House of Representatives unanimously passed a bill last week that prohibits challengers from using foreclosure lists to question voters' eligibility without any other evidence. The state Senate, which has only two days of work tentatively scheduled before Nov. 4, is expected to consider the bill, but probably not before the election, said Matt Marsden, spokesman for Senate Majority Leader Mike Bishop of Rochester.

The Election Assistance commission, a federal agency that studies the conduct of elections, said in a 2006 report -- which also included the 2004 presidential election -- that there were plenty of allegations of fraud and intimidation, especially in swing or battleground states, but little evidence to back up the allegations.

The national Commission on Federal Election Reform reviewed 55,000 calls made to a voter hotline on Election Day 2004 -- 44% of those calls had to do with voter registration or polling place issues, another 24% were concerns about absentee voting and 5% were calls about voter intimidation or harassment.

But Heaster Wheeler, executive director of the Detroit branch of the NAACP, said his nonpartisan organization is gearing up to protect voters who will, for the first time, cast votes for an African-American presidential candidate on a major party ticket.

"We're very clear about the historicity of this moment," Wheeler said. "There shall be no intimidation -- Detroit will be ready, and southeast Michigan will be ready. Anybody who wants to monitor this election is welcome because we, too, will be there to monitor the monitors."

U.S. Investing $250 Billion in Banks

U.S. Investing $250 Billion in Banks

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The Treasury Department, in its boldest move yet, is expected to announce a plan on Tuesday to invest up to $250 billion in banks, according to officials. The United States is also expected to guarantee new debt issued by banks for three years — a measure meant to encourage the banks to resume lending to one another and to customers, officials said.

And the Federal Deposit Insurance Corporation will offer an unlimited guarantee on bank deposits in accounts that do not bear interest — typically those of businesses — bringing the United States in line with several European countries, which have adopted such blanket guarantees.

The Dow Jones industrial average gained 936 points, or 11 percent, the largest single-day gain in the American stock market since the 1930s. The surge stretched around the globe: in Paris and Frankfurt, stocks had their biggest one-day gains ever, responding to news of similar multibillion-dollar rescue packages by the French and German governments.

Treasury Secretary Henry M. Paulson Jr. outlined the plan to nine of the nation’s leading bankers at an afternoon meeting, officials said. He essentially told the participants that they would have to accept government investment for the good of the American financial system.

Of the $250 billion, which will come from the $700 billion bailoutCitigroup, Bank of America, Wells Fargo, Goldman SachsJPMorgan Chase, officials said. The other half is to go to smaller banks and thrifts. The investments will be structured so that the government can benefit from a rebound in the banks’ fortunes. approved by Congress, half is to be injected into nine big banks, including and

President Bush plans to announce the measures on Tuesday morning after a harrowing week in which confidence vanished in financial markets as the crisis spread worldwide and government leaders engaged in a desperate search for remedies to the spreading contagion. They are desperately seeking to curb the severity of a recession that has come to appear all but inevitable.

Over the weekend, central banks flooded the system with billions of dollars in liquidity, throwing out the traditional financial playbook in favor of a series of moves that officials hoped would get banks lending again.

European countries — including Britain, France, Germany and Spain — announced aggressive plans to guarantee bank debt, take ownership stakes in banks or prop up ailing companies with billions in taxpayer funds.

The Treasury’s plan would help the United States catch up to Europe in what has become a footrace between countries to reassure investors that their banks will not default or that other countries will not one-up their rescue plans and, in so doing, siphon off bank deposits or investment capital.

“The Europeans not only provided a blueprint, but forced our hand,” said Kenneth S. Rogoff, a professor of economics at Harvard and an adviser to John McCain, the Republican presidential candidate. “We’re trying to prevent wholesale carnage in the financial system.”

In the process, Mr. Rogoff and other experts said, the government is remaking the financial landscape in ways that would have been unimaginable a few weeks ago — taking stakes in the industry and making Washington the ultimate guarantor for banking in the United States.

But the pace of the crisis has driven events, and fissures in places as far-flung as Iceland, which suffered a wholesale collapse of its banks, persuaded officials to act far more decisively than they had previously.

“Over the weekend, I thought it could come out very badly,” said Simon Johnson, a former chief economist of the International Monetary Fund. “But we stepped back from the cliff.”

The guarantee on bank debt is similar to one announced by several European countries earlier on Monday, and is meant to unlock the lending market between banks. Banks have curtailed such lending — considered crucial to the smooth running of the financial system and the broader economy — because they fear they will not be repaid if a bank borrower runs into trouble.

But officials said they hoped the guarantee on new senior debt would have an even broader effect than an interbank lending guarantee because it should also stimulate lending to businesses.

Another part of the government’s remedy is to extend the federal deposit insurance to cover all small-business deposits. Federal regulators recently have been noticing that small-business customers, which tend to carry balances over the federal insurance limits, had been withdrawing their money from weaker banks and moving it to bigger, more stable banks.

Congress had already raised the F.D.I.C.’s deposit insurance limit to $250,000 earlier this month, extending coverage to roughly 68 percent of small-business deposits, according to estimates by Oliver Wyman, a financial services consulting firm. The new rules would cover the remaining 32 percent.

“Imposing unlimited deposit insurance doesn’t fix the underlying problem, but it does reduce the threat of overnight failures,” said Jaret Seiberg, a financial services policy analyst at the Stanford Group in Washington.

“If you reduce the threat of overnight failures,” Mr. Seiberg said, “you start to encourage lending to each other overnight, which starts to restore the normal functioning of the credit markets.”

Recapitalizing banks is not without its risks, experts warned, pointing to the example of Britain, which announced its program last week and injected its first capital into three banks on Monday.

Shares of the newly nationalized banks — Royal Bank of Scotland, HBOS and Lloyds — slumped on Monday, despite a surge in banks elsewhere, because shareholder value was diluted by the government.

The move, analysts said, makes the government Britain’s biggest banker. And it creates a two-tier banking system in which the nationalized banks are run like utilities and others are free to pursue profit growth. As part of the plan, the chief executives of the three banks stepped down.

Still, Mr. Paulson’s strategy was backed by lawmakers, including Senator Charles E. Schumer, Democrat of New York, who said he preferred capital injections to buying distressed mortgage-related assets — a proposal that Treasury pushed aggressively before its turnabout.

In a letter to Mr. Paulson on Monday, Mr. Schumer, chairman of the Joint Economic Committee, urged the Treasury to demand that banks receiving capital eliminate their dividends, restrict executive pay and stick to “safe and sustainable, rather than exotic, financial activities.”

“I don’t think making this as easy as possible for the financial institutions is the way to go,” Mr. Schumer said in a call with reporters. “You need some carrots but you also need some sticks.”

But officials said the banks would not be required to eliminate dividends, nor would the chief executives be asked to resign. They will, however, be held to strict restrictions on compensation, including a prohibition on golden parachutes and requirements to return any improper bonuses. Those rules were also part of the $700 billion bailout law passed by Congress.

The nine chief executives met in a conference room outside Mr. Paulson’s ornate office, people briefed on the meeting said. They were seated across the table from Mr. Paulson; Ben S. Bernanke, chairman of the Federal Reserve; Timothy F. Geithner, president of the Federal Reserve Bank of New York; Federal Reserve Governor Kevin M. Warsh; the chairman of the F.D.I.C., Sheila C. Bair; and the comptroller of the currency, John C. Dugan.

Among the bankers attending were Kenneth D. Lewis of Bank of America, Jamie Dimon of JPMorgan Chase, Lloyd C. Blankfein of Goldman Sachs, John J. Mack of Morgan Stanley, Vikram S. Pandit of Citigroup, Robert Kelly of Bank of New York Mellon and John A. ThainMerrill Lynch. of

Bringing together all nine executives and directing them to participate was a way to avoid stigmatizing any one bank that chose to accept the government investment.

The preferred stock that each bank will have to issue will pay special dividends, at a 5 percent interest rate that will be increased to 9 percent after five years. The government will also receive warrants worth 15 percent of the face value of the preferred stock. For instance, if the government makes a $10 billion investment, then the government will receive $1.5 billion in warrants. If the stock goes up, taxpayers will share the benefits. If the stock goes down, the warrants will be worthless.

As Treasury embarked on its recapitalization plan, it offered some details on the nuts-and-bolts of the broader bailout effort. The program’s interim head, Neel T. Kashkari, said Treasury had filled several senior posts and selected the Wall Street firm Simpson Thacher as a legal adviser.

It named an investment management consultant, Ennis Knupp, based in Chicago, to help it select asset management firms to buy distressed bank assets. And it plans to announce the firm that will serve as the program’s prime contractor, running auctions and holding assets, within the next day.

“We are working around the clock to make it happen,” said Mr. Kashkari, a former Goldman Sachs banker who has been entrusted with the job of building this operation within weeks.

As details of the American recapitalization plan emerged, fears grew over the impact on smaller countries. Iceland is discussing an aid package with the International Monetary Fund, a week after Reykjavik seized its three largest banks and shut down its stock market.

The fund also offered “technical and financial” aid to Hungary, which last week suffered a run on its currency. Prime Minister Ferenc Gyurcsany said the country would accept aid only as a last resort.

In a new report on capital flows, the Institute of International Finance projected that net capital in-flows to emerging markets would decline sharply, to $560 billion in 2009, from $900 billion last year.

In Asia, markets continued to rise on Tuesday, lifted further by the announcement that the Japanese government would inject 1 trillion yen ($9.7 billion) into the financial system.

Banks dictate conditions of US financial bailout

Banks dictate conditions of US financial bailout

By Alex Lantier
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The 936 point rise on the US stock market yesterday was the American ruling elite’s initial verdict on the extraordinarily favorable terms the government is granting to financial firms in the $700 billion bailout passed by Congress on October 3. Far from heralding improving economic conditions for working people, the Wall Street surge reflects the financial establishment’s success in extorting massive sums of money from taxpayers.

Several factors played important roles in the market’s rise. A technical correction was likely after the massive falls of last week, when the Dow Jones Industrial Average fell 2,236 points, or 21.33 percent, to 8451.19. The announcement of bank bailouts in Europe totaling trillions of dollars—under conditions where national governments are competing to rescue their respective banks—contributed to expectations that Washington would continue to bail out its own banks. Another major factor was undoubtedly a series of announcements by US officials underscoring that US banks would essentially dictate the terms of the bailout.

Late yesterday morning, news broke that the CEOs of the largest US banks would meet with US Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, to discuss the terms of the bailout. The Wall Street Journal wrote, “Expected to attend were banking executives including Ken Lewis, CEO of Bank of America; Jamie Dimon, CEO of JPMorgan Chase; Lloyd Blankfein, CEO of Goldman Sachs Group; John Mack, CEO of Morgan Stanley; and Robert P. Kelly, CEO of Bank of New York Mellon.”

A Treasury spokeswoman said, “Treasury and [the Federal Reserve] are meeting today with leading financial market participants to finalize details on a financial market stabilization initiative.” The Journal wrote, “One person familiar with the matter said Mr. Paulson is expected to discuss details of his new plan to take equity stakes in financial firms, among other points.”

The meeting’s roster underscores the social character of the bailout. A handful of current and former top banking executives gathered for a meeting, publicly announced a few hours before it took place and closed to the public, to discuss the conditions under which they will receive hundreds of billions of dollars in public funds. The fact that, in a healthier political climate, these executives would face investigation and prosecution for overseeing the predatory lending practices that led to the housing and credit crises was simply ignored.

In this meeting of the godfathers of American finance, no one was present who represented the overwhelming majority of the American population. Indeed, the participants live in a world of wealth and power that has no resemblance to the existence of ordinary working people.

One could start with Paulson himself, whose former bank stands to benefit handsomely from the bailout which he has authored. While at Goldman Sachs, Paulson amassed a personal fortune of $700 million.

The list continues:

According to Forbes magazine, Ken Lewis last year brought in a salary of $20.13 million, and his holdings of Bank of America stock are worth an estimated $112 million.

Jamie Dimon received a 2007 Christmas bonus of $14.5 million and holds $190 million in JPMorgan stock.

Lloyd Blankfein received a Christmas bonus of $68 million and his holdings of Goldman Sachs stock were worth $414.5 million last year.

Vikram Pandit received a $165 million signing bonus from Citigroup last year, together with a $2.7 million salary for a few months of work and $48 million in stock options.

John Mack received $41.8 million in compensation last year, and his 2007 holdings in Morgan Stanley stock were worth $220 million.

These firms’ stock, and particularly that of Goldman Sachs and Morgan Stanley, rose rapidly on news of the meeting with Paulson. Goldman stock rose 25 percent to $111 a share, and Morgan Stanley stock rose 87 percent to $18.10 per share.

Other financial stocks also rose significantly. Citigroup rose 13.25 percent to $15.98, Bank of New York Mellon rose 15.77 percent to $30.68, and Bank of America rose 9.2 percent to $22.79. JPMorgan stock fell in initial trading on fears of further write-downs, but after the meeting announcement it rose from just over $40 per share to close at $41.64.

Neel Kashkari, the assistant secretary of the treasury and ex-Goldman Sachs executive who is overseeing the $700 billion bailout, confirmed in a speech yesterday that his goal—in purchasing both equity (shares of stock) and assets of financial corporations—is to concentrate money in the hands of the biggest banks.

Kashkari told a Washington DC meeting of the Institute of International Bankers: “We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs [in the bailout], the equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions.”

This emphasis on bailing out supposedly “healthy” banks reflects the increasingly shaky position of many of the major banks. They are jockeying for influence over the government handouts that will determine which banks profit, which suffer, and which close.

Writing 125 years ago in the third volume of his masterwork, Capital, Marx noted, “So long as things go well, competition affects an operating fraternity of the capitalist class... But as soon as it is no longer a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, i.e., to what extent he must share it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalist’s interests and those of the capitalist class as a whole then comes to the surface...”

This anti-social struggle between the various factions of the bourgeoisie is expressed in the secretive and exclusive character of the planning of the bailout.

The Treasury has set up the bailout’s asset purchases—which are to be carried out by private firms—so that only the largest companies will be able to participate and rake in the lucrative fees the government will pay out. Kashkari said: “Our initial procurements set high capability standards: for example, securities asset managers had to have at least $100 billion of dollar-denominated fixed-income assets under management. This is critical given the magnitude of the program—up to $700 billion. Treasury believes it would not be fiscally prudent to ask a firm that only had experience managing only a few billion to manage $100 billion.”

The Treasury is reserving the other roles in the bailout for an elite group of financial and legal firms. Kashkari stated that the Treasury Department had considered only three candidates for the role of “master custodian firm,” whose function, according to Kashkari, would be to “hold and track the assets we purchase as well as run and report on the auctions we use to buy the assets.” The Treasury also contacted six law firms as potential consultants on the bailout’s stock-purchase program. Kashkari added, “We received two proposals, and selected [top New York law firm] Simpson Thatcher [& Bartlett] on Friday.”

The result of this bailout—a major consolidation and restructuring of the US banking industry—will be quite harmful to the interests of the population. The smaller number of surviving banks will have even more market power to set interest rates and control access to credit for working people, students and small businesses.

While the best-connected firms will profit immensely from the bailout, the bourgeoisie and its political representatives insist there is no money for elementary social needs of the working class, such as foreclosure relief, universal health care and the right to a secure retirement. The major presidential and vice presidential candidates have uniformly called for cuts in existing, already inadequate, programs such as Social Security and Medicare.

The stock market’s rise today is not the advent of a new era of prosperity for the American people. Rather, the bourgeoisie is celebrating the Great Heist of 2008.

Bullion Shortage and Spot Prices Tell Two Different Stories

Bullion Shortage and Spot Prices Tell Two Different Stories

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Having blogged earlier on a physical silver shortage and the drying up of gold bullion purchases, recent events in the precious metals markets justify an update that again arrives at the conclusion that last Friday's silver and gold price plunge on COMEX has pretty little to do with the actual physical investment demand for gold and silver. Tim Iacono had a good post with the headline "Gold prices getting fishier and fishier," that does away with the myth that the US mint faces unprecedented demand. I stumbled across several more reports that show the ongoing dichotomy between official spot or futures prices and premiums actually paid by investors, if they can get their coins or bars at all.

The British Evening Standard ran a story over the weekend that said, demand in Germany had grown 10-fold and dealers were not taking any more orders:
German gold dealers say demand has skyrocketed this past week to 10 times normal so no more orders can be taken for the foreseeable future.
"The demand exceeds our capacities by a great deal," said Heiko Ganss, head of precious metal company Pro Aurum.
"The requests cannot be satisfied right now," a dealer from the Düsseldorf WGZ Bank confirmed.
"Demand for gold as a conservative investment has risen dramatically," said stephan Henkel. "right now the demand is about 10 times as high as in normal times."
Gold deliveries now take between four and six weeks.
This was confirmed by the Berlin daily "Tagesspiegel," which reported in a very insightful article that German gold dealer Pro Aurum has closed its mail-order business due to demand never seen before. One reportedly has to wait four weeks to take delivery of one kilo gold bars.
Physically backed gold ETCs (Exchange Traded Commodities) see heydays as well, according to a story at investegate.
Physically-backed gold ETCs saw $93m of net inflows, equivalent to 106,000 ounces of gold, in the six business days up to October 6, the largest weekly increase during the past 10 weeks, while silver also saw net inflows.
Despite a fall in gold prices last week, the ETCs' total assets reached $4.5bn, equivalent to 5,340,000 ounces. So far this year the products have seen $992m in inflows, equivalent to 1,530,000 ounces, an increase of 30%.
ETFS Physical Silver experienced a net inflow over the six-day period of USD7m, an increase of 4% or 1,194,729 ounces. Over the past six weeks, the product's volume of silver has increased by 25% to 12.8 million ounces, the highest level since January 30, and its total assets to $141m.
The new gold rush has also taken grip of Dubai's gold market. According to a report from ameinfo,
We have a similar rush in the souks of Dubai. Gold coins are selling at the highest premiums to spot gold price in 30 years, and stocks are running out.
In silver the premium paid for bullion bars is up to 50% above the spot price as dealers are running low and demand remains very strong.
Vietnam saw gold rising strongly last Saturday too. From Vietnam News:
Domestic gold prices increased strongly here yesterday, rising by VND50,000 to between VND17.90 million and VND18.10 million a tael yesterday as the world share situation became more chaotic.
Nguyen Huu Dang, head of the business department of the Ha Noi-based Bao Tin Minh Chau Jewellery Co, said his shop was full of sellers because of the big profits.
Bloomberg fills in the gaps on the world map, reporting excessively strong demand in more places. In Australia,
The Perth Mint, producer of 10 percent of the world's bullion, doubled output in the past six months, joining a global push to boost production as investors seek protection from the credit crisis.
Perth Mint sold so-called Kangaroo and Nugget coins weighing a total of 62,630 ounces in the three months to Sept. 30, compared with 154,501 ounces for the 12 months to June 30, senior manager Bron Suchecki said in an interview from Perth, Australia yesterday, adding there's been a surge in "moms and dads'' buying over the counter in the past three months.
"It's reflecting a real breakdown in trust in financial products,'' Suchecki said at the mint. "People aren't thinking how do I grow my wealth' but 'how do I protect it."
The shortages don't stop there, reported Bloomberg. In Austria, Muenze Osterreich, producer of gold and silver philharmonics has added a third shift.
Muenze Oesterreich, which makes the world's second highest- selling gold coin, increased output of the Philharmonic almost fourfold and doubled production of gold bars in the past year, Vienna-based Marketing Director Kerry Tattersall said yesterday. The 800-year-old mint, located in a former Habsburg palace, has also added a third work shift to press more coins.
The US Mint announced already a week ago that it would expand its production after gold coins have been suspended from sale quite many times since one year.
Now can someone tell me why gold is always falling ahead of the US trading session? Dan Norcini offers daily insights, alleging gold price manipulation for quite some time. Check out his daily commentary at jsmineset.com.

The Fallacy of the 401(k)

The Fallacy of the 401(k)

By Marie Cocco

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The essential fallacy of the 401(k) has been exposed. It took a historic market collapse -- one that threatens to impoverish workers already in retirement and those who are nearing it. But then, crushing hardship is often what's required to usher out an era of ideological illogic and unconscionable greed.

The advent of the 401(k) in the late 1970s and early 1980s was a leading indicator of what became a political mania for shifting the risk and responsibility for life's big challenges -- health care, an adequate income in retirement -- from employers and other broad-shouldered institutions to the narrower, weaker backs of individuals themselves.

It was never sold this way, of course. The pitch for the 401(k) was a contemporary version of the get-rich-quick scheme: The promise of strolling along a sun-dappled beach in retirement would be realized with ease, so long as workers regularly contributed modest amounts to the accounts, then let the compounding magic of the market work. To hear the mutual fund companies and the media tell it, only fuddy-duddies and dinosaur employers would be foolish enough to opt for the old-fashioned defined-benefit pension, the type employers paid for and professional managers oversaw, and which guaranteed monthly payments in old age. The type that gave the hard-boiled men and women of the industrial age security, but would never reward them with riches.

The offer seemed good to media observers, and to the politicians who nurtured the do-it-yourself retirement with successive legislative schemes. During the stock market boom of the 1990s, esteemed business publications published breathless articles featuring manufacturing workers who would use their lunch breaks to track their mutual fund balances and ponder the possibilities of the loan they would take out for a cabin on the lake or an anniversary trip to Hawaii.

But despite the hype, the data on 401(k)s have never -- ever -- shown that these accounts were creating a mass of workers who would be able to retire with security, let alone luxury.

The 401(k)s didn't expand the proportion of the work force with pension coverage, notwithstanding claims that shifting to accounts that required workers to contribute would make employers more willing to offer the benefit. Less than half of workers have any type of pension coverage from their current employer at all, according to the Center for Retirement Research at Boston College.

For those who do have retirement accounts, the bottom line has long been grim. In 2004, the last year for which data are available, the median balance in IRA and 401(k) retirement accounts was $35,000, according to the Federal Reserve. For those nearest to retirement -- households headed by someone between 55 and 64 -- the median balance in 2004 was $60,000. That's enough to generate about $400 a month in retirement income, according to the research center.

These numbers reflect balances before the current market meltdown, which wiped out about $2 trillion in retirement assets when losses in individual accounts as well as employer-based pension funds are tallied. How did this happen? Like so many other political experiments of the last three decades, it was good for the corporate bottom line -- and therefore, supposedly good for America. The 401(k) plan was first promoted to supplement, not replace, traditional pensions, according to Alicia Munnell, director of the Boston College center. Over time, as new businesses were formed, they opted to provide only these accounts, eschewing traditional plans.

More recently, even companies with healthy, traditional pension systems have frozen those plans (effectively abandoning their pledges to longtime workers) and replaced them with 401(k)s. Why? "Shifting from a defined-benefit plan to a 401(k) plan will reduce required employer contributions from 7 to 8 percent of payrolls to the 3 percent employer match," Munnell and a team of researchers wrote in a 2006 paper.

This was never about empowering workers to reap the rewards of financing their own retirement. It was about reducing corporate costs.

"I think what has become clear is that we just can't have a system where people are exposed to this type of market risk," Munnell told me in an interview. Nor, in the age of global competition, can American businesses solely shoulder pension costs that in other countries are at least partially borne by governments.

Some new system that might be called "Social Security-plus" must be developed. Remember that in a year or two, when politicians try to sell us on the supposed need to "reform" Social Security with something that really amounts to Social Security-minus.

Ohio GOP plays voter fraud card

Ohio GOP plays voter fraud card


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If Republican lawsuits and rhetoric are any indication, the specter of voting fraud is looming large over the November election.

A weeklong period in which new voters can register and immediately cast a ballot? Ripe for voting fraud. The state's method of verifying voter registration information? Insufficient to prevent voter fraud.

Voter fraud was a buzz phrase for the Ohio GOP when it pushed voter identification requirements through the state Legislature in 2005. It's now a driving factor behind a flurry of GOP lawsuits leveled against Democratic Secretary of State Jennifer Brunner, seeking either to restrict early voting or mandate how voter information should be checked.

But do the arguments come with supporting evidence that voter fraud is prominent, or that the current election system isn't catching it when it does happen? No.

Voter fraud is not a widely studied phenomenon, but the vast majority who have studied allegations say that it's extremely rare.

"There's a lot more rhetoric than reality when it comes to actual voter fraud," said Dan Tokaji, an elections law expert at Ohio State University. "There's this public perception that voter fraud is common when the reality is that it's quite rare."

A 2005 report by the League of Women Voters of Ohio and the Coalition on Homelessness and Housing in Ohio found that of about 9 million votes cast in the state from 2002-2004, there were four fraudulent ballots. The data was collected from interviews with all 88 county boards of elections.

"Voter fraud" is often construed to include fraudulent registrations turned in by activist voter registration groups. Most infamously, names like Jive Turkey, Mary Poppins and Dick Tracy showed up in a 2004 registration drive and were cited by GOP lawmakers as demonstrating the pressing need to employ anti-fraud measures, such as requiring voter ID.

The GOP often points to groups like the Association of Community Organizations for Reform Now, or ACORN, which have routinely been accused of fraud and are currently under investigation in Cuyahoga County and across the country. ACORN said Wednesday that it can't possibly make sure that all the registrations it turns in are valid.

But this is not voter fraud, it's voter registration fraud. The two are not the same. Jive Turkey isn't showing up at the polls asking for a ballot.

This type of voter fraud happens when an unqualified voter actually casts an actual ballot in an election. This type of activity is extremely rare, says a 2007 report by the nonpartisan Brennan Center for Justice at New York University School of Law.

In the U.S. Supreme Court case on Indiana's law requiring a photo ID at the polls, the state could not present one example of a voter going to the polls and pretending to be someone he or she was not, Tokaji said. The court upheld the state law, despite the lack of evidence.

People attempting to commit voter fraud in Ohio's November election would have to impersonate someone they're not, and do so despite voter identification requirements. Or they must register under a false Ohio name and address and have the ID to back it up.

Registrations are put into a statewide database and matched against information from the state Bureau of Motor Vehicles and the Social Security Administration, making voter fraud quite difficult. The system also checks for duplicate registrations.

Additionally, as the Brennan Center report notes, the consequences of getting caught for voter fraud in a federal election — five years in prison and a $10,000 fine — are probably not worth the reward: one vote.

When Ohio Republicans sought, unsuccessfully, to close a weeklong window that ended Oct. 6 in which Ohioans could register and immediately cast a ballot, the main argument was that Ohio law did not permit same-day registration and voting. But a secondary argument was that the process would make it too easy to commit voting fraud because voters could cast ballots before having their registration information verified.

That window was viewed as a benefit to Democrat Barack Obama, as the campaign and outside groups transported college students, low-income voters, the homeless and minorities to the polls.

Greene County Sheriff Gene Fischer on Thursday requested registration records for all 302 people who registered and voted on the same day in the county. Greene County is home to five colleges and universities, including two historically black colleges.

Democrats were outraged, calling the tactic pure voter intimidation. Fischer withdrew the request Friday, citing a federal court decision requiring Brunner to match registration records with data from the Ohio Bureau of Motor Vehicles and the Social Security Administration and provide any mismatches to counties.

Brunner has appealed the ruling on the case, which was brought by the Ohio GOP. She has argued the state was already performing the matches, and that federal law provides no requirement for what to do if there's a mismatch.

Ohio Republicans had sued because they say there aren't proper safeguards in place to make sure people aren't casting votes using false registration information.


On The Net:

Ohio Secretary of State: http://www.state.oh.us/sos [http://www.state.oh.us/sos]