With Madoff’s sentencing comes the relief that the culprit is caught, and those who were duped by him and his henchmen are at least, to some degree, relieved to see some kind of justice. I know that those who suffered thier loss because of him will never have their lives back and with all due respect to the victims of Madoff, there is another side to all of this. Has it not occured to anyone that perhaps Madoff was offered up to the sacrifice? Is it not possible that what Madoof has done is only a small part of a much larger whole and we as a country have yet to feel the effects of the greates ponzi scheme ever perpetrated.

Let’s look at Wikipedia’s definition of a Ponzi Scheme:

“A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors rather than from any actual profit earned. The Ponzi scheme usually offers returns that other investments cannot guarantee in order to entice new investors, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.

The system is destined to collapse because the earnings, if any, are less than the payments. Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.”

Could it be that the “bailouts” are a sort of Ponzi Scheme and the investors are destined to lose. Who are the investors. All Americans, everyone of us and our children. We have no idea what the effects of the Bailouts will have until we begin to see the returns and I am convinced of one thing, there will be no return!! We will never see the money our government has freely given to multi-national banks and corporations. Our tax dollars are gone and I guarantee you and I and our children will be paying for this scheme for a long time!

Madoff is nothing compared to the people who have ripped off the coffers of the United States, our money, your money, the money that should have been used for the betterment of our country not to line the pockets of multinationals who have no allegiance to our country. These people only have one allegiance, Profit! Yes Madoff was a distraction, a dumb show for those of us who have not yet realized the greatest ponzi scheme ever perpetrated on a Nation.

I did not make this video, important information please pass along.

Well there it goes we let our government sell us down the road, we are up the proverbial river without a paddle. Do you really believe this so called bailout will benefit you and your children and their future. People who are losing their jobs as I write this and the ones who already have lost their jobs this month will see nothing in their future from this. People wake up , when in the history of our country has anyone seen a president sign a bill so quickly? What do they have up their sleeve? It’s definitely not your best interest in mind, we the people are in for some very hard times and the only people who will be helped by this boondoggle bill will be the very rich. Don’t kid yourself, you have been sold a bill of goods. I highly suggest you stock up on food and load the guns because you will soon see an America very different that you are use to. More people will lose their jobs more gas shortages will become prevalent, more food shortages will occur, more failure to protect us from our enemies will occur. Bush and his cronies have taken our government hostage and set up the future administrations for failure. The world bank will soon own our country lock stock and barrel, we are faced with globalization on the corporate level as we have never seen before and soon the curtain will fall on this great country. If you don’t believe me then all you have to do is wait and see if I’m wrong.

Does anyone else notice that we are setting ourselves up for the coming of what some call the Anti Christ, yep that’s what I said. An economic crisis on world proportions that will be solved by the coming of a man. Before I go on let’s look at the nature of what Anti Christ really is. Many paint a picture of a man who will be evil and set our world on the course of destruction. In some ways this may be correct but not entirely.

Let’s look at the nature of Christ. Christ was the ultimate sacrifice in the literal sense, a lamb of God, a true blood sacrifice for the good of humanity. Now let’s put anti Christ in this light. A Man who is a true innocent brought to the ultimate sacrifice for all that is evil. Someone who will be killed for the destruction of humanity not the salvation. Now this is Anti Christ, and what will follow the sacrifice of one such person will be the stuffs that horror movies are made of. So it is not the man who will solve the problems of the world that will plunge us in to a tailspin of destruction but the death of this man. The beast that will rise from this death will not be the man but much like the churches that sprang up around the death of Christ it will be the consciousness that will spring up from this death that will be filled with control and evil.

You may think me crazy, I am, you may think me wrong, I don’t believe so. The coming of extreme Islam is only an element of the great war about to befall us all. There is no right side in this realm. We will all be victims of the madness and insanity will act as a purging of our world.

As I said before arm yourself with food and water, if you have guns get them ready (although they will only help for a short time) the best thing you could do is hope, hope that the scenario that seems to be setting itself up is not the one we all seem to fear in some way or another. It sits in our subconscious waiting like a beast to devour our peace of mind. If you are an intelligent free thinking person you will know what I am saying is true. Hope is the only weapon we have, but I fear it’s too late.

by Jan Lundberg
Culture Change Letter #189, June 20, 2008

The empire of cheap food is crumbling

You. Will. Not. Be. Able. To. Get. Food. Need this be spelled out any more plainly? It is time to consider that the stage has been set for petroleum-induced famine.

We have “innocently” accommodated rising population with greater and greater food production via technology and the profit motive. But now we have run out of room to grow, as biotechnology, for example, has severe limitations — major ones being petroleum dependence and topsoil loss. The biggest wild card for our existence is climate change, as we see with floods and other extreme weather affecting our food supply.

We are headed for massive shortages of food and other essentials, mainly brought about by the depletion of geological fossil reserves of cheap energy and water. The situation is demonstrated regularly with easy arithmetic based on statistical indicators from the United Nations, Worldwatch Institute, World Resources Institute, Earth Policy Institute, and numerous governments. Usually the full force of the message is offset by predictions of huge rises in future human population growth that are simple extrapolations of historical trends.

No one can say with certainty that the worst effects of today’s crisis will occur tomorrow or by any particular date. But it is irrational to assume there will only be gradual tightening of supplies until some solutions miraculously come to our aid. One ought to at least admit that one year ago few people thought we’d be going in the direction we’re going in, this fast, today.

Three days is our average food supply around the modernized world, i.e., for cities and their supermarkets. Long-term food stocks have plummeted: “Cereal stocks that are at their lowest level in 30 years,” according to Worldwatch institute in its most recent Vital Signs. This is exacerbated by increasingly weirder weather, compounded by the oil price/supply pressure on food. What can interfere with the three-day situation are truckers on strike (as in Europe), extended/repeated power outages, and the inability of the work force to commute to work.

I asked Chris Flavin, Worldwatch Institute president, about the escalating crisis that I assumed he was quite worried about. He told me on Wednesday,

“A lot will depend on the crop year and the weather. There is slack in the food supply system from meat consumption, for example. One steak’s energy requirement is the same as one gallon of ethanol. I see the glass half full and don’t have an apocalyptic view. We’re seeing fuel economy improvements and other self-correcting mechanisms. There’s $100 billion in renewable energy investment this year. We needed this crisis to start changing toward conservation. The pendulum is swinging again, as it did in the 1970s. We’re not going off the end of the cliff on peak oil. Production declines will be gradual.” I sent him my thoughts on the latter, with my thanks. I sure was surprised that he wasn’t half as worried as I am. Maybe he does not see as much of a problem the fact that the nation’s infrastructure is petroleum-based. He probably would not agree with me that the Earth is being murdered along with us human beings.

Zap! A global-warming heat wave kills many thousands in a U.S. city. Other cities take note, realizing their own cities are “like the one that got zapped last weekend.” Between the water supply problems, energy overload for air conditioning, rising prices for food, water and gasoline, people try to escape the urban heat island effect. Too many consumers stocking up and trying to split town exacerbated the tragedy.

When cities run out of food, and people want to leave en masse, they will get stuck in traffic jams the way fleeing (potential) victims of Hurricane Rita did in 2005. Will survivors be the ones who had the fullest gas tanks? Will these survivors also require guns to obtain food outside the city, whether by hunting or sticking up some hapless or well-armed locals?

Culture Change’s reports do not intend to add to hysteria. Indeed, if only there were no reason to be alarmed. But looking at our collective situation, it is difficult to see how wrenching shortages are avoidable. The consequence of reactions to these shortages will not be pretty. Without facing this, and taking action to prevent it, our Ship of Fools is on a course to hit the rocks.

Whether you are relatively “set” — with local food supply, not just money — or you are living from paycheck to paycheck and thus depend on the trucks coming into the supermarket without a hitch, you will not be immune to some interruption or limitation on the food you have probably taken for granted. As petroleum is in fast-dwindling supply and is relied upon for mass producing our food, shipping it (on average 1,500 miles for North Americans), packaging it and preparing it, we are up against a petroleum-induced famine of our own making. What evil-doer will we blame instead of ourselves?

The good news is that creative ways to obtain wild food are alive and well. Acorns and insects, however, are frowned upon — by the conventional consumer well fed for now. Is it time to stop cutting down oak trees? Poisoning snalis that are the escargot species? Wasting our nitrogen-rich urine by flushing it into our water supply instead of feeding it to fruit trees? Let us go over other options that we have:

Will we bring back the Victory Gardens through depaving and planting food in lawns? Until the food pops up for harvest, what will we eat — cats and rats? None of these sudden strategies can feed millions of hungry people in cities that don’t have pro-active leadership as yet. Yet, pedal power feeds millions in many a Chinese city surrounded by small farms. But every day the global economy plugs along, China is more fossil-fuel dependent, using far more coal than the U.S. and the U.K. combined.

Progress has been illusory in the last half century, but the period has been ballyhooed as amazing. “…the amount of grain produced per person grew from 285 kilograms in 1961 to a peak of 376 kilograms in 1986.” Since then it has gone down to 350 kilograms. China’s is 325 kilograms, the U.S. enjoys 1,230 kilograms, and in Zimbabwe — which Richard Heinberg told me is a guide to U.S. society after petrocollapse — is just 90 kilograms per capita. [Worldwatch, 2008] Can the most modern in the world really conserve the Earth suddenly?

There’s no let-up on the horizon, but people fervently hope for relief, as sure as tomorrow’s newspapers will be printed. As sure as the July 4th fireworks will be another display of our powerful continuity. Is this “Summer Driving Season” our last hurrah? Meanwhile, people are hurting in the pocket book, and are buying less stuff because of the oil price trend. So they look to blame someone, such as OPEC, the major oil companies, George Bush, take your pick. Some await Barack Obama to take over the White House and cleanse us of our woes, but even he says that community action is where it’s at.

Clearly, a half trillion dollar war on Iraq was not what our finances needed. If all that money had not been wasted, oil prices and food would be cheaper than they are. But what about the trickle-down of those corporations profiting off the war? Surely those billions for the contractors, and the fat salaries for those Americans so welcome in the Land Between Two Rivers, aided our economy. Or did they? The war profiteers and their friends in the corporate media expect everyone to buy capitalist theory. But wouldn’t you rather have had the half trillion bucks go to more livable conditions in our towns, such as community gardens, extended hours for libraries, better pay for teachers, and preventive health care? Thought so.

Unfortunately, our socioeconomic problems are too deeply rooted in disastrous treatment of Mother Nature, for even radical changes in federal spending priorities to get us out of this. So, the big one is coming. Looking at the fundamentals of our society and how it has changed from The Great Depression of the 1930s, we are in for something much worse than those days when the family farms were intact. What is implied for the big one on the horizon, according to optimistic activists such as Joanna Macy and David Korten, is “the great turning.” Doesn’t sound too scary, so I hope they’re right. They will be right, but they seem to skip the unpleasant bit about collapse.

The empire is crumbling, but first we must go through end-stages as the Romans and others had to: increasing debt, falling agricultural output, over-extended military, growing urban population without much productive purpose, etc. But we’re the good guys! — we call our empire’s philosophy “Democracy,” and we are so clever with science. Really, though, we’ve simply done better at distracting the populace and giving them the carrot more often than the stick, apparently. This translates to consumer freedom through more goods. The Big Gulp drink in disposable plastic — who could ask for more? We have had none other than The Empire of Cheap Food. Cheap in the sense that cancer can be had at lower prices than previous generations had to pay. Also, subsidized petroleum (to this day as well) jacked up the food supply and the human numbers.

It’s amazing how really intelligent people can be in dreamland over the possibility of positive change coming to the rescue. It’s not just limited to the technofix. It’s the general idea that people “are becoming more aware,” or “there are more and more people getting into organic gardening, CSA’s (Community Supported Agriculture), permaculture” and the like.

To get an indication of which may be more valid — (A) the trend for salvation as indicated by the growing phenomenon of gardening as noted by the New York Times last week, or (B) the inexorable, accelerating crunch of dwindling resources for too many people no matter how positive they may feel now — let us consider the result of a test on the community level.

This was very recently done in a most aware and progressive place. The population is small but well educated, oriented to be sensitive to world affairs, affluent, and active for local improvements. Sustainability is a goal in the eyes of many.

Here’s what was found from a survey of small and/or organic farms: no labor-help is needed at the beginning of the summer, nor for the whole summer long. Not even free help, volunteering. The farms’ production are set and unchangeable, apparently. Too bad, when the amount of food imported from afar is about 95% of what is eaten. One would think that at a time of rising food prices and the awareness of the global energy picture, such as peak oil, and when climate change makes the growing of food far more chancy, there’d be a discernible interest in upping the output and adding to community involvement of local farming. But the fact that people are (1) not anticipating any more demand for local and organic food this year, compared to last year, and that (2) there is no apparent need to gear up for greater production, seems ominous. It seems to indicate that there needs to be a raving crisis to get people to change their habits and plans.

Meanwhile, with a 100-year flood on the Iowa corn fields — where erosion on monocropped, depleted soil killed by petroleum pesticides and fertilizer and mechanical tilling — we are in for a hell of a summer. Is your food secure? Are you gardening, saving seeds, and protecting precious land and water?

The food price increases have something to do with oil prices that have doubled in a year. And the oil prices have something to do with peak oil. And peak oil has something to do with wasting the Earth headlong into deprivation and ecological destruction. And it’s about civilization as a runaway train. If you don’t agree with the metaphor, just try getting off. Crash must come, and come it will, and soon. I hope I’m wrong that: You. Will. Not. Be. Able. To. Get. Food.

That would be our concern when the price of oil can skyrocket (which it is already doing) — if we were prudent. The price of oil is far too low when there are still countless people driving cars unnecessarily. Apparently these drivers don’t find global warming to be as a big deal as “the economy.” Because it’s money, and only money, that can change some people — until they find they cannot eat their money.

Where I sit, the plants are crying out: It’s near 100 degrees Fahrenheit two days in a row in bone-dry San Francisco. It’s the wild deviations from the averages that are deadly to life.

Charles Biderman, TrimTabs 06.23.08, 7:00 PM ET
Stratospheric crude oil prices precipitated by speculation are wreaking havoc on the U.S. economy.

Based on income tax withholdings data from the Daily Treasury Statement, the wages of all U.S. workers on payrolls were unchanged on a year-over-year basis in the past two weeks (Friday, June 6 through Thursday, June 19) and rose 1.1% year-over-year in the past four weeks (Friday, May 23 through Thursday, June 19). Both of those growth rates are well below the 2.8% year-over-year in May, and they are consistent with an economy that is contracting sharply.

As long as oil prices stay above $120 per barrel, the economy is more likely to slow than strengthen, and companies are not likely to announce much float shrink. With real wages falling, large numbers of jobs being shed, gas prices exceeding $4 per gallon almost everywhere and home prices falling about 1% per month nationally, this year is going to be tough for American consumers.

Believe it or not, there is plenty of oil in the world. What is in short supply are investors willing to go short oil futures. The open interest on oil futures worldwide is 2.6 million contracts. With oil prices at $135 per barrel, each contract is worth $135,000. To control $135,000 of oil, investors have to put up no more than $10,000.

A hefty $1.3 billion per month flowed into commodity trading advisers (CTAs) in the first four months of this year, and $700 million per month flowed into commodity exchange-traded funds (ETFs) in the first five months of this year. Those amounts do not even include investments through other vehicles by hedge funds and pension funds. The latest issue of Barron’s reports that $55 billion flowed into commodity investments in the first quarter of 2008, and probably at least one-third of that amount was directed into long-only investments in oil.
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In any case, if half of the $2 billion per month inflow into CTAs and commodity ETFs were used to go long oil futures, it would be enough to go long 100,000 contracts, which is equal to 4% of the open interest on oil futures. In other words, open interest would grow roughly 50% per year just from inflows into CTAs and commodity ETFs.

What is happening now is not demand destruction, it is a financial disaster. The U.S. consumes 21 million barrels of per day. At $135 per barrel, the U.S. spends $1.0 trillion per year on oil, which is equal to 15% of the $6.8 trillion in take-home pay of everyone who pays taxes. If oil prices rose to $200 per barrel, the U.S. would spend $1.5 trillion per year on oil, which would be equal to 22% of take-home pay. Moreover, those percentages of 15% and 22% do not even include the cost of coal or natural gas. In other words, the U.S. will be broke long before oil prices hit $200 per barrel, and the rest of the world would be sure to follow.

Another way to put the oil crisis into perspective is to compare increased spending on oil to inflows into savings and investment vehicles. For every $60 per barrel increase in the price of oil, the U.S. spends an additional $450 billion annually, or $38 billion per month, on oil. In the past twelve months, the inflow into savings and investment vehicles–bank savings, certificates of deposit, retail money market funds, and all long-term mutual funds–was $744 billion, which is $296 billion more than the additional money the U.S. would spend each year on oil if the price of oil rose by $60 per barrel from its current level.

From April through June, the inflow into savings and investment vehicles was $35 billion per month, down 43% from $61 billion per month in the same period last year. In other words, the U.S. will generate almost no savings if the price of oil stays at $135 per barrel. If the price of oil rises even modestly from its current level, the U.S. will be operating at a deficit.

If regulators raised the margin requirement for oil futures to 25% from no more than 7.5%, the oil market would crack. Unfortunately for oil users, regulators are unlikely to boost the margin requirement, unless outside pressure becomes unbearable, because the income of commodity exchanges and traders would plummet.
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But there are two other solutions to the oil crisis.

The first is requiring major players in the oil futures market to disclose their total positions of all kinds in crude. Given the importance of oil to the U.S. economy, everyone should be able to know who is going long crude oil in a big way. Institutional owners must report what stocks they own at least semiannually. Why should they not be required to report the amount of crude oil they are long?

The second solution is for oil consumers to make a concerted effort to go short oil futures. The U.S. government has been spending $280 million per month, pumping 70,000 barrels of oil per day into salt caverns. Instead of buying oil, why not go short 35,000 contracts monthly at $8,000 per contract, in other words selling high the crude we bought relatively low? What if other major crude oil users also went short oil futures each month? What if the Japanese government, airlines, trucking companies and utilities spent several billion dollars to go short oil futures each month until the oil market came to its senses?

It is insane for the world to go broke while oil traders and a handful of gangsters who control their national oil production make huge fortunes.

· Speech to US Congress will also criticise lobbyists
· ‘Revolutionary’ policies needed to tackle crisis

* Ed Pilkington in New York
* The Guardian,
* Monday June 23, 2008

James Hansen, one of the world’s leading climate scientists, will today call for the chief executives of large fossil fuel companies to be put on trial for high crimes against humanity and nature, accusing them of actively spreading doubt about global warming in the same way that tobacco companies blurred the links between smoking and cancer.

Hansen will use the symbolically charged 20th anniversary of his groundbreaking speech to the US Congress - in which he was among the first to sound the alarm over the reality of global warming - to argue that radical steps need to be taken immediately if the “perfect storm” of irreversible climate change is not to become inevitable.

Speaking before Congress again, he will accuse the chief executive officers of companies such as ExxonMobil and Peabody Energy of being fully aware of the disinformation about climate change they are spreading.

In an interview with the Guardian he said: “When you are in that kind of position, as the CEO of one the primary players who have been putting out misinformation even via organisations that affect what gets into school textbooks, then I think that’s a crime.”

He is also considering personally targeting members of Congress who have a poor track record on climate change in the coming November elections. He will campaign to have several of them unseated. Hansen’s speech to Congress on June 23 1988 is seen as a seminal moment in bringing the threat of global warming to the public’s attention. At a time when most scientists were still hesitant to speak out, he said the evidence of the greenhouse gas effect was 99% certain, adding “it is time to stop waffling”.

He will tell the House select committee on energy independence and global warming this afternoon that he is now 99% certain that the concentration of CO2 in the atmosphere has already risen beyond the safe level.

The current concentration is 385parts per million and is rising by 2ppm a year. Hansen, who heads Nasa’s Goddard Institute for Space Studies in New York, says 2009 will be a crucial year, with a new US president and talks on how to follow the Kyoto agreement.

He wants to see a moratorium on new coal-fired power plants, coupled with the creation of a huge grid of low-loss electric power lines buried under ground and spread across America, in order to give wind and solar power a chance of competing. “The new US president would have to take the initiative analogous to Kennedy’s decision to go to the moon.”

His sharpest words are reserved for the special interests he blames for public confusion about the nature of the global warming threat. “The problem is not political will, it’s the alligator shoes - the lobbyists. It’s the fact that money talks in Washington, and that democracy is not working the way it’s intended to work.”

A group seeking to increase pressure on international leaders is launching a campaign today called 350.org. It is taking out full-page adverts in papers such as the New York Times and the Swedish Falukuriren calling for the target level of CO2 to be lowered to 350ppm. The advert has been backed by 150 signatories, including Hansen.

By Carola Hoyos and Javier Blas in London

Published: June 20 2008 22:02 | Last updated: June 20 2008 22:02

Western countries have upgraded the food and fuel crisis into a national security concern as they fear record high energy and agriculture commodity costs are destabilising key developing regions of the world.

The concerns come as the world suffers for the first time since 1973 from the confluence of record oil and food prices. Corn, soyabean and meat prices jumped this week to all-time highs, while oil prices hit a record of almost $140 a barrel.

This shift toward a national security concern will become apparent at Sunday’s oil meeting in Jeddah, Saudi Arabia, where ministers are expected to warn that developing countries are cracking under the burden of record costs.

Saudi Arabia, the world’s largest oil producer and the only country able to raise output, has recognised the danger after developing countries, including US-ally Pakistan, pleaded for a reprieve from oil payments.

Morocco was forced last month to ask for an $800m loan from Saudi Arabia and United Arab Emirates to cushion the impact of oil and cereal imports.

One Washington official said: “What we have been watching is behaviour [that indicates] China, India, Indonesia, Vietnam [and] Malaysia simply can’t bear the burden on the central budget and that the medium to long-term confluence of oil and food prices is just too much.” He added: “It is leading to a real security issue where the streets are talking to the president.”

Martin Bartenstein, Austria’s economics minister who is travelling to Jeddah, said on Friday that the risk of social tension caused by high oil prices driving inflation to double digits will be a main tenet of his argument.

“It is very high on our agenda,” said a senior diplomat from a larger European nation.

Senior active and former US, European and United Nations officials said they had met US White House staff on the issue for briefings having been prompted in part by the unrest that toppled Haiti’s government and more recently after several Asian countries risked popular anger by cutting fuel subsidies.

By David Michael Green
24/03/08 “ICH” — – Watching George W. Bush in operation these last couple of weeks is like having an out-of-body experience. On acid. During a nightmare. In a different galaxy.

As he presides over the latest disaster of his administration, (No, it’s not a terrorist attack - that was 2001! No, it’s not a catastrophic war - that was 2003! No, it’s not a drowning city - that was 2005! This one is an economic meltdown, ladies and gentlemen!) bringing to it the same blithe disengagement with which he’s attended the previous ones, you cannot but stop and gaze in stark, comedic awe, realizing that the most powerful polity that ever existed on the planet twice picked this imbecilic buffoon as its leader, from among 300 million other choices. Seeing him clown with the Washington press corps yet once again - and seeing them fawn over him, laugh in all the right places, and give him a standing ovation, also yet once again - is the equivalent of having all your logic circuits blown simultaneously. Truly, the universe has a twisted and deeply ironic sense of humor. Monty Python is about as funny - and as stiff - as Dick Nixon, by comparison.

It’s simply incomprehensible. It’s not so astonishing, of course, that a country could have a bad leader whose aims are nefarious on the occasions when they are competent enough to rise to that level of intentionality. Plenty of countries have managed that feat, especially when - as was the case with Bush - every sort of scam is employed to steal power, and then pure corruption and intimidation used to keep it. History is quite littered indeed with bimbos and petty criminals of this caliber. What is harder to explain is how a country of such remarkable achievements in other domains, and with the capacity to choose, and in the twenty-first century no less, allows this to happen. And then stands by silently watching for eight years as the tragedy unfolds before their eyes, all 600 million of them, hardly any of them even blinking.

And so, remarkably, as we mark now the fifth anniversary of the very most tragic of these debacles, the most destructive and the most shameful - because it was the most avoidable - the sad question of the hour is less what is to be done about it than will anyone even notice? Not likely. And not for very long if they do. And, most of all, definitely not enough so as to take meaningful action to bring it to an end, even at this absurdly late date.

But let’s give credit where credit is due. This is precisely by design. This is exactly the outcome intended by the greatest propaganda-promulgating regime since Hermann Göring set fire to the Reichstag. It was Göring himself who famously reminded us that, “Naturally the common people don’t want war; neither in Russia, nor in England, nor in America, nor in Germany. That is understood. But after all, it is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. …Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.”

Sure worked in Germany. And it worked even better here, because these guys were so absolutely careful to avoid exposing the costs of their war to those who could demand its end. For example, by some counts, there are more mercenaries fighting in Iraq, at extremely high cost, than there are US military personnel. There’s only one reason for that. If the administration implemented the draft that is actually necessary to supply this war with adequate personnel, the public would end both the war and the careers of its sponsors, post haste. For the same reason, this is the first American war ever which has not only not been accompanied by a tax increase, but has in fact witnessed a tax cut. Likewise - to ‘preserve the dignity’ of the dead, of course - you are no longer permitted to see photographs of flag-draped caskets returning to Dover Air Force Base. And the press are embedded with forces who are also responsible for their safety, which is just a fancy way of saying that they’re so censored they make Pravda look good. It is, in short, quite easy for average Americans to get through their day, every day, without the war impacting their lives in any visible respect, and that is precisely what hundreds of millions of us are doing, week in and week out. All of this is courtesy of an administration that couldn’t run a governmental program to save its own life - but, boy, they sure as hell know how to market stuff.

So perhaps there is no excuse, after all, for my naïveté, for my credulousness in wanting to believe that twenty-first century America might be different enough not to follow the smallest of men - a personal failure and a 40-year drunkard who, unlike Herr Göring’s führer, couldn’t even claim charismatic eloquence as the sole virtue accounting for his power - to follow such a petulant child off the deep end of a completely unjustified war. Perhaps Americans and American democracy are no wiser or better than any other people or political system, even today, even after the worst century of warfare in human history, even after the mirror-image experience of Vietnam. Maybe the experience of Iraq hasn’t even changed them, and they’ll once again follow like lemmings when led to war by pathetic creatures such as George W. Bush, fifty years from now. Or five years from now. Or even five months from now, as the creature d.b.a Dick Cheney tees up a confrontation with Iran in order keep Democrats out of the White House, and himself out of jail.

Sure, presidents and prime ministers, no less than kings and führers, will lie their countries into war. Sure, they’re very good at it, and getting better all the time. Definitely a frightened people are more prone to stupidity than those lucky enough to contemplate in the luxury of quiet safety. Without question, it helps an awful lot - if you’re just Joe Sixpack, out there trying to figure out international politics in-between a long day’s work, helping the kids with their algebra homework, and the Yankee game - to have a checking-and-balancing Congress, a responsible opposition party, and/or a critical media helping you to understand the issues accurately, rather than gleefully capitulating to executive power at every opportunity. But that by no means excuses a public who were fundamentally far more lazy than they were ignorant or confused. And lazy is one thing when you’re talking about a highway bill or even national healthcare. But when it comes to war, lazy is murder.

I don’t think it took a giant leap of logic to understand that this war was bogus from the beginning, even based on what was known at the time. The war was sold on three basic arguments, each of which could have been easily dismantled even then with a little thoughtful consideration.

The first was WMD, of course. So, okay, perhaps your average American didn’t know that the United States government (including many in the current administration) had actually once supplied Saddam Hussein the material to make these evil weapons, and had covered for him at the UN and elsewhere when he used them. Although this historical myopia is very much part of the problem, of course. Americans are so ready to denounce supposed enemies without doing the slightest bit of historical homework to become acquainted with the slightest bit of history to make sense of the situation. If you don’t know that the US actually canceled elections and helped assassinate a ‘democratic’ president in Vietnam, of course you’re going to support war there. If you don’t know that the US toppled a democratically elected Iranian government to steal the country’s oil and then installed a brutal dictatorship in its place, of course you’re going to be angry at US diplomats being held hostage. And if you don’t bother to learn the true history of Iraq, perhaps you’ll find the WMD argument quite persuasive.

But, in fact, even without the historical background information, it never made a damn bit of sense. Iraq had been pulverized by war and sanctions for over twenty years prior to 2003. Two-thirds of its airspace was controlled by foreign militaries. Its northern region was effectively autonomous, a separate country in all but name. It was in no position to attack anyone. Moreover, it hadn’t attacked anyone - not the United States or anyone else. Indeed, it hadn’t even threatened to attack anyone. Shouldn’t that be part of the calculation in determining whether to go to war? Do we really want to give carte blanche to any dry (we hope) drunkard in the White House who today wants to bomb Norway (”They’re stealing our fish!”), or tomorrow wants to invade Burkina Faso (”They dress funny!”)?

Too often, of course, the historical answer to that question has unfortunately been yes, we apparently do want to do that. But let’s consider the massive warning signs in this case, even apart from what could be known about the administration’s lies at the time. Shouldn’t it have been enormously problematic that Iraq had nothing to do with 9/11? Even the administration never had the gall to make that claim. Wasn’t it transparent to anyone that America had plenty on its plate already in dealing with the enemy we were told we had, rather than adding a new adventure to the pile? And why wasn’t this thing selling throughout the world, or even amongst the traitorous half of the Democratic Party in Congress? Remember how everyone at home and abroad - yes, including the French - supported the US and its military actions in Afghanistan only twelve months before? Shouldn’t it have been a warning sign of epic proportions that these same folks wouldn’t countenance a war in Iraq just a year later? That the administration had to yank its Security Council resolution off the table, even after breaking both the arms of every member-state around the horseshoe table, because it could still only get Britain and two other patsies to lie down for this outrage, out of a total of fifteen, and nine needed to pass?

And how about the logic of that whole WMD thing, after all? Did anyone ever stop to think that several dozen other countries have WMD, including some that are pretty hostile to the United States? Did anyone not remember that the Soviets once had nearly 25,000 strategic nuclear warheads pointed in our direction? What ever happened to the logic of deterrence? To mutually assured destruction? And what about the mad rush to go to war, preempting the UN weapons inspectors from doing their job? Are we really okay with the notion that instead of ‘risking’ whatever would have been at risk by giving the inspectors another six or eight weeks to finish up, we’ve instead bought this devastating war down on our own heads for no reason at all? If you stop to think about it, it makes you shudder. Which I guess explains why not too many people stop to think about it.

The second rationale for war was the bogus linkage between Iraq and al Qaeda. The extent and ramifications of this lie are so significant that the White House, it was just recently revealed, squelched a Pentagon report showing no connections between the two. Is this sort of censorship what the Bush administration means by democracy, the remedy it’s always preaching for the rest of the world but never practicing at home? Anyhow, remember how definitive Cheney and the rest were of this supposed al Qaeda linkage, based pretty much entirely on a meeting between two operatives in Prague which likely didn’t even take place? Now we find out that the Department of Defense has spent the last five years combing through a mere 600,000 documents, and found zero evidence of such a link. Not some evidence. Not mixed evidence. Zero evidence.

But you could tell even then that they had almost nothing to go on. Christ, the United States government itself has had far more interactions with al Qaeda - including helping to build the beast from its inception - than one disputed meeting between two spooks in Prague. Doesn’t it seem that a decision to go to war should hang on more than a single thread like that, let alone a narrow and tattered one? And how many of us are down for attacking any country right now that might have had a single meeting between a low-level functionary and an al Qaeda representative?

Then, once again, there’s the matter of that whole pesky logic thing. Pay attention now, class. What do we know about al Qaeda? They are devoted to religious war - jihad - in the name of replacing governments across the Middle East with theocracies, or better yet recreating the old Islamic caliphate stretching across the region, right? Right. Now if this vision could have more thoroughly contradicted Saddam’s agenda for a secular dictatorship seeking regional domination on his own Stalinist terms, it is hard to imagine how. You don’t need a PhD in international politics to see that these two actors were about as antithetical to each other as the Republican Party is to integrity. Then again, even having one doesn’t necessarily mean you have the foggiest clue about what’s going on in the world, as Condoleezza Rice clearly demonstrated by brilliantly failing to anticipate that Hamas would win elections she had pushed the Palestinians to hold. For someone serving as secretary of state, this idiocy is the rough equivalent of anyone else being shocked when a dropped bowling ball hurtles to the ground, because they’re not yet fully acquainted with the concept of gravity. Evidently, in Texas this is what they call ‘credentials’.

Lastly, Bush’s little adventure in Mesopotamia was supposed to bring democracy to the region, remember? Never mind, of course, that there has long already been a fairly thriving Islamic democracy, right next door. Oops! It’s called Turkey. And let’s not forget Mr. Bush’s long-standing devotion to democracy, as he amply demonstrated in the American election of 2000. Or as he has continually manifested by bravely and publicly pushing the Chinese to democratize. Just as he has with his pals in Egypt and especially the family friends running Saudi Arabia, the recipient of more American foreign aid than nearly any other country in all the world. And let’s not forget the several hundred thousand perished souls from Darfur, whom this great champion of human rights has fought valiantly to keep alive by… by… well, I’m sure he’s done a lot behind the scenes. Sure is gonna be hard for them to exercise their precious right to vote from the next world, eh?

What is clear is that the reasons given to the American public for the war in Iraq were entirely bogus. This much is already on the public record, from the Downing Street Memos and beyond. Even if we can only speculate on why they actually invaded - oil, glory, personal insecurity, Israel, clobbering Democrats, Middle Eastern dominance - what we know for sure is that the rationale fed to the public was a knowingly fabricated pack of scummy lies. It wasn’t about WMD, it wasn’t about links to al Qaeda, and it sure wasn’t about democracy.

But even if we can’t identify the true motivations within the administration for invading, we can surely begin to see the costs. Probably a million Iraqi civilians are dead. Over four million are displaced and now living as refugees. Together, these equal a staggering one-fifth of the population of the entire country. Meanwhile, the remaining four-fifths are living in squalor, fear and a psychological damage so extensive that it is hard to grasp. America has lost 4,000 soldiers, with perhaps another 30,000 gravely wounded. Hundreds of thousands more will be scarred for life from their experiences in the hell of Mr. Bush’s war. Our military is broken and incapable of responding to a real emergency, at home or abroad. Our economy will sustain a blow of perhaps three trillion dollars before it is all said and done. Our reputation in the world is in the toilet. We have turned the Iranian theocracy into a regional hegemon. And we have massively proliferated our own enemies within the Islamic community. That would be one hell of an expensive war, even if the reasons given for it were legitimate. It is nearly incomprehensible considering that they were not.

This week, a man died in France, the last surviving veteran of World War I, a devastating conflict that - even a century later - nobody can still really explain to this day. Meanwhile, Dick Cheney, John McCain and Joe “Make-me-SecDef-Mac-oh-please-pick-me-Mac” Lieberman parachuted into Iraq for photo-ops to sustain the war they don’t have the integrity or the guts to abandon. Never mind that their visits had to be by surprise, and that they stroll around the Green Zone wearing armored vests - surely the most powerful measures of the war’s success imaginable. Of course, to be fair, we’ve only been at it for five years now. Perhaps after the remaining ninety-five on McCain’s agenda go by, Americans will finally be safe enough in Iraq to announce their visits in advance.

So, Happy Anniversary, America! You put these people in charge, and then - after seeing in explicit in detail what they were capable of - you actually did it again in 2004! You stood by in silence watching the devastation wrought upon an innocent people, produced in your name and financed by your tax dollars. And you continue to do just that again, now in Year Six.

Brilliant! Put on your party hat, America. You won the prize.

You’ve successfully answered the musical question, “How lethally stupid can one country be?”

David Michael Green is a professor of political science at Hofstra University in New York. He is delighted to receive readers’ reactions to his articles (dmg@regressiveantidote.net), but regrets that time constraints do not always allow him to respond.

Roubini’s Nightmare Scenario;

A Vicious Circle Ending In A Systemic Financial Meltdown

By Mike Whitney

13/03/08 “ICH” — - “It’s another round of the credit crisis. Some markets are getting worse than January this time. There is fear that something dramatic will happen and that fear is feeding itself,” Jesper Fischer-Nielsen, interest rate strategist at Danske Bank, Copenhagen; Reuters

Yesterday’s action by the Federal Reserve proves that the banking system is insolvent and the US economy is at the brink of collapse. It also shows that the Fed is willing to intervene directly in the stock market if it keeps equities propped up. This is clearly a violation of its mandate and runs contrary to the basic tenets of a free market. Investors who shorted the market yesterday, got clobbered by the not so invisible hand of the Fed chief.

In his prepared statement, Bernanke announced that the Fed would add $200 billion to the financial system to shore up banks that have been battered by mortgage-related losses. The news was greeted with jubilation on Wall Street where traders sent stocks skyrocketing by 416 points, their biggest one-day gain in five years.

“It’s like they’re putting jumper cables onto a battery to kick-start the credit market,” said Nick Raich, a manager at National City Private Client Group in Cleveland. “They’re doing their best to try to restore confidence.”

“Confidence”? Is that what it’s called when the system is bailed out by Sugar-daddy Bernanke?

To understand the real meaning behind the Fed’s action; it’s worth considering some of the stories which popped up in the business news just days earlier. For example, last Friday, the International Herald Tribune reported:

“Tight money markets, tumbling stocks and the dollar are expected to heighten worries for investors this week as pressure mounts on central banks facing what looks like the “third wave” of a global credit crisis….Money markets tightened to levels not seen since December, when year-end funding problems pushed lending costs higher across the board.”

The Herald Tribune said that troubles in the credit markets had pushed the stock market down more than 3 percent in a week and that the same conditions which preceded the last two crises (in August and December) were back stronger than ever. In other words, liquidity was vanishing from the system and the market was headed for a crash.

A report in Reuters reiterated the same ominous prediction of a “third wave” saying:

“The two-year U.S. Treasury yields hit a 4-year low below 1.5 percent as investors flocked to safe-haven government bonds….The cost of corporate bond insurance hit record highs on Friday and parts of the debt market which had previously escaped the turmoil are also getting hit.”

Risk premiums were soaring and investors were fleeing stocks and bonds for the safety of government Treasuries; another sure sign that liquidity was disappearing.

Reuters: “The level of financial stress is … likely to continue to fuel speculation of more immediate central bank action either in the form of increased liquidity injections or an early rate cut,” Goldman Sachs said in a note to clients.”

Indeed. When there’s a funding-freeze by lenders, investors hit the exits as fast as their feet will carry them. That’s why the lights started blinking red at the Federal Reserve and Bernanke concocted a plan to add $200 billion to the listing banking system.

New York Times columnist Paul Krugman also referred to a “third wave” in his article “The Face-Slap Theory”. According to Krugman, “The Fed has been cutting the interest rate it controls - the so-called Fed funds rate – (but) the rates that matter most directly to the economy, including rates on mortgages and corporate bonds, have been rising. And that’s sure to worsen the economic downturn.”…(Now) “the banks and other market players who took on too much risk are all trying to get out of unsafe investments at the same time, causing significant collateral damage to market functioning.” What the Times’ columnist is describing is a run on the financial system and the onset of “a full-fledged financial panic.”

The point is, Bernanke’s latest scheme is not a remedy for the trillion dollar unwinding of bad bets. It is merely a quick-fix to avoid a bloody stock market crash brought on by prevailing conditions in the credit markets.

Bernanke coordinated the action with the other members of the global banking cartel—The Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank—and cobbled together the new Term Securities Lending Facility (TSLF), which “will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally.” (Fed statement)

The plan, of course, is wildly inflationary and will put additional downward pressure on the anemic dollar. No matter. All of the Fed’s tools are implicitly inflationary anyway, but they’ll all be put to use before the current crisis is over.

The Fed’s statement continues: “The Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008.”

So, why is the Fed issuing loans to foreign banks? Isn’t that a tacit admission of its guilt in the trillion dollar subprime swindle? Or is it simply a way of warding off litigation from angry foreign investors who know they were cheated with worthless toxic bonds? In any event, the Fed’s largess proves that the G-10 operates as de facto cartel determining monetary policy for much of the world. (The G-10 represents roughly 85% of global GDP)

As for Bernanke’s Term Securities Lending Facility (TSLF) it is intentionally designed to circumvent the Fed’s mandate to only take top-grade collateral in exchange for loans. No one believes that these triple A mortgage-backed securities are worth more than $.70 on the dollar. In fact, according to a report in Bloomberg News yesterday: “AAA debt fell as low as 61 cents on the dollar after record home foreclosures and a decline to AA may push the value of the debt to 26 cents, according to Credit Suisse Group.

“The fact that they’ve kept those ratings where they are is laughable,” said Kyle Bass, chief executive officer of Hayman Capital Partners, a Dallas-based hedge fund that made $500 million last year betting lower-rated subprime-mortgage bonds would decline in value. “Downgrades of AAA and AA bonds are imminent, and they’re going to be significant.” Bass estimates most of AAA subprime bonds in the ABX indexes will be cut by an average of six or seven levels within six weeks.” (Bloomberg News) The Fed is accepting these garbage bonds at nearly full-value. Another gift from Santa Bernanke.

Additionally, the Fed is offering 28 day repos which –if this auction works like the Fed’s other facility, the TAF—the loans can be rolled over free of charge for another 28 days. Yippee. The Fed found a way to recapitalize the banks with permanent rotating loans and the public is none the wiser. The capital-starved banksters at Citi and Merrill must feel like they just won the lottery. Unfortunately, Bernanke’s move effectively nationalizes the banks and makes them entirely dependent on the Fed’s fickle generosity.

The New York Times Floyd Norris sums up Bernanke’s efforts like this:

“The Fed’s moves today and last Friday are a direct effort to counter a loss of liquidity in mortgage-backed securities, including those backed by Fannie Mae and Freddie Mac. Given the implied government guarantee of Freddie and Fannie, rising yields in their paper served as a warning sign that the crunch was worsening and investor confidence was waning. On Oct. 30, the day before the Fed cut the Fed funds rate from 4.75 percent to 4.5 percent, the yield on Fannie Mae securities was 5.75 percent. Today the Fed Funds rate is 3 percent, and the Fannie Mae rate is 5.71 percent, virtually the same as in October…..A sign of the Fed’s success, or lack of same, will be visible in that rate. It needs to come down sharply, in line with Treasury bond rates. Today, the rate was up for most of the day, but it did fall back at the end of the day. Watch that rate for the rest of the week to see indications of whether the Fed’s move is really working to restore confidence.”

Norris is right; it all depends on whether rates go down and whether that will rev-up the moribund housing market again. Of course, that is predicated on the false assumption that consumers are too stupid to know that housing is in its biggest decline since the Great Depression. This is just another slight miscalculation by the blinkered Fed. Housing will not be resuscitated anytime in the near future, no matter what the conditions; and you can bet on that. The last time Bernanke cut interest rates by 75 basis points mortgage rates on the 30-year fixed actually went up a full percentage point. This had a negative affect on refinancing as well as new home purchases. The cuts were a total bust in terms of home sales.

Still, equities traders love Bernanke’s antics and, for the next 24 hours or so, he’ll be praised for acting decisively. But as more people reflect on this latest manuver, they’ll see it for what it really is; a sign of panic. Even more worrisome is the fact that Bernanke is quickly using every arrow in his quiver. Despite the mistaken belief that the Fed can print money whenever it chooses; there are balance sheets constraints; the Fed’s largess is finite. According to MarketWatch:

“Counting the currency swaps with the foreign central banks, the Fed has now committed more than half of its combined securities and loan portfolio of $832 billion, Lou Crandall, chief economist for Wrightson ICAP noted. ‘The Fed won’t have run completely out of ammunition after these operations, but it is reaching deeper into its balance sheet than before.”

Steve Waldman at interfluidity draws the same conclusion in his latest post:

“After the FAF expansion, repo program, and TSLF, the Fed will have between $300B and $400B in remaining sterilization capacity, unless it issues bonds directly.” (Calculated Risk)
So, Bernanke is running short of ammo and the housing bust has just begun. That’s bad. As the wave of foreclosures, credit card defaults and commercial real estate bankruptcies continue to mount; Bernanke’s bag o’ tricks will be near empty having frittered most of his capital away on his Beluga-munching buddies at the investment banks.
But that’s only half the story. Bernanke and Co. are already working on a new list of hyper-inflationary remedies once the credit troubles pop up again. According to the Wall Street Journal, the Fed has other economy-busting scams up its sleeve:
“With worsening strains in credit market threatening to deepen and prolong an incipient recession, analysts are speculating that the Federal Reserve may be forced to consider more innovative responses -– perhaps buying mortgage-backed securities directly.

“As credit stresses intensify, the possibility of unconventional policy options by the Fed has gained considerable interest, said Michael Feroli of J.P. Morgan Chase. He said two options are garnering particular attention on Wall Street: Direct Fed lending to financial institutions other than banks and direct Fed purchases of debt of Fannie Mae and Freddie Mac or mortgage-backed securities guaranteed by the two shareholder-owned, government-sponsored mortgage companies. ( “Rate Cuts may not be Enough”, David Wessel, Wall Street Journal)

Wonderful. So now the Fed is planning to expand its mandate and bail out investment banks, hedge funds, brokerage houses and probably every other brandy-swilling Harvard grad who got caught-short in the subprime mousetrap. Ain’t the “free market” great?

But none of Bernanke’s bailout schemes will succeed. In fact, all he’s doing is destroying the currency by trying to reflate the equity bubble. And how much damage is he inflicting on the dollar? According to Bloomberg, “the risk of losses on US Treasury notes exceeded German bunds for the first time ever amid investor concern the subprime mortgage crisis is sapping government reserves….Support for troubled financial institutions in the U.S. will be perceived as a weakening of U.S. sovereign credit.”

America is going broke and the rest of the world knows it. Bernanke is just speeding the country along the ever-steepening downward trajectory.

Timothy Geithner, President of the New York Fed put it like this:

“The self-reinforcing dynamic within financial markets has intensified the downside risks to growth for an economy that is already confronting a very substantial adjustment in housing and the possibility of a significant rise in household savings. The intensity of the crisis is in part a function of the size of the preceding financial boom, but also of the speed of the deterioration in confidence about the prospects for growth and in some of the basic features of our financial markets. The damage to confidence—confidence in ratings, in valuation tools, in the capacity of investors to evaluate risk—will prolong the process of adjustment in markets. This process carries with it risks to the broader economy.”

Without a hint of irony, Geithner talks about the importance of building confidence on a day when the Fed has deliberately distorted the market by injecting $200 billion in the banking system and sending the flagging stock market into a steroid-induced rapture. Astonishing.

The stock market was headed for a crash this week, but Bernanke managed to swerve off the road and avoid a head-on collision. But nothing has changed. Foreclosures are still soaring, the credit markets are still frozen, and capital is being destroyed at a faster pace than any time in history. The economic situation continues to deteriorate and even unrelated parts of the markets have now been infected with subprime contagion. The massive deleveraging of the banks and hedge funds is beginning to intensify and will continue to accelerate until a bottom is found. That’s a long way off and the road ahead is full of potholes.

“In the United States, a new tipping point will translate into a collapse of the real economy, final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the US dollar fall. The collapse of US real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down massively.” (Statement from The Global Europe Anticipation Bulletin (GEAB)

Is that too gloomy? Then take a look at these eye-popping charts which show the extent of the Fed’s lending operations via the Temporary Auction Facility. The loans have helped to make the insolvent banks look healthy, but at great cost to the country’s economic welfare. http://benbittrolff.blogspot.com/2008/03/really-scary-fed-charts-march.html

The Fed established the TAF in the first place; to put a floor under mortgage-backed securities and other subprime junk so the banks wouldn’t have to try to sell them into an illiquid market at fire-sale prices. But the plan has backfired and now the Fed feels compelled to contribute $200 billion to a losing cause. It’s a waste of time.

UBS puts the banks total losses from the subprime fiasco at $600 billion. If that’s true, (and we expect it is) then the Fed is out of luck because, at some point, Bernanke will have to throw in the towel and let some of the bigger banks fail. And when that happens, the stock market will start lurching downward in 400 and 500 point increments. But what else can be done? Solvency can only be feigned for so long. Eventually, losses have to be accounted for and businesses have to fail. It’s that simple.

So far, the Fed’s actions have had only a marginal affect. The system is grinding to a standstill. The country’s two largest GSEs, Fannie Mae and Freddie Mac, which are presently carrying $4.5 trillion of loans on their books, are teetering towards bankruptcy. Both are gravely under-capitalized and (as a recent article in Barron’s shows) Fannies equity is mostly smoke and mirrors. No wonder investors are shunning their bonds. Additionally, the cost of corporate bond insurance is now higher than anytime in history, which makes funding for business expansion or new projects nearly impossible. The wheels have come of the cart. The debt markets are upside-down, consumer confidence is drooping and, as the Financial Times states, “A palpable sense of crisis pervades global trading floors.” It’s all pretty grim.

The banks are facing a “systemic margin call” which is leaving them capital-depleted and unwilling to lend. Thus, the credit markets are shutting down and there’s a stampede for the exits by the big players. Bernanke’s chances of reversing the trend are nil. The cash-strapped banks are calling in loans from the hedge funds which is causing massive deleveraging. That, in turn, is triggering a disorderly unwind of trillions of dollars of credit default swaps and other leveraged bets. Its a disaster. Economist Nouriel Roubini predicted the whole sequence of events six months before the credit markets seized and the Great Unwind began”. Here’s a sampling of his recent testimony before Congress:

Roubini’s Testimony before Congress:

“There is now a rising probability of a “catastrophic” financial and economic outcome; a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown….Capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy. Market prices include a large illiquidity discount on top of the discount due to the credit and fundamental problems of the underlying assets that are backing the distressed financial assets. Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions. Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit.

To understand the risks that the financial system is facing today I present the “nightmare” or “catastrophic” scenario that the Fed and financial officials around the world are now worried about. Such a scenario – however extreme – has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.”

Roubini has been right from the very beginning, and he is right again now. Bernanke can place himself at the water’s edge and lift his hands in defiance, but the tide will come in and wash him out to sea anyway. The market is correcting and nothing is going to stop it.

Just felt like sharing this one:

By Paul Craig Roberts

13/03/08 “ICH ” — - I’ve been watching the dollar die all my life. I sometimes think I will outlast it.

When I was a young man, gold was $35 an ounce. Today one ounce gold bullion coins, such as the Canadian Maple Leaf, cost more than $1,000.

Our coinage was silver. Our dimes, quarters, and half dollars had purchasing power. Even the nickel could purchase a candy bar, ice cream cone or soft drink, and a penny could purchase bubble gum or hard candy. If a kid could collect 5 discarded soft drink bottles from a construction site, the 2 cents deposit on the returnable bottles was enough for the Saturday afternoon movie. Gasoline was 32 cents a gallon. A dollar’s worth was enough for a Saturday night date.

Our silver coinage was 90% silver. People sometimes melted coins in order to make silver spoons, known as coin silver, which can still be found in antique shops. Except for the reduced silver (40%) Kennedy half dollar which continued until 1970, 1964 was the last year of America’s silver coinage. The copper penny departed in 1982. As Assistant Secretary of the Treasury, I opposed the demise of America’s last commodity money, but I couldn’t prevent the copper penny’s death.

During World War II (1941-1945), nickel was diverted from coinage to war, and the US mint issued a wartime silver (35%) nickel.

It is not easy to find items to purchase with today’s US coins, but the silver coins of the same face value still have purchasing power. The 10 cent piece of my youth contains $1.42 worth of silver at today’s silver price. The quarter is worth $3.55, and the half dollar contains $7.10 of silver. The silver dollar is worth 15.2 times its face value. These are just the silver values of coins that might be worth far more depending on condition and rarity. The silver in the wartime nickel is worth $1.10, which is 22 times the coin’s face value. Even the copper penny is worth 2.5 cents.

When I was a young man enjoying travels in Europe, the German mark or Swiss franc traded four to one US dollar. The euro, which is today’s equivalent to the mark or franc, costs $1.55.

People who haven’t accumulated much age have little idea of the corrosive power of “acceptable” inflation. Unlike gold and silver, fiat money has no intrinsic value. When money is created faster than goods and services it drives up prices, thus driving down the value of the money. If freely traded currencies are excessively printed or if inflation, budget deficits, and trade deficits drive currencies off their fixed exchange rates, prices of imports rise as the foreign exchange value of the currency falls.

Today the US, heavily dependent on imports, is subject to double-barrel inflation from both domestic money creation and decline in the dollar’s foreign exchange value.

The US inflation rate is about twice as high as the government’s inflation measures report. In order to hold down Social Security payments, the government changed the way it measures inflation. In the old measure, inflation measured the nominal cost of a defined standard of living. If the price of steak rose, up went the inflation rate. Today if the price of steak rises, the government assumes that people switch to hamburger. Inflation doesn’t go up. Instead, the standard of living it measures goes down.

This is just one of the many ways that the government pulls the wool over our eyes.

With the dollar value of the euro rising through the roof, today a vacation in Europe is far more costly than in the past. Thanks to China, so far Americans have been sheltered from the greatest effects of the dollar’s declining value. Our greatest trade deficit is with China. The prices of the goods from China have not risen, because China keeps its currency pegged to the dollar. As the dollar goes down, China’s currency goes with it, thus holding down price rises.

The resignation of Admiral William Fallon as US military commander in the Middle East probably signals a Bush Regime attack on Iran. Fallon said that there would be no US attack on Iran on his watch. As there was no reason for Fallon to resign, it is not farfetched to conclude that Bush has removed an obstacle to war with Iran.

The US is already over stretched both militarily and economically. An attack on Iran is likely to be the straw that breaks the camel’s back.

Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand.