When Europe Lies with Russia...

Since the '90's Russia has steadily constructed pipelines into Europe, only too happy to supply and pander to the voracious European appetite for oil and gas. Russia has undoubtedly encouraged this dependency. These Soviet oil and gas tentacles now supply all the major European countries with their industrial lifeblood, as Putin and Medvedev patiently wait for their coming advantage.

With America's stock market still pussing and bleeding all over the world's financial markets, while the US government's fiscal debt leaves its economy racked, bare and weak as the precious dollar value goes up and down like a yoyo, supported only by abstract statistical lies from the US government to its own people and the greed of Wall Street, and as US leaders desperately try to avoid their strained dependency on Middle East oil, Putin's indirect plan continues to move steadily and quietly ahead, completely unhindered by both America or Europe.

In the recent conflict between Georgia and Russia, NATO's reaction must surely be described as feeble. This weak political and martial response by Europe is quite evidently governed by stark economic fears. Energy is the lifeblood of any nation and Europe's political mettle has recently been tested hard. Georgia wanted to join NATO, but Angela Merkel - the German Chancellor, vetoed against Georgia joining - amidst weak protests from France, UK and the US. Germany is a big and symbiotic industrial partner for Russia - Germany supplies the technology and organization, and Russia endlessly trickle-feeds Germany her precious oil and gas. If Georgia - on the border with Russia - were to be allowed into the NATO fold, Russia would not be very pleased. And all Putin would have to do is turn off the oil and gas taps into Europe as he has already done against his own rebellious satellites in recent years. Therefore, as perceived by Putin, Merkel and other European states, Georgia is surely a paltry sacrifice to pay as compared to the dire economic need for the persistent trickle of black Russian oil into Europe.

So, as Russia's oil influence and dependency spreads inevitably like a surreptitious pox acrossEurope, the political tide will undoubtedly shift and change - the tug of Russia's political sway too strong to resist, since Europe - for her own economic survival - must soon eventually bow and scrape in deference to Russia's policies. And so, as Russia's influence steadily blooms into outright dominance, this subtle takeover will be complete and a new hegemon is born.

In the bloodless aftermath, America will become more isolated and politically friendless - a lone, bewildered animal left to forage and fend for itself. Russia, in partnership with the likes of China, Venezuela and certain other countries in the Mid-East, will persist and continue to hurt America - and through America's own callous loss of control over her currency - this cabal will be able to silently attack and wrong-foot America economically until the dollar falls big and - because of the American government's careless laissez-faire attitude towards its own huge fiscal debt - dollar hyperinflation and bankruptcy will arrive to eventually decimate American World Leadership and lay waste the American Way, abruptly to dissolve into a forlorn and forgotten memory.

Of course this could never happen, could it ?

Keep praying.

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References:

A Study in Collapse by J R Nyquist

The Monster at the Bottom of the Abyss by J R Nyquist

Inflation, Money Supply, GDP, Unemployment and the Dollar - Alternate Data Series - by John Williams

Menu of Pain by slowsmile

The Ravages of Ignored US Debt by slowsmile

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World Bank Report - The Safest Countries for Your Savings

Survey - Canada Rated as the Soundest Banking System

In a report from Reuters yesterday, here are the latest "safe bank" ratings. This article presents ratings of both weak and rock solid banks and rates the banks per country. It's an interesting read. Needless to say both America and UK are way down there in the ratings now...

"Canada has the world's soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake world markets.

But Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after a 50 billion pound ($86.5 billion) pledge this week by the government to bolster bank balance sheets.

The United States, where some of Wall Street's biggest financial names have collapsed in recent weeks, rated only 40, just behind Germany at 39, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.

The United States was on Thursday considering buying a slice of debt-laden banks to inject trust back into lending between financial institutions now too wary of one another to lend.

The World Economic Forum's Global Competitiveness Report based its findings on opinions of executives, and handed banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).

Canadian banks received 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7).

UK banks collectively scored 6.0, narrowly behind the United States, Germany and Botswana, all with 6.1. France, in 19th place, scored 6.5 for soundness, while Switzerland's banking system scored the same in 16th place, as did Singapore (13th).

The ranking index was released as central banks in Europe, the United States, China, Canada, Sweden and Switzerland slashed interest rates in a bid to end to panic selling on markets and restore trust in the shaken banking system.

The Netherlands (6.7), Belgium (6.6), New Zealand (6.6), Malta (6.6) rounded out the WEF's banking top 10 with Ireland, whose government unilaterally pledged last week to guarantee personal and corporate deposits at its six major banks.

Also scoring well were Chile (6.5, 18th) and Spain, South Africa, Norway, Hong Kong and Finland all ending up in the top 20.

At the bottom of the list was Algeria in 134th place, with its banks scoring 3.9 to be just below Libya (4.0), Lesotho (4.1), the Kyrgyz Republic (4.1) and both Argentina and East Timor (4.2).

RANKINGS

1. Canada

2. Sweden

3. Luxembourg

4. Australia

5. Denmark

6. Netherlands

7. Belgium

8. New Zealand

9. Ireland

10. Malta

11. Hong Kong

12. Finland

13. Singapore

14. Norway

15. South Africa

16. Switzerland

17. Namibia

18. Chile

19. France

20. Spain

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124. Kazakhstan

125. Cambodia

126. Burundi

127. Chad

128. Ethiopia

129. Argentina

130. East Timor

131. Kyrgyz Republic

132. Lesotho

133. Libya

134. Algeria

SOURCE: World Economic Forum Global Competitiveness Report 2008-2009."

Professor Kotlikoff's "Menu of Pain"

Herewith is an economic paper written by two professors of Economics at the University of Boston. This paper describes the fiscal debt situation as it was back in 2003 while the country was under the leadership of Bush Jnr. It is an enlightening read. Bye the way, all quoted fiscal debt - everytime you see $44 trillion dollars, please now read $59 trillion dollars, since this little noticed paper was written in 2003 (The situation is, of course, much worse now). What follows is a critique of those fiscal measures necessary to pay back the fiscal debt, herein referred to as the Menu of Pain.

By Laurence J. Kotlikoff and Jeffrey Sachs, 5/19/2003

"OUR GOVERNMENT is going broke. The feds face bills that are far beyond our capacity to pay -- by $44 trillion to be precise. The longer we ignore them, the bigger they get. Yet President Bush is working overtime to deepen our fiscal trap. This $44 trillion figure is not ours. Nor is it some other academics' calculation. It was produced last fall by economists and budget analysts at the US Treasury, the Federal Reserve, the Office of Management and Budget, and the Congressional Budget Office. The study was ordered by then Treasury Secretary Paul O'Neil and was slated to appear in the president's budget, released in February. O'Neil instructed his team, led by Jagadeesh Gokhale, Federal Reserve senior economist, and Kent Smetters, then deputy assistant secretary for economic policy at the Treasury, to answer the following question: Suppose the government could, today, get its hands on all the revenue it can expect to collect in the future, but had to use it, today, to pay off all its future expenditure commitments, including debt service net of any asset income. Would the present value (the value today) of the future revenues cover the present value of the future expenditures?

The answer is no, and the fiscal gap is the $44 trillion. Now, that is big bucks by anyone's definition. It's four times current GNP and 12 times official debt. Imagine everyone in the country working for four years and handing over every penny earned to pay this bill, and you'll grasp its size. Unfortunately, we can't ascribe the $44 trillion calculation to overly pessimistic assumptions. On the contrary, the assumptions are optimistic with respect to future longevity as well as growth in federal health expenditures, discretionary spending, and labor productivity.

Gokhale and Smetters asked a follow-up question: By how much would taxes have to be raised Bankrupt or expenditures cut on an immediate and permanent basis to generate, in present value, the $44 trillion? Their ''menu of pain'' is mind-boggling. Entree A is raising federal income tax collections (individual and corporate) by 69 percent. Entree B is raising payroll tax collections by 95 percent. Entree C is cutting Social Security and Medicare benefits by 56 percent. Entree D is cutting federal discretionary spending by more than 100 percent, which, of course, is not feasible. Combination platters are also available. For example, we might select quarter portions of entrees A through D.

But no matter what combination we order, digesting this medicine is going to be plenty painful. Why are the nation's fiscal affairs in such a mess? The reason is straightforward. Baby boomers are just five years from starting to collect Social Security retirement benefits and eight years from starting to collect Medicare benefits. When all 76 million boomers are retired, we'll have twice the number of elderly beneficiaries, but only 15 percent more workers to pay their benefits. If the fiscal gap and its associated menu of pain are unfamiliar, there's a reason. You can scour the thousands of pages of the president's FY 04 budget, and you won't find the analysis. It never made it in.

When Secretary O'Neill was replaced last December, the analysis was yanked from the budget. To be clear, limiting our need to know is not just a Republican responsibility. When it came to publishing a generational accounting analysis in the FY 92 budget, President Clinton's political watchdogs overruled OMB and pulled the same trick. And bankrupting has been a collective effort of all postwar administrations, each of which has cared more about the next election than the next generation.

Our current team leader, President Bush, is doing his part. Taken together, his first tax cut and his proposed second tax cut, which is about to be passed by Congress, account for roughly a sixth of the fiscal gap. The president, an ardent believer in voodoo economics, is convinced his tax cuts will stimulate growth and dramatically raise revenues. Neither economic theory nor economic facts supports this view. In fact, the president is not only burying us in explicit and implicit debt, he's undermining the economy's future performance.

The stakes are now too high for more political games and flaky economic theories. Democrats and Republicans alike need to send our leaders a firm message: Deal responsibly with the coming generational obligations! If we don't, we can look forward to massive cuts in future Social Security and Medicare benefits, tax hikes, high inflation, and bitter political strife. Putting aside the president's latest tax cut would be an excellent start on the road to responsibility."

Laurence J. Kotlikoff is chairman of the Department of Economics at Boston University. Jeffrey Sachs is professor of economics at Columbia University.

How $700 Billion from the Paulson Plan will Become $70 Trillion via the US Treasury and the Fed

October 5, 2008 at 2:56 am

slowsmile

Not many people know about this. I’ve never read this in any article or blog. I worked this out because I have worked in banking for some years.

The reasons given for the coming massive dollar inflation are by no means complete. My own view is that - whether the $700 Paulson Plan is passed or not - Mainstreet America is going to suffer badly any way you look at it. Here’s why.

Most articles which address the effects of the Paulson Bail-Out talk directly about the Economic view, the Wall Street view, the Mainstreet view and the Government view. Funny that no-one ever talks about the Paulson Plan with regard to banking laws and banking mechanisms - The Banking Viewpoint. If people studied it from this aspect - they would fully realize the disgusting and perverse nature of The Paulson Plan.

Put simply, The Fed is a Bank - and therefore acts under the normal banking laws and banking mechanisms of the US. One of these legal mechanisms is called ‘Fractional Reserve Lending’(FRL). This mechanism allows any bank to multiply its direct cash holdings by 10 in order to lend out money as loans. Simple and legal. Bankers never talk about this insidious FRL mechanism, but this is the main way that all banks make their profit.

So when The Fed - a bank - receives the $700 billion - they will simply multiply this amount by 10 using FRL, so that it has now grown to $7 trillion. And when the Fed ‘lends’ this money to save other financial institutions - these banks can also multiply their amounts received by 10 using the FRL mechanism.

So, now the amount has grown to $70 trillion out of thin air.

My question to you is this - What will happen to the dollar when this worthless $70 trillion suddenly hits the Mainstreet American Economy ? And who will suffer the most ? It doesn't take rocket science to understand what will happen to the dollar value....And be assured that Paulson understands this, Bernanke knows, and Bush Jnr. will have been told. . .

It’s a Mainstreet massacre any way you look at it.