Martin Armstrong – Behind the Curtain, The Full Monty!

What follows is 62 pages of Martin Armstrong spilling what he knows about the club, about politicians, about Goldman Sachs, Warren Buffett, murder, international intrigue, and his own involvement in all of it. We’ve seen a lot of it before, but this is certainly the most comprehensive and reads like a mini-epic in the making.

Those who have not followed Armstrong’s case will learn a great deal about it from reading this. Here you will get a good narrative of his perspective and how the events of his case are related to world happenings and market manipulations by members of the “club.” There is so much here to point out that I’m not even going to try and instead just recommend that you designate a couple of hours this weekend, sit down and read it.

One aspect I really like about this paper is that he sees the need for political reform. His suggestions are close to mine in that he sees the need to separate the special interests and their money from politics. This is exactly what the political reform part of Freedom’s Vision would accomplish:

We need elected posts with term limits. In other words, we elect the BUREAUCRACY and that is the head of all departments. There is a term limit to one appointment, and no election should be subject to any private contribution. The revenue of the government must pay for all elections. Stop the buying of any influence. This would (1) prevent the "Club from spinning any committee,(2) would prevent donations that buy political appointments such as Secretary of the Treasury. There would be no succession of CEOs from Goldman Sachs. And above all, we would get rid of this clever view of politicians that they exercise the NATIONAL POWER but do not answer nationally to anyone. That allows corruption to keep a particular senator in place in say Vermont and that then controls the entire Judiciary. This is a system doomed to corruption and manipulation.

… We MUST end political contributions. ALL elections should be funded by taxpayer money period. We cannot afford this nonsense anymore. We will be reduced to wearing just sackcloth unless we get political reform and fast.

Part I:


Part II:


Part III:

Freedom’s Vision – Answers to a Reader’s Questions…

Frequent Economic Edge reader and poster, “Blonde Guest,” has taken the time and effort to parse through Freedom’s Vision and came up with a set of excellent questions. Indeed, when one is not familiar with the concepts it’s difficult to explain it to other people as it touches on a lot of issues, especially if you get to the depths where deeper knowledge is required. However, when explained in simple terms that people can understand, it is not complex and will actually produce a system that is far less complex than the current one.

With that I present the many questions that are embedded in Blonde Guest’s post and subsequently attempt to answer them in order below:

Good Morning Nate,

Many questions on Freedom's Vision. How do you sell that we are on the precipice of monumental change to the people? Just came from a dinner of Ivy league, Big Ten etc... educated women, and although most sense that something is not right, they cannot comprehend that the economy is in grave danger. These highly educated women admit they do not speak the language. I referred then to your site, and the rest of your blog list prior to our dinner and they frankly told me they could not comprehend 90%. When they do not comprehend it, they shut down and move on. We need to get this out in easily understood concepts and terms. If I cannot explain the basics in 15 minutes or less the audience shuts down. The attention span may increase as the economy gets worse and people are looking for answers. And no one will swarm (an active component) if they don't understand and buy into the vision.

Can you explain the bankruptcy component and how our foreign creditors are going to be satiated? Where does the money to return the past two years of income taxes come from? (One of my women said it sounds like the mythical Obama money) and how does the government continue functioning with no income? or pay off the interest on current debt? or current debt? More printing? I understand how paying off 2.6T in consumer debt would help the citizens and everyone loves free money, but what are the strings?

How is this clearing of Federal debt being paid off entirely during the transition period with old dollars/ new dollars not a national default?(sovereign debt crisis)? How is the rest of the world going to handle this reset? How do we deal with the unfunded mandates?

Is this vision based on Still's story of Gursey? We issue the money, extra money and tax (inflate) the money out of the system? We make a new financial infrastructure completely made with made up money and citizens take the hit of inflation equally? New leverage limits are put in place and something like Glass-Steagall is actually enforced. Rule of law is established, and enforced.

Sorry for all the questions, but I am just trying to get a handle on Freedom's Vision.

Good Morning Blonde,

Those are all great questions! It is my pleasure to answer them for you because it gives me another chance to say it in a different way and maybe that will help people understand.

Please keep Bill Still's quote in mind, "It's not WHAT backs our money, it's WHO controls the QUANTITY."

In regards to the need to “sell” that we are on the verge of monumental change… indeed, the events we have experienced lately have people “sensing that something is just not right.” They have seen the transition from millions to billions to trillions and no longer comprehend the figures. There are disconnects in the data and in the story line that contribute to that uneasiness. When I go to the barber, as I talk to the older generations, most are very angry and are aware that the path we are on is unsustainable. Even younger people know that they cannot count on SS or other forms of retirement to be there for them.

Yes, most people shut down and cannot handle going too deeply into the truth. I see it all the time, even my good friends who know cannot go far into the depths of conversation with me – it’s too much for them. It is possible to summarize in 15 minutes, just hit the highlights. No it’s not possible to explain in great detail in that amount of time, this is due to the complex nature of our current economy – Freedom’s Vision is actually much more simple with fewer moving parts. It’s transitioning from debt saturation and derivative entanglement that makes it seem difficult.

It is, however, a historic opportunity to use the deleveraging to make the transition to a non debt-backed money system on the federal level and to create a sustainable and recognizable system going forward. And we need to emphasize how Freedom’s Vision benefits the people, the states, businesses, banks, Federal Government programs, basically everyone but the current crop of casino managers.

This is exactly why our citizens need leadership and why they need an easy task to accomplish, one that makes them a part of the solution. They know that all is not well and that change is appropriate and thus I believe many will join into the SWARMS so that they feel empowered. Fortunately, they will be supporting a good cause with their best interests squarely in focus.

The TRUTH does not require a hard sell! There will be enough people who get it that the SWARM will be HUGE. Just imagine if “only” 10 or 20 thousand people all bombard a person’s office and points of contact in a day. They would literally be immobilized by legitimate requests from citizens to support change.

Regarding foreign creditors, they will be paid off in full during the transition period. Again, this would be inflationary as you are changing DEBT into money. That money then will go someplace into some other asset groups. That inflationary force is balanced by removing debt and derivatives (leverage) from the system. With firm but accommodating monetary controls, weighed against ALL asset classes, zero inflation is targeted, thus holding the value of the dollars that are paid back steady. Again, should you simply print dollars and pay back your debt it would be inflationary. The ability to take down leverage is what makes this a historic opportunity. The monetization already occurred when the debt and other leverage was created… this undoes it, and when done correctly will not change the overall quantity of money in the system.

The money to return the past two years of taxes is simply created without debt backing. Once again, should you do that and just send it out there devaluation of the money will ensue. However, by ensuring that the vast majority of that money is used to pay down debt, it will not be nearly as inflationary, it will be an act of deleveraging. Again, these inflationary forces will be offset by other deleveraging as well, there are historic amounts of it out there that need to be removed.

Who said the government would have no income? Freedom’s Vision does not touch the tax structure, although I’d love to. And for those who can really handle the truth, the government does not need to collect taxes at all. I’m not going to go there, our purpose is to keep the system as close as possible to what people currently recognize.

There will be no more current debt and thus no more interest payments in the Federal Government’s budget. Currently those payments go to PRIVATE banks and bankers, they are dollars that come from you to pay someone else for your own money system!

“Printing” will only happen once the system is in place when the IP determines that PRICES need it to maintain the zero price target. As the economy cycles, there will be times when adding quantity happens and there will be times when subtracting quantity happens (right now it is add only). This is a simple mechanism as prices reflect all the underlying forces when measured correctly. Instead of moving 14 different levers, the IP will only be moving one, and they will be keeping the money and our economy in the center of its operating envelope instead of trying to create never ending growth that must happen when debt backs our money.

I know that it sounds “magical” that the majority of the $2.6 trillion in consumer debt can just disappear. No magic trick is necessary. The truth is that much more than two years of taxes has been STOLEN from everyone. It has been funneled into the large banks to create their mythical profits and “assets.” This process will cleanse those assets back out of the banks via the bankruptcy process and they will be disposed of in accordance with the current rule of law as dictated by the bankruptcy process. A judge will evaluate each “asset” (debt) and decide if it is serviceable or not. If not, it is cleansed. This is what should have happened all along. The act of clearing out these debts will de-lever the banks and the entire system. This deleveraging allows the treasury to return money to the citizens to pay back their debt, money that rightly never should have been taken from them. This is simply undoing what’s been done and allows the people to pay down debt, and this in turn is virtuous because the deposits and paying down of the consumer credit will by itself greatly add to bank health. This in turn makes the people more solvent, the banks more solvent, and businesses more solvent. Again, it won’t be inflationary because debts will be repaid and leverage taken down. So, NO STRINGS, there is no reason not to support this.

It is NOT a national default… we will be paying back all creditors with sound dollars. It is a change to the way our money system works, but it is a sound change, unlike the change that created the current debt backed money system in the year 1913. Our money system has changed many times in our history. This will be a progression forward that will cure many of the faults of our previous dollar systems. If you wish to see national default, look no further than the current program of “Quantitative Easing.” This buying up of one’s own debts fools no one but ourselves. It is piecemeal default and it does nothing but damage the people and future generations of the United States.

This is going to create the most sound money system on the planet… there will be no debt at the Federal level. Interest rates will normalize and be driven by free market forces. The dollar will become much stronger against other currencies that are still backed by debt. It would behoove other countries to accomplish the same cleansing and transition at the same time. Should they fail to do so, they will wind up paying the price as all debt infested currencies should. They will be encouraged to make the transition and we recommend that the U.S. form transition teams to go to the other countries of the world to help them transition in a like manner.

Another ramification for other countries is that the special bankruptcy courts in the U.S. will be defaulting on a lot of debt and derivatives in the banking system. A lot of counterparties will be overseas. They will, of course, not be happy that defaults will ripple. Defaults of debt and derivatives in the current system is going to happen regardless! This is simply a controlled way of accomplishing the cleansing. Again, if other countries are running the same procedures at the same time then the transition for them will be much smoother as they will be clearing out unserviceable debt and derivatives on their end as well.

Unfunded liabilities instantly get better under the new system because zero percent price inflation is the target. Thus the payout assumptions no longer have exponential math behind them. This is addressed in the outline. A fund is also created to ensure solvency and to absorb future fluctuations in the country’s demographic composition.

Initially the monetary reform and the political reform work together. Those are the first goals. Then we go on to develop a “Future’s Vision” where we can talk about providing leadership for the economy and how to create jobs. While the general thinking is expressed in the third section of the outline, those ideas are somewhat similar to the story of how the Channel Island of Guernsey created money, spent it into existence to build public infrastructure, and then taxed the money back out of the system. What is suggested in Freedom’s vision would be different in that seed money would fund research and development, much like NASA has done in the past. This needs to be done to create the energy and infrastructure of the future and cannot be done by current corporations or the way our government works now. It would partner with and send the fruits of the research into private enterprise, again, nothing new, look at how NASA used to do research that benefited and created giant strides in aviation. We need to do the same thing for even more important future needs like energy. The seed money can be recaptured by sharing in the profits generated by the new technology world wide. Once the seed money is recovered, that money can then fund further research or be taken back out of the system. Again, overall price inflation is still being controlled in the background by the IP who is monitoring ALL asset category prices.

Again, there should not be overall inflation over time if this is implemented. There will be periods of mild inflation or deflation (as is normal in cyclical movement), but they will be corrected early and not allowed to compound upon themselves. Thus giant booms and busts will be avoided, but a healthy and robust economy will result, one that has the ability to absorb shocks and keep on going.

Yes, new limits resembling Glass-Steagall will be put in place and ENFORCED. The goal is to get the banks to a strict 10 to 1 reserve and cap it there. By restricting derivatives and other forms of modern leverage, we believe that this is achievable, especially when the special interest money can no longer be used to get involved in politics to make the rules go away, as has been the case! When leverage and effective reserve capability are allowed to get out of hand, that is one of the ways that inflation is created! The central bankers MUST create inflation or deflation results. This is because they are skimming interest and fees, constantly taking and taking money from the system. They have to continually make more money, this is one way they do it and why the quantity of money (debt) is currently out of control. Under Freedom’s Vision, those pressures either go away or are held steady.

No problem in answering your questions, that’s what needs to happen, they are all good and legitimate ones. Once you see the truth behind our money system and a clear path out of our problems, providing solid answers requires little effort. People need to realize that money is a creation of man and that certain men have set the system up to profit from the fruits of our citizen’s labor. This simply undoes much of that and returns the power of our money back to the people where it belongs. In doing so, we have tried to maintain a system that will be virtually indistinguishable from the way most people currently conduct their business.

While the underlying concepts are difficult to grasp, they are only difficult because of the distortions and opaqueness intentionally created by the men behind the curtain. Freedom’s Vision will bring checks and balances, transparency, and the rule of law back to where they belong.


Artwork by AZ Rainman

Morning Update/ Market Thread 1/7

Good Morning,

Equity futures are down this morning, here’s a snapshot of the overnight DOW and S&P action:



The Dollar is up very sharply, bonds are flat, oil and gold are both down a little after oil’s rocket ride of late. In fact, oil’s gone straight up ever since Dubai’s debts were backed.

Both the Yen and the Euro are lower. Below is a chart showing the Yen on the left (up is lower Yen), and the EUR on the right (down is lower here). Note the flag that has formed on the EURO. Should that flag break downwards as I’m expecting, the target will be about 1.33ish:



The Monster employment report fell from 119 to 115. Here’s their and Econoday’s spin:

Highlights
Monster's employment index fell 4 points in December to 115 reflecting what the report said is seasonality during the month. The year-on-year reading, which limits the effect of seasonality, is the best in 18 months at minus 12.2 percent.

“Reflecting seasonality?” Gee, I thought December was supposed to have increases in employment as people are hired for the Christmas season? The BEST year over year reading is minus 12.2%? Oh my. They don’t normally report that, if they want to spin the positive, then maybe they should have waited a while longer to come out with the yoy figures!

Weekly jobless claims rose last week to 434,000. This is better than the consensus read of 450k, here’s the positives:

Highlights
Initial jobless claims were little changed in the Jan. 2 week, up 1,000 to 434,000 (prior week revised 1,000 higher to 433,000). The Labor Department reported no special factors. The four-week average extended its long streak of improvement, down a sizable 10,250 to 450,250 for its lowest level since September last year. Continuing claims continue to show improvement, down 179,000 in the Dec. 26 week to 4.802 million.

I’ll dig up the report and we’ll take a look at the number of emergency claims later in the daily thread. Tomorrow is the monthly employment report.

There are a ton of Treasury auctions that are supposedly going to run this afternoon. The Treasury’s site is not indicating in its normal spot that there are any, much less the amounts. In a different location they posted a tentative schedule but not with amounts. I’m guessing there’s a lot of issuance today, we’ll keep tabs on that, too, as results come in.

Yesterday’s movement produced another small change of the McClelland Oscillator, therefore expect a large move either today or now tomorrow. I will not be surprised by a large move tomorrow on the jobs report.

Still no sizeable volume, this market is WAY overbought, divergences are everywhere I look. The VIX bounced off of support yesterday, and the XLF continued rising above the upper Bollinger. Prices are still within the new smaller rising wedges and so the odds of them being in play is good. A break below about 1,125 would break the lower boundary on the SPX. The support pivot right now is 1,133, then 1,107. Resistance is at 1,168.

Did everyone catch Barney Frank’s handiwork in trying to sneak rules about shorting equities into his latest bill? Here’s the story at ZH if you missed it: In Order To Make The Ponzi Market Keep Going Ever Higher, Barney Frank Tries To Make Shorting Virtually Impossible . And thus stocks can only go up and the games people play continue:

Joe South – Games People Play:

Total U.S. Savings Rate Lowest in Recorded History…

Usually when we talk about savings rate, we talk about the savings of our citizens. This personal “savings” rate should not be confused with money that is in savings accounts. No, the savings rate is a calculation based upon how much money is not being spent on other things. And this means that DEBT REPAYMENT generally counts as personal savings.

The personal savings rate went negative (although no longer reflected on the Fed's charts), but since this crisis began has turned back positive, the result of citizens pulling in their spending while deleveraging by paying off debt. Below is the chart of the Personal Savings rate, it is currently just below 5%:



The next chart shows the personal savings AMOUNT in billions of dollars:



What is occurring is that the government, of course, is trying to make up for the slowing by spending themselves into huge deficits. Below is the chart showing Gross Government Savings, a hugely negative figure, one that I contend in reality is many times larger:



If you take personal, corporate, and government savings and combine them into one chart, you wind up with the lowest overall savings rate since the Great Depression, and once the 4th quarter is tallied, 2009 will likely wind up being the worst year ever:



Below is the Bloomberg article that discusses this chart:

U.S. Savings Rate Falls to Depression-Era Levels: Chart of Day

By David Wilson

Jan. 6 (Bloomberg) -- Government deficits have caused the U.S. savings rate to turn negative for the first time since the Great Depression, and the gap is widening even as households and companies put away more money than ever before.

The CHART OF THE DAY shows net savings, adjusted for depreciation and changes in the value of business inventories, as a percentage of gross income. This rate is provided by the Commerce Department on a quarterly basis since 1947, when the chart begins. Annual figures go back to 1929.

The savings shortfall widened to negative 2.3 percent in the first three quarters of last year from negative 0.2 percent in all of 2008. Before 2008, there hadn’t been a full-year drop since 1934, the last year of a four-year period when rates were below zero.

Deficit spending by the federal government reduced net savings at an annual rate of $1.33 trillion during last year’s third quarter. State and local government deficits widened the gap by another $14.9 billion. At the same time, personal and corporate savings increased by a record $983 billion.

Health-care outlays represent “the key for savings” in the next few years, according to Michael Mandel, president of South Mountain Economics. The former chief economist at BusinessWeek magazine -- now owned by Bloomberg LP, the parent of Bloomberg News -- published a similar chart two days ago on his Innovation and Growth blog.

“The U.S. will be stuck between a rock and a hard place” if costs keep soaring, Mandel wrote yesterday in an e-mail. “If health-care reform manages to restrain spending, then we’ll see net national savings eventually head upwards.”

What all this shows is simply that your government is spending your savings faster than you can save. This is a symptom of DEBT SATURATION and attempts to create never ending credit growth. We are all just going along for the mathematical ride at this point, that is until and unless we can resume control of our government, and take it back from the hands of the central bankers and other special interest groups.

Speaking of special interest groups, LOL, “If health-care reform manages to restrain spending?” Is he kidding? That’s the funniest one I’ve heard yet from an "analyst." Sure, we all expect such lies now from our politicians. Want to know why we have come to expect it?

Try $126,536,249 reasons why. This is how much money was contributed to the campaigns of 100 Senators who voted on the latest health care "reform." Please review the table at the following link: The Senate Passes Health-care Bill - A look at how members of the U.S. Senate voted (ht W.S.).

I'm not even sure if that includes money from the insurance industry or not. I'm guessing not, and they are likely to be the largest winners. This is how things currently get done in the United States, not on your behalf, but on behalf of those who make the largest contributions. The largest contributors of them all? Central bankers, of course.

Ace – How Long:


Please help put an end to this type pandering, support FREEDOM’S VISION and "Swarm Politics", thank you!

Morning Update/ Market Thread 1/6

Good Morning,

Equity futures are pretty close to level this morning after falling in the evening and rising this morning. Below is the action in the DOW and S&P:



The dollar, of course, did the opposite and is up just a little, with bonds on the long end down a little. Both oil and gold are higher, oil now closing in on $82 a barrel.

The MBA Purchase Index rose by a supposed 3.6% in the prior week. Completely worthless index, give me transparency or don’t give me any bull. Here’s Econoday’s take, gee they are actually worried about rising rates?

MBA's purchase index rose 3.6 percent in the Jan. 4 week after falling 4.0 percent in the Dec. 25 period (data for the latter period had been delayed due to the holiday). The refinance index fell 1.6 percent in the Jan. 1 week after plunging 30.5 percent in the Dec. 25 week. The average 30-year mortgage rose to 5.18 percent in the latest week, up from 5.08 percent in the prior week. Concern is building that interest rates may begin to rise if economic growth picks up and as the Federal Reserve winds down its purchases of mortgage-backed securities.

On the Job front, Challenger’s layoff announcements fell in the month of December. No surprise there, December is not a month associated with mass layoffs unless management is doing serious battle with labor:

Highlights
Challenger's count of layoff announcements fell to 45,094 from 50,349 in November and compared against 166,348 in December 2008. The results are consistent with expectations for incremental improvement in Friday's jobs report.

The ADP job report estimates that 84,000 lost their jobs in December, an improvement, but more than estimates. Here’s what Bloomberg is reporting:

Jan. 6 (Bloomberg) -- Companies in the U.S. cut an estimated 84,000 jobs in December, according to a private report based on payroll data.

The drop, the smallest since March 2008, was larger than forecast and compares with a revised 145,000 decline the prior month, data from ADP Employer Services showed today. ADP figures overstated the Labor Department’s estimate of private payroll losses by 85,000 per month on average in the six months to November after today’s revisions.

Last month ADP reported 169,000, so the 145,000 is a favorable revision. The trend in both these reports is better, but we’re still adding to the scores of unemployed, certainly not keeping pace with what’s required just to break even. Of course the DOL’s jobs report comes out on Friday, the Bloomberg consensus is that the number will reach ZERO, and that the rate will remain 10%. I’m not sure about this one, that consensus may be a little too wishful, but the release in February is the one that usually contains adjustments and can be kind of wild.

The non-manufacturing ISM comes out at 10 Eastern, the petroleum status report at 10:30, and the FOMC minutes at 2 Eastern.

The McClelland oscillator had a small movement yesterday with the down, up, down, up action and thus we can expect a large directional move in the near future, likely today or tomorrow.

Yesterday’s move in the XLF was ridiculous, sending prices way above the upper Bollinger band. Sorry, but I have to remain very cynical on action like this. GS rose greatly even after a downgrade from Meredith Whitney. What I see are a bunch of children running our banks and our government and they have this neat little toy where they snicker and manufacture bizarre derivatives and debt backed money and force interest rates to zero while they whisper about one another’s stock and buy or sell at will with no adult supervision anywhere. Truly, it’s like watching an unsupervised daycare. Below is the XLF, it still looks like it’s gunning for a gap fill up at $15.40?



Here’s a 3 month daily chart of the DOW. Yesterday’s action produced a small red hammer. It is a potential reversal indicator, of course it needs confirmation by today’s action, volumes still have not gotten above Christmas week’s, the daily stochastics are overbought and the RSI is still diverging, literally it’s been diverging for months now, I’ve never seen anything like it, and believe that the divergences in place at this time are historic in size and scope, at least in modern history:



Below is a 60 minute chart of the DOW, it has formed a rising wedge with prices climbing the bottom of the larger rising wedge when in the non log chart mode. The slow stochastic on this time frame is just coming down out of overbought and the RSI is divergent from the last high:



The SPX’s hammer yesterday was not as well defined as the DOW’s. It, too, is forming a rising wedge, but again, it’s not as well formed as the DOW’s. The rest of my Stochastic indicators are in the middle, so not a lot of help with direction for today. If a directional move does transpire, the small move in the McClelland is a good indication to stick with it longer than you might otherwise for those who are day trading.

There were 369 new highs yesterday, this is squarely in the range of prior major tops. For some reason all I see are a bunch of children running around singing, “Come and play, everything’s A-okay, can you tell me how to get, how to get to Sesame Street?”

Charles Biderman and Komal Sri Kumart on Money Flows 2009 and Likely for 2010…

Both are people who are seeing bubbles in bonds with a burst nearing… Biderman has a good big picture, and Kumart, of TCW, is yet another expert on bonds who appears headed for the exits. Note that as these people see money flowing out of DEBT (bonds, etc) that they see it flowing into commodities.

The latest rumors are that the Fed is likely to continue purchasing GSE paper basically extending their March deadline as they know that removing that artificial support will result in much higher mortgage rates. In this way, the entire market is FALSE, it is underpinned and propped up. Remove the support and down it goes. Can they keep the support there forever and ever? I think not, eventually we will all pay for their greed and misinformed methodology.

Morning Update/ Market Thread 1/5

Good Morning,

Equity futures are close to even this morning with a quiet overnight period. What, no one with a few billion and some fast machines to play games with the market overnight? How unexciting. Here’s a snapshot:



The dollar was down, but has pulled back to about even, bonds are up slightly, oil down slightly, and gold is about level.

The Goldman ICSC and Redbook were both out with their usual positive week to week growth fantasy, one up from the week prior, the other down, neither anywhere near what’s occurring in the real world where sales tax receipts are still down and falling and where more than 45,000 businesses were forced to close last year, many that had survived for more than a century, but 2009 got them ( 100-year-old businesses we lost ).

Pending home sales and factory orders come out at 10 Eastern, vehicle sales will be reported throughout the day. Yesterday, the manufacturing ISM showed slight growth and came in slightly better than expected, while Construction Spending fell and by a greater amount than expected while including previous months that were revised sharply lower.

The previous article covered the technical landscape pretty well. Bullish sentiment abounds and so many people see that the market is signaling a run up to SPX 1,200, heck, I’ll bet if you stopped any person on the street they would be more likely to give you that number than they would be to tell you who the Secretary Treasurer is. That means caution, especially when the criminals running our markets and our money system are driving fast machines!

Velvet Revolver - She Builds Quick Machines (Libertad):

Technical Update…

Sixteen of the past eighteen Mondays have been up, today was obviously a part of that bizarre trend. On the day, the S&P gained 1.6%, closing at 1,133, the DOW rose 1.5%, the NDX gained 1.4%, and the RUT finished the day leading with a 2.4% jump. The dollar was down significantly, oil closed at $81.57 a barrel, and gold up at $1,121 per ounce.

There were 322 new highs on the NYSE and 1 new low. Not as high as the 404 we had recently, but once again at levels only seen near tops. NYSE upside volume came in at 86%, advancing issues at 77.7%, indicating that the buying was strong but not panic. The volume levels rose over last week, but were still overall quite weak. The indices finished with the 60 and 30 minute stochastics overbought, and there are new and very clear RSI divergences on the 60 minute chart to go along with the daily time frame divergences.

The current support pivot is at SPX 1107 with overhead at 1,133 which stopped today’s rise. Of course 1,115 is the SPX flag top and it acted as a springboard for today’s rocket launch. SPX 1,090 is the next lower pivot and 1,168 is the next higher.

The obvious, probably too obvious, SPX target is 1,200. You can see the flag in the 3 month daily chart below:



On the longer term weekly SPX chart you can see that we have retraced just slightly more than 50% of the bear market losses. The 1,200 flag target is up near the top of the old rising wedge, and 1,227 is the 61.8% retrace of the bear. Here you can see that the weekly stochastic has been overbought for months. There’s actually a small RSI divergence even on this timeframe, a rare occurrence:



Here’s the DOW daily, it managed to climb back into the rising wedge, non log chart only, and back above the top of its flag, right to the top of the upper Bollinger. It is a new closing rally high, but the volume is less than convincing:



The XLF managed to climb strongly, something it hasn’t done for quite some time. To me I see a pretty clear A,B,C type of move forming, this being wave C up. If C is the same length of A, it will make it up to close the little gap at about $15.40. We’ll see, this chart still looks weak, and while JPM and GS made moves today, there is weakness elsewhere:



Here’s a good example of that weakness, PHK, the Pimco High Income Fund (junk bonds). But the weakness seen here is not only in this fund, it is spread across several corporate bond funds. It would seem that someone knows something and is advising their clients to exit. Pimco put out a report that was pretty bearish this morning. As they put it, "You can only eat what’s in the cafeteria, and right now the cafeteria doesn’t have anything particularly appetizing in it." Stress like this in corporate bonds was seen prior to the top in ’07 and again in May of ’08:



Oil broke out of its latest formation and the Point & Figure chart picked up on the breakout producing a new target of $104 a barrel:

OIL:


It’s freaky but the weirdo’s commenting on our economy call this a good thing! James Kunstler had a humorous quip this morning on the subject:

Yesterday, The Seattle Times published a story with the idiotic headline: Oil Touches $80 on US Economy, Demand Optimism. Apparently, they think high oil prices are "a good sign."

How much can a nation not get it? Would $100 oil ignite a new orgy of "consumer" spending and another round of investment in commercial real estate? Welcome to the Futility Economy. This is the economy where Nature and its material companion, Reality, punish us for our stupidity and fecklessness.

Up is down, right is left, and credit flowing out of control is good.

The bond markets hung right around where they finished last week. In the case of the TNX (10 year treasuries) that is just above the neckline of a two year H&S pattern with a now confirmed target of 5.8%. When achieved, that target will hit mortgage rates hard making houses all the more difficult to afford:



USB, the 30 year bond fund, is in about the same relative position with its massive H&S top as the TNX, except in this case price is on the right hand scale instead of yield. The H&S target is 90, while the P&F diagram has a target of 94:



Last year the SPX rose more than 2.5% on the first trading day of year, but by the 7th of January a decline began that did not let up until March. Bullish sentiment is at an extreme and there are huge market divergences in place… I am therefore practicing extreme patience and not chasing anything, although day or very short term traders may want to play long and if you do I hope you use good stops. Wall Street and their Monday up days game (16 of 18) leaves me in a New York state of mind…

Billy Joel – New York State of Mind:

Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis…

What follows is a study published by the University of Arizona’s College of Law. While I have not waded into the moral arguments too deeply surrounding the housing crisis, I am one who approaches this issue with the same impersonal business thinking of a bank or any business. I would do what’s best for me. Of course, I saw this crisis coming and sold ALL my real estate, rental properties and residence. Being proactive is always best, but if you are underwater then you must evaluate and make the best decision for you. Please consult an attorney BEFORE taking any action.

My perspective is that in the contest of the chicken and the egg, the banks were the chicken that laid the crisis’s egg. They and other social pressures lead people in our society to believe that somehow it’s immoral for you to make a business decision, even though it was their unethical practices that caused your home to become unaffordable in the first place. Our entire banking system is now corrupt beyond belief, the banks latest gimmick is front running the new credit law and jacking to usurious levels the interest on credit cards.

This entire report is interesting, the following paragraphs is just a sample (ht RRH):

A concern repeatedly voiced by policy makers, economists, and the media is that the “social pressure not to default will weaken” to the point homeowners will begin to walk in droves. Of particular concern is the contagion effect, the notion that once a few people in a neighborhood walk, others will follow, until whole neighborhoods end up as empty wastelands. Indeed, geographical patterns already show that foreclosures cluster in neighborhoods, suggesting that once foreclosure is seen as acceptable within a given community, and an individual knows others who have survived foreclosure, there may be less reason to feel ashamed of one’s decision to walk or to fear the consequences.

Alarmed by the possibility that foreclosures may reach a tipping point, formal federal policy has aimed to stem the tide of foreclosures through programs designed to “reduce household cash flow problems,” such as the Making Home Affordable (MHA) loan modification program and Hope For Homeowners. Implicit in this approach is the assumption that home owners are unlikely to default on their mortgage if they can “afford” the monthly payment. In other words, federal policy assumes that homeowners are – for the most part - not “ruthless” and won’t walk away from their mortgages simply because they have negative equity. Most homeowners walk only when they can no longer afford to stay. As evidence of this fact, only 45% of homeowners would walk even if they had $300,000 in negative equity. This percentage drops to 38% among the subset of individuals who believe it is immoral to strategically default on one’s mortgage (a subset to which 87% of homeowners belong).

These numbers suggest that the “moral constraint” is a powerful one indeed – and that, for most people, only the complete inability to afford their mortgage would push them to default. On the other hand, the fact that 63% of “amoral” individuals would default at $300,000 in negative equity, and 59% would do so at $200,000, suggests that federal policy can only proceed on the premise that affordability is the prime consideration as long as the moral and social constraints on foreclosure remain strong. The government thus has an incentive, along with certain other economic and social institutions interested in limiting the number of foreclosures, in cultivating guilt and shame in those who would contemplate walking away. Similarly, knowing that guilt and shame alone are not enough to prevent many individuals from defaulting once negative equity is extreme, these same institutions have an interest in increasing the perceived cost of foreclosure by cultivating fear of financial disaster for those who contemplate it.

But, to be sure, the predominate message of political, social, and economic institutions in the United States has functioned to cultivate fear, shame, and guilt in those who might contemplate foreclosure. These emotions in turn function as a form of internalized social control – encouraging conformity to the norm of meeting one’s mortgage obligations as long as one can afford to do so.

The clear message to American homeowners from nearly all fronts is that one has a moral responsibility to pay one’s mortgage. The message is conveyed not only by political, social, and economic institutions, but by the majority of Americans who believe that voluntarily defaulting on a mortgage is immoral. At the political level, government spokespersons, including President Obama, have repeatedly emphasized the virtue of homeowners who have acted “responsibly” in “making their payments each month”116 and have lamented the erosion of “our common values” by, for example, those who irresponsibly borrowed beyond their means.117 The worst criticism has been reserved, however, for those who would walk away from mortgages that they can afford. Typical of such criticism is that of Secretary of the Treasury Henry Paulson, who declared in a televised speech: “And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator – and one who is not honoring his obligations.”

Underwater and Not Walking Away

Morning Update/ Market Thread 1/4/2010

Welcome to 2010! May we all be able to affect some positive influence on the world!

Futures have been moving up ever since trading resumed yesterday afternoon. It’s the Chinese growth miracle, don’t you know? Yes, even though ships are sitting idle, factories are sitting idle, new buildings are empty, fleets of new cars are parked, it seems that they still know how to produce massive amounts of paper fluff! They may be even more proficient at it than we are and I’m beginning to think they are even more proficient at generating false statistics too. We’re all going to get to witness how that works out, it will be exciting, but it’s not a place I’ll be “investing” my money. The DOW and S&P futures are pictured below with their overnight action:



The dollar initially rose overnight but is now down sharply, the Euro is up sharply, and bonds are up as well. Oil is absolutely taking off on a comedic tour of outer space, launching $2 higher and getting above $81 a barrel. The target on the breakout of oil is all the way up at $96 to $100 a barrel, look out middle-class. Gold has also made another move higher.

The ISM Manufacturing Index and Construction Spending figures come out at 10 Eastern. Of course the big data (if you can call it that) is the employment report for December that will come out on Friday. Of course we have bonds galore coming up this week, and every week, the tally for sale or roll has not yet been posted, but we’ll keep an eye on that.

I think the most important news over the weekend can be found in two Zero Hedge articles, the first dealing with money market accounts. In a nutshell, the Administration and SEC are proposing new rules that will allow “money market fund managers the option to 'suspend redemptions to allow for the orderly liquidation of fund assets.'" In other words, they can freeze your money market account and not give you back your money when you ask for it! In this way, I guess their intention is that there can never be another market crash of any kind and once your money is in you may not get it out unless they feel like it. Personally, money markets, like all our paper markets, are way overinflated and this would be a complete show stopper for me. I REFUSE to put my money any place where someone else dictates when I can withdraw it. Since this rule is being proposed, if I were you and had a significant amount of money in a money market fund, I would take it out NOW, before the rule change. Umm, gee, could that be one of the reasons why gold and oil are shooting up? Nah, our government doesn’t make mistakes, they know what they are doing. Here’s the Zero Hedge link: This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied.

Their second important article deals with a huge divergence in the amount of money paid out by the Treasury for Unemployment benefits versus the number of people claimed to be drawing payments. The difference suddenly grew into a whopping 32% gap. This is a money trail I have followed and written a couple of articles on as well, but I approached it from the angle that the fund is bankrupt, which it is, but this uncovers potential FRAUD in the reporting of unemployment data. Here’s the link, it’ll be interesting to get the Treasury’s reaction. Yet another reason to support Freedom’s Vision, as it would strip out all the reporting of government statistics and place it into an Independent Data Panel. Here’s the ZH article: Is The Government Misrepresenting Unemployment By 32%?

I covered a lot of the technicals this weekend, but to recap, the DOW finished Friday back inside the sideways pattern and the S&P finished right on the top of its range. That is a dangerous location as it can serve as a launching pad. Below is a 3 month chart, for some reason it is producing a false black bar… ignore that, and look at where the last red candle finished:



So, the markets finished last week by generating new sell signals on the daily stochastics, but are oversold on all the short term oscillators, and thus we expect a bounce in the short term. The move up in the overnight action has already produced 5 clear and distinct waves, so that, when the markets used to be somewhat free, would indicate that some type of pause is needed pretty soon on the ramp job.

I do expect volumes to be coming up sharply this week. If the move is higher, the target remains 1,200 on the S&P.

But note that the dollar, when going up, has not been hurting equities lately, but when falling allows equities and commodities the opportunity to advance. The relationships are changing and need to be watched. I still think the real action is in the debt markets, that will be producing unbelievable pressure throughout the year ahead.

Billy Joel – Pressure:

The Fallacy of Gold Backed Money…

The Fallacy of Gold Backed Money
Artwork by AZ Rainman

To download a printable version, click on The Fallacy of Gold Backed Money

Bill Still – The Still Report, Why Gold Money Won't Work Part I (5:47):


Bill Still – The Still Report, Why Gold Money Won't Work Part II (9:59):


Bill Still – The History of Non Debt-Backed British Tally Sticks…



Artwork by AZ Rainman

Craig Harris – An Introspective Look at the Future of America…

What follows is a thorough (code word for lengthy, lol) examination of the events of the past year and what may lie ahead by a man, Craig Harris, who has started a new blog, writes very well, and obviously gets it.

Somewhat depressing to read the current state of affairs, not to worry, simply take whatever pharmaceutical or drug you use to numb the pain, but please do it AFTER reading Craig’s piece because the issues he reflects upon are vital to the future of America. A great paper for discussion, see you in the comments section…

An Introspective Look at the Future of America

By Craig Harris
earthblog.news@gmail.com

As we close out 2009 and look forward into 2010 and beyond, this has been a year of near financial catastrophe and monumental change, none of which benefited America or ordinary Americans. Late in 2008 and throughout 2009, events have happened in the US which would have been labeled unfathomable just a few short years ago, and yet already these monumental changes are expected to be filed into the memory hole and Americans are expected to believe nothing has changed.

As we exit the year, we are told the US is a laissez-faire free market economy and yet the US government is now the largest owner of housing in the US as well as the owner of last resort for some of the largest and completely insolvent US corporations. The Federal Reserve, a privately and anonymously owned and controlled corporation chartered with issuing the nations currency, were given the green light by themselves to transfer to themselves and their shareholders the people's wealth in the form of their future labor. The FED balance sheet has ballooned to become a junk bond warehouse as they overtly and covertly buy their own debt, immune from any sort of oversight, regulation or auditing and operating above the law. Along with that, increasingly coercive brute force measures are now routinely necessary to manage and manipulate so called "free market" asset prices which are cheerled by so called "financial news media" whose board members and management are all the same people who transferred the people's wealth to themselves. The corporate media party line idea of a "free market US economy" now seems like a distant memory and it all feels like systemic fraud, corruption, malfeasance and organized crime at the very highest levels.

During 2009 we have seen the continued collapse of American industry amid wave after wave of layoffs. The corrupt corporate media cartel likes to trot out a group of FED sponsored shills who call themselves "professors" to call this a "jobless recovery" although it's difficult to imagine a recovery where American industry has collapsed and is now owned by the government. US cities both large and small have been decimated by the loss of the US manufacturing base. Detroit now resembles a third world country with a 50% unemployment rate. Ransacked, foreclosed houses go for a dollar apparently because no one who has a choice is willing to own property or live there. The US has an officially stated unemployment rate of ten percent and a real unemployment rate of over 20 percent. Wall Street may have recovered due to a direct injection of capital from the future labor of the people, but there has been no action taken whatsoever to improve the situation of the average citizen as the disconnect between the ruling Oligarchs and Wall Street, the real economy and the lives of ordinary Americans continues to widen. The people's bailout money, which represents the future labor of Americans, went directly into the pockets of the people who created the crisis in the first place because they are in the enviable position of being "too big to fail". Interestingly, or sadly, the same people and institutions responsible for and who profited from the catastrophe are still in charge and have handed even more power and control to themselves. Although there has been talk in Washington of "too big to fail" being undesirable, the result of the post collapse policies have resulted in ever fewer, ever larger players with more power and control and instead of being "too big to fail" now wield so much money and power that they demonstrate wholesale ownership of the entire US political body.

Due to the post collapse monetary and fiscal policies, the people have now been saddled up with an unpayable level of debt. The cause of the near total collapse of the financial system was too much debt and the "solution" has has been even more debt piled on to the original debt. During the year, the Dallas FED estimated the financial obligations of the US government at 99 trillion dollars. The head of the TARP program estimated the bailout cost at 24 trillion dollars. Totaled together the US has in the neighborhood of 120 trillion dollars of current and future obligations on an annual revenue of around 2 trillion dollars which is falling due to high unemployment, higher state and local taxes and fees and lower wages. Cutting that down to size, imagine earning 200,000 a year and having a debt of 12 million dollars. In short, the US dollar has become a token of an unpayable debt and thus the anchor of the entire global financial system is a ponzi fraud. It becomes impossible to compute the value of anything as measured in a fraudulent currency that represents an unpayable debt.

The banking system is not lending money because it's still insolvent. The people, having lost over 5 trillion dollars in the real estate bust are also collectively insolvent. Many US states and cities are bankrupt or near bankrupt. One in nine Americans subsist on food stamps. Even as a college education has become unaffordable to most Americans, college graduates now find themselves jobless. One in seven households now have their adult children living back at home due to the inability to find a job. The homeless population is growing and tent cities sprouted up across America during 2009. The estimated homeless population in LA alone is 40,000 people a night. People in the US if they have a job are working longer and harder to make the same income. Wages have remained stagnant and the real cost of living continues to spiral ever higher for ordinary Americans. The new man in charge, elected on a platform of "change", has delivered his change in the form of change=no change, or how do you like your change now?

By any metric you choose, whether it's the median home costing half the median income even at artificially low interest rates, to the ballooning cost of insurance, healthcare, education or anything else people spend their money on, the US is experiencing a rapid decline in the standard of living for ordinary Americans and an emerging ultra rich ultra powerful shadow oligarch rule amid a generalized and widespread financial and social decay. The US population is becoming a nation of voiceless serfs with fewer and fewer remaining civil and property rights and a rapidly decaying standard of living, the antitheses of everything America is said to represent and strive for.

The hypocrisy and fraud of the oligarch rule corporate media story line is now nearly impossible for an educated, informed adult to digest. As Jim Grant pointed out recently, according to Section 19 of the Coinage Act of 1792, the penalty prescribed for any official who fraudulently debased the people's money is death, yet in 2009 debasing the people's money resulted in a "man of the year" award from the self serving corporate media who will be next in line for a bailout from the people for their good service to the new oligarch rule. This organized crime, this theft, occurring right out in the open, may explain why employees of the largest US financial institution are now not allowed to gather in groups larger than 12 outside and their executives are carrying firearms. In an affront to the intelligence and sensibility of any citizen of this planet, the new US president expanded a war he was elected to end and started a new frontier in Pakistan, for that he was awarded a Nobel Peace Prize. The people who were awarded hundreds of billions of dollars of the people's money because they lost all their money are skimming millions and billions off the top for themselves and their associates in what they call "bonuses". 2009 has been a year of egregious assault on the American public by the people in charge.

The "people's representatives" as they like to be called, no longer represent the people at all but instead solely represent and pledge allegiance to the special interests and corporate lobbyists who have bought and paid for their votes, along with the media oligarchs who control who sits in the seats. Regardless of whether they call themselves Democrats or Republicans, they are a group of self important, self serving, morally bankrupt, corrupt, clueless buffoons and criminals running unchecked by a complicit corporate media.

Every American should be ashamed, embarrassed and sad that their country has been bought and sold to an organized criminal enterprise which includes the entire political body and the media. The only thing the "people's representatives" have in common is contempt for the people they are ostensibly representing. It is revolting for any American to watch these cretins heaping praise Ben Bernanke at the congressional theater of the absurd. His institution has already debased the dollar by 95% and failed miserably in every mandate they had since they took over in 1913. If any American has managed to retain or save any money, he can now put it on deposit in their banking system and earn a negative real return (a loss of his purchasing power) while at the same time the banks will take his deposit and loan it to his brother at 30% interest. So Mr Bernanke the money printer has control over the largest legal loan sharking operation ever concocted and it is funded by the America people, against the America people.

During 2009, the leadership has taken actions which benefit the corporations and special interests who own them, while showing nothing but wanton disregard for the millions of citizens whose lives their sponsors have destroyed. What we are headed towards in the US if we are not there already, is a Straussian society of ultra rich, ultra powerful oligarchs and a serfish powerless population with no middle class to speak of. The US president De Jour is, and from here on out will be a yes man, subservient to the ultra powerful too big to fail oligarchs who control the money and power and are responsible for putting him in the drivers seat. This is not compatible whatsoever with prosperity, democracy or anything else the US still holds itself out as. Here at the end of 2009, the United States has morphed into a bankrupt fascist oligarchy which owns the military machine as a policy enforcement tool, the entire political body and the media. It isn't going to fix itself because the fraud, corruption and malfeasance is systemic. It meets every definition of organized crime and it's all happening right out in the open.

In my way of thinking, this is not at all unlike the breakdown of the Soviet Union where for a period of time a sort of mafia of oligarchs weilded the wealth and power, carved up the remaining wealth of the country among themselves and had their way with the country amid a climate of manufactured fear, chaos and decay. The key point being that the people in control are out to make money and increase their power at the expense of the citizens. Mr Orwell said "the purpose of power is power" and that statement needs to be well understood. These megalomaniac, sociopathic aspirations of ever more power and control by an elitist group of criminals come at the expense of America and future Americans. It doesn't matter whatsoever to the oligarchs because they have property waiting in Croatia. When the remaining wealth has been extracted from America, they will all pull out and the citizens will be left with a rusted out bankrupt hull. I believe the circumstances for this eventuality have already been created, just not yet realized due to the enormous size of the economy and the momentum it has. In other words, I believe it's collapsing as fast as it can although living through it seems like slow motion. When viewed from the future in a historical context however, I think it will have seemed fairly rapid.

The financial markets have deteriorated into a Las Vegas casino atmosphere where the the only consistent winners are the house and the too big to fail entities trading on foreknowledge and inside information shared freely between the treasury and the few remaining large trading houses. The entire system is bankrupt, fraudulent, corrupt and irretrievably broken. The anchor of the global financial system, the US dollar, has become the worlds largest ponzi scheme and the remaining 95% of the worlds population would like a new, viable standard. At this point however, despite any action the FED may or may not take, the US debt is far too large to ever be repaid. It is questionable if the interest payments will even be serviceable if interest rates were to rise, and the only reason interest rates are low is because the FED is using brute force. At this time the only way out without a complete collapse is to inflate away the debt, thus turning a deflationary collapse into a long period of inflationary decay and declining standard of living.

I have been of the opinion that what we saw in October 2008 was a collapse of the global fiat financial system which was more or less expected due to the collapse of the real estate bubble. I have reminded my subscribers that when I was forecasting a drop in real estate prices of as much as 50% during the heyday of the mania, that sounded unfathomable. What I believe is in store for our future sounds nearly as unfathomable now as that idea did back then. I believe the reason it sounds unfathomable is due to the constant barrage of lies, misinformation and propaganda from the tight knit corporate media oligarchy which has essentially merged with the new power structure of the US in a corrupt, overt form of fascism that would make Mussolini blush or Goebbels the propagandist nod in approval.

Over a period of decades and with one FED induced serial bubble after another, the financial system finally reached an unsustainable level of debt and leverage in 2008. When the FED started raising interest rates, when the real estate bubble burst, it involved so much debt and leverage that the whole system failed, pricing models and risk models failed, and the banking system quickly became insolvent.

I believe we have already had a systemic collapse, and the only thing the FED can do now is alter the look and feel of the collapse and to manage the allocation of the remaining wealth. In the end, whether by deflationary collapse or inflationary decay, the result of the collapse will feel the same to the US general population regardless of the interim path taken.

If the FED had done nothing, the whole system would have quickly degenerated into a deflationary collapse and failure of the financial system due to insolvency. The course the FED chose however is the one myself and many others predicted beforehand...the FED chose to solve the problem of too much debt by creating even more debt by taking the unprecedented action of buying it's own debt under euphemisms like "quantitative easing" and "debt monetization" and also covert buying to artificially force negative real return rates of interest. Through this course of action, the FED so far has been able to turn what would have been a rapid deflationary collapse into a decaying inflationary depression which is euphemistically called "a recession that is now over" by the six people who control 96% of the global media and attempt to pass off propaganda as "news" to a woefully mis informed, dumbed down and apathetic general public.

Going forward, If the FED doesn't buy enough of their own debt, then interest rates on the long end would rise and the risk becomes a deflationary collapse into insolvency for the FED and it's banking system. If interest rates remain effectively at zero on the short end and artificially suppressed by quantitative easing on the long end, then the real estate market can recover and the banks can regain solvency. If interest rates rise as the free markets would argue for however, then the real estate market sinks even further, the US dollar rises, and greater insolvency of the banks follows. The higher interest rates go, the thinner the knife edge gets and the FED would quickly find itself staring into another October 2008 collapse kind of situation. On the other hand, if by buying enough of their own debt they can keep short and long term interest rates down, then the free money percolates through the banking system, puts pressure on the dollar, lifts commodity and real estate prices and pulls out of the collapse via inflating away the debt so long as they can avoid run away hyperinflation in the process. This is the path we have traveled throughout 2009.

The key point is that the FED has had the option of doing two things...creating even more debt in order to save itself and the banking system, or do nothing and watch themselves collapse into a mass of failure, loss of power and control, insolvency and domino style bankruptcy and default. They have chosen the expected course, which is to increase the debt and print money, which is the way they save themselves and their banking system. In short, given a choice between saving the people and saving themselves after a collapse, they have taken the expected course which is to attempt to save themselves. What else would you expect? If they had wanted to save the people they would have taken the peoples bailout money and handed it to them in the form of a check. Instead they handed it to the banks.

Although they have been somewhat successful in reducing the insolvency of the banking system, they have effectively created a giant wealth transfer mechanism whereby all the money that disappeared in the collapse was re created out of thin air and given to the banks and wall street. I think of it as a sort of shell game. The money disappeared from Mom and Pop's 401k and re appeared on the balance sheets of the banks via freshly created new money (debt). As a result, we have something still called "free market capitalism" which is not free market capitalism at all. We have emerged from this crisis with a sort of financial oligarchy where a few entities who control all the wealth and power also control politics and media. Understanding this will help to understand issues like "healthcare reform" which will involve you paying more and getting less, with the primary beneficiaries being the oligarchies who control health care and insurance.

The one major point I have to make at this time is throughout 2009, there was no action taken that put the average citizen in a better position, but instead during the course of the year there was a gigantic wealth transfer from the citizens to the banking system, effectively orchestrated by the so called "people's representatives" who are in fact, all owned by the banking system and Wall Street with half a dozen or so oligarchies and lobbyists in a public display of fraud, malfeasance and corruption that sets a new historical precedent.

I have been and remain of the opinion that the ultimate "solution" to this crisis will be for the entities who now control the wealth and power to accumulate even more wealth and power via a global central bank and global currency which now for the first time in public has been discussed on and off throughout 2009 and described as the New World Order by such luminaries as Henry Kissinger. So looking out beyond 2010, I see a new global reserve currency emerging and a global central bank which will effectively also be a global governing authority where the heads of state effectively report to the group of central bankers and their anonymous shareholders who effectively control the money, power and politicians on a global scale. When the global currency is introduced, only then do I expect a sort of collapse of the US dollar versus this global currency. In this way, the world can carry on while the former global reserve currency called the US dollar will be free to depreciate to a level where solvency is regained and the now unpayable US debt is inflated away to the point where it can be repaid in depreciated dollars. US citizens will experience a continued decay as the US becomes to resemble more and more, a third world country. Detroit is already there. The corporate media won't show it to you but if you do a youtube search on Detroit what you see will shock you.

My view of the world tends to be the long view. Throughout 2009 I have been positioned and trading in in various hard assets including but not limited to gold silver, back month crude oil, Soybeans, raw land and Americana. I own and trade some Chinese shares but no US equities or bonds. I have lost confidence in the US leadership. I have lost confidence in the fairness of the "system" where some elite entities are free to keep the profits and nationalize their losses. I have opted to opt out by embarking on a long term effort to transfer more and more capital "off wall street" and their organized crime ring they call the banking system, and instead investing in things without fraudulent or impaired balance sheets. At some point in the future, I want to be short US 10 and 30 year bonds because it is nonsensical to me that anyone would be willing to loan a bankrupt country money for 30 years at an interest rate of 4% or so. The only reason this situation exists today is due to the FED monetizing debt and attempting to manipulate the long end using brute force.

So as we head off into 2010, I see a lot of uncertainty in the short term. If interest rates rise and the US dollar gets stronger, by mid year I would expect a repeat of October 2008. What I expect to happen over the longer term however is that the FED will ultimately print enough money to attempt to slowly inflate the debt away to a manageable amount amid a generalized and severe decay in terms of the standard of living for Average Americans. At some point along the line, I expect the world reserve currency role to be moved into a global currency and for the US dollar to be allowed to float against it without the benefits associated with the world currency role, and for the US standard of living to continue to decline and eventually decay into a societal collapse followed by something different. I expect China to emerge as the dominant economic power in the world and to purchase a large amount of US assets. Somewhere along the line I also expect the Nobel Peace Prize recipient to bomb Iran because he will be ordered to do so by the people who control the money.

Personally, based on what I see coming over the long term I have elected to forego city life and have embarked on a long term project in the picturesque Appalachian foothills in an effort to increase my degree of self sufficiency and insulate myself from the continued decay and declining standard of living sweeping the country. My long view for the US is high inflation which will not show up in the government's fraudulent statistics, along with a declining standard of living, increasing decay and ultimately leading to chaos, societal and government collapse in the US within a decade or two, maybe sooner.

I would like to end by quoting Marc Faber with one of the most compelling quotes of 2009. I find this quote compelling because the price of anything as measured by a fraudulent standard is meaningless. To me, it is a gift to be able to still exchange US dollars for anything with real value.

"I would buy every three months some gold and not worry so much about the price because the weight stays the same"

My favorite quote, “As Jim Grant pointed out recently, according to Section 19 of the Coinage Act of 1792, the penalty prescribed for any official who fraudulently debased the people's money is death, yet in 2009 debasing the people's money resulted in a "man of the year" award from the self serving corporate media…”

The Psychology of Implementing Freedom’s Vision…

The reason for posting this article is that I see many people who are in the state described by Dr. Levine below.

In his article Are Americans a Broken People? Why We've Stopped Fighting Back Against the Forces of Oppression… he asks, “Have consumerism, suburbanization and a malevolent corporate-government partnership so beaten us down that we no longer have the will to save ourselves?”

I see this reaction from many people regarding actually implementing Freedom’s Vision. Some people believe that there is just no way we could ever overcome our oppressors and institute those ideas. Well, I call B.S.! We are the ONLY ONES who do possess the power to implement change - and we’re going to!

Freedom’s Vision is designed to get us from our current debt and derivative saturated existence to one where the majority of that has been cleansed from the system and our money can once again go to work for us. It does so in a way that directly benefits most people in our society – it gives them an incentive to back it. The SWARM concept is meant to do exactly what Dr. Levine suggests, give the people small morale building victories on their way to achieving significant change.

On the Edge with Max Keiser and Bruce E. Levine:


On the Edge with Max Keiser and Bruce E. Levine:

Are Americans a Broken People? Why We've Stopped Fighting Back Against the Forces of Oppression…

By Bruce E. Levine

A psychologist asks: Have consumerism, suburbanization and a malevolent corporate-government partnership so beaten us down that we no longer have the will to save ourselves?

Can people become so broken that truths of how they are being screwed do not "set them free" but instead further demoralize them? Has such a demoralization happened in the United States?

Do some totalitarians actually want us to hear how we have been screwed because they know that humiliating passivity in the face of obvious oppression will demoralize us even further?

What forces have created a demoralized, passive, dis-couraged U.S. population?

Can anything be done to turn this around?

Can people become so broken that truths of how they are being screwed do not "set them free" but instead further demoralize them?

Yes. It is called the "abuse syndrome." How do abusive pimps, spouses, bosses, corporations, and governments stay in control? They shove lies, emotional and physical abuses, and injustices in their victims' faces, and when victims are afraid to exit from these relationships, they get weaker. So the abuser then makes their victims eat even more lies, abuses, and injustices, resulting in victims even weaker as they remain in these relationships.

Does knowing the truth of their abuse set people free when they are deep in these abuse syndromes?

No. For victims of the abuse syndrome, the truth of their passive submission to humiliating oppression is more than embarrassing; it can feel shameful -- and there is nothing more painful than shame. When one already feels beaten down and demoralized, the likely response to the pain of shame is not constructive action, but more attempts to shut down or divert oneself from this pain. It is not likely that the truth of one's humiliating oppression is going to energize one to constructive actions.

Has such a demoralization happened in the U.S.?

In the United States, 47 million people are without health insurance, and many millions more are underinsured or a job layoff away from losing their coverage. But despite the current sellout by their elected officials to the insurance industry, there is no outpouring of millions of U.S. citizens on the streets of Washington, D.C., protesting this betrayal.

Polls show that the majority of Americans oppose U.S. wars in Afghanistan and Iraq as well as the taxpayer bailout of the financial industry, yet only a handful of U.S. citizens have protested these circumstances.

Remember the 2000 U.S. presidential election? That's the one in which Al Gore received 500,000 more votes than George W. Bush. That's also the one that the Florida Supreme Court's order for a recount of the disputed Florida vote was overruled by the U.S. Supreme Court in a politicized 5-4 decision, of which dissenting Justice John Paul Stevens remarked: "Although we may never know with complete certainty the identity of the winner of this year's presidential election, the identity of the loser is perfectly clear. It is the nation's confidence in the judge as an impartial guardian of the rule of law." Yet, even this provoked few demonstrators.

When people become broken, they cannot act on truths of injustice. Furthermore, when people have become broken, more truths about how they have been victimized can lead to shame about how they have allowed it. And shame, like fear, is one more way we become even more psychologically broken.

U.S. citizens do not actively protest obvious injustices for the same reasons that people cannot leave their abusive spouses: They feel helpless to effect change. The more we don't act, the weaker we get. And ultimately to deal with the painful humiliation over inaction in the face of an oppressor, we move to shut-down mode and use escape strategies such as depression, substance abuse, and other diversions, which further keep us from acting. This is the vicious cycle of all abuse syndromes.

Do some totalitarians actually want us to hear how we have been screwed because they know that humiliating passivity in the face of obvious oppression will demoralize us even further?

Maybe.

Shortly before the 2000 U.S. presidential election, millions of Americans saw a clip of George W. Bush joking to a wealthy group of people, "What a crowd tonight: the haves and the haves-more. Some people call you the elite; I call you my base." Yet, even with these kind of inflammatory remarks, the tens of millions of U.S. citizens who had come to despise Bush and his arrogance remained passive in the face of the 2000 non-democratic presidential elections.

Perhaps the "political genius" of the Bush-Cheney regime was in their full realization that Americans were so broken that the regime could get away with damn near anything. And the more people did nothing about the boot slamming on their faces, the weaker people became.

What forces have created a demoralized, passive, dis-couraged U.S. population?

The U.S. government-corporate partnership has used its share of guns and terror to break Native Americans, labor union organizers, and other dissidents and activists. But today, most U.S. citizens are broken by financial fears. There is potential legal debt if we speak out against a powerful authority, and all kinds of other debt if we do not comply on the job. Young people are broken by college-loan debts and fear of having no health insurance.

The U.S. population is increasingly broken by the social isolation created by corporate-governmental policies. A 2006 American Sociological Review study ("Social Isolation in America: Changes in Core Discussion Networks over Two Decades") reported that, in 2004, 25 percent of Americans did not have a single confidant. (In 1985, 10 percent of Americans reported not having a single confidant.) Sociologist Robert Putnam, in his 2000 book, Bowling Alone, describes how social connectedness is disappearing in virtually every aspect of U.S. life. For example, there has been a significant decrease in face-to-face contact with neighbors and friends due to suburbanization, commuting, electronic entertainment, time and money pressures and other variables created by governmental-corporate policies. And union activities and other formal or informal ways that people give each other the support necessary to resist oppression have also decreased.

We are also broken by a corporate-government partnership that has rendered most of us out of control when it comes to the basic necessities of life, including our food supply. And we, like many other people in the world, are broken by socializing institutions that alienate us from our basic humanity. A few examples:

Schools and Universities: Do most schools teach young people to be action-oriented -- or to be passive? Do most schools teach young people that they can affect their surroundings -- or not to bother? Do schools provide examples of democratic institutions -- or examples of authoritarian ones?

A long list of school critics from Henry David Thoreau to John Dewey, John Holt, Paul Goodman, Jonathan Kozol, Alfie Kohn, Ivan Illich, and John Taylor Gatto have pointed out that a school is nothing less than a miniature society: what young people experience in schools is the chief means of creating our future society. Schools are routinely places where kids -- through fear -- learn to comply to authorities for whom they often have no respect, and to regurgitate material they often find meaningless. These are great ways of breaking someone.

Today, U.S. colleges and universities have increasingly become places where young people are merely acquiring degree credentials -- badges of compliance for corporate employers -- in exchange for learning to accept bureaucratic domination and enslaving debt.

Mental Health Institutions: Aldous Huxley predicted today's pharmaceutical societyl "[I]t seems to me perfectly in the cards," he said, "that there will be within the next generation or so a pharmacological method of making people love their servitude."

Today, increasing numbers of people in the U.S. who do not comply with authority are being diagnosed with mental illnesses and medicated with psychiatric drugs that make them less pained about their boredom, resentments, and other negative emotions, thus rendering them more compliant and manageable.

Oppositional defiant disorder (ODD) is an increasingly popular diagnosis for children and teenagers. The official symptoms of ODD include, "often actively defies or refuses to comply with adult requests or rules," and "often argues with adults." An even more common reaction to oppressive authorities than the overt defiance of ODD is some type of passive defiance -- for example, attention deficit hyperactivity disorder (ADHD). Studies show that virtually all children diagnosed with ADHD will pay attention to activities that they actually enjoy or that they have chosen. In other words, when ADHD-labeled kids are having a good time and in control, the "disease" goes away.

When human beings feel too terrified and broken to actively protest, they may stage a "passive-aggressive revolution" by simply getting depressed, staying drunk, and not doing anything -- this is one reason why the Soviet empire crumbled. However, the diseasing/medicalizing of rebellion and drug "treatments" have weakened the power of even this passive-aggressive revolution.

Television: In his book Four Arguments for the Elimination of Television (1978), Jerry Mander (after reviewing totalitarian critics such as George Orwell, Aldous Huxley, Jacques Ellul, and Ivan Illich) compiled a list of the "Eight Ideal Conditions for the Flowering of Autocracy."

Mander claimed that television helps create all eight conditions for breaking a population. Television, he explained, (1) occupies people so that they don't know themselves -- and what a human being is; (2) separates people from one another; (3) creates sensory deprivation; (4) occupies the mind and fills the brain with prearranged experience and thought; (5) encourages drug use to dampen dissatisfaction (while TV itself produces a drug-like effect, this was compounded in 1997 the U.S. Food and Drug Administration relaxing the rules of prescription-drug advertising); (6) centralizes knowledge and information; (7) eliminates or "museumize" other cultures to eliminate comparisons; and (8) redefines happiness and the meaning of life.

Commericalism of Damn Near Everything: While spirituality, music, and cinema can be revolutionary forces, the gross commercialization of all of these has deadened their capacity to energize rebellion. So now, damn near everything – not just organized religion -- has become "opiates of the masses."

The primary societal role of U.S. citizens is no longer that of "citizen" but that of "consumer." While citizens know that buying and selling within community strengthens that community and that this strengthens democracy, consumers care only about the best deal. While citizens understand that dependency on an impersonal creditor is a kind of slavery, consumers get excited with credit cards that offer a temporarily low APR.

Consumerism breaks people by devaluing human connectedness, socializing self-absorption, obliterating self-reliance, alienating people from normal human emotional reactions, and by selling the idea that purchased products -- not themselves and their community -- are their salvation.

Can anything be done to turn this around?

When people get caught up in humiliating abuse syndromes, more truths about their oppressive humiliations don't set them free. What sets them free is morale.

What gives people morale? Encouragement. Small victories. Models of courageous behaviors. And anything that helps them break out of the vicious cycle of pain, shut down, immobilization, shame over immobilization, more pain, and more shut down.

The last people I would turn to for help in remobilizing a demoralized population are mental health professionals -- at least those who have not rebelled against their professional socialization. Much of the craft of relighting the pilot light requires talents that mental health professionals simply are not selected for nor are they trained in. Specifically, the talents required are a fearlessness around image, spontaneity, and definitely anti-authoritarianism. But these are not the traits that medical schools or graduate schools select for or encourage.

Mental health professionals' focus on symptoms and feelings often create patients who take themselves and their moods far too seriously. In contrast, people talented in the craft of maintaining morale resist this kind of self-absorption. For example, in the question-and-answer session that followed a Noam Chomsky talk (reported in Understanding Power: The Indispensable Chomsky, 2002), a somewhat demoralized man in the audience asked Chomsky if he too ever went through a phase of hopelessness. Chomsky responded, "Yeah, every evening . . ."

If you want to feel hopeless, there are a lot of things you could feel hopeless about. If you want to sort of work out objectively what's the chance that the human species will survive for another century, probably not very high. But I mean, what's the point? . . . First of all, those predictions don't mean anything -- they're more just a reflection of your mood or your personality than anything else. And if you act on that assumption, then you're guaranteeing that'll happen. If you act on the assumption that things can change, well, maybe they will. Okay, the only rational choice, given those alternatives, is to forget pessimism."

A major component of the craft of maintaining morale is not taking the advertised reality too seriously. In the early 1960s, when the overwhelming majority in the U.S. supported military intervention in Vietnam, Chomsky was one of a minority of U.S. citizens actively opposing it. Looking back at this era, Chomsky reflected, "When I got involved in the anti-Vietnam War movement, it seemed to me impossible that we would ever have any effect. . . So looking back, I think my evaluation of the 'hope' was much too pessimistic: it was based on a complete misunderstanding. I was sort of believing what I read."

An elitist assumption is that people don't change because they are either ignorant of their problems or ignorant of solutions. Elitist "helpers" think they have done something useful by informing overweight people that they are obese and that they must reduce their caloric intake and increase exercise. An elitist who has never been broken by his or her circumstances does not know that people who have become demoralized do not need analyses and pontifications. Rather the immobilized need a shot of morale.

I want to caution that I believe that, indeed, there are some people who do need to be on medication and that not all psychological medication is bad. That’s not my point in posting this article which centers more around his notion that debt and corporatism have created a society of compliant but sometimes unhappy people controlled by debt. They are happy when the bubble is growing and the prices of their “assets” are increasing, but the game is exposed for what it truly is when asset prices begin to fall.

We don’t have to accept this system as our fate. We do have the power to change it. Money, after all, is simply an invention of man which at its core is meant to be a medium of exchange so that we may all trade the fruits of our labors. Breaking free of the shackles of DEBT is entirely possible and achievable. Give it a try at the personal level, you will be far more likely to find happiness and meaning in your own life when you are no longer shackled! And together we will unshackle our nation for future generations, that is our intention.

Eric Clapton – Somewhere Over the Rainbow: