THE THREE THOUSAND PERCENT FACTOR

From the man who has wrecked every enterprise he’s ever been handed comes the latest, perhaps irrecoverable blow. I refer, of course, to Dubya’s ruinous financial “stimulus” package, which amounts to the biggest credit binge in the history of the known universe.

Every credit card holder knows that even if the interest rates that pushed you into insolvency are momentarily eased, you can never clear your debt by borrowing more money.

But what that dumb shmuck in the White House does not realize is that whatever the recipients of his $300 and $1,200 handouts do with the dough, this latest $150 billion fire-extinguisher will shortly hit a raging financial conflagration like a bucket of raw gasoline.

Why?

Because, as Paul Grignon, creator of the must see animation “Money Is Debt” points out, “The banking system creates new credit based on existing credit.” So when the gummint issues a check, “depending on the type of account it is deposited in, the bank can then create a new loan for up to 100% of it.”

But it doesn’t stop there.

“Actual reserve ratios vary from 10:1 to no reserve at all, but 33:1 is common – meaning that if $1,000 is deposited at 33:1, $970 of new bank credit can be created. If that $970 is then deposited again, $940 new bank credit can be created…” on and on in a pyramid of ever-thinner air.

Noting that “cash does not necessarily enter the picture at any point,” Grignon goes on to explain that the government will initially borrow its “stimulus” money as “a Federal Reserve bank credit distributed as checks (promises to pay) that are then deposited (loaned) to a commercial bank, which can then use the government’s promise to pay as backing for a new loan. The end result, if each new ‘loan’ were deposited in a bank, would be a total of about $30,000 of new bank credit that can be created from that initial deposit of a $1,000 government check.”

That’s right, Fed fans. “The banking system, through the creation of new so-called ‘loans’, each based on a deposit that was itself just created as a so-called loan, will, if borrowers can be found “ – multiply Bush’s $150 billion handout up to 3,000 percent! And that resulting high-octane “liquidity” could ignite an unquenchable firestorm.

Why?

Because when money’s tight, sellers must slash their prices to woo buyers. But when the Fed releases a glut of money chasing the same goods and services – prices go up. Another term for this is Big Time Inflation. This means that everything that has been costing more recently because of rising oil prices and consumer and government debt – is about to cost even more.

But the Federal Reserve (which is neither “federal” nor a “reserve” but a privately-held group of extortionists who mint money into the debt that holds all Americans hostage) is now frantically slashing interest rates to take the pressure off mortgage and credit-card holders crushed under the avalanche of interest rates the Fed had just finished raising to cool off all that borrowing…

Now the fickle fed is once again easing credit, making it easier to borrow for folks who already cannot make their payments.

If an airline flew its jets like these yo-yo’s, you’d never get on their planes. But now that the wings are coming off, China and our dear friends in the Persian Gulf have been forced to buy the whole damn fleet!

It seems that the Bush Gang, who should never have been entrusted with a nickel to go buy licorice, is currently borrowing more than $2 billion a day just to keep the country afloat long enough to squeak past the next presidential selection with their heads still attached to their bodies. The biggest lender is China, which doesn’t have much choice considering how many greenbacks are already stuffed in its bulging godowns. They’re followed by Japan and Europe, who are similarly constrained from simply dumping their dollars. And of course OPEC nations are essentially making loans to the USA every day by selling their valuable oil for depreciating dollars instead of the more stable, upward-trending euro.

This is changing, though.

Meanwhile, back inside a superpower imploding as fast as its former nemesis (and for many of the same reasons that brought down the former Soviet Union), the Independent reports that two of “Wall Street’s biggest banks are preparing to write off tens of billions of dollars of investments in the US mortgage market, and to replace the capital with an $18 billion cash infusion from emerging market investors.”

You guessed it. “The biggest single new investor is likely to be the Chinese government, which has used the financial crisis to snap up large chunks of the US finance industry. Most recently it paid $5 billion for a stake in Morgan Stanley, and is also putting US$1billion into Bear Stearns. [Independent Jan 15/08]

When China owns your banks, China owns your country. But don’t get mad. Without Beijing’s loans and outright purchases of just about everything on the planet that’s not nailed down, you would be eating mud cookies alongside starving Haitians – another country savagely screwed by American intervention.

Now other nations are piling on, too, desperate to divest their dollars in the only place on the planet where greenbacks still have value – the US of A.

FIRE SALE
Here’s what else Bush forgot to tell you on his way to Armageddon:

In 1998, crude oil cost about $11 a barrel and the U.S. paid about $45 billion that year for its imported oil. “Over the past decade,” explains Michael T. Klare, author of Resource Wars, Blood and Oil and the soon-to-be-released Rising Powers, Shrinking Planet: The New Geopolitics of Energy, “this country has squandered approximately one and a half trillion dollars on imported oil, much of which has been poured down the tanks of grotesquely fuel-inefficient vehicles that were conveying drivers on ever lengthening commutes from the exurbs to employment in center cities.”

By 2007, the annual bill for the planet’s most profligate petroleum users exceeded $400 billion. This oil, of course, was immediately turned into burnt carbon and lofted into already feverish skies.

“As the oil import bill kept rising, the value of the dollar kept falling, and inflationary pressures kept building,” continues Klare, who is a professor of Peace and World Security Studies at Hampshire College. “Of course, the country’s central bankers responded in classic fashion by raising interest rates. This naturally resulted in substantially higher monthly payments for homeowners with variable-rate mortgages” who were forced into default on their mortgages.

But whether it’s gas in the tank (or Abrams tanks), home heating fuel, or just about anything you buy off a shelf – everyone still has to make the nut to buy oil for their personal use, or its downstream derivatives.

Which was why the second day of 2008 turned out to be a harbinger of all-caps DOOM, when imported oil hit $100 a barrel.

The borrowed fortunes (and futures) Americans must now spend on go-juice are now being deposited abroad in Sovereign Wealth Funds controlled by government agencies like the Kuwait Investment Authority and the Abu Dhabi Investment Authority.

Don’t go to sleep. There will definitely be a quiz, because as Klare continues, “These SWFs now control approximately $3 trillion in assets, and, with more petrodollars pouring into the petro-states every day, they are projected to hit the $12 trillion mark by 2015.”

And what are these Sovereign Wealth Funds doing with all their fast-depreciating trillions?

Move over, China.

“For one thing, buying up choice U.S. assets at bargain-basement prices,” Klare replies. “In the past few months, Persian Gulf SWFs have acquired a significant stake in a number of prominent American firms, giving them a potential say in the future management of these companies.”

Kuwait has taken a $12 billion stake in Citigroup and a $6.5 billion share in Merrill Lynch. Abu Dhabi also owns a $7.5 billion stake in Citigroup. Even the private Carlyle Group bank has had to sell a $1.5 billion share of its war-profiteering stake to Mubadala Development, also run by the government of Abu Dhabi.”

Oh oh.

“These acquisitions are just a small indication of a massive, irreversible shift in wealth and power from the United States to the petro-states of the Middle East and energy-rich Russia,” Klare confirms. “What this means is not just the continuing enfeeblement of the American economy, but an accompanying decline in global political leverage.” [TomDispatch.com Jan 31/08]

YOUR CARD HAS BEEN DECLINED
Back on Main Street, USA the squeeze is on. Remember, 70% of the U.S. economy depends on shoppers shopping – mostly on credit. And Americans now hold almost 700 million credit cards sagging with $915 billion in consumer debt. The average borrower is trying to make next month’s compounding interest payments on more than $9,000.

“The perception… is that credit cards are used for frivolous spending, that it’s just easy money for people to use to buy their nice sneakers,” says José Garcia, a senior researcher at the think tank Demos and author of a new study called “Borrowing to Make Ends Meet”. In fact, they are “a way that people have been dealing with economic shock.” [inthesetimes.com]

Some 77 million Americans are already having difficulty paying medical bills. The average cost of college tuition increased 165% between 1970 and 2005, and went up another 6% last year alone. Meanwhile, 35 million Americans are going hungry every year – including 13 million children. And the cost of most grocery staples is rising fast. [Reuters Nov 14/07]

With credit card holders defaulting, and American homeowners set to lose as much as $8 trillion in equity, big banks are running out of financial maneuvering room, worries Robert Manning, author of Credit Card Nation and professor of finance at the Rochester Institute of Technology. “Which means they are going to have to squeeze their credit card divisions for even more cash flow to help underwrite the loss of mortgage fees and underwriting fees.” [truthout Dec 10/07; inthesetimes.com]

This is already “affecting people across the board,” Garcia picks up. “As people feel the subprime crisis, credit card companies are putting additional strain [by raising their] credit card interest rates, which also will increase the amount of economic instability in households.”

In November 2007, credit card debt in the United States surged over 11%.

But get this: “Like mortgages, credit card debt is often carved up and sold on global debt markets as securities,” Adam Doster reveals. “Credit card debt is unsecured, meaning no portion of defaults can be salvaged. If those bundled securities of debt decline in value, as mortgage-backed securities did last summer, banks and institutional investors (pensions, mutual funds, hedge funds) could all take a major hit, which could cause comparable damage to the broader economy.” [inthesetimes.com]

RUNNING ON EMPTY
Doug Casey is the author of Crisis Investing, which spent 26 weeks atop the New York Times Best-Seller list. He also publishes the highly respected International Speculator. “I remain of the opinion that we’re headed into the biggest economic smashup in history,’ Casey predicts. “That’s an outrageous statement, “ he quickly adds.

But there it is.

Casey throws a rope over quicksand, saying the one thing that can help lever an economy out of a recession “is a large pool of savings” that can be invested in new production and purchases. But then he jerks it back by mentioning that personal savings in the U.S. are nearly nonexistent. And sinking fast.

“That’s why it’s the height of idiocy for pundits to talk about how patriotic it is to go out and shop. It can only deplete the capital that will be needed in the future, and deepen the bottom with more bankruptcies, stealing consumption from the future. That’s why the Fed’s lowering interest rates on the federal funds rate… is such a bad idea: It encourages people to save less and borrow more… guaranteeing yet a bigger bust.” [worldnetdaily.com Jan 17/02]

DO YOU SEE WHAT I SEE?
As everyone knows, perception drives the markets. And when public perceptions catch up with reality – or vice versa – almost everyone follows the same maxim:

“When in danger, when in doubt, run in circles, scream and shout.”

Chris Skrebowski, editor of the leading oil industry trade journal Petroleum Review spent nearly a decade arguing against Peak Oil pundit Colin Campbell. “I tried hard to prove him wrong. I have failed for nine years. I am now with him. In fact, I think he’s a bit of an optimist,” Skrebowski says today.

“The perception of looming decline may be worse than the decline itself,” Campbell himself worries. “The market overreacts to even small imbalances… There will be panic.”

The threat is real. Today, more than 60 out of the 65 countries possessing oil have passed the peak of their discoveries; 49 of them have passed their production peaks,” reports the Independent’s Jeremy Leggett. “Supply will get very tight from 2008 or 2009,” Skrebowski foresees. Fuel prices “will soar. There is very little time and lots of heads are in the sand.”

2008!?!?!!

Roger Booth spent his professional life at Shell. He now believes that with Peak Oil already occurring in 2004, “A crash of 1929 proportions is not improbable.”

Campbell goes further, declaring that costs of goods and services dependent on oil to grow, manufacture, transport and acquire them – which is just about everything – “are set to soar in the absence of spare capacity until demand is cut by recessions. We will enter a volatile epoch of price shocks and recessions in increasingly vicious circles. A stock-market crash is inevitable.” [Independent Jan 20/06]

We’re almost already there, states the Bank for International Settlements’ annual report. The conditions which led up to the Not-So-Great Depression of the 1930s, and the Asian crises in the 1990s “are reflected in the current environment,” declares the central bankers’ bank. [Telegraph June 26/07]

IT’S THE WARS, STUPID
It’s not just the end of cheap oil and the greed driving both ends of fraudulent loan scams that dragged us all into this fustercluck. Casey comes to bat observing that rising GDP “doesn’t necessarily mean increased prosperity. What if the government embarked on a massive pyramid building program, an archetypical example of public works? GDP might rise, but it would add absolutely nothing to the well being of individuals.”

What if successive empire American builders spent nearly 70 years building a weapons pyramid, with those at the top taking most of the profits, and the people crushed under its country-broad base getting hosed?

Not collecting taxes from the rich, and failing to invest in the country’s physical and social infrastructure “while spending insane amounts of money on ‘defense’ projects” that profit a few government-linked corporations but “bear no relationship to the national security of the United States,” Chalmers Johnson points out – is a recipe for fiscal as well as karmic disaster.

In his book Nemesis: The Last Days of the American Republic, Johnson discusses “military Keynesianism”. By this he means “the mistaken belief that public policies focused on frequent wars, huge expenditures on weapons and munitions, and large standing armies can indefinitely sustain a wealthy capitalist economy. The opposite is actually true.”

What Johnson terms, “our devotion to militarism” – despite being broke and having to sell our children and all the furniture to overseas landlords – has long since cost us our manufacturing competitiveness by diverting more borrowed money to non-productive weaponry and perpetually damaging wars than all other nations’ military budgets combined.

Now add the current occupations of Iraq and Afghanistan – which are not part of the officially disingenuous defense budget and exceed the combined military budgets of Russia and China – to the $23 billion spent every year by the Orwellian “Department of Energy” to develop, build and maintain nuclear bombs…

Plus another hidden billion dollars for recruitment and reenlistment incentives to entice reluctant RPG-fodder for lifetime service in combat, $25 billion for foreign military assistance (primarily for Israel)…

Plus $76 billion for Veterans Affairs – half of which goes for woefully inadequate long-term care of some 31,000 soldiers grievously injured, so far, in Iraq and Afghanistan (where the locals resent being invaded and occupied)…

Plus another $46 billion to turn the former home of the free into a police state under an Hitlerian Department of Homeland Security…

Plus $39 billion for the Military Retirement Fund…

Plus an extra $2 billion for the FBI’s “paramilitary activities”… (!)

Plus another $8 billion for NASA’s “military-related activities”… (!)

Not to mention “well over $200 billion in interest for past debt-financed defense outlays”

– and you can see where all the money’s going. In 2008 alone, total spending for the U.S. military establishment that is currently bringing not freedom but FUBAR to the planet, while sucking America’s commercial lifeblood like a vampire – is “conservatively calculated” at $1.1 trillion.

And you’re saying that your school district, bridge and road repair crews, local foodbanks and shelters, green energy initiatives, dike builders, fire department, recycling depot, electric vehicle initiative, elder housing and local organic growers need some money?

What’s wrong with your priorities?

Don’t you know that terrorists have already taken over the White House?

WHEN UP IS DOWN AND DOWN IS OUT
Sorry. My Justice gene must be out of whack.

Don’t worry, be happy. Even if we can’t all buy ranches like Bush’s retreat in Paraguay, members of Congress – “who profit enormously from defense jobs and pork-barrel projects in their districts,” Johnson reminds us – have passed the Federal Financial Management Improvement Act requiring all federal agencies “to hire outside auditors to review their books and release the results to the public.”

Only one problem: “Neither the Department of Defense, nor the Department of Homeland Security has ever complied.”

No wonder that by 1990, the value of the weapons, equipment, and factories devoted to the U.S. Military Inc. had reached a staggering 83% of the value of all American manufacturing plants and equipment!

But this was hardly good news for workers. At least, not for those in the United States. “It is often believed that wars and military spending increases are good for the economy. In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment,” concluded the Center for Economic and Policy Research in Washington, D.C. in May 2007.

Their new study showed that 66 years of diverting money away from civilian manufacturing to feed an out of control arms industry cost 4,640,000 jobs.

Meanwhile, Johnson point outs, the weaponeers Ike warned us about squandered $8 trillion in capital resources from 1947 to 1987 – including spending more than $6 trillion on the development, testing, and construction of species-threatening nuclear bombs that can never be used.

“The fact that we did not modernize or replace our capital assets is one of the main reasons why, by the turn of the twenty-first century, our manufacturing base had all but evaporated,” Johnson jeremiads. The age of this industrial equipment (drills, lathes, etc.) marks the United States’ machine tool stock as the oldest among all major industrial nations. Nothing has been done in the period since 1968 to reverse these trends and it shows today in our massive imports of equipment – from medical machines… to cars and trucks… Today we are no longer the world’s leading lending country. In fact we are now the world’s biggest debtor country, and we are continuing to wield influence on the basis of military prowess alone.”

Not for long, Bubba. Still, White House fundamentalists lifting their threats and slogans directly from their al-Qaeda counterparts (whom they formerly financed) – and entranced American television viewers who still believe the virtual reality assembled for them daily by news “managers” – figure they can afford the crippling expenses, if not the spiritual consequences, of waging permanent warfare against just about everyone on the planet – and the planet, besides. Because, as they put it, “We are the richest country on Earth.”

ARE YOU COMING TO OUR TEA PARTY?
Don’t believe it. These are the people whose representatives still try to sabotage every international attempt to stave off our space colony’s looming collapse, while insisting that global warming is “a hoax”. And who fervidly believe their God is coming any minute to “save” the mass-murderers who despoiled His creation.

In fact, both God and Gaia are fed up. Have you noticed the weather lately? And according to the CIA’s World Factbook, the world’s richest political place is… the European Union. As nerve.com points out, “The U.S. Economy is so deep in the crapper,” even supermodel Gisele “refuses to be paid in American greenbacks, opting in recent contracts for Euros instead.”

Smart girl. On November 7, 2007, the U.S. Treasury announced that the national debt had topped $9 trillion. It’s all covered, of course, by foreign loans that must be repaid with interest, and the purchases of U.S. businesses, banks and real estate by foreign buyers who, when a thoroughly trashed U.S. military finally runs out of equipment and recruits, will be in an unassailable position to dictate terms.

Wake up, fellow and female Americans! Unless we do something now to reverse direction, the “hidden costs” of higher oil prices, care for wounded soldiers and interest on money borrowed to brutally bomb and occupy Afghanistan and Iraq could cost us $3.5 trillion through 2017. [Reuters Nov 13/07]

Just as Climate Shift, the End of Cheap Oil, severe water shortages, topsoil loss, depleted uranium contamination and the Karma Collection Agency catastrophically converge.

This is why Bush’s stimulus package is a problem-worsening distraction and a sick joke.

What we really need is another people’s revolution.

Not next year.

Right now.

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