Thursday, August 25, 2011

The Dumbest Rally of All Time

The Dumbest Rally of All Time

Go To Original

"Without the destructive power of the banks, hedge funds and other investment companies, the world would not be where it is today — at the edge of an abyss." Der Spiegel, "The Destructive Power of the Financial Markets"

Yesterday's 322 point surge on the Dow Jones must rank among the dumbest rallies of all time. The proximate trigger for the triple-digit moonshot was the feint hope that Fed chairman Ben Bernanke might pull another rabbit out of his hat at his Jackson Hole confab and announce another round of his bond purchasing program called Quantitative Easing. Keep in mind, that at the same time high-frequency computers were juicing the market with an ocean of liquidity sending near-dead equities into the stratosphere, skittish investors with hard cash were headed for the exits. 2-year Treasuries hit a record low yield of 0.22 percent as the flight-to-safety continued apace a full 3 years after Lehman Brothers crashed. Plunging Treasuries confirm that the economy is still in the throes of a multi-year Depression that hasn't been mitigated by any of interest-hacking strategies of the Fed or by the blinkered budget-cutting antics of our vacationing executive, Barack Hoover Obama.

Is it any wonder why confidence in the markets and the country's main institutions is at an all-time low?

Look; Unemployment is tipping 9 percent, GDP has slipped below 1 percent for the last 6 months, the fiscal jet fuel that kept the economy in the black is gone, the credit markets are beginning to refreeze, and Europe's in the shitter. Is there any reason to load up on stocks expecting brighter returns in the future?

No.

The bond market is blinking "Depression". The benchmark 10-year is hovering around 2 percent as terrified investors load up on risk-free assets that actually lose money when adjusted for inflation. Does that sound like a ringing endorsement of current policy?

So what does Obama do? He pushes through a structural adjustment program (The "debt ceiling" agreement) that stuffs the stimulus-starved economy into a fiscal straightjacket, and then crows about how mush he "cares about jobs".

Right. How can the government create jobs when the new law forbids expansion of the deficits? It can't be done. So, unemployment will stay unnecessarily high for the foreseeable future, all because of Obama. Is that why the markets are so happy?

Here's a clip from an article by Michael Spence at Project Syndicate:


"The world is witnessing is a correlated growth slowdown across the advanced countries, ...and across all of the systemically important parts of the global economy, possibly including the emerging economies. And equity values’ decline toward a more realistic reflection of economic fundamentals will further weaken aggregate demand and growth. Hence the rising risk of a major downturn – and additional fiscal distress." Michael Spence, "Stagnant and Paralyzed", Project Syndicate


Great summary. Not only is demand flagging across the industrial world, but political gridlock in the EU and the US has increased the likelihood of another slump. Austerity-obsessed policymakers have slashed spending and implemented belt-tightening measures that are dimming the prospects for future growth. Add to that the fact the EU is in the midst of a credit crunch, and you have all the ingredients for another stomach-churning stock market crash followed by years of vicious contraction. Needless to say, policymakers in the US and EU have no idea of how to put the economy back on track. They remain committed to a flawed ideology that's pushing the world to the brink of disaster.

Let's look at the eurozone for a minute. It's generally accepted now that saving the 17-member monetary union will require some kind of financial transfer from the rich countries to the poor. Eurobonds provide the easiest way of achieving that objective. But how much would that cost a country like Germany? If we can figure that out; then we can determine whether the plan will be acceptable or not to German policymakers. Here's an excerpt from an article titled "The Future of the Eurozone" by Max-Planck Gesellschaft:

"A transfer mechanism that simply equalizes 50 percent of the difference from average, based on 2007 figures, sums up to 445 billion euros per year. For Germany, for instance, this would be a contribution of almost 74 billion euros per year, on the basis of the 2007 figures....

These rough calculations show: a transfer mechanism that achieves little more than half the amount of equalization in governmental revenues would have transfers that are magnitudes larger than the total current EU budget. ...

It is hard to believe that Europe could survive the political antagonisms that would be created by transfers of this magnitude...." ("The Future of the Eurozone", Max-Planck Gesellschaft)

This plan is never going to fly in Germany, so we can assume that the eurozone will eventually break up, although it could take a year or so. That means the panic in the credit markets will intensify, widening the spreads on bond yields and putting more pressure on the EU banking system which is chock-full of garbage bonds that are set to take hefty haircuts when the sh** hits the fan.

Is that why the markets are surging, because traders just love the idea on another credit meltdown?

And, while the credit-noose is tightening in the EU, what's going on in the US?

Nothing. No jobs programs, no extension of unemployment benefits, the payroll tax break ends on December 30, and Obama refuses to stump for second round of stimulus. How's that for a "pro growth" strategy?

The economy needs more stimulus and it needs it fast. Take a look at this chart on Paul Krugman's blogsite that shows how the depletion in government stimulus coincides with the decline in growth. http://krugman.blogs.nytimes.com/2011/07/09/anti-stimulus-2/

Now, take a look at GDP, which peaked in late 2009 and early 2010, and has slipped ever since: (4Q 2009-3.8%; 1Q 2010--3.9%; 2Q 2010--3.8%; 3Q 2010--2.5%; 4Q 2010--2.3%; 1Q 2011--0.4%, "revised" 2Q 2011---0.9%)

Get the picture? The recovery WAS stimulus. Absent the stimulus, there is no recovery. Credit is not expanding, households are still deleveraging, business investment is way off, and aggregate demand is weak. In other words, the economy is dead-in-the-water. Without sustained government spending to shore up the flagging economy, recession is inevitable. But policymakers---led by Obama--refuse to budge. They remain fully committed to their bad ideas.

Why?

Economist Peter Dorman answers this question in his essay titled "It’s the Political Economy, Stupid!" Here's a short excerpt:

"....We are not living through an epoch of intellectual failure, but one in which there is no available mechanism to oust a political-economic elite whose interests have become incompatible with ours. This is not some sudden development, much less a coup d’etat as is sometimes claimed. No, the accretion of power by the rentiers has been systematic, structural and the outcome of a decades-long process. It is deeply rooted in modern capitalist economies due to the transformation of corporations into tradable, recombinant portfolios of assets, increasing concentration of and returns to ownership, and the failure of regulation to keep pace with technology and transnational scale. Those who sit at the pinnacle of wealth for the most part no longer think about production, nor do they worry very much about who the ultimate consumers will be; they take financial positions and demand policies that will see to it that these positions are profitable....

The real problem is political, and it is profound. Unless we can unseat the class that sees the world only through its portfolios, they may well take us all the way down. Unfortunately, no one seems to have a clue how such a revolution can be engineered in a modern, complex, transnational economy. ("It’s the Political Economy, Stupid!", Peter Dorman, Econospeak)

So, when does discontent turn to open rebellion?

The sooner the better.

Link9/11 After A Decade: Have We Learned Anything?

9/11 After A Decade: Have We Learned Anything?

Go To Original

In a few days it will be the tenth anniversary of September 11, 2001. How well has the US government’s official account of the event held up over the decade?

Not very well. The chairman, vice chairman, and senior legal counsel of the 9/11 Commission wrote books partially disassociating themselves from the commission’s report. They said that the Bush administration put obstacles in their path, that information was withheld from them, that President Bush agreed to testify only if he was chaperoned by Vice President Cheney and neither were put under oath, that Pentagon and FAA officials lied to the commission and that the commission considered referring the false testimony for investigation for obstruction of justice.

In their book, the chairman and vice chairman, Thomas Kean and Lee Hamilton, wrote that the 9/11 Commission was “set up to fail.” Senior counsel John Farmer, Jr., wrote that the US government made “a decision not to tell the truth about what happened,” and that the NORAD “tapes told a radically different story from what had been told to us and the public.” Kean said, “We to this day don’t know why NORAD told us what they told us, it was just so far from the truth.”

Most of the questions from the 9/11 families were not answered. Important witnesses were not called. The commission only heard from those who supported the government’s account. The commission was a controlled political operation, not an investigation of events and evidence. Its membership consisted of former politicians. No knowledgeable experts were appointed to the commission.

One member of the 9/11 Commission, former Senator Max Cleland, responded to the constraints placed on the commission by the White House: “If this decision stands, I, as a member of the commission, cannot look any American in the eye, especially family members of victims, and say the commission had full access. This investigation is now compromised.” Cleland resigned rather than have his integrity compromised.

To be clear, neither Cleland nor members of the commission suggested that 9/11 was an inside job to advance a war agenda. Nevertheless, neither Congress nor the media wondered, at least not out loud, why President Bush was unwilling to appear before the commission under oath or without Cheney, why Pentagon and FAA officials lied to the commission or, if the officials did not lie, why the commission believed they lied, or why the White House resisted for so long any kind of commission being formed, even one under its control.

One would think that if a handful of Arabs managed to outwit not merely the CIA and FBI but all 16 US intelligence agencies, all intelligence agencies of our allies including Mossad, the National Security Council, the State Department, NORAD, airport security four times on one morning, air traffic control, etc., the President, Congress, and the media would be demanding to know how such an improbable event could occur. Instead, the White House put up a wall of resistance to finding out, and Congress and the media showed little interest.
During the decade that has passed, numerous 9/11 Truth organizations have formed.

There are Architects and Engineers for 9/11 Truth, Firefighters for 9/11 Truth, Pilots for 9/11 Truth, Scholars for 9/11 Truth, Remember Building 7.org, and a New York group which includes 9/11 families. These groups call for a real investigation.

David Ray Griffen has written 10 carefully researched books documenting problems in the government’s account. Scientists have pointed out that the government has no explanation for the molten steel. NIST has been forced to admit that WTC 7 was in free fall for part of its descent, and a scientific team led by a professor of nano-chemistry at the University of Copenhagen has reported finding nano-thermite in the dust from the buildings.
Larry Silverstein, who had the lease on the World Trade Center buildings, said in a PBS broadcast that the decision was made “to pull” Building 7 late in the afternoon of 9/11. Chief fire marshals have said that no forensic investigation was made of the buildings’ destruction and that the absence of investigation was a violation of law.
Some efforts have been made to explain away some of the evidence that is contrary to the official account, but most of the contrary evidence is simply ignored. The fact remains that the skepticism of a large number of knowledgeable experts has had no effect on the government’s position other than a member of the Obama administration suggesting that the government infiltrate the 9/11 truth organizations in order to discredit them.
The practice has been to brand experts not convinced by the government’s case “conspiracy theorists.” But of course the government’s own theory is a conspiracy theory, an even less likely one once a person realizes its full implication of intelligence and operational failures. The implied failures are extraordinarily large; yet, no one was ever held accountable.

Moreover, what do 1,500 architects and engineers have to gain from being ridiculed as conspiracy theorists? They certainly will never receive another government contract, and many surely lost business as a result of their “anti-American” stance. Their competitors must have made hay out of their “unpatriotic doubts.” Indeed, my reward for reporting on how matters stand a decade after the event will be mail telling me that as I hate America so much I should move to Cuba.

Scientists have even less incentive to express any doubts, which probably explains why there are not 1,500 Physicists for 9/11 Truth. Few physicists have careers independent of government grants or contracts. It was a high school physics teacher who forced NIST to abandon its account of Building 7’s demise. Physicist Stephen Jones, who first reported finding evidence of explosives, had his tenure bought out by BYU, which no doubt found itself under government pressure.

We can explain away contrary evidence as coincidences and mistakes and conclude that only the government got it all correct, the same government that got everything else wrong.

In fact, the government has not explained anything. The NIST report is merely a simulation of what might have caused the towers to fail if NIST’s assumptions programed into the computer model are correct. But NIST supplies no evidence that its assumptions are correct.

Building 7 was not mentioned in the 9/11 Commission Report, and many Americans are still unaware that three buildings came down on 9/11.

Let me be clear about my point. I am not saying that some black op group in the neoconservative Bush administration blew up the buildings in order to advance the neoconservative agenda of war in the Middle East. If there is evidence of a coverup, it could be the government covering up its incompetence and not its complicity in the event. Even if there were definite proof of government complicity, it is uncertain that Americans could accept it. Architects, engineers, and scientists live in a fact-based community, but for most people facts are no match for emotions.

My point is how uninquisitive the executive branch including the security agencies, Congress, the media, and much of the population are about the defining event of our time.

There is no doubt that 9/11 is the determinant event. It has led to a decade of ever expanding wars, to the shredding of the Constitution, and to a police state. On August 22 Justin Raimondo reported that he and his website, Antiwar.com, are being monitored by the FBI’s Electronic Communication Analysis Unit to determine if Antiwar.com is “a threat to National Security” working “on behalf of a foreign power.”

Francis A. Boyle, an internationally known professor and attorney of international law, has reported that when he refused a joint FBI-CIA request to violate the attorney/client privilege and become an informant on his Arab-American clients, he was placed on the US government’s terrorist watch list.

Boyle has been critical of the US government’s approach to the Muslim world, but Raimondo has never raised, nor permitted any contributor to raise, any suspicion about US government complicity in 9/11. Raimondo merely opposes war, and that is enough for the FBI to conclude that he needs watching as a possible threat to national security.

The US government’s account of 9/11 is the foundation of the open-ended wars that are exhausting America’s resources and destroying its reputation, and it is the foundation of the domestic police state that ultimately will shut down all opposition to the wars. Americans are bound to the story of the 9/11 Muslim terrorist attack, because it is what justifies the slaughter of civilian populations in several Muslim countries, and it justifies a domestic police state as the only means of securing safety from terrorists, who already have morphed into “domestic extremists” such as environmentalists, animal rights groups, and antiwar activists.

Today Americans are unsafe, not because of terrorists and domestic extremists, but because they have lost their civil liberties and have no protection from unaccountable government power. One would think that how this came about would be worthy of public debate and congressional hearings.

Dr. Paul Craig Roberts was appointed by President Reagan Assistant Secretary of the U.S. Treasury and confirmed by the US Senate. He was Associate Editor and columnist with the Wall Street Journal, and he served on the personal staffs of Representative Jack Kemp and Senator Orrin Hatch. He was staff associate of the House Defense Appropriations Subcommittee, staff associate of the Joint Economic Committee of Congress, and Chief Economist, Republican Staff, House Budget Committee. He wrote the Kemp-Roth tax rate reduction bill, and was a leader in the supply-side revolution. He was professor of economics in six universities, and is the author of numerous books and scholarly contributions. He has testified before committees of Congress on 30 occasions.