Buy Farmland and Buy Gold – Sound Advice for the Future
February 24, 2010
TimesOnline.co.uk
By Leo Lewis
The world’s most powerful investors have been advised to buy farmland, stock up on gold and prepare for a “dirty war” by Marc Faber, the notoriously bearish market pundit, who predicted the 1987 stock market crash.
The bleak warning of social and financial meltdown, delivered today in Tokyo at a gathering of 700 pension and sovereign wealth fund managers.
Dr Faber, who advised his audience to pull out of American stocks one week before the 1987 crash and was among a handful who predicted the more recent financial crisis, vies with the Nouriel Roubini, the economist, as a rival claimant for the nickname Dr Doom.
Speaking today, Dr Faber said that investors, who control billions of dollars of assets, should start considering the effects of more disruptive events than mere market volatility.
“The next war will be a dirty war,” he told fund managers: “What are you going to do when your mobile phone gets shut down or the internet stops working or the city water supplies get poisoned?”
His investment advice, which was the first keynote speech of CLSA’s annual investment forum in Tokyo, included a suggestion that fund managers buy houses in the countryside because it was more likely that violence, biological attack and other acts of a “dirty war” would happen in cities.
He also said that they should consider holding part of their wealth in the form of precious metals “because they can be carried”.
One London-based hedge fund manager described Mr Faber’s address as “excellent, chilling stuff: good at putting you off lunch, but not something I can tell clients asking me about quarterly returns at the end of March”.
Dr Faber did offer a few more traditional investment tips, although their theme fitted his general mode of pessimism.
In Asia, particularly, he said, stock pickers should play on future food and water shortages by buying into companies with exposure to agriculture and water treatment technologies.
One of Dr Faber’s darker scenarios involves growing military tension between China and the United States over access to limited oil resources.
Today the US has a considerable advantage over China because it has free access to oceans on both coasts, and has potential energy suppliers to the north and south in Canada and Mexico.
It also commands an 11-strong fleet of aircraft carriers that could, if necessary, secure supply routes in a conflict situation.
China and emerging Asia, meanwhile, face the uncertainty of supplies that must travel from the Middle East through winding sea lanes and the Malacca bottleneck.
American military presence in Central Asia, Dr Faber said, may add to the level of concern in Beijing.
“When I tell people to prepare themselves for a dirty war, they ask me: “America against whom?” I tell them that for sure they will find someone.”
At the heart of Dr Faber’s argument is a fundamentally gloomy view on the US economy and its capacity to service a growing mountain of debt.
His belief, fund managers were told, is that the US is going to go bankrupt.
Under President Obama, he said, the country’s annual fiscal deficit will not drop below $1 trillion and could rise beyond that figure.
Arch bears have predicted that US debt repayments could hit 35 per cent of tax revenues within ten years.
Dr Faber believes that the ratio could easily hit 50 per cent in the same time frame.
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Goldman Sachs Post Soaring Profits
January 21,2010
CNNMoney
By David Ellis
Goldman Sachs delivered some of its best results in the firm’s history on Thursday, after it drastically reined in pay for thousands of employees.
Hoping to defuse a potential backlash over year-end bonuses, the Wall Street powerhouse said it trimmed its compensation pool to $16.2 billion during the quarter.
That helped boost its fourth-quarter results to $4.9 billion, or $8.20 a share, eclipsing analysts’ estimates for a profit of $5.20 a share, according to Thomson Reuters. Profits for 2009 also soared, hitting a new record of $13.4 billion.
Robust activity in Goldman’s massive trading division earlier in the year helped juice the firm’s full-year results, even as trading dramatically slowed down in the final months of the year.
And while revenue within Goldman’s traditional investment banking and asset management businesses fell from a year ago, that decline was easily offset by the reduction in employee expenses.
Money spent on salaries, benefits and bonuses in 2009 ended at 38.5% of the firm’s total revenue, the lowest level for that ratio since the firm went public in 1999.
David Viniar, Goldman Sachs’ chief financial officer, indicated that the move was done largely in response to the recent outcry about compensation from the American public, who helped prop up the firm with taxpayer dollars a little more than a year ago.
There has certainly been much frustration on Capitol Hill as well, with politicians incredulous that financial firms like Goldman Sachs would dare pay outsized bonuses, particularly at a time when millions remain out of work.
“We are not deaf to the calls for restraint and we heard them,” Viniar said during a conference call with the media.
Hoping to defuse a potential backlash, the company has taken aggressive action on several fronts in recent months. In December it revoked cash bonuses for its 30-member management committee, as well as contributing $620 million to two charitable organizations the firm oversees.
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Flying Spy Drone Over Haiti
January 21,2010
Wired.com
By Noah Shachtman
A controversial CIA contractor has found new work in Haiti, flying drones on disaster recovery duty.
When last we heard from Evergreen International Aviation, the Oregon-based firm was offering to post sentries at local voting centers during the 2008 election, ”detaining troublemakers” and making sure voters “do not get out of control.”
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Now, company vice president Sam White tells Aviation Week that the firm is flying at least one ScanEagle surveillance drone over Haiti. ”The company has a fleet of 747s and a fleet of large and small choppers, and has begun ferrying in supplies to Port au Prince,” the magazine’s Paul McLeary notes. “White wouldn’t say who the company is moving cargo for, saying only that ‘we’re working with different agencies, and we have one plane coming in tomorrow full of humanitarian supplies.’”
Over the years, Evergreen has had all sorts of interesting clients over its five-plus decades in operation. Back in the late ’80s, the company “acknowledged one agreement under which his companies provide occasional jobs and cover to foreign nationals the CIA wants taken out of other countries or brought into the United States.” In 2006, Evergreen’s parent company flew Bill O’Reilly into Kuwait in 2006, according toSourceWatch. Last April, the company won a $158 million contract to supply the Air Force with helicopters in Afghanistan.
Haiti wouldn’t be Evergreen’s first disaster-response mission, however. In September, the State of California chartered Evergreen’s 747 supertanker, to help put out forest fires there.
UPDATE: Brian Whiteside, executive vice president of Evergreen Unmanned Systems, denied that his company is flying drones for the earthquake recovery operation. “We have no UAVs [unmanned aerial vehicles] in Haiti — nothing currently in Haiti, and nothing in the region,”he tells Danger Room. Whiteside acknowledged that “we do have teams over there that are trying to help.” But Whiteside isn’t sure what, exactly, they’ve been able to accomplish. “We don’t have very good comms with them.” And when I asked him which government agency or charity Evergreen was trying to support, he ducked the question, and referred me to his spokesperson.
UPDATE 2: McLeary went back and posted the quotes he got from Evergreen’s Sam White. “We also have some UAVs here that we’re bringing in to, uh, probably work with the press to help out downloading live video links and aerial shots of the devastation,” he said. “We also have 747 cargo airplanes, and so we’re working with different agencies there and uh, we have a plane landing here tomorrow to bring in a lot of humanitarian supplies. So we’ll be here for quite some time.”
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Ron Paul: The Government Is Too Big to Succeed
January 20, 2010 by joel
Filed under Government
January 20, 2010
Campaign for Liberty
By Ron Paul
Last week, the Financial Crisis Inquiry Commission kicked off their first round of hearings on the
causes of the economic meltdown on Wall Street. The commission is being compared to the the
Pecora Commission launched in 1932 to investigate the causes of the Great Depression. The
Pecora commission is beloved by those who believe the solution to every problem is more laws
because it was used to justify a number of new laws, including Glass-Steagall. Of course, none of
those laws addressed the real causes of the Great Depression. It was the introduction of unsound
monetary policy and central economic planning pursued by the Federal Reserve that really threw
everything off balance. The Fed was founded in 1913 to stabilize the economy and prevent a
recurrence of the short-lived Panic of 1907, but instead it promptly produced the Great Depression
which lasted more than 15 years.
The Pecora Commission was stacked with big government sympathizers who blamed the free
market and the gold standard without question, and without any consideration of government
interference in the economy. This panel is no different. Never will they contemplate how
government steered us into this crisis, and what perverse incentives can be removed or repealed so
that the market will function more smoothly. Never will they discuss how investment should come
from savings, not debt. Never will it occur to them that fiat money, artificially low interest rates and
the whole Federal Reserve System might be unwise and unstable, not to mention unconstitutional.
The answer will always be more government regulation and oversight. It is predictable that this
government panel will eventually come to the firm conclusion that government needs to be bigger,
and that the market is just too free.
Geithner Told AIG To Withhold Details About Bailout
January 8, 2010 by joel
Filed under Government
January 08, 2010
Bloomberg
By Hugh Son
The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.
AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.
“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”
Geithner Had ‘No Role’
“Secretary Geithner played no role in these decisions,” Meg Reilly, a Treasury spokeswoman, said in an e-mail. “He was recused from working on issues involving specific companies, including AIG,” after his nomination for Treasury secretary on Nov. 24, 2008. Geithner “began to insulate himself weeks earlier in anticipation of his nomination,” she said in a separate statement.
Geithner, who was tapped by President Barack Obama, took the Treasury job in January, 2009. Mark Herr, a spokesman for New York-based AIG, declined to comment.
Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.
Bank of London Policymake Warns of Massive U.S. Dollar Collapse
January 7,2009
Telegraph.co.uk
By Edmund Conway
The long-held assumption that US assets – particularly government bonds – are a safe haven will soon be overturned as investors lose their patience with the world’s biggest economy, according to Willem Buiter.
Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency’s prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama’s mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.
Writing on his blog , Prof Buiter said: “There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place.”
He said that the dollar had been kept elevated in recent years by what some called “dark matter” or “American alpha” – an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.
“The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally,” he said. “Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed.”
He said investors would, rightly, suspect that the US would have to generate major inflation to whittle away its debt and this dollar collapse means that the US has less leeway for major spending plans than politicians realise.
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Health Care Bill Is A Huge Tax Heist
December 23, 2009 by Andrew
Filed under Government
December 23, 2009
Prison Planet
By Paul Joseph Watson
A Boston Globe analysis of the health care bill which Democrats are trying to ram through before Christmas illustrates how the legislation is a gigantic tax heist which will further economically cripple Americans already laboring under the worst financial crisis since the great depression.
H.R. 3590 Patient Protection and Affordable Care Act [2], which is set to be voted on by the Senate on Christmas Eve, contains a raft of pork barrel and tax hikes. The legislation has not even been read in full by many of the representatives eager to make it the law, including fervent advocate John Kerry.
“While it would take days to read the entire bill, my cursory review of the legislation identified at least 19 tax increases,” writes the Globe’s Jamie Downey.
Chief amongst those tax hikes is the one outlined in Section 1501 – Requirement to maintain minimum essential coverage. Individuals who don’t maintain mandatory health insurance will face an annual tax penalty of $750, an amount set to escalate even higher in future.
Section 9013 reduces the amount that can be deducted as expenses for people incurring significant health costs. This will directly impact the living standards of individuals already struggling under the burden of long-term illnesses.
With income taxes already on the increase to pay for the mass looting of the American taxpayer in the form of the multi-trillion dollar bailout, with the highest rate already increasing by 3.6 percent, a further tax on Medicare will be imposed on individuals making in excess of $200,000 and married couples making over $250,000 under Section 9015.
The government will also collect a new 5 percent tax on voluntary cosmetic procedures under Section 9017. Since in other state-run health care systems, such as Canada, “voluntary procedures” is a term also applied to people with life-threatening conditions who sometimes have to wait 18 months to get treatment, the eventual scope of this new tax can only be imagined.
While the new taxes on individuals are bad enough, the penalties imposed on pharmaceutical corporations, health insurers and employers are perhaps worse because the tax hikes will undoubtedly passed on to the general public in the form of higher costs.
Section 9008 imposes an annual fee on branded prescription pharmaceutical manufacturers and importers, which equates to a a $2.3 billion excise tax on the pharmaceutical industry based on market share starting immediately. Prescription drugs, which will not be free for Americans under “free” health care, will soar in cost as a result of this new tax.
Section 9009 imposes a $2 billion excise tax on the medical device industry. This will increase the cost of life-saving technology and equipment, meaning hospitals will buy fewer devices, meaning longer waiting lists for vital treatment and more deaths as a result of these delays.
An annual excise tax of $6.7 billion on health insurance providers under Section 9010 will also jack up prices.
“How can the imposition of $11 billion in excise taxes (section 9008, 9009 and 9010) on the health care industry reduce costs to consumers? Does anyone else suspect these companies will have to pass these costs over to consumers?” writes Downey.
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When Will Jobs Return
October 30, 2009
CNN Money
By Chris Isidore
The economy is growing again. So when are the jobs that go with growth going to get here?
Not anytime soon, unfortunately.
The consensus forecast is that job losses will continue through the end of this year, with many economists not expecting unemployment to peak until next summer. That will add to the 7.2 million jobs already lost in this downturn.
Even with Thursday’s report that showed the economy grew at a 3.5% annual rate in the third quarter, the continued job losses are not a shock.
Jobs are what are known as a trailing or lagging indicator, meaning that they change in response to other economic events, rather than predicting changes the way a leading indicator, such as the stock market, does. That’s because even after a recession has ended, employers are slow to add staff until they’re sure that demand has returned.
The real worry is that the deepest and longest recession since the Great Depression will be followed by a jobless recovery, just like what happened after the recessions in 1990-1991 and 2001.
50 Best Jobs in America
It took almost two years after the end of the 2001 recession before the economy started adding jobs on a consistent basis. And it wasn’t until February 2005 until the job market got back to the employment levels of four years earlier.
Some economists argue that the job losses in this downturn will prompt employers to start hiring at a rapid clip soon after the economy starts to improve.
“People cut so quickly that they cut things they shouldn’t have, not just fat but also muscle and bone,” said Robert Brusca of FAO Economics.
Many other economists were already looking for a tough labor market for at least the next year.
According to a survey by the National Association of Business Economics, the consensus forecast of 44 top economists is for an addition of only 12,000 jobs a month in the first quarter of next year.
The economists surveyed also indicated they don’t expect monthly job gains to top the 150,000 level — which is generally thought of as what is needed to keep pace with population growth — until the end of 2010.
And in the most troubling sign, more than a half of the economists surveyed said they didn’t expect a recovery to pre-recession levels in the job market until 2012 while a third said they didn’t believe a full job recovery would occur until 2013 or beyond. There are number of reasons for this pessimism.
Money to hire is tight
Small businesses are typically the engine of job growth, but their access to credit is still severely limited. That means that even if they’re confident about their future prospects, many small employers won’t be able to afford to add staff.
“Recessions that involve a financial crisis take a much longer time for there to be a jobs recovery,” said Heidi Shierholz, labor economist for the Economic Policy Institute, a liberal think tank. “The credit crunch isn’t getting worse, but it’s still very tight.”
Obama Missed Opportunity for Reform
October 12, 2009 by JP
Filed under Government
October 12, 2009
The Raw Story
By Daniel Tencer
The Obama administration “refused” to take meaningful steps to reform the banking system in the wake of last year’s financial crisis, and the opportunity to do so has now been missed, says a former chief economist for the International Monetary Fund.
Simon Johnson told PBS’s Bill Moyers that he expects an even larger financial crisis to hit the United States in the coming years because the system was not fixed through reform, but rather through a massive injection of taxpayers’ money into the failing banks.
“The short term opportunity was missed,” Johnson said on Bill Moyers Journal Friday night. “There was an opportunity the Obama administration had. President Obama campaigned on a message of change. … The time for change for the financial sector was absolutely upon us, this was abundantly apparent in January of this year.”
Johnson continued: “Rahm Emanuel, the president’s chief of staff, is known for saying ‘Never let a good crisis go to waste.’ The crisis for the big banks is substantially over. And it was completely wasted. The administration refused to break the power of the big banks when they had the opportunity earlier this year. And the regulatory reforms they are now pursuing … will turn out to be essentially meaningless.”
Johnson said that the bank bailout would not fix the long-term instability of the financial sector, and “when [the crisis] comes back, it will come back with a vengeance, and it will be I think even more devastating.”
The government’s policy towards the financial crisis amounts to “socialism for the big banks,” US House Rep. Marcy Kaptur (D-OH) told Moyers and Johnson. “They’ve basically taken their mistakes and they’ve put it on the taxpayer … that’s socialism, that’s not capitalism.”
Kaptur has become something of a crusader for homeowners’ rights in the wake of the housing crisis, as well as a major critic of US banks. Moyers played a clip of her giving a speech this past January in which she urged homeowners to ignore eviction notices and become “squatters in [their] own homes” if they need to.
So why should any American citizen be kicked out of their homes in this cold weather? … Don’t leave your home. Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don’t have that mortgage, and you are going to find they can’t find the paper up there on Wall Street. So I say to the American people, you be squatters in your own homes. Don’t you leave. In Ohio and Michigan and Indiana and Illinois and all these other places our people are being treated like chattel, and this Congress is stymied.
Kaptur recounted an anecdote about inviting representatives of investment bank JPMorganChase, the largest forecloser of homes in Kaptur’s Ohio district, to a meeting, and then waiting around all day as no one from JPMorganChase showed up — until nearly the end of the day.
“That’s how they treat our people,” Kaptur said.
Asked what she thought of the Obama administration’s decisions to have in place many of the figures associated with the financial collapse — such as former Federal Reserve Bank of New York head Timothy Geithner, who is now treasury secretary, and Federal Reserve Chairman Ben Bernanke, a Bush administration appointee — Kaptur said: “I don’t think any individuals who had their hands in creating this mess should be in charge of cleaning it up. I honestly don’t think they’re capable of it.”
In May, Johnson penned an article for The Atlantic in which he compared the US’s financial system to that of a corrupt third-world country, and said that, if the IMF had given the US the same advice it gives developing countries, it would have told Washington to break up the banks.
Johnson described a “deep and disturbing” similarity between the US financial crisis and similar crises to have hit developing countries in earlier times:
Elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
Rep. Kaptur said the only way to reform the political system is to “take the money out” of it. “We have to get rid of the constant fundraising that happens inside the Congress,” she said.
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Kiss the Dollar Goodbye
October 12, 2009
The Raw Story
By Agence France-Presse
The dollar’s position as the world’s leading reserve currency faces increased pressure as the financial crisis allows emerging economies greater influence on the world stage, analysts said.
A report last week in The Independent claiming that China, Russia and Gulf States are among nations prepared to ditch the dollar for oil trades has heightened the uncertainty surrounding the US currency’s future.
The dollar slumped against rivals last week in the wake of the British daily’s controversial report.
“The US dollar is being hurt by the continued talk of a shift away from a dollar-centric world,” said Kit Juckes, an analyst at currency traders ECU Group.
“Three conclusions stand out very clearly. Firstly, the shift in economic power away from the G7 economies is continuing. “Secondly, there is a growing acceptance amongst those winners that one consequence of this power shift will be to strengthen their currencies.
“And finally, as long as the US economy is not strong enough for any rise in interest rates to be conceivable for a long time, the dollar’s underlying downtrend will remain in place,” added Juckes.
The Independent, under the front-page headline “The Demise of the Dollar”, reported last Tuesday that Gulf states, together with China, Russia, Japan and France, were considering replacing the dollar as the currency for oil deals.
“In the most profound financial change in recent Middle East history, Gulf Arabs are planning — along with China, Russia, Japan and France — to end dollar dealings for oil,” wrote The Independent’s Middle East correspondent Robert Fisk.
They would switch “to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar,” added Fisk, citing Gulf Arab and Chinese banking sources.
The report was denied by a host of countries, including Kuwait, Qatar and Russia, while France dismissed it as “pure speculation.”
Even so, the United Nations itself last week called for a new global reserve currency to end dollar supremacy, which had allowed the United States the “privilege” of building up a huge trade deficit.
UN undersecretary-general for economic and social affairs, Sha Zukang, said “important progress in managing imbalances can be made by reducing the (dollar) reserve currency country’s ‘privilege’ to run external deficits in order to provide international liquidity.”
Zukang was speaking at the annual meetings of the International Monetary Fund and World Bank, whose President Robert Zoellick recently warned that the United States should not “take for granted” the dollar’s role as preeminent global reserve currency.
Meanwhile at a G20 summit in Pittsburgh last month, world leaders unveiled a new vision for economic governance, with bold plans to fix global imbalances and give more clout to emerging giants such as China and India.
Following the summit, US Treasury Secretary Timothy Geithner repeated Washington’s commitment to a strong dollar.
But last week the finance chief was left to watch as traders used The Independent’s report as an opportunity to push lower the troubled US unit.
The report “has helped concentrate the minds of traders and investors alike, and has given them another excuse to take the dollar lower,” GFT Global Markets analyst David Morrison told AFP.
“Despite what the Fed and other central bankers say, a weaker dollar is desirable because it is necessary to rebalance the global economy.
“As long as the decline is gentle and orderly, then they’re happy. But aggressive selling would spook the markets,” he added.
Commerzbank currency analyst Antje Praefcke agreed that the market’s reaction was significant because it showed that the dollar was on a downward trajectory.
“The questionable article in the Independent was of course disclaimed,” Praefcke said.
“It is nonetheless an interesting study of the pscychological factors which are currently putting pressure on the dollar. Even if conspiracy theories turn out to be nonsense, the dollar is subsequently able to retrace only some of its losses.”
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