Lessons From The 1930s Currency Wars

With Abe picking his new dovish playmate, and Draghi doing his best to jawbone the EUR down without actually saying anything, it is becoming very clear that no matter what level of bullshit histrionics is used by the politicians and bankers in public, the currency wars have begun to gather pace. Japan's more open aggressive policy intervention is the game-changer (and increasingly fascinating how they will talk around it at the upcoming G-20), as if a weaker JPY is an important pillar of the strategy to make this export-oriented economy more competitive again, it brings into the picture something that was missing from earlier interactions among central banks of the advanced economies –competitive depreciation. The last time the world saw a fully fledged currency war was in the early 1930s. Morgan Stanley's Joachim Fels looks at what it was like and what lessons can be drawn for the sequence of events - there are definite winners and losers and a clear first-mover advantage.

Via Morgan Stanley, Back to the 1930s? What Would a Currency War Look Like?

What did the currency war of the 1930s look like?

The backdrop for the currency war of the 1930s was the Gold Standard and the Great Depression (many economists blame the former for the latter). By fixing the value of the currency to the price of gold, the Gold Standard prevented a country from printing too much money. If it did, people would simply exchange it for gold (or for other currencies pegged to gold). Yet, this rigid ‘rule’ also denied policy-makers any flexibility to deal with shocks to their economies. This was the reason why the UK abandoned this regime, setting off a volatile chain of events:

• On September 19, 1931, sterling was taken off the Gold Standard. It was devalued against gold and hence against the ‘gold bloc’ currencies (currencies that remained pegged to gold). The run-up to this event and its fallout was felt throughout the world.
• Prior to the devaluation, in June and July 1931, one prominent bank in both Austria and Germany failed, which led to capital controls being imposed in both places. Capital controls protected these economies in the near term, but exacerbated fears about the future of sterling and the Gold Standard itself.
• Following the devaluation of sterling, Norway and Sweden went off the Gold Standard on September 29. A day later, Denmark followed.
• The US economies, like other countries of the gold bloc, lost competitiveness and exports turned down. Eventually, in January 1934, the US Congress passed the ‘Gold Reserve Act’ to nationalize gold held by banks and monetized it by giving banks gold certificates that they could use as reserves at the Fed. More importantly, it also forced a devaluation of the US dollar against gold.
• Like the US economy, the remaining gold bloc countries (France, Germany and some smaller economies) also suffered a loss of competitiveness and poor export and industrial production growth. By 1936, they gave up and abandoned the Gold Standard as well.

What lessons can we draw from the events of the 1930s?

 We draw three pertinent lessons from that episode:

Lesson 1: As in every crisis, events were and will always be highly non-linear, with domestic conditions the most likely cause: It was painfully high unemployment that was the main driver of the devaluation of sterling.2 Although unemployment had been painfully high for a while, it was only a few months prior to the devaluation that market fear really ratcheted up.

Lesson 2: Markets punish policy uncertainty: Needless to say, there were dramatic movements in the exchange rate of the countries that devalued. However, with the devaluation out of the way, market and economic pressure as well as policy uncertainty shifted to the ‘gold bloc’ economies. For investors, it became a matter of when, rather than whether, the gold bloc economies would be forced to respond.

Lesson 3: Early movers benefited at the expense of the gold bloc, a ‘beggar-thy-neighbor’ outcome: From an economic standpoint, the sharp improvement in competitiveness of the early movers stood them in good stead against the gold bloc economies who stuck to the regime. Exhibit 1 shows that the UK and the Scandinavian economies saw a significant improvement in industrial production by 1935, whereas the ‘gold bloc’ economies (France and Germany – even though the latter employed capital controls) suffered. By the time the gold bloc economies capitulated, they had lost significant ground on this front to the early movers.

Could it happen again? Like any historical precedent, there are differences and similarities that must be accounted for.

What’s different this time? Unlike the Gold Standard era, most major currencies are now part of a flexible exchange rate regime, which should make such large currency moves less likely. Further, extreme tail risks that might well have precipitated such dramatic policy responses only a few years ago have also receded.

What’s similar? Domestic origins and ‘beggar-thy-neighbor’ effects: Even though policy-makers battled using exchange rates, the events of the 1930s had their origins in domestic issues. As mentioned above, it was painfully high unemployment in England that led sterling off the Gold Standard. The competitive devaluations that followed were also reactions by policy-makers to protect their domestic economies.

Similarly, it is the domestic agenda that could drive competitive depreciation today. In this vein, the desire of Japan’s policy-makers to revive investment in their export-oriented economy likely means that the yen will likely play an important role. However, since global demand is likely to remain sluggish, a revival of Japan’s export sector on the back of yen weakness is likely to eat into the market share of other exporters – something that could well invite measures to curb significant weakening of the yen. These negative spillovers are identical in nature to the ‘beggar-thy-neighbour’ policies of the 1930s.

If it did happen, what could an improbable but not implausible sequence of events look like?

In what follows, we create a plausible sequence using events that have both a reasonable probability of occurring and are already on investors’ radar screens:

• The starting point: Japan’s policy-makers initially follow a concerted plan of reflating the Japanese economy, with a weak yen as an important pillar of strengthening the export sector.
• Further easing from the major central banks... The ECB and/or the Fed ease further due to a deterioration in financial conditions. In the case of the euro area, euro strength or an idiosyncratic increase in risks might be responsible for a tightening in financial conditions. In the US, the obvious candidate is the risk surrounding the fiscal cliff and the debt ceiling confronting the US Congress.
• ...and/or capital controls from EM economies: Uncomfortable with the combination of further capital inflows and yen weakness, some AXJ and LatAm economies impose capital controls.
• Japanese policy-makers react to yen strength: In order to ensure export competitiveness, Japanese policy-makers take further measures to weaken the yen.

There isn’t much in the ‘timeline’ above that is news, yet the combination serves well to illustrate how a currency war could plausibly play out.

Where are we now?

The key variable in the sequence of events above is the reaction of Japan’s policy-makers. If a weaker yen is indeed an integral part of their plans and if they have a strong intent to make sure it remains so, the risk of a currency war is higher now than it has been in the past. Investors have moved beyond questioning whether EM economies will have a response and are now wondering at what point such a response is likely. At the same time, near-term risks in the US and euro area economies remain in play, as does the prospect of prolonged or even enhanced monetary stimulus.

In the EM world, Japan’s export competitors in AXJ could respond with some combination of verbal intervention, FX intervention, capital controls and, with a much lower likelihood, policy rate cuts. In the particularly interesting cases of Korea and Taiwan, our economist Sharon Lam believes that verbal intervention (already under way to some extent), intervention in the foreign exchange markets and capital controls represent the most likely policy reactions. Rate cuts at a time when both economies are already expanding may serve to accelerate domestic growth and perversely cause even more capital inflows and currency appreciation rather than depreciation. For moderate moves in the yen’s value, the effects on China are likely to be limited since it does not compete head-to-head with Japan’s high-end electronics and car exports.However, in a currency war situation, the slow-moving USDCNY exchange rate may make restoring competitiveness tricky.

However, even as we discuss AXJ, let us not forget that other parts of the EM world are also concerned about currency appreciation. For all the talk about potential policy action in AXJ, we have already seen some of it come out of Latin America. In contrast to AXJ, Latin America is slowing, which puts rate cuts firmly on the agenda. Indeed, Colombia’s recent rate cut was likely influenced by the peso’s strength. Luis Arcentales, our Mexico economist, believes that concerns about the currency war have also probably been an influencing factor in Banxico’s u-turn towards a dovish stance from a hawkish one just a few weeks ago. In an innovative twist to the usual FX intervention, Peru has announced that it will buy back its international bonds and issue ones denominated in its domestic currency instead. Even Chile, one of the most advanced and stable EM economies, is discussing structural reforms to address the strength of its currency.

In summary, while a currency war is not our base case, the new-found commitment of Japan’s policy-makers does raise the risk of retaliatory action to keep the yen weak, and brings us a step closer to a currency war.The experience of the 1930s suggests to us that such large currency crises are likely triggered by domestic issues, and that they do create distinct winners and losers. EM policy-makers are already gearing up to make sure they remain on the winning side, but the balance of power for now rests with Japan.

Zero Hedge

The legalization of gay marriage in the UK and France reduces the possibility for them to adopt children from Russia

GOD bless Russia for protect those kids!!!!


The legalization of gay marriage in the UK and France reduces the possibility for British and French families to adopt children from Russia, Konstantin Dolgov, the commissioner for human rights, democracy and the rule of law of the Russian Foreign Ministry said Wednesday.

The diplomat wrote on his Twitter: "British and French parliaments have legalized gay marriage. This reduces the possibility for the citizens of those countries to adopt Russian children."

The parliaments of the two countries approved the bills to legalize same-sex marriage with an interval of less than a week. In France, hundreds of thousands of people took to the streets to protest against the law. However, the protests did not show any effect on the National Assembly.

In the UK, there were no mass protests against the legalization of same-sex marriage. In fact, the British Parliament has not made a revolution: in the United Kingdom, people do not treat such unions as something extraordinary. The Brits have nothing against the adoption of children by same-sex families.

Konstantin Dolgov's statement can hardly be called Moscow's official position. At least, for the time being, because the official is not alone in his judgments.

For example, Presidential Commissioner for Children's Rights Pavel Astakhov believes that the adoption of children by same-sex couples is out of the question.

"Russia's position is expressed in our basic laws, in the Constitution and in the Family Code. It is clearly stated there that, first of all, a marriage is a union between a man and a woman. Secondly, our children can be adopted by family couples only," he told the Russian Newspaper.

The Ombudsman also reminded that the UN Convention on the Rights of the Child does not say that adults have a right for a child. "It says that a child is eligible for a mother and a father, and there should not be anything else," says Pavel Astakhov.

In late January, the State Duma adopted the bill to ban the propaganda of homosexuality among minors. One shall assume that the debate around it is far from being over. As for the reaction of European countries and the U.S., it was predictably negative.

It is worthy of note that the issue of the total ban on the adoption of Russian children by foreigners has already been raised in Russia before. United Russia deputy Yevgeny Fyodorov was one of the initiators of adequate amendments to the Family Code. He explained the need for such a step by saying that "it was wrong to sell children and people in general."

"Because, unfortunately, during the 1990s, we entered into a series of agreements that do not allow Russia not to export its children, then we should minimize this process at least gradually. The first stage is a law related to the U.S.. The second stage is to leave only the countries, with which agreements have been concluded (France is among those - ed.). And the third stage is to terminate the agreements, when it can be legally possible. As a result of these actions, exports of children from the Russian Federation must be stopped completely," Yevgeny Fyodorov earlier told Pravda.Ru.

Other deputies at the Russian parliament, however, were skeptical about the idea of ​​the total ban of adoptions. Olga Batalina, first deputy chairman of the Duma Committee on Family, Women and Children, a member of United Russia, said that such a bill would have no prospects whatsoever.

According to her, "in the countries, where this process is conducted openly, in the interests of children, where children's safety is guaranteed, where officials are ready to work actively to create a comfortable environment for adopted children, and where they do not accept any acts of aggression against children, I believe international adoption can work there," she said.

It should be noted that European countries are very different from the U.S. at this point. To put it in a nutshell, in Europe, there are no records of violent acts committed against the children adopted from Russia.

However, Russian officials openly say that the legalization of same-sex marriage will become an additional obstacle for the adoption of children from Russia. For the time being, it goes about restrictions only, although one shall assume that if it comes to practical steps, the controversy will be highly severe.

Anton Kulikov

Pravda.Ru

Ali Khamenei shuts door on direct nuclear talks with US

Iran’s supreme leader Ayatollah Ali Khamenei turned down the US offer of one-on-one talks on its nuclear program Thursday, Feb. 7, just 24 hours after US Defense Secretary Leon Panetta announced that due to budgetary constraints, the US could only keep one, not two, US aircraft carrier strike groups in the Persian Gulf, and had cancelled the departure of a second carrier, the USS Harry S. Truman.

The ayatollah in a speech posted on his web site accused the US of proposing talks while "pointing a gun at Iran.”

On Saturday, US Vice-President Joe Biden suggested direct talks – separate from the wider international discussions scheduled for Feb. 26 in Kazakhstan between the five permanent members of the UN Security Council plus Germany. No previous negotiations in this format over the years have ever produced a breakthrough.

Biden said Washington was prepared for direct talks with Iran "when the Iranian leadership, supreme leader, is serious". "That offer stands,” he said later, “but it must be real and tangible and there has to be an agenda that they are prepared to speak to. We are not just prepared to do it for the exercise," he said.

But the ayatollah said such negotiations "would solve nothing.” He added: "You are holding a gun against Iran saying you want to talk. The Iranian nation will not be frightened by threats."

Wednesday, the US widened sanctions on Iran for tightening the squeeze on Tehran's ability to spend oil cash.

The cancellation of the Harry Truman’s departure for the Gulf leaves a single US aircraft carrier in the vast naval region of the Persian Gulf, Mediterranean and southern part of the Indian Ocean bordering on Africa, DEBKAfile's military sources report, and no US fleet presence opposite Syria.

Khamenei’s rejection of Washington’s latest offer of direct talks followed the new US ban imposed Wednesday on the transfer of revenues from Iranian oil exports to its coffers. The money will henceforth be available only for the purchase of goods in the countries of destination for Iranian oil.
Senior American officials said that this sanction would significantly restrict Iran's freedom to use its oil income at will.

Khamenei did not say so specifically, but his rejection of dialogue with Washington was undoubtedly influenced by President Barack Obama’s forthcoming visit to Israel. By the metaphor of “holding a gun against Iran,” the Iranian leader was not just reacting to the new sanctions; he was also hitting back at the White House announcement’s stress that the president’s talks with Prime Minister Binyamin Netanyahu would focus on Iran and Syria - asDEBKAfile reported Wednesday.
The expectation is that Obama and Netanyahu will confer on the military option both governments have reserved for dealing with Iran’s nuclear program.

Khamenei's rejection of face-to-face talks does not cancel the international negotiations scheduled to take place in Kazakhstan. It does, however, render them more pointless than ever.

DEBKAfile

Remain calm all is well

Facts do not cease to exist because they are ignored.” – Aldous Huxley

I woke up this past Saturday morning and opened my local paper to find out that all was well. An Associated Press article declared a healthy jobs market, fantastic auto sales, a surging housing market, and a stock market rocketing to new all-time highs. What’s not to love? If the mainstream media says the economy is as good as new, it must be so. Why should we let facts get in the way of a good storyline? The stock market has surged to 2007 highs, so the country’s employment situation must be strong.

The chart above tells a slightly different story. The S&P 500 has regained almost all its losses since October 2007 as Bernanke and Washington politicians chose to save Wall Street and screw over Main Street. The working age population has risen by 12.8 million since 2007 and there are 4 million less Americans employed. The December Household Survey from the BLS being touted by the mainstream media as proof of a jobs recovery told a slightly different story:  

• The number of unemployed Americans went up by 126,000 in one month
• Another 169,000 Americans left the workforce evidently because their stock market gains made them wealthy.
• There are 250,000 more Americans unemployed than there were in September 2012.
• There are 6,000 less Americans employed than there were in October 2012.
• The unemployment rate reported to the masses went up to 7.9% (the true rate reached 23%).

This is just the picture over the last few months. The picture since 2007 is beyond horrific, as more than 10 million Americans have left the workforce. Everyone knows people willingly leave the labor force when the economy crashes and their net worth is reduced by 30%. Who needs a paying job then? Just because there are 101 million working age Americans not working and the labor participation rate of 63.6% is at a three decade low, certainly doesn’t mean we aren’t experiencing a tremendous jobs recovery, according to the mainstream media.   

The deep thinkers at CNBC, Fox, CNN and the rest of the captured corporate status quo mouthpieces, propagate the false storyline that the reason for Americans leaving the workforce is Baby Boomers retiring. Considering the average Boomer has $90,000 of total savings and 28% of them have less than $1,000 saved, I suspect there are few willingly leaving the workforce. The Boomers have taken on 4 million additional jobs since the low point in 2009, while the 16 to 54 year olds have lost an additional 2.9 million jobs. Does this reflect a strengthening jobs market? Does the fact that real hourly wages have fallen for the last two years reflect an improving labor market?  

Inquiring minds might wonder how auto sales could be booming when there are 4 million less employed Americans and real wages are falling. Of course, mainstream media faux journalists aren’t paid to inquire, think critically, or even think at all. They are paid to regurgitate propaganda designed to keep the masses sedated and ignorant. The “fabulous” rebound in auto sales has been buoyed by the return of easy money lending, even to deadbeat borrowers with lousy credit histories. There is a reason the Federal government hasn’t attempted to spin off their 80% control of Ally Financial (aka GMAC, Ditech, Rescap). The Feds are attempting to manufacture a recovery by doling out subprime auto loans to anyone who can scratch an X on a loan document and offering 0% loans over 7 years to good credits. How exactly does a finance company generate a profit by making 0% loans for seven years and approving loans to people with no means of paying them back? Experian recently noted that 44% of ALL auto loans have been to subprime borrowers over the last year. When a financing company doesn’t have to worry about profits or loan losses, everyone gets a Cadillac Escalade. The losses on these subprime loans will be in the billions when the next leg down in this Crisis hits. The taxpayer will unknowingly pick up the tab, just as they have been doing for the last five years. The trend in this chart is nothing but a Federal government induced fraud.

 

PhD in Stupidity

The Federal government induced sham auto recovery is small peanuts compared to the bubble they are blowing in the higher education realm. Since the Federal government took over 85% of the student loan market in 2009, the debt outstanding has surged to over $1 trillion from below $600 billion. The Feds don’t care about credit risk or loan losses. You’re on the hook for the losses. The purpose for doubling the amount of student loans was to artificially lower the unemployment rate by removing as many people from the labor force as possible. The 600,000 University of Phoenix enrollees getting their on-line master’s degrees in basket weaving while sitting in their mother’s basement, subsidized with $20,000 loans from the taxpayer, didn’t count as unemployed.

Enrollment in these diploma mills has begun to plunge, as the scam has been revealed. The New York Times reported that:

“Enrollments at the University of Phoenix and in the for-profit sector over all have been declining in the last two years, partly because of growing competition from other online providers, including nonprofit and public universities, and a steady drumroll of negative publicity about the sector’s recruiting abuses, low graduation rates and high default rates … including many charges that the schools enrolled students who had almost no chance of succeeding, to get their federal student aid.”

Enrolling students who have no chance of graduating is exactly what the Obama Administration and the status quo want.

Based upon the chart below you would think the United States is producing the brightest bunch of young people in U.S. history. Nothing could be further from the truth. Only 43% of the 1.66 million private and public school students who took the college-entrance exam posted scores showing they are prepared to do well in college, according to data released by the College Board, the nonprofit group that administers the SAT. The SAT data mirror scores from the ACT college-entrance exam which showed about 75% of students failed to meet college-readiness standards. If SAT scores are at decade lows, how could college enrollment be at record highs? Our government controlled public school system is graduating functionally illiterate dullards and the government is then subsidizing these subprime students as they matriculate into substandard colleges across the land.  Approximately 3.4 million seniors are graduating from our high schools every year. The 1.66 million seniors who took the SAT exam are the cream of the crop. If the 50% of students who took the SAT exam could score so pitifully, imagine how dimwitted the 50% of students who didn’t even take the exam must be.  The upshot of these tests are that only 700,000 of all the graduating high school seniors (21%) are capable of getting a B minus or above in college.

Think about that for one second. Only 21% of all graduating high school seniors are intelligent enough to get a B minus in college, but 70% of them are enrolling in college. Of course enrolling in college and graduating college are two different things. Only 30% actually graduate college. The other 40% get drunk, fornicate, sleep late, fail, rack up gobs of debt, and then drop out. There are approximately 13 million 18 to 24 year olds enrolled in college today and at least 6 million of them have little to no chance of graduating. If the Federal government was not subsidizing them with loans, they would rightfully be looking for jobs geared to their intellectual capabilities. Would tuition rates be soaring if there were 6 million less drones matriculating into one of the 4,000 mostly mediocre higher learning institutions in this country?

 

The Federal government bureaucrats who think they can control the levers of finance to steer our economy to greater heights are creating a new subprime bubble. The absolute implosion of the for profit diploma mills, that have fed like bloated pigs at the Federal loan trough, is the Bear Stearns moment for the massive student loan losses that will be foisted on the shoulders of the American taxpayer. The deceptive schemes, fraud, and financial aid manipulation practices of the publicly traded diploma mills – Corinthian Colleges (down 90%), ITT (down 90%), Apollo Group (down 80%) and DeVry (down 60%) have been revealed, as their ill- gotten profits have evaporated and their stock prices have crashed. Enrollment at the king of worthless online degrees, the University of Phoenix, has plunged from 600,000 to 400,000 and they are closing 115 of their 227 campuses. The proof that much of the student loan bubble has been created by these for-profit shysters can be seen by the fact that 60% of all student loans are owed by people over 30 years old, with 33% owed by people over 40 years old. These people bought into the re-training fallacy perpetuated by government drones and mainstream media mouthpieces.

But still the Federal government continues to blow the bubble bigger and bigger as non-revolving consumer debt has reached all-time highs. Peter Thiel recently compared this bubble to the housing bubble we are still dealing with:

“We have a bubble in education, like we had a bubble in housing…everybody believed you had to have a house, they’d pay whatever it took. Today, everybody believes that we need to go to college, and people will pay– whatever it takes. There are all sorts of vocational careers that pay extremely well today, so the average plumber makes as much as the average doctor. I did not realize how screwed up the education system is. We now have $1 trillion in student debt in the U.S. Cynically you can say it’s paid for $1 trillion of lies about how good education is.”

Delinquency rates have already begun to skyrocket as the diploma mill scam implodes, dropouts can’t make loan payments with their EBT cards and even graduates from legitimate colleges are stuck waitressing at TGI Fridays and can’t make their payments. Millions of millenials are ensnared in the chains of debt servitude, with no chance of escape. 

Delinquency rates on student loans made in the past two years stand at 15%, according to FICO, versus 12.4% for loans made from 2005 to 2007. This is proof that loans doled out since the Federal government took control of the market have been distributed willy-nilly in a frantic effort to artificially reduce the unemployment rate. Average student- loan debt last year rose to $27,253 from $17,233 in 2005, with almost 605 of bank managers surveyed in December expecting delinquencies to worsen in six months, according to FICO. Andrew Jennings, chief analytics officer of Fair Issac, said in a statement:

“This situation is simply unsustainable and we’re already suffering the consequences. When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”

When subprime mortgages blew up, at least there was collateral to alleviate some of the losses. When the subprime auto loans blow up, at least there will be vehicles to repossess. Student loan debts are the ultimate in subprime, with no collateral and millions of jobless debtors. The situation is much worse than the delinquency numbers reveal. More than half of the student loans are in deferment, grace periods, or forbearance, meaning they are not currently requiring repayment. This means the true delinquency rates are twice as high as the reported figure of 15%. What happens next can be succinctly summed up by the esteemed economist John Kenneth Galbraith:

 “Then the shit hit the fan.” – John Kenneth Galbraith

The involuntary taxpayer bailout for this Federal Government created disaster will exceed $200 billion after the shit is done hitting the fan.

Do You Want Pepperoni on that Housing Recovery?

Everywhere I turn I’m hearing about the strong housing recovery that is propelling our economy, generating jobs and spurring a resurgence in retail spending by the millions of deleveraged consumers. Wall Street paid economists on CNBC, NYT economic “journalists”, and even the Fox News blond bimbo brigade all assure me the housing market is in a strong recovery and it’s the best time to buy. There are just two small problems with the story. None of the propaganda spouted by the mouthpieces of the kleptocracy is supported by the facts. And what little uptick in sales and prices that has occurred is due to collusion, fraud and manipulation by Wall Street, the Federal Reserve, the Treasury Department, and connected crony corporate interests.

I challenge anyone to show me the tremendous housing recovery on the new home sales chart below. New homes sales have “surged” to an annual pace of 369,000, only 74% below the 2006 peak and about 50% below the long term average. New home sales fell in December at the fastest rate since February 2011. Existing home sales also fell in December, are pacing at 1999 levels, and are still 30% below 2006 levels. In a country of 115 million households, with mortgage rates at all-time lows, there were a total of 26,000 new homes sold in December, and only 10,000 of them were actually built. For some perspective, new home sales are at the same level as they were in 1967 when the U.S. population was 200 million.  

The kleptocrats’ master plan has multiple dimensions designed to lure unsuspecting dupes back into the market. The Federal Reserve has bought over $1 trillion of toxic mortgage debt, freeing the criminal Wall Street banks to start raping the American public again. Bernanke has driven mortgage rates to near all-time lows by tripling his balance sheet, with promises to quadruple it before the end of the year. By driving real interest rates below zero Bernanke has the dual purpose of driving people into the stock market for a positive return and luring “investors” into the housing market.

The Wall Street part of this grand scheme has been to delay the foreclosure process on millions of homes, thereby restricting the amount of inventory on the market. By artificially creating an inventory “shortage”, they have been able to drive prices higher, with the purpose of trying to get the 25% of underwater homeowners back to breakeven. The Treasury Department, through their captured entities (Fannie, Freddie, FHA) are guaranteeing 95% of all mortgages, with the FHA requiring only 3.5% down payments, with the hundreds of billions in  present and future losses being incurred by the American taxpayer. You’ve heard of the cycle of life. This is the government cycle of fraud.

The last part of the plan has been to lure investors into the market. Fannie Mae and Freddie Mac have sold huge blocks of foreclosed homes to connected friends of Wall Street at below market rates so they could convert them to rental properties. This has further artificially reduced inventory available for sale, and jacked up prices by as much as 20% in the former bubble markets of Phoenix, Las Vegas and California. Investors and flippers account for 30% of all home sales, with another 24% of home sales listed as distressed sales. Sure sounds like a healthy market to me. With this full court press by the powers that be to produce a housing recovery, the chart below reveals the utter ineptitude of their effort. Real home prices, even using the fake government manipulated CPI, have barely budged from their lows and sit at 1990 levels. Real home prices are still down 40% from their 2006 highs.     

If a true housing recovery was underway how could mortgage purchase applications be at 1997 levels? If housing was recovering there would be more mortgage applications. It really is that simple. Do supposed journalists have any critical thinking skills or are they just playing their assigned role in this kleptocracy?

Essentially, the kleptocrats’ primary purpose has been to protect and enhance the wealth of the oligarchs that control Wall Street, Washington DC, and corporate America. They have achieved their goal, while destroying the middle class and sentencing unborn generations to a life sentence of debt servitude.

If we have been experiencing a solid jobs recovery, strong automobile sales, a resurgence of consumer spending, and rising home sales and home prices, how could GDP be negative in the 4^th quarter? The mainstream media immediately declared it the best negative GDP of all-time. They pompously declared that GDP would have been positive if government defense spending hadn’t plummeted. These disgraceful excuses for journalists failed to mention the huge surge in government and defense spending in the 3^rd quarter just prior to the presidential election that accounted for a 3.1% GDP and helped get Obama re-elected. A less trusting person than myself might question why the surge in government spending prior to the election.

Did the mainstream media government mouthpieces question the absolutely laughable 0.60% inflation rate used to calculate the 4^th quarter GDP? No they didn’t. That wouldn’t support their storyline of recovery. Using even the bastardized CPI figure of 2.0% would have produced a -1.5% GDP figure. Using real inflation figures over time reveals what every middle class family in America knows in their bones – the economy has essentially been in recession since the early 2000s. The massive dose of debt issued by the government has masked the true nature of our economic decline.   

 

All is not well. Any awake and aware citizen knows the economic, financial, societal and social fabric of this country is in tatters, and is getting progressively worse by the day. Since this supposed economic recovery began in mid-2009, the country has added 4 million jobs, more than 100% of which went to workers over the age of 55, forced into the workforce by Bernanke’s zero interest rate policy. Over this same time frame of economic recovery, 16 million Americans went on food stamps. How could this possibly happen if the economy has been recovering? Either the government and mainstream media are lying about the economic recovery or the Obama administration has been fraudulently encouraging people to go on food stamps to win votes in elections. Which of these truths is more palatable to your sensibilities?     

It comes down to this. The monied interests, high financiers, corporate interests, captured politicians, government apparatchiks, and corporate media have a vested interest in maintaining the corrupt and destructive status quo. They have become rich and powerful through their manipulation of the currency, ravenous sacking of the national wealth, destruction of the working middle class, and ability to use mass media propaganda to convince the willfully ignorant masses to learn to love their debt servitude. Our once proud, liberty minded, self-sufficient nation of freedom loving individuals has devolved into a kleptocracy,  where a small cadre of powerful men run the show solely to increase the personal wealth and political power of officials and the ruling class at the expense of the wider population. They are essentially running a state sponsored embezzlement and Ponzi scheme to pillage the wealth of the dumbed down, sedated, technologically distracted masses. Our entire system has been captured and we are entering the final stages of decay and ultimately a day of reckoning where the guilty and innocent alike will suffer the awful consequences of currency collapse, death and destruction on a wide scale, and likely civil and world war.

 “The Fed is now engaged in a control fraud, and what appears to be racketeering in conjunction with a few big investment banks. They may have entered into it with good intentions, but they seem to have been turned towards deceit and corruption. This is not an historical event, but an ongoing theft in conjunction with a number of Wall Street banks, and politicians whom they have paid off through a corrupt system of campaign financing and influence peddling. This is nothing new in history if one reads the un-sanitized version. But people never think it can happen today, that somehow yesterday things were different, as if one is looking at some distant, foreign land. This is a facet of the illusion of general progress.

We are now in the cover-up stage of a scandal, similar to Watergate when the White House was stone-walling. The difference is that the corruption and capture of the government is much more pervasive now, and includes a significant portion of the mainstream media, so meaningful reform is difficult. Most of what has transpired so far has been designed to distract and placate the people in their righteous anger. The Fed deceives the Congress and the public, turns a blind eye to glaring conflicts of interest, and is essentially debasing the currency while transferring the wealth of the nation to their cronies. And still the regulators do not enforce the laws they have, and Washington drags its feet while accepting buckets of cash from the perpetrators.” – Jesse

The entire system is corrupt to its core. Both political parties, regulatory agencies, Wall Street, the Federal Reserve, and mainstream media are participants in this enormous fraud. They grow more desperate and bold by the day. The lies, misinformation and propaganda being spewed on a daily basis become more outrageous and audacious. They are using the Big Lie method on a grand scale. They frantically need to lure the muppets into the stock market and the housing market to keep the game going a little longer. You can sense we are reaching a tipping point. The system they have created is mathematically unsustainable. Therefore, it will not be sustained. The world is going mad. Governments across the globe are all trying to out debase each other. Austerity and inflation for the peasants and caviar and champagne for the Davos class is the chosen path. All is not well. Ben Bernanke and the oligarchs running the show will be immortalized in history books forever when this farce comes to a spectacular conclusion.   

 “If all else fails, immortality can always be assured by spectacular error.” –John Kenneth Galbraith

Zero Hedge

Virginia To Establish Its Own Currency?

Virginia is one step closer to breaking ties with the country's monetary system.

A proposal to study whether the state should adopt its own currency is gaining traction in the state legislature from a number of lawmakers as well as conservative economists. The state House voted 65-32 earlier this week to approve the measure, and it will now go to the Senate.

While it’s unlikely that Virginia will be printing its own money any time soon, the move sheds light on the growing distrust surrounding the nation’s central bank. Four other states are considering similar proposals. In 2011, Utah passed a law that recognizes gold and silver coins issued by the federal government as tender and requires a study on adopting other forms of legal currency.

Virginia Republican Del. Robert Marshall told FoxNews.com Tuesday that his bill calls for creation of a 10-member commission that would determine the “need, means and schedule for establishing a metallic-based monetary unit.” Essentially, he wants to spend $20,000 on a study that could call for the state to return to a gold standard.

Read more: http://nation.foxnews.com/virginia/2013/02/06/virginia-establish-its-own-currency#ixzz2KDxztX6Q

Iran’s Supreme Leader Khamenei rejects U.S. offer of talks

Iranian supreme leader Ayatollah Ali Khamenei rejected Thursday a U.S. offer to negotiate one-on-one on Tehran’s disputed nuclear program so long as Washington continues to impose sanctions on Iran.

“You (Americans) want to negotiate when you are pointing the gun at Iran. The Iranian nation will not be intimidated by such actions,” Khamenei told air force commanders, according to excerpts of his speech posted on his website.

“Some rejoice at the offer of negotiations ... (but) negotiations will not solve anything,” he said.

The all-powerful Khamenei has final say on all key issues in the Islamic republic, including Iran’s sensitive nuclear activities and foreign policy.

His remarks came in response to an offer put forward by US Vice President Joe Biden to engage Iran directly to resolve the nuclear case.

Al Arabiya News

The “gospel” of the 21st century

I was at the grocery store the other day when I was unexpectedly confronted with an adult-oriented magazine located right next to the vitamin section. I immediately had to look away from the front cover, which featured a scantily clad, seductively posed, sex symbol. Yet it was only a few weeks ago that Iread an article about how this same sex symbol loves to speak in tongues and has to restrain herself from outbursts in tongues while attending church services. What?

This is actually a perfect illustration of American charismatic Christianity, where you can say you love Jesus (like the rapper “The Game” claims to do) and still frequent strip clubs (as “The Game” still does), or where you can flow in the gifts of the Spirit and become a made-for-TV preaching sensation, only to announce that God told you that you married the wrong woman, leading to a quick divorce and remarriage.

Yes, this is the “gospel” of the 21st century, “Spirit-filled” church of America, where the cross is bypassed, denial of the flesh is scorned, purity is called legalism, and anything goes if it feels good.

It is the “gospel” of self, in which Jesus dies to make you into a bigger and better you, a “gospel” in which God is here to serve you and help you fulfill your dreams, and where the measure of all things is not how God feels about it but how you feel about it (or how it makes you feel).

Back in the late 1950s (as I recounted in my 1990 book How Saved Are We?) there was a notorious gangster named Mickey Cohen. He attended a Billy Graham meeting in Beverly Hills, and although he expressed some interest in the message, as revival historian J. Edwin Orr explained, Cohen “made no commitment until some time later when another friend urged him, using Revelation 3:20 as a warrant, to invite Jesus Christ into his life. This he professed to do, but his life subsequently revealed no evidence of repentance, ‘that mighty change of mind, heart and life’ [as defined by Richard Trench]. He rebuked [his] friend, telling him: ‘You did not tell me that I would have to give up my work,’ meaning his rackets; ‘You did not tell me that I would have to give up my friends,’ meaning his gangster associates. He had heard that so-and-so was a Christian football player, so-and-so a Christian cowboy, so-and-so a Christian actress, so-and-so a Christian senator, and he really thought that he could be a Christian gangster.”

Today, in some charismatic circles, you can be a Christian gangster—or, at least, a tongue-talking, seductive starlet, or a Christian lingerie model, or a strip-club-attending, Jesus-speaking rapper, just to mention a few. After all, as we are reminded day and night, “Who are you to judge?”

Actually, what Jesus taught was that we should not judge hypocritically or superficially or unjustly and that we should not condemn. But Jesus also said, “Do not judge by appearances, but judge with right judgment” (John 7:24). The Lord commands us to judge, as long as we do it rightly.

Paul taught the very same thing, writing to the Corinthians, “not to associate with anyone who bears the name of brother if he is guilty of sexual immorality or greed, or is an idolater, reviler, drunkard, or swindler—not even to eat with such a one. For what have I to do with judging outsiders? Is it not those inside the church whom you are to judge?” (1 Cor. 5:11-12)

Why is it that everyone seems to know the words, “Judge not” (Matt. 7:1), but very few seem to know—or care about—the divine call to judge those “inside the church” (meaning those who profess to be followers of Jesus)?

Without a doubt, only the Lord knows who is saved and who is not. But the Word makes things very simple for us, outlining God’s part and our part: “But God’s firm foundation stands, bearing this seal: ‘The Lord knows those who are his,’ and, ‘Let everyone who names the name of the Lord depart from iniquity.’” (2 Tim. 2:19) There you have it! To quote the words of John, “No one born of God makes a practice of sinning, for God’s seed abides in him, and he cannot keep on sinning because he has been born of God” (1 John 3:9). Could God make himself any more clear?

Unfortunately, as Orr noted years ago, “Many have sadly forgotten that the only evidence of the new birth is the new life,” and the Scriptures make perfectly clear that if we profess to follow Jesus with our lips but do not follow Him with our lives, we do not belong to Him. (I’m not talking about momentary lapses in our walks with the Lord or about serious mistakes that we make, only to reject and renounce them. God’s mercy and forgiveness are great. I’m talking about the consistent, willful pattern of our lives. Are we following Jesus or not?)

It’s time to say goodbye to this watered-down, sin-excusing, so-called gospel that offers everything and calls for nothing. It’s time to get back to the cross and back to the truth. Otherwise, as America collapses in a heap of amoral ruin, the soft preachers of America will be largely to blame.

Charisma News