U.S. Marshals Military Might To Challenge Asian Century. Bad idea!

The first decade of what more than a generation ago was predicted to be the Asian Century is winding down, marking ten years since the end of the American Century.

China overtook Japan as the world’s second-largest economy during the second financial quarter of this year and three-quarters of the BRIC (Brazil, Russia, India, China) nations, the world’s largest emerging economies, are entirely or primarily in Asia. During its first heads of state summit in Russia last year, BRIC “urged the creation of a new global financial security system.” [1] At the time its members accounted for 15 percent of the global economy and 42 percent of international currency reserves [2] even after the advent of the U.S.-triggered world financial crisis in 2008.

60 percent of humanity lives in Asia and the continent is home to several of the fastest growing economies in the world.

Demographics and economics alike assure a preeminent role for Asia in any natural – which is to say peaceful – course of development.

Asia is in fact part of a broader land mass, Eurasia, which in turn is inextricably connected to the rest of what over a century ago British geographer Halford Mackinder called the World Island: Asia, Europe, the Middle East and Africa. The last has recently recorded a population exceeding a billion, making it the second most populous continent.

The Asia-Europe-Africa grouping contains the overwhelming majority of the human race, perhaps as many as 5.6 billion of the world’s 6.8 billion inhabitants. The entire Western Hemisphere, by contrast, has a population under one billion and Oceania’s numbers are negligible.

But for 500 years a small number of nations in the global West and North, a limited contingent of countries that collectively calls itself
the North Atlantic community, has dominated most of the world.

With the demise in 1991 of an eastern power that for decades had presented them with the greatest challenge in their history, the Soviet Union, the major Western states, a coalition of all the main past colonial empires and the new American global superpower united in the North Atlantic Treaty Organization military alliance, viewed the entire world as being ripe for penetration and dominance, starting with the former Eastern European socialist bloc and the territories of the former Soviet Union.

Military formations were used to spread American and Western European influence throughout Europe, Africa and the Middle East – NATO and its numerous partnership programs, U.S. Africa Command, ad hoc “coalitions of the willing” – and into the Caucasus, the Caspian Sea basin, Central Asia and South Asia, in which last location the Pentagon and NATO are waging a nine-year-old war with 150,000 troops.

In the past eleven years the U.S. has obtained military, including missile shield, bases and facilities in parts of the world where the Pentagon had never ensconced itself before: Kosovo, Bulgaria, Romania, Poland, Hungary, Israel, Iraq, Kuwait, Jordan, Djibouti, Ethiopia, Kenya, Mali, Afghanistan, Kyrgyzstan, Uzbekistan and Colombia.

Just since last year the Pentagon has conducted bilateral and multinational military exercises in and off the coasts of nations like India, Pakistan, Bangladesh, Nepal, Sri Lanka, Mongolia, Cambodia, Vietnam, Malaysia, East Timor, Finland, Sweden, the Baltic states, Poland, Hungary, Bulgaria, Romania, Ukraine, Azerbaijan, Georgia, Kazakhstan, Angola, Burkino Faso, Gabon, Ghana, Mali, Mozambique, Senegal and Uganda in addition to traditional Cold War allies and partners, including holding the first large-scale joint war games in Israel.

This month troops from the U.S. and other NATO nations have participated in military exercises in Mongolia and Kazakhstan, which both border Russia and China.

If Asia is superior with regard to economic growth and potential, resources natural and human, and other factors, the U.S. supersedes it in one key category: An overwhelming advantage in military firepower. The world’s largest expeditionary warfighting machine, U.S. Pacific Command, and its biggest naval “permanent forward projection force,” the U.S. Seventh Fleet, both are concentrated on East Asia.

The Pentagon withdrew troops and even closed bases in Asia after the end of the Cold War, but now it is returning.

In addition to three joint naval exercises in as many months – in the Sea of Japan in late July, the South China Sea this month and the Yellow Sea in September – the U.S. is massively expanding military facilities in Guam, has deployed 60 percent of its nuclear submarine fleet to the Pacific region and is considering increasing its naval fleet from 282 to 346 ships to “beef up U.S. maritime power in Asia.” [3]

In recent days Robert Scher, U.S. Deputy Assistant Secretary of Defense for South and Southeast Asia, was in the capital of Vietnam to meet with Lieutenant General Nguyen Chi Vinh, Deputy Minister of Defense, for the two countries’ “first high-level defense dialogue.”

On August 17, a week after a U.S. warship docked in Vietnam for the two nations’ first joint military exercise, the Pentagon official stated the event was “the next significant historic step in our increasingly robust defense relationship,” and confirmed that the discussions included sharing “impressions of Chinese military modernization.” [4]

The next day the chief of U.S. Pacific Command, Admiral Robert Willard, was in the Philippines to meet with defense officials from the host nation including the head of the military, Lieutenant-General Ricardo David, and insisted that “the United States will maintain a presence in the South China Sea for many years,” with what he identified as increasingly “assertive” Chinese actions as the rationale for doing so. [5]

In respect to conflicting Philippine and Chinese claims on the Spratly islands, Willard said that the Pentagon “very much looks forward to working continually” with Manila’s military to ensure it is “shaped just right to meet the needs of this very complex archipelago that’s located in a very strategic area of the world.” [6]

This week the Japanese press announced that the nation’s military will conduct war games in December “simulating the recapture of an isolated island from enemy forces,” the first such exercises by the Self-Defense Forces which are “seen as a response to China’s recent naval expansion.”

The Yomiuri Shimbun revealed that “The island-reclaiming drills will be part of joint exercises with the U.S. military and the U.S. Navy’s 7th Fleet will provide support.” [7]

The drills will be held under a recently elaborated defense program for the Nansei Islands near territory southwest of Okinawa.

On August 19 the Japanese Foreign Ministry said that the Senkaku Islands, contested by Japan and China, are “subject to the Japan-US security treaty” and that Washington and Tokyo would “respond together” to any attack there. The ministry’s press secretary said, “It is natural that Japan and the United States respond together.” [8]

A senior Japanese Defense Ministry official stated “We’ll show China that Japan has the will and the capability to defend the Nansei Islands.” The war games will include “Air Self-Defense Force F-2 fighters, which have
advanced air-to-ground and antiship attack capabilities, and Maritime
Self-Defense Force P-3C antisubmarine patrol aircraft” as well as C-130 Hercules transport planes, airborne brigade units and F-15 Eagle fighters.

“The planned exercises are a groundbreaking move….It will also be a good opportunity to reinforce cooperation between U.S. forces and the SDF.”

An article in the August 20 edition of a major Japanese daily stated: “It must be demonstrated to China, which has been strengthening its military capability and plans to expand its sphere of influence, that the SDF and the U.S. military form a watertight defense array.” [9]

This week Japan’s Defense Ministry said it would “keep paying attention to China’s military trend” and “Taiwan renewed its call…on the U.S. to sell it advanced weaponry as it joined Japan in vowing to keep a close eye on China’s rising military power.”

“Taipei and Tokyo were reacting to the release of a U.S. Defense Department
report which warned that China’s expanding capabilities are changing the
strategic balance in East Asia.” [10]

On the same day that the preceding account appeared, the Indian press disclosed that New Delhi will order a “large” amount of U.S. Javelin third generation anti-tank guided missiles used in last year’s Yudh Abhyas 2009 bilateral combat exercises with 1,000 U.S. and Indian troops, which featured “17 Stryker vehicles – the largest deployment of the vehicles outside of Iraq and Afghanistan,” and which showcased “the Javelin Anti-Tank Missile system, employed to defeat current and future threat armored combat vehicles.” [11]

Regarding the proposed Javelin acquisition, one of India’s main newspapers wrote: “Much to the dismay of Russians and Europeans, India is increasingly taking the FMS [foreign military sales] route to ink big arms deals with the US. The biggest on the verge of finalisation…is for 10 C-17 Globemaster-III giant strategic airlift for upwards of $3 billion.” [12] President Barack Obama is scheduled to visit India in November to secure further arms deals which by some reports will establish the U.S. as the nation’s main weapons supplier, replacing Russia in that role.

On August 19 one of Australia’s main newspapers carried an opinion piece by Greg Sheridan, recently appointed by the Woodrow Wilson International Center for Scholars in Washington, D.C. its Australian Scholar, in which he wrote:

“The US has five full military treaty allies in Asia: Japan, South Korea, Thailand, The Philippines and Australia, and one de facto ally, Singapore, and an increasingly critical strategic relationship with India.

“It is also developing a strong strategic relationship with Vietnam….It is also working hard on Indonesia and Malaysia….”

He quoted U.S. Defense Secretary Robert Gates at June’s Shangri-La Dialogue in Singapore affirming that “My government’s overriding obligation to allies, partners and the region is to reaffirm America’s security commitments in the region….The strength of US commitment and deterrent power will be expressed through the continued forward presence of substantial US forces in the region.” Sheridan added, “You can’t get much more explicit than that” concerning the “complex security equation in the Asia-Pacific.”

The Australian analyst summed up his argument by calling for “a greater US naval and air force presence” in Darwin on the Timor Sea. [13]

The rise of a dynamic, integrated and dominant Asia in this century is inevitable and inexorable. Any attempt to retard or thwart it by military force from outside the continent will produce catastrophic consequences.

Notes

1) Voice of Russia, June 17, 2009
2) Russian Information Agency Novosti, June 17, 2009
3) U.S. Expands Asian NATO To Contain And Confront China
Stop NATO, August
4) Agence France-Presse, August 17, 2010
5) Chosun Ilbo, August 20, 2010
6) Bloomberg News, August 18, 2010
7) Yomiuri Shimbun, August 20, 2010
8) Agence France-Presse, August 19, 2010
9) Yomiuri Shimbun, August 20, 2010
10) Agence France-Presse, August 17, 2010
11) Embassy of the United States, India, October 19, 2009
12) Times of India, August 17, 2010
13) The Australian, August 19, 2010

Job Losses and Foreclosures: Harder Times Are Getting Harder

We know we live in hard times that are on the verge of getting harder with 500,000 new claims for unemployment last week, a recent record.

The stock market may be over for now as fear and panic drives small investors out. Big corporations hoard stashes of cash rather then hire workers. The D-Word (depression) is back in play.

Foreclosures are up, and the Administration’s programs to stop them are down, well below their stated goals, only helping 1/6th of those promised assistance.

And here’s a statistic for you: 300,000. That’s the number of foreclosure filings every month for the past 17 months. This year, 1.9 million homes will be lost, down from 2 million last year. Is that progress? In July alone, 92, 858 homes were repossessed.

At the same time, the number of cancelled mortgage modifications exceeded the number of successful ones. According to Ml-implode.com, last month, “the number of trial modification cancellations surged to 616,839, greatly outnumbering the 421,804 active permanent modifications.”

And don’t think this is only a problem that affects the homeowners about to go homeless. The New York Times quotes Michael Feder, the chief executive of the real estate data firm Radar Logic to the effect that we are all at risk.

“My concern is that if we have another protracted housing dip, it’s going to bring the economy down,” Mr. Feder said. “If consumers don’t think their houses are worth what they were six months ago, they’re not going to go out and spend money. I’m concerned this problem isn’t being addressed.”

The larger point is that even if you believe the economy is already down, it can go lower. No one knows how to “fix it” either just as BP couldn’t plug the “leak” that, truth be told, is still oozing oil.

So what are we doing about it? Are we demanding debt relief or a moratorium on foreclosures? Are we shutting down the foreclosure factories?

Nope.

Progressives are spending time and wasting passion this August debating on an Islamic Cultural Center near Ground Zero, invariably responding to the provocations and agenda of adversaries. They are always on the defense, never taking the offense.

Who is beating the drum for job creation and a new economic policy? Maybe the unions, but their voice is muted and ignored in the electronic noise machine. Marches are planned by the UAW and Rev. Jesse Jackson on August 28th in Detroit and in Washington on 10.02.10. But the expected war of the words between Rev. Al Sharpton and Glenn Beck over the legacy of the March on Washington is expected to generate more heat.

Meanwhile, even as the Administration seems to be finding signs of a “recovery,” a parade of failures march on from the discovery that there is an oil slick the size of Manhattan in the Gulf to the persistence of frauds in finance from state pension funds in New Jersey to the case against the head of the Bank of America.

Even worse, Shorebank, one of the banks that community activists considered a national model of social responsibility has gone down in Chicago, the 104th bank to fail this year with 15 branches including some in Detroit and Cleveland. It was also active in 40 countries. In June, it reported over $2 billion in deposits. By August, it was gone.

In all, 349 US banks have disappeared since 2007.

ShoreBank promoted itself as a community development and environmental bank. It was based in Michelle Obama’s old neighborhood with the slogan “Lets Change The World.” Now the world of Wall Street has changed the bank with a partnership of investors including American Express, Bank of America and Goldman Sachs taking over under the name “United Partnership.”

Hundreds of other banks are on the FDIC hit parade and may be next.

There were many worse casualties in banking in the past according to Barry James Dyke’s informative book, Pirates of Manhattan. He notes that ten thousand banks failed during the depression and 2,900 bit the dust in the S&L crisis. The current number may have been higher had Congress not bailed out the Banksters who used some of our money to play PacMan, gobbling up smaller institutions.

AP reported, “ShoreBank lost $39.5 million in the second quarter amid soured real estate loans. The bank had been under a so-called cease and desist order from the FDIC for more than a year, requiring it to boost its capital reserves. ShoreBank was able to raise more than $146 million in capital this spring from several big Wall Street institutions. It was unable, however, to secure federal bailout funds it sought from the Treasury Department’s Troubled Asset Relief Program.”

Republicans are “investigating” alleged Administration support for the Bank,

AP explained, “Rep. Darrell Issa of California, the senior Republican on the House Oversight and Government Reform Committee, sent a letter to a White House legal adviser asking specific questions on possible contacts between administration officials and executives of ShoreBank or potential investors.

The White House has said no administration officials met with ShoreBank concerning its rescue or requested help from financial institutions on its behalf.” ‘

Questions raised by Republicans, of course, seek to politicize the issue when it is the FDIC ‘s deal with the big banks that needs to be probed, as Zero Hedge explains:

“As it stands, Goldman and 11 other banks are receiving a multimillion dollar gift to conduct a portfolio liquidation run-off of ShoreBank’s assets, while merely making sure existing deposits are serviced.”

(Note: the FDIC is led by a Republican. Hmm.)

Blogger Mike, “Mish” Shedlock concludes: “The FDIC’s handling of Shore Bank smells as bad as a pile of dead alewives on a Chicago beach in mid-July

My question is: Why didn’t the Administration help shore up ShoreBank (if it could be shored up) as they did so many of the “too big to fail” banks?

Their hands-off attitude, perhaps in fear of being criticized, as they were anyway, helped doom the bank and, by extension, the idea that we could have socially responsible lending institutions.

So much for the priorities and power of Obama’s “Chicago Mafia.”

If they don’t have the guts to save a bank in their own hometown they know has meant so much to so many, is it any wonder they won’t take on the crimes on Wall Street?

Last week, Treasury Secretary Tim Geithner was complaining that he is being falsely identified as a “Goldman Guy,” insisting he never worked for the financial institution that was recently branded a “Giant Squid On The Face Of Humanity.”

He doesn’t seem to realize that the speculation is not based on the details of his resume but on an assessment of his track record as a toady for the pals he worked with when he ran the Federal Reserve Bank in New York.

And by the way, Tim, why the hold–up on the appointment of Elizabeth Warren to run the new Consumer Financial Protection Bureau in your old institution? Is she too smart and popular for you?

Why the fiddling while our modern Rome burns?

“Monetary Shock and Awe”: The Fed Prepared to Launch Most Radical Intervention in History

by Mike Whitney

The equities markets are in disarray while the bond markets continue to surge. The avalanche of bad news has started to take its toll on investor sentiment. Barry Ritholtz’s “The Big Picture” reports that the bears have taken the high-ground and bullishness has dropped to its lowest level since March ‘09 when the market did a quick about-face and began a year-long rally. Could it happen again? No one knows, but the mood has definitely darkened along with the data. There’s no talk of green shoots any more, and even the deficit hawks have gone into hibernation. It feels like the calm before the storm, which is why all eyes were on Jackson Hole this morning where Fed chairman Ben Bernanke delivered his verdict on the state of the economy on Friday.

Wall Street was hoping the Fed would “go big” and promise another hefty dose of quantitative easing to push down long-term interest rates and jolt consumers out of their lethargy. But Bernanke provided few details choosing instead this vague commitment:

“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”

Check. There’s no doubt that Helicopter Ben would be in mid-flight right now tossing bundles of $100 bills into the jet-stream like confetti if he had the option. But Bernanke is fighting a rearguard action from inside the FOMC where a fractious group of rebels want to wait and see if the recent downturn is just a blip on the radar or something more serious, another tumble into recessionary hell.

This week, the markets were blindsided by two days of dismal housing news, grim durable goods orders, a slowdown in manufacturing, and modest gains in employment. 4 years later, and housing is still mired in a depression. When does it end? Households and consumers are buried under a mountain of debt; personal bankruptcies, delinquencies, defaults and foreclosures continue to mount while politicians threaten to tighten the purse-strings putting more pressure on families who can barley put food on the table let alone pay the mortgage.

Just months ago, 57 out of 57 economists surveyed predicted that the economy would avoid a double dip recession. Now they’re not so sure. Stock market gains have been wiped out and the S&P 500 has dropped 14 percent from its high in April. All of the main economic indicators are testing new lows. The so-called “soft patch” is looking like another hard landing. The fear is palpable. On Thursday, the Dow slipped another 74 points by the end of the session. It could have been worse. The markets have been holding on by their fingernails hoping that Bernanke will bail them out. But it’s going to take more than the usual promise of low interest rates for an “extended period” to boost enthusiasm. Wall Street is looking for the “big fix”, a trillion dollar resumption of the Fed’s bond purchasing program (QE) to pump up flaccid asset prices, electro-shock demand, and raise consumer inflation expectations. The big banks and the brokerage houses want Bernanke to rout the Cassandras and the gloomsters and pump some adrenalin into sluggish indexes. The Fed chairman promised to help…..but not just yet, which is why the markets continue to seesaw.

Bernanke takes the threat of deflation seriously. His earlier speeches laid out a deflation-fighting strategy that is so radical it would shock the public and Wall Street alike. Here’s an excerpt from a speech he gave in 2002 which illustrates the Fed boss’s willingness to move heaven and earth to fend off the scourge of pernicious deflation:

Ben Bernanke: “My thesis here is that cooperation between the monetary and fiscal authorities in Japan could help solve the problems that each policymaker faces on its own. Consider for example a tax cut for households and businesses that is explicitly coupled with incremental BOJ purchases of government debt – so that the tax cut is in effect financed by money creation. Moreover, assume that the Bank of Japan has made a commitment, by announcing a price-level target, to reflate the economy, so that much or all of the increase in the money stock is viewed as permanent.

Under this plan, the BOJ’s balance sheet is protected by the bond conversion program, and the government’s concerns about its outstanding stock of debt are mitigated because increases in its debt are purchased by the BOJ rather than sold to the private sector. Moreover, consumers and businesses should be willing to spend rather than save the bulk of their tax cut: They have extra cash on hand, but – because the BOJ purchased government debt in the amount of the tax cut – no current or future debt service burden has been created to imply increased future taxes.

Essentially, monetary and fiscal policies together have increased the nominal wealth of the household sector, which will increase nominal spending and hence prices….from a fiscal perspective, the policy would almost certainly be stabilizing, in the sense of reducing the debt-to-GDP ratio….

Potential roles for monetary-fiscal cooperation are not limited to BOJ support of tax cuts. BOJ purchases of government debt could also support spending programs, to facilitate industrial restructuring, for example. The BOJ’s purchases would mitigate the effect of the new spending on the burden of debt and future interest payments perceived by households, which should reduce the offset from decreased consumption. More generally, by replacing interest-bearing debt with money, BOJ purchases of government debt lower current deficits and interest burdens and thus the public’s expectations of future tax obligations.” (Some Thoughts on Monetary Policy in Japan, Governor Ben S. Bernanke, The Federal Reserve Board Tokyo, Japan, May 31, 2003)

Yikes! This is monetization writ large. Anyone who thought Bernanke lacked cohones should reread this passage. The Fed chair is prepared to launch the most radical intervention in history, monetary Shock and Awe. But will the bewhiskered professor be able to persuade congress to follow his lead, after all, the fiscal component is critical to the program’s success. They’re two spokes on the same wheel. Here’s how (I imagine) it would work: Congress passes emergency legislation to suspend the payroll tax for two years stuffing hundreds of billions instantly into the pockets of struggling consumers. The Fed makes up the difference by purchasing an equal amount of long-term Treasuries keeping the yields low while the economy resets, employment rises, asset prices balloon, and markets soar. As the economy accelerates, the dollar steadily loses ground triggering a sharp increase in exports and sparking a viscous trade war with foreign trading partners. Then……it’s anyone’s guess? Either Bernanke’s “nuclear option” succeeds in resuscitating the comatose economy or foreign holders of dollars and dollar-backed assets dump their gargantuan trove of US loot in a pile and set it ablaze. It’s all a roll of the dice.

Media Pornography:Millions of dollars from US State Department to Venezuelan media groups…

by Eva Golinger

Imagine you’re walking on the street with your children and you pass a newstand with today’s papers displayed as usual and the front pages clearly visible to all who pass by. But to your horror, today’s national daily has an almost full-page graphic image of dead, bloodied bodies piled on top of each other in the local morgue. Every newstand you walk by has the same image, even repeated in several national and local papers. Your children are forced to see this with no warning.

Such a horrifying image could be justified if it was taken last night after some atrocious event had occurred. But no, as it turns out, it’s a photograph taken last December, more than eight months ago, and is simply being used to make a political statement against crime. Furthermore, the photograph has no visible credits and, according to the morgue authorities, was taken in secrecy, unauthorized, and in clear violation of the privacy rights of the family members of the deceased.

Is this the kind of journalism society defends? When do media cross the limits into the grotesque, the pornographic and the obscene? Whose job is it to ensure viewers and readers are protected from such offensive and violent images? Is it only a question of journalistic ethics, or is it a larger issue of values, privacy rights and fundamental well being?

POLITICAL AGENDAS

These are the issues Venezuela is grappling with after the publication of a graphic image, as described above, in the daily paper, El Nacional. The image was then republished in another national daily, Tal Cual, along with several regional newspapers.

El Nacional editor and owner, Miguel Henrique Otero, admitted the image was taken “unauthorized” last December in the Caracas morgue, and said he “held off from publishing it because of its graphic content” until the “right moment”. Venezuela is one month away from critical legislative elections, and Otero forms part of an extremist opposition organization, “2D”, supporting opposition candidates to the National Assembly. Otero makes no effort to hide his “anti-Chavez” opinions in his newspaper, one of the two main national dailies.

In an interview on CNN en Español with Otero, the US news network admitted the image published by El Nacional was too graphic to present to viewers and stated, “CNN will not show this image during any of our broadcasts since we consider it could perturbe viewers and is too graphic to show”. Nonetheless, Otero, and other corporate media in Venezuela, claim the publication of the graphic image is a part of “free expression”.

But Otero did admit during the interview on CNN that he decided to publish the 8-month old photo last Friday because Venezuela is “one month away from elections” and “we are in campaign mode”, thereby admitting the publication of the photo was a political act, and not merely an expression of press freedom.

So, the question then arises, are there limits to media’s power? If so, what are they and who decides what they are?

PUBLIC OUTCRY

Venezuelans reacted largely critical regarding the publication of the graphic photo in El Nacional. A group of concerned citizens protested on Tuesday before the Attorney General’s office, demanding children be protected from such violent images. Litbell Diaz, President of the National Institute for the Rights of Children and Adolescents (Idena), declared to the press, “Whoever published that photograph knew those types of images affect children, but their intention was to destabilize, and it was done with premeditation”.

Diaz and several dozen representatives from Idena, along with hundreds of children and adolescents, requested the Public Prosecutor’s office open a criminal investigation into the publication of the photograph by El Nacional.

On Tuesday afternoon, Venezuela’s Mediation Court for the Protection of Children and Youth in Caracas ordered the prohibition of “images, information and publicity of any kind, with bloody content or messages of terror, physical aggresion, or images that use war content or messages of deaths and deceased that could alter the psychological well being of children and youth”. This is the first time in Venezuela that the judiciary has taken a stance on print media content. The decision also ordered El Nacional to cease publication of such images based on an “Order of Protection” requested by the Public Prosecutor’s office. The national daily Tal Cual was also subject to the restraining order, which was issued for a one-month period while investigations continue.

The judicial decision caused national responses.

Opposition candidate to the National Assembly, Delsa Solorzano, declared during an interview on Wednesday that “pornographic magazines are sold in newstands” so therefore, “children are already vulnerable” to such images. What Solorzano failed to mention is that pornographic material is not fully viewable in newstands and is placed “out of reach” for children. On the other hand, the El Nacional front page was displayed prominently in newstands and shops nationwide.

Forensic doctors working at the Caracas morgue publicly repudiated the publication of the graphic image in El Nacional claiming it was an “aggression” against their profession and workplace. “This is not an easy job, and we do not agree that the [press] manipulate us. We demand respect and ask you allow us to do our jobs in peace”, said Carmen Julieta Centeno, National Coordinator of Forensic Scientists of the CICPC (Venezuela’s Forensic Police).

For his part, President Chavez called the publication of the 8-month old violent image a sign of “desperation” on behalf of the opposition. “The country demands respect…The publication of this image just shows desperation, because they are trying to sabotage the Bolivarian Revolution by any means”.

“The opposition have been working on a mix of plans, so that by today we would have been in a state of chaos in the country”, said Chavez, adding, “Nonetheless, it seems as though their plans haven’t worked and they are desperate now, so they are trying to generate reactions from the people”.

But journalist Alberto Nolia, who hosts en evening program on Venezuelan state television that harshly criticizes the opposition, declared the court’s decision “absurd”. While considering the publication of the image in El Nacional “yellow journalism”, Nolia also stated that “children are not stupid, they know what’s going on. Perhaps it would be better to publish images of people killed by violent crime with explanations about who they were and the fact that now their lives are over, so that kids will understand the severity of delinquency”.

“Neither children nor anyone should be protected from learning of the violence of our societies”, declared Nolia, adding that “the problem of crime in Venezuela is very serious”.

MEDIA LIMITS

Earlier this year, US media struggled with the publication of graphic images from Haiti’s tragic earthquake. In a National Public Radio (NPR) discussion titled “What’s Too Graphic? How to Photograph Disaster”, most journalists agreed that it was essential to weigh the public value and use of the images or information versus family privacy and violent impact.

“Photographs have the power to impact people at a visceral level and change the hearts and minds of public opinion and national focus”, said Kenneth Irby, Director of the Visual Journalism Group at the Poynter Institute for Media Studies. “There’s an awful lot of censorship that happens both in terms of military and governmental activites in America (US) in particular”, he added, referring to Pentagon controls over the publication of images of US soldiers killed in battle.

In the US, a country that strongly lauds itself for press freedom standards, freedom of expression is not absolute under the First Amendment. Privacy rights often supersede press freedoms. According to US Tort Law, “material may be published so long as it is legally obtained, not offensive to a reasonable person and of legitimate public concern”.
But who makes such determinations?

Today, the Pentagon is hunting down the founders of the website, Wikileaks.com, because of the publication of thousands of classified US government documents. Wikileaks claims the publication is in the “public interest”, but the Pentagon says it’s harmful to “private interests”. Who is right and who is wrong?

As media grow stronger and gain more power and influence over our societies, these issues will become more prominent in our every day lives. At some stage it will be necessary to stop considering all journalists and corporate media outlets as “proveyers of the truth” and start to look critically at the interests and agendas those powerful corporations represent.

Last month, declassified documents from the US Department of State evidenced millions of dollars in funding to Venezuelan media groups and journalists, to “foster freedom of expression and press” and to ensure favorable reporting on issues of interest to the US government.

Economic Black Hole: 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover.

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Global Research, August 30, 2010
The Economic Collapse - 2010-01-24
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Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.

The problem is debt. Collectively, the U.S. government, the state governments, corporate America and American consumers have accumulated the biggest mountain of debt in the history of the world. Our massive debt binge has financed our tremendous growth and prosperity over the last couple of decades, but now the day of reckoning is here.

And it is going to be painful.

The following are 20 reasons why the U.S. economy is dying and is simply not going to recover….

#1) Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression? Well, the “second wave” of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it. A huge mountain of mortgages is going to reset starting in 2010, and once those mortgage payments go up there are once again going to be millons of people who simply cannot pay their mortgages. The chart below reveals just how bad the second wave of adjustable rate mortgages is likely to be over the next several years….

#2) The Federal Housing Administration has announced plans to increase the amount of up-front cash paid by new borrowers and to require higher down payments from those with the poorest credit. The Federal Housing Administration currently backs about 30 percent of all new home loans and about 20 percent of all new home refinancing loans. Tighter standards are going to mean that less people will qualify for loans. Less qualifiers means that there will be less buyers for homes. Less buyers means that home prices are going to drop even more.

#3) It is getting really hard to find a job in the United States. A total of 6,130,000 U.S. workers had been unemployed for 27 weeks or more in December 2009. That was the most ever since the U.S. government started keeping track of this statistic in 1948. In fact, it is more than double the 2,612,000 U.S. workers who were unemployed for a similar length of time in December 2008. The reality is that once Americans lose their jobs they are increasingly finding it difficult to find new ones. Just check out the chart below….

#4) In December, there were also 929,000 “discouraged” workers who are not counted as part of the labor force because they have “given up” looking for work. That is the most since the U.S. government first started keeping track of discouraged workers in 1949. Many Americans have simply given up and are now chronically unemployed.

#5) Some areas of the U.S. are already virtually in a state of depression. The mayor of Detroit estimates that the real unemployment rate in his city is now somewhere around 50 percent.

#6) For decades, our leaders in Washington pushed us towards ”a global economy” and told us it would be so good for us. But there is a flip side. Now workers in the U.S. must compete with workers all over the world, and our greedy corporations are free to pursue the cheapest labor available anywhere on the globe. Millions of jobs have already been shipped out of the United States, and Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades. The days when blue collar workers could live the American Dream are gone and they are not going to come back.

#7) During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time around the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs is going to stop any time soon.

#8) All of this unemployment is putting severe stress on state unemployment funds. At this point, 25 state unemployment insurance funds have gone broke and the Department of Labor estimates that 15 more state unemployment funds will likely go broke within two years and will need massive loans from the federal government just to keep going.

#9) 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day. The United States of America is very quickly becoming a socialist welfare state.

#10) The number of Americans who are going broke is staggering. 1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008.

#11) For decades, the fact that the U.S. dollar was the reserve currency of the world gave the U.S. financial system an unusual degree of stability. But all of that is changing. Foreign countries are increasingly turning away from the dollar to other currencies. For example, Russia’s central bank announced on Wednesday that it had started buying Canadian dollars in a bid to diversify its foreign exchange reserves.

#12) The recent economic downturn has left some localities totally bankrupt. For instance, Jefferson County, Alabama is on the brink of what would be the largest government bankruptcy in the history of the United States – surpassing the 1994 filing by Southern California’s Orange County.

#13) The U.S. is facing a pension crisis of unprecedented magnitude. Virtually all pension funds in the United States, both private and public, are massively underfunded. With millions of Baby Boomers getting ready to retire, there is simply no way on earth that all of these obligations can be met. Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the collective unfunded pension liability for all 50 U.S. statesfor Forbes magazine. So what was the total? 3.2 trillion dollars.

#14) Social Security and Medicare expenses are wildly out of control. Once again, with millions of Baby Boomers now at retirement age there is simply going to be no way to pay all of these retirees what they are owed.

#15) So will the U.S. government come to the rescue? The U.S. has allowed the total federal debt to balloon by 50% since 2006 to $12.3 trillion. The chart below is a bit outdated, but it does show the reckless expansion of U.S. government debt over the past several decades. To get an idea of where we are now, just add at least 3 trillion dollars on to the top of the chart….

#16) So has the U.S. government learned anything from these mistakes? No. In fact, Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $2 trillion to pay its bills, a record increase that would allow the U.S. national debt to reach approximately $14.3 trillion.

#17) It is going to become even harder for the U.S. government to pay the bills now that tax receipts are falling through the floor. U.S. corporate income tax receiptswere down 55% in the year that ended on September 30th, 2009.

#18) So where will the U.S. government get the money? From the Federal Reserve of course. The Federal Reserve bought approximately 80 percent of all U.S. Treasury securities issued in 2009. In other words, the U.S. government is now being financed by a massive Ponzi scheme.

#19) The reckless expansion of the money supply by the U.S. government and the Federal Reserve is going to end up destroying the U.S. dollar and the value of the remaining collective net worth of all Americans. The more dollars there are, the less each individual dollar is worth. In essence, inflation is like a hidden tax on each dollar that you own. When they flood the economy with money, the value of the money you have in your bank accounts goes down. The chart below shows the growth of the U.S. money supply. Pay particular attention to the very end of the chart which shows what has been happening lately. What do you think this is going to do to the value of the U.S. dollar?….

#20) When a nation practices evil, there is no way that it is going to be blessed in the long run. The truth is that we have become a nation that is dripping with corruption and wickedness from the top to the bottom. Unless this fundamentally changes, not even the most perfect economic policies in the world are going to do us any good. In the end, you always reap what you sow. The day of reckoning for the U.S. economy is here and it is not going to be pleasant.

How to Own Physical and Paper Gold as Trend Continues Towards $1500

The Gold Report: Louis, earlier this month the U.S. government sold its new 10-Year Notes at about 2.7%. That’s the lowest yield ever for a refunding, yet the sale was over three times subscribed. What’s that telling us?

Louis James: Any particular event may or may not be a watershed; I try not to ascribe too much significance to one thing. Sometimes it’s a straw in the wind and sometimes it’s the straw that breaks the camel’s back; you can’t really tell until afterwards. But this one is interesting. It seems to me what this is telling us is that people are more worried elsewhere than they are in the United States. I was reading about declining numbers from China for about nine months running, and, of course, there’s been all the excitement in the eurozone this year that’s caused a lot of turmoil.

TGR: What numbers are those from China?

LJ: It was industrial output. This situation is not necessarily evidence of how great and trustworthy U.S. debt is. It’s evidence of how much worse everybody else’s debt is. In the race to the bottom, the U.S. is firmly in the rear—this month. That doesn’t mean the U.S. is not headed down; it just means it’s not leading the pack charging downwards.

TGR: The Fed sale came while the Dow was falling and gold was rising. Do you think this is the beginning of a trend or just more volatility?

LJ: Just more volatility. Even veteran Doug Casey won’t look at the daily price of gold. He will look at the weekly and monthly movements. And if there’s a big price jog in a day, we might discuss it— but again, we try not to ascribe too much meaning to the daily fluctuations. Gold is a volatile commodity, and the gold stocks, of course, are the most volatile stocks on Earth. One single buyer can move these markets. You have to, just for your own sanity, pull back and have a bigger picture view.

TGR: If you had $100,000 to invest right now in 10-year T-bills or the equivalent in gold, where would you put your money and why?

LJ: Absolutely, no question: if those were my only two choices, I would put 100% of that in gold. I have very little confidence in the loser in the race to the bottom. Just because the United States is seen as the “least bad” place to invest and people have to put their money somewhere, that doesn’t actually make U.S. Treasuries a safe investment. When there is as much doubt about the solvency of the backer of any security as there is about the U.S. and the other world powers, it just makes no sense. But that’s actually only half the equation; the other half of the equation is that I am very bullish on gold.

TGR: All right, but banks and foreign investors are buying these T-bills. If it’s plain to you that buying gold is a much better investment, why aren’t these banks and these other institutions doing the same?

LJ: In spite of the news that gold has made, it’s not seen as an important instrument of investment by most people. If you’re a gold bug or you’re somebody who is already interested in the sector, you see advertisements on the Super Bowl and say, “Oh, wow, this is really catching on! This is going to be like the ’70s and the wave is coming.” Perhaps the wave is coming; I believe there will be a wave. But I am not sure we’re even in the beginning stages of that crest yet. There has been some effort to get the word out, but if you go to a family dinner and you ask your family and friends how many of them actually own gold, unless yours is a family of gold bugs, you’re not going to get a lot of people holding up their hands.

The average person is still not involved in this market, and the average central banker and the average Wall Street type still doesn’t think about gold anywhere near as much as he or she will when the mania phase kicks in. I have a friend who is a financial manager for some very wealthy families in Europe. He’s based in Switzerland, and he, alone among his peers that I know of, placed a lot of his clients in gold before the crash of 2008. He’s now very popular with his clients.

But that’s uncommon. Most people wouldn’t even talk about it. My sister is a mainstream U.S. banker. She called me a couple of weeks ago and asked me how to go about buying physical gold. I was shocked. There is awareness percolating out there, but it’s just barely getting started.

TGR: Maybe your sister read your piece on Goldseek.com, where you talked about picking up American Buffalo gold coins. Tell us about your penchant for hoarding gold coins.

LJ: Well, I like gold coins.

TGR: But why Buffaloes?

LJ: I like the Buffaloes because they’re unalloyed. It’s as much gold as you’re going to get in a bullion coin. You look at it and it’s just gold, whereas as the Eagles are alloyed with a little bit of copper that makes them harder and more durable. The Eagles are the most recognized coin in the world and most easily exchangeable anywhere you go—but the Buffalos are prettier, and well recognized among those in the business.

I like having physical gold—the fact that it’s portable and, in many cases, untraceable. The government has passed new regulations whereby U.S. gold coin dealers will have to fill out 1099s on anybody who buys or sells $600 worth of gold. Which means, of course, that the tax man is going to be looking at these things all the way down to a single-ounce coin transaction (unless gold really crashes from here).

That’s a significant change. Right now the anonymity is a strong pull for U.S. consumers. But I think everybody should have some physical gold, because gold is the only financial instrument that is not simultaneously somebody else’s obligation. Silver too, of course. If you’ve got paper gold, even good quality paper gold like Perth Mint Certificates, it’s still a piece of paper. You should have some physical gold in hand. Obviously you can’t carry around millions of dollars with you, but a couple of months’ living expenses is a good rule of thumb.

TGR: But let’s say gold goes up significantly from where it is now. Unless you’re buying something substantial, I don’t see how it’s going to work as a currency because if you want to buy a loaf of bread, how are you going to do that with a gold coin? That gold coin could be worth $4,000.

LJ: That’s true, but there are half-ounces, one-tenth ounces; there’s silver, too. I saw a YouTube video featuring a convenience store in Los Angeles that has a guy in the back with an assay test and scales for gold and silver. At that place you can buy a loaf of bread with your ex-wife’s wedding ring if you want.

But will gold become a currency again? I think there’s a good chance that it might if the financial catastrophe unfolds the way we think it will, and paper currencies, as a whole, come to be regarded with the suspicion that they so justly deserve. But whether or not that happens, it is good to have some form of concentrated portable wealth in times of financial chaos.

I was in the Republic of Georgia, just a couple of weeks before the bombs started falling two years ago, and I was interested to see that there are gold dealers on street corners there. It is part of their culture, and it’s part of Middle Eastern culture. In Mexico, many towns have basically pawnshops where they will buy scrap gold and silver. I’ve used such places to liquidate bullion and buy groceries. On a larger scale, a couple tubes of gold coins that would fit in any briefcase or purse could easily be turned into, say, a house in Argentina. You will find a facilitator in Argentina who would make the exchange happen.

TGR: But how do you protect yourself when you’re carrying around a briefcase full of gold bullion? I mean if you’re buying Buffalo coins fairly consistently, you probably have a reasonable store of wealth at this point, and to me that seems dangerous.

LJ: Well, first and foremost, you don’t tell anyone. [Laughs] So here I am telling people in this interview!

TGR: You stated it on your website long before this.

LJ: Yes, but, seriously, this is the first rule: security through obscurity. You don’t tell your neighbors; you don’t bring out that bar of gold at Thanksgiving and show everybody how proud you are of it.

For small amounts, if nobody knows about it, you’re not likely to have any trouble. If you’re a serious player, a segregated account in a facility that’s set up specifically for gold storage is a good idea. Some of the near-gold substitutes are also a good idea. I mentioned Perth Mint Certificates before; we like those. The Australian government runs a mint that’s an audited facility; they will store gold and silver for individuals. These certificates are transferable and they’re deliverable. If you get nervous about your gold, you can have them send you your gold via FedEx Corp. (NYSE:FDX). Or you can sign your Perth Mint Certificate over to someone else for paper currency, or whatever you want in exchange.

TGR: In the same Goldseek.com article where you mentioned your coins, you said: “The strategy called for is a more cash-focused version of our ‘buy only the best of the best’ (BOTBOTB) program. Buy nothing new unless you’re offered a great bargain in a solid company that can deliver significant new or expanding production.” Give us a quick overview of your more cash-focused BOTBOTB program.

LJ: What we’re saying is that we’re not in any hurry to have our portfolio fully invested at this point. We see a significant risk of correction in the very near term; yet we are very bullish on gold going forward. We see the second dip in the W-shaped economic slump coming, perhaps by the end of this year. We have already had some of the typical summer weakness. With these possibilities in mind, we don’t want to tell people, “Buy, buy, buy!”—not when there’s a very good chance they will be able to buy at better prices soon.

You want to buy right now only if you can look at something and say, “These guys have all their ducks in a row. Even if there is a correction, they have enough cash, they have the right property and they have the right people that they will proceed anyway.” If you see that in a company you want to own but don’t, then buying some of those shares may not be a bad idea. We could be wrong about the correction, so you don’t want to be completely out of the market.

There are good companies out there that I think will go higher from where they are now. But I already have shares in most of those, so I don’t want to buy more now. What we say to new subscribers in the newsletter is “Here are the ones to focus on.”

TGR: All right, what are some of the companies in your newsletter?

LJ: We like emerging producers or companies with discoveries in hand. An emerging producer that I like a lot is Medusa Mining Ltd. (ASX:MML; AIM:MML; TSX.V:MLL). It’s an Australian company that has quite a large portfolio of properties in the Philippines along a very prospective belt where there have been a number of discoveries. They keep finding new gold veins with great potential in the same property as their very high-grade producing Co-O Mine. Co-O is cranking out about 100,000 ounces a year, a significant producer, but they’re finding more gold at about the same rate as they’re mining it, so the asset is not depleting—a strong plus in an extractive business. They’re able to make money, and they have great discovery potential. I like that a lot. There’s underpinning value there. And I should say it would be safe for anybody reading this to assume that I own shares in these companies, because I do eat my own cooking.

TGR: Hopefully, our readers will consider you a gourmet. What are some other companies you are following?

LJ: One of the companies that I think we have spoken about before is AuEx Ventures, Inc. (TSX:XAU). This company is a project generator. It has multiple projects, most of them in Nevada, but also in a very prospective area of Argentina that’s pro-mining, and in Spain of all places, which is a better mining jurisdiction than most people appreciate. AuEx’s main asset is the Long Canyon Project in Nevada, a joint venture with a company called Fronteer Gold Inc. (TSX:FRG; NYSE.A:FRG). AuEx has 49%; Fronteer has 51%. We’re talking about AuEx rather than Fronteer because AuEx is much cheaper. Fronteer is a great company with other assets I do like a lot, but that’s a different play (partly a uranium speculation).

Long Canyon is just a peach of an asset; it’s a potential open pit, which is your cheapest method of mining, and for an open-pit resource, it’s very high-grade, more than 3 grams per ton gold. And it’s oxide material, which means you can heap leach the ore instead of the more expensive milling. It has all the characteristics of a highly profitable mine. They did a preliminary economic assessment, and the internal rate of return was something like 66%.

TGR: That’s well above average.

LJ: Fantastic numbers. The resource has doubled since that preliminary assessment, which will improve the project economics, and they continue to step out and discover more. They recently hit 10 grams per ton over 44.2 meters of mineralization; it’s just a peach of a project. AuEx is not particularly cheap today; if there is a market correction, these shares could easily go on sale at a great discount. But at the end of the day, they have a project that looks very much like Nevada’s next gold mine.

TGR: Any others?

LJ: One that I like, with a shorter fuse, is International Tower Hill Mines Ltd. (TSX:ITH; NYSE.A:THM), which is an Alaska-focused discoverer-explorer developer. Their primary asset is the Livengood Project, on land owned by the state of Alaska, intended to generate royalties to pay for the state’s mental health care system—so they have an ally in the government that really wants to see the project developed. That’s always a good thing for permitting and other purposes. The royalty is a cost, but it’s bearable. The project is huge. Depending on the cutoff grade, it’s almost 20 million ounces, but within that you’ve got 9 million ounces at a good open-pit grade.

There are lots of good things I could say about Livengood. But I mentioned a short fuse; the company has a portfolio of other assets that they’re spinning out into a new company. Shareholders of record at a certain point will get shares in the new company that will get the other assets and some cash to advance them. That should happen over the next month or two. In other cases where we have seen this kind of spinout, it has worked out very well for shareholders.

TGR: International Tower Hill is part of the Cordero Group. When we interviewed you last time, you talked about Fortuna Silver Mines Inc. (TSX:FVI; Lima Exchange:FVI), part of the Gold Group, which specializes in mining plays.

LJ: The group you refer to here is basically centered around Simon Ridgway. The Gold Group has a number of companies—Radius Gold Inc. (TSX.V:RDU), Focus Ventures Ltd. (TSX.V:FCV), Western Pacific Resources Corp. (TSX.V:WRP) and others. There’s a bunch of them, but the projects are all quite different.

In some ways, Fortuna Silver is similar to Medusa. It has a producing mine with a really big, high-grade vein that they could mine for many years, and they’re continuing to discover more resources in that project area. This is the silver-zinc-lead Caylloma Mine in Peru, and it’s another peach of a project—one that has 400 years of mining history and was once a cornerstone of the wealth and power of the king of Spain. It’s a cash cow that is going to continue cranking out cash for years. Different zones have different mixtures or minerals, but a significant portion of the value at Caylloma comes from the base metals.

We’re wary of base metals these days, but Caylloma has a very clean concentrate that’s actually in great demand. Smelters want Fortuna’s concentrate, because it’s pure enough to use as flux to mix with the concentrate that they get from other mines that isn’t so pure. They have negotiated very good terms with their smelter.

TGR: And then there is Fortuna’s gold-silver San Jose Project in Mexico.

LJ: Right. There’s where the big upside is. You have this cash cow with Caylloma that’s funding the work, and on the other hand, you have this new gold-silver mine that’s primarily silver. We like a gold lining to a silver story much better than a lead lining. It’s bigger too; San Jose is basically going to quadruple Fortuna’s production. And it’s already being built. We expect that to come into production next year and start adding to the company’s bottom line immediately.

There’s always a question you have about exploration companies that become miners, because these are very different skill sets. To discover something is one thing, but bring a mine into production is something very different. Fortuna is one of those rare companies that has shown it can do it. These guys are very good.

I believe that the technical risk of developing the San Jose Project is very low. The resource is there and there’s room to make it bigger, so you have cash flow, visible growth and a team that has shown it knows how to do things. I like it.

TGR: Where do you see gold finishing 2010?

LJ: Well, our company has been predicting $1,450 to $1,500 by the end of 2010. That was our call at the beginning of the year, so I want to stand by it. Right now, it may seem, “Well, gee, maybe it won’t; gold’s retreating.” But it is common for gold and the gold stocks to retreat in the summer, and it is common for gold to have a very good fourth quarter in the average year.

There are some people who like to try to calculate the correct price of gold, given supply and demand fundamentals. I believe this is all a little bit silly because the supply of gold is essentially infinite, as gold is not really consumed—most of the gold ever mined is sitting around in refined form in one vault or another. At the right price, it comes into the market. It’s just not a commodity that is bought and sold and consumed the way other commodities are, even silver.

The price of gold is really a barometer of fear. Given what we’ve said about the other dip in the “W,” our basic view is we’re still in the eye of the storm and we’re looking to head out into second half of the storm later this year and into 2011. As this becomes evident and fear rebounds, the consequences for gold should be very substantial. People think the economy is recovering and everything’s going to be fine, and that hope is going to get smashed. The level of fear produced is going to be even larger than in 2008. That will move gold significantly.

TGR: Do you have a forecast out on 2011?

LJ: No, we’ll probably do that at the end of the year.

TGR: Do you have some parting thoughts you would like to leave with us with?

LJ: I just want to specify again that I am bullish in the near term on gold, if you think of the end of the year as near term. But in the very immediate future, I am saying there is plenty of room for volatility. If you read this article and go out and buy gold Buffaloes today because they’re Louis James’ favorite, and gold goes falls off $30 tomorrow, don’t get mad. If gold drops in the short term, look at that as a buying opportunity.

TGR: Thanks, Louie. Interesting to talk with you, as always.

The Poor Have No Chance of Joining the Rich, the Game is Rigged

THE AGE OF MAMMON

“Financiers – like bank robbers – do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out.” – Mobs, Messiahs and Markets

As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920′s. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don’t find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political “fundraisers” to attend. You can’t be cheap when buying off your protection in Washington DC.

Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also. No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You cannot serve both God and Mammon. – Matthew 6:19-21, 24

It seems that Lloyd Blankfein, the CEO of Goldman Sachs, may have been overstating the case in saying his firm doing God’s work. With his $67.9 million compensation in 2007 and payment of $20.2 billion to his co-conspirators, Blankfein appears to be a proverbial camel trying to pass through the eye of a needle. This compensation was paid in the year before the financial collapse brought on by the criminal actions of Lloyd and his fellow henchmen. After having his firm bailed out by the American middle class taxpayer at the behest of his fellow Goldman alumni Hank Paulson, Lloyd practiced his version of austerity by cutting compensation for his flock to only $16.2 billion ($500,000 per employee) in 2009. I’m all for people making as much money as they can for doing a good job. But, I ask you – What benefits have Goldman Sachs, the other Wall Street banks, and hedge funds provided for America?

Never have so few, done so little, and made so much, while screwing so many.

In 2005, the top 25 hedge fund managers “earned” $9 billion, or an average of $360 million. One year after a financial collapse caused by the financial innovations peddled by Wall Street, the top 25 hedge fund managers paid themselves $25 billion, or an average of $1 billion a piece. For some perspective, there were 7 million unemployed Americans in 2006. Today there are 14.6 million unemployed Americans. While the country plunges deeper into Depression, the barbarians pick up the pace of their plundering and looting of the remaining wealth of the nation. Bill Bonner and Lila Rajiva pointed out a basic truth in 2007, before the financial collapse.

“On the Forbes list of rich people, you will find hedge fund managers in droves, but no one who made his money as a hedge fund client.” – Mobs, Messiahs and Markets

Ask the clients of Bernie Madoff how they are doing.

1920′s Redux

The parallels between the period leading up to the Great Depression and our current situation leading to a Greater Depression are revealing. When you examine the facts without looking through the prism of party politics it becomes clear that when the wealth and power of the country are overly concentrated in the clutches of the top 1% wealthiest Americans, financial collapse and depression follow. This concentration of income and wealth did not cause the Stock Market Crash of 1929 or the financial system implosion in 2008, but they were a symptom of a sick system of warped incentives. The top 1% of income earners were raking in 24% of all the income in America in 1928. After World War II until 1980, the top 1% of income earners consistently took home between 9% and 11% of all income in the country. During the 1950′s and 1960′s when Americans made tremendous strides in their standard of living, the top 1% were earning 10% of all income. A hard working high school graduate could rise into the middle class, owning a home and a car.

From 1980 onward, the top 1% wealthiest Americans have progressively taken home a greater and greater percentage of all income. It peaked at 22% in 1999 at the height of the internet scam. Wall Street peddled IPOs of worthless companies to delusional investors and siphoned off billions in fees and profits. The rich cut back on their embezzling of our national wealth for a year and then resumed despoiling our economic system by taking advantage of the Federal Reserve created housing boom. By 2007, the top 1% again was taking home 24% of the national income, just as they did in 1928. When the wealth of the country is captured by a small group of ruling elite through fraudulent means, collapse and crisis becomes imminent. We have experienced the collapse, while the crisis deepens.

Figure 4: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2007.

It’s Good To Be the King

The Wall Street oligarchs were able to accumulate an ever increasing portion of corporate profits by inventing securitization, interest-rate swaps, and credit-default swaps which swelled the volume of transactions that bankers could make money on. These products were originally introduced as a means for corporations to hedge their risks. Wall Street shysters chose to use their “creative” financial products to build the biggest gambling casino in the history of the world. They functioned as the house, siphoning off billions in profits, but then got caught up in the hysteria and placed billions of bets themselves. This resulted in the financial industry generating 41% of all business profits in 2007. From World War II through 1980, financial industry profits ranged between 10% and 15%. Simon Johnson explains the despicable hijacking that has taken place since then.

From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The original robber barons amassed huge personal fortunes, typically through the use of anti-competitive business practices. These well known titans of industry included Henry Ford, Andrew Carnage, John D. Rockefeller, and JP Morgan. They may have practiced questionable business ethics, but they did create wealth while benefitting the country as a whole. They introduced the automobile, provided the nation with steel, produced the oil that powered our economy, and brought order to industrial chaos of the day. It seems their fortunes were built by creating rather than destroying.

The disgustingly rich Wall Street wheeler dealers who live in Greenwich CT and NYC and summer in the Hamptons have created nothing. Their immense wealth has been created through draining the economic system of its lifeblood. Their financial innovations have created no lasting benefit for our society. Wall Street knowingly created no documentation (liar loans) mortgage loans, Option ARM loans, and subprime loans. You do not create products that beg for fraud unless you want fraud. The packaging of these fraudulent mortgages into CDOs and CDSs by Wall Street’s crime machine benefitted Wall Street only. Those who got the loans defaulted, lost the homes, and had their credit ruined. Wall Street financiers have lured the American public into debt with easy credit and a marketing machine geared to convince the average Joe that he could live just like the rich. Simon Johnson explained the phenomena in a recent article.

“Excessive consumer debt is an outcome of prolonged inequality – in trying to remain middle class, too many people borrowed too much, while unscrupulous lenders were only too willing to take advantage of such people.”

You Call This Capitalism?

Capitalism is supposed to be an economic system in which the means of production and distribution are privately owned and operated for profit; decisions regarding supply, demand, price, distribution, and investments are not made by the government; Profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses. The American economy is in no way a free market capitalistic system. It has become a oligarchic consumer capitalist society that is manipulated, in a deliberate and coordinated way, on a very large scale, through mass-marketing techniques, to the advantage of Wall Street and mega-corporations.

When you hear the Wall Street class on CNBC argue against tax increases for the rich, they hark to the fact that small businesses would be hurt most by the expiration of the Bush tax cuts. There are 6 million small businesses in the US, with 90% of them employing less than 20 employees. These are not the rich. The vast majority of these businesses earn less than $1 million per year. There are only about 134,000 people in America who make on average $2.5 million per year. There are another 600,000 people who make on average $760,000 per year. Out of a workforce of 150 million, less than 1 million rake in over $750,000 per year. These are not small businesses. They are the Wall Street elite, corporate CEOs and the privileged classes that control the power in NYC and Washington DC.

The following charts clearly show that perverse incentives in the US financial system have allowed corporate executives to reap ungodly pay packages, while the middle class workers who do the day after day heavy lifting in corporations have been treated like dogs. Considering the S&P 500, which measures the stock returns of the 500 largest companies in the U.S., has returned 0% for the last 12 years, the CEOs of these companies would slightly embarrassed paying themselves 400 times as much as their average workers. Not in the age of mammon. Big time CEOs are rock stars. Outrageous pay packages are a medal of honor in a world where humility and honor don’t exist.

Figure 6: CEOs’ pay as a multiple of the average worker’s pay, 1960-2007

Source: Executive Excess 2008, the 15th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy.

Figure 7: CEOs’ average pay, production workers’ average pay, the S&P 500 Index, corporate profits, and the federal minimum wage, 1990-2005 (all figures adjusted for inflation)

Source: Executive Excess 2006, the 13th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy.

The Depression that currently is engulfing the nation was 30 years in the making. The criminal Wall Street financiers are the modern day John Dilingers. They have mastered the art of stealing from the masses while convincing these same people that they should admire them because they are rich. This is the oddity about Americans as pointed out by Bill Bonner and Lila Rajiva.

“The poor genuinely believe the rich are better than they are. They are smarter and better educated. The poor even support low tax rates for the rich, as long as they have a lurking chance of joining them.” – Mobs, Messiahs and Markets

The truth is that the poor have no chance of joining the the rich. The game is rigged. The poor have admired the rich for decades. But, hard times have arrived. And they are about to get harder. The rich have armed guards to keep the poor at bay. They will need an army of guards before this crisis subsides.

Leonard Cohen sums it up perfectly in his song Everybody Knows:

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows
Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

What made America great is now Killing her!

INNOVATION

 

“Creative Destruction is Secular not Cyclical”

What made America great was her unsurpassed ability to innovate.  Equally important was also her ability to rapidly adapt to the change that this innovation fostered. For decades the combination has been a self reinforcing growth dynamic with innovation offering a continuously improving standard of living and higher corporate productivity levels, which the US quickly embraced and adapted to.

This in turn financed further innovation. No country in the world could match the American culture that flourished on technology advancements in all areas of human endeavor. However, something serious and major has changed across America.  Daily, more and more are becoming acutely aware of this, but few grasp exactly what it is.  It is called Creative Destruction. 

It turns out that what made America great is now killing her!

Our political leaders are presently addressing what they perceive as an intractable cyclical recovery problem when in fact it is a structural problem that is secular in nature. Like generals fighting the last war with outdated perceptions, we face a new and daunting challenge. A challenge that needs to be addressed with the urgency and scope of a Marshall plan that saved Europe from the ravages of a different type of destruction. We need a modern US centric Marshall plan focused on growth, but orders of magnitude larger than the one in the 1940’s. A plan even more brash than Kennedy’s plan in the 60’s to put a man of the moon by the end of the decade. America needs to again think and act boldly. First however, we need to see the enemy. As the great philosopher Pogo said: “I saw the enemy and it was I”.

THE  PROBLEM IS NOT CYCLICAL, IT IS SECULAR.

 

The dotcom bubble ushered in a change in America that is still reverberating through the nation and around the globe. The Internet unleashed productivity opportunities of unprecedented proportions in addition to new business models, new ways of doing business and completely new and never before realized markets.  Ten years ago there was no such position as a Web Master; having a home PC was primarily for doing word processing and creating spreadsheets; Apple made MACs; and ordering on-line was a quaint experiment for risk takers.  The changes in ten short years are so broad based that a whole article would be required to even frame the magnitude of the changes. What needs to be understood is that this is precisely what is destroying America. Let me explain.

The process of Creative Destruction is the essential fact of capitalism. It is what capitalism consists in and what every capitalist concern must survive within. America as the birth place of modern capitalism was rooted in a clear understanding of this process and the indisputable reality of survival of the fittest. 

“CREATIVE DESTRUCTION: … the competition from the new commodity, the new technology, the new source of supply, the new type of organization – competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives”.

Joseph A. Schumpeter 

From Capitalism, Socialism and Democracy (New York: Harper, 1975) [orig. pub. 1942], pp. 82-85:

In 1997 prior to the ‘go-go’ Dotcom era unfolding, America’s unemployment was less than half of what it is today at 4.7%.  At that time the US added 3 Million net jobs which reflected the creation of 33.4 Million new positions while obsolescing or cutting 30.4 Million old  positions. Job losses occurred in old vocations such as typists, secretaries, filing clerks, switchboard operators etc.  Hired were new occupations such as C++ programmers, web masters, database managers, network analysts etc. 

As the chart above illustrates however, the additions have fallen off precipitously while the job losses have stayed relatively flat. In 2009 job losses were 31.0M and only slightly larger than 1997 which would be expected with further internet application development. New job creation however was only 24.7M which is dramatically lower than the 33.4 in 1997.

The result is 40.8M people on food stamps in the US, as seen below.

This net creative destruction chart reflects closely the US economic output gap.

Employment levels at 58.5% are now near 30 year lows and do not show any signs of significant improvement. This is despite nearly $13T in artificial stimulus to restart an economy that appears to refuse to restart or unarguably is minimally a ‘jobless recovery’.

 

Once again Tyler Durden and the folks at Zero Hedge did an excellent analysis of the July unemployment numbers by correctly adjusting for shifts in workforce participation. It is surprising that no one other than Zero Hedge understands how to properly assess the monthly labor rate. Their analysis, using government BLS numbers, is shown below and reflects an unemployment rate of 14.7% adjusted for workforce participation.

 

Is it any wonder Christina Romer as head of Obama’s Council of Economic Advisors resigned the day before the July Non-Farm Payroll numbers were released, when she once again would have had to spin and justify the unemployment rate to the media?

ITS STRUCTURAL, NOT THE FAMILIAR CYCLICAL BUSINESS CYCLE

 

All the preceding graphics have been labeled with a December 1999 vertical bar. In every instance it shows a major cusp occurring near that point in time. The dotcom market bubble finally popped 3-4 months later. There are anomalies that create some distortions after this period, such as the explosion in both the residential and commercial real estate sectors that temporarily fostered massive hiring from brokers, agents, contractors, trades personnel, developers, etc. Much of this has subsequently been pulled back. 

 

WHAT HAPPENED?

The short answer is the US is no longer innovating fast enough. Innovation needs to sustain its exponential growth to absorb the creative destruction job losses.  It no longer can. Mathematicians would have argued some time ago this was a certainty to happen, but precisely when this would occur however was the unknown.

We have been cutting Research and Development expenditures in the US dramatically. I warned of this in 2009 in my article: America, Innovate or Die! It has only gotten worse since.  Corporations may be reflecting minor cuts on their balance sheets in this area but it obscures the fact that the money is increasingly being re-allocated and spent offshore. Jobs and innovation follow R&D.

The Financial Times in the UK featured this global analysis to the right, which to the best of my knowledge never saw the light of day in any US publication. The rate of growth in research papers in the US is not keeping up.

Total researcher share is shrinking and falling further behind as the chart below demonstrates.

 

 

Even more alarming is the number of US patents being filed. Other than IBM and Microsoft the numbers are stunningly small. It needs to be fully appreciated that both IBM and Microsoft now have large numbers of major world class research facilities outside the US and the US filings numbers below are likely reflecting this (see America, Innovate or Die!).

 

 

“The numbers of engineering graduates in China and India far outpace that of the United States. In China, it is 600,000; in India, 350,000; in the United States, 70,000, and many of these are foreign students who, more likely than not, will be returning to their home countries.”

Senator Edward Kennedy  — 10-25-05 

 Testimony – Senate Record

 

Let me relate a personal story if I may. In the early 90’s I was a Vice President of Engineering for a S&P 500 corporation in Massachusetts. This engineering facility in Massachusetts consisted of over 900 engineers supporting an enterprise with 28 facilities and over 10,000 employees. Today it is all gone. The towns in the immediate area of this enterprise also had major facilities of two other S&P 500 corporations. They are also both gone. There were companies in Massachusetts at that time by the name of DEC, Data General, Prime, Wang to name but four, that employed hundreds of thousands of highly skilled personnel. They are likewise gone. So where are the jobs to replace them?

Communities in this area now reflect those who have temporarily found jobs as a result of the over building of retail stores and malls during the last ten years in almost every available piece of land that could conceivably be built on. I walked into yet another Home Depot and found one of my former employees working in the electrical department who happened in the ‘90s to be one of the world’s best power supply design engineers. He told me there was one other with him from his old department. Both as I recall had Master’s degrees in electrical engineering.

The new technology in the area is now Bio-Tech. These new Bio-Technology corporations however only employ in the 5 and 10 thousand range of employees. Not the 100s of thousands that the four corporations I mentioned above once did.  These Bio-Tech players additionally have an extremely high percentage of Master’s and PhD level employees. What about the high school and/or college grads?  Few need apply. I personally see this demographic lined up for Dunkin Donuts application forms each morning while relaxing after my morning jog. More also out of work PhDs due to reduced teaching positions is not the solution. This is the state of affairs in R&D that our politicians don’t see nor fully comprehend.

IS IT GOING TO CHANGE?

I told you the above personal story as a way of leading into one of my primary goals in the early 90s as VP of Engineering of this particular operation. It was something called Cycle Time reduction. This is the process of shortening the time to market of products from concept to revenue generation. The chart to the right shows a graphical representation of this.

We were so successful at reducing this through computerization such as the implementation of CAAD-CAM-CIM, JIT, Kanban, TQM and a host of other acronyms that we were at levels approaching 80% of the following years revenue being forecasted to be derived from products still on the engineering concept boards. Margins and room for error were absolutely razor thin. The strategy was like the old three legged race at the community picnic. The faster some tried to run the more they tripped themselves up. It was a strategy where speeding up the process left unprepared competitors with a fatal competitive disadvantage. The fight for market share was intense. Though I had moved on, when the internet arrived and supply chain management was reinvented and overlayed onto the previous advancements, the enterprise was rapidly shuttered and moved to the far east. It is one, of no doubt, thousands of similar stories in America.  America’s ability to innovate and adjust to that innovation killed this American based organizational unit. The highly skilled, intense and motivated employees innovated themselves out of a job.

THE LESSON IS THIS

 

America used the rate of innovation as a foundation for its competitive advantage. Like the tortoise and hare however, the US can no longer maintain this rate and hence the advantage has temporarily shifted to the previous followers who are presently less impacted. America must once again innovate and change but now in a manner more fitting for the realities of this new decade.  

The product today is no longer the widget that comes off a manufacturing line and is stuffed into a box to be shipped to distribution centers for sale. The product today with short product life cycles and hundreds of new products is Intellectual Capital. Intellectual Capital is the knowledge of knowing how to do something. How to design and build something – not the actual ‘doing of it’. Until America forces corporations to account for Intellectual Property properly, the multi-nationals will continue to fully exploit this tax loophole. Even worse, America’s innovation will continue to be used against her. The cost of manufactured products today are less and less in labor & production and increasingly in materials and innovation. Capital is likewise shifting to be more intellectual versus financial. A major overhaul of accounting standards must be driven by our legislators or it will not be changed. It is not to the multi-nationals advantage to allow such a debate and shift to occur.

Unfortunately our law makers allowed this American asset to leave the US unrestricted, untaxed and without recourse. It was America who knew how to design and build a PC. It is fine for the product to be built where it is cheapest as part of free trade, but only when the cost of the knowledge or Intellectual property is priced in. Amortization of research & development must include the Intellectual property value as well. The Intellectual Capital was an American asset, not a corporate asset which left. Massive royalties should now be flowing to the US taxpayer today which would offset many state and local services cuts. Instead we are left with underfunded corporate legacy pension plans that the government in the years to come will no doubt pick up the tab for by likely hyperinflating the currency. Though it is too late to revisit the horrendous US failure of public policy in the past, it is not too late to prepare for tomorrow.

A STARTING POINT FOR CHANGE – Gordon’s Top Ten

 

As I said in the beginning the US needs a bold new “Marshall” plan to fight the new destruction of creative destruction. Here is a starting point for public debate:

1 – If we can spend $165B bailing out AIG, then we can spend $100B (4 years of college @ 50K/year X 500,000 students) and guarantee everyone in America a college education to compete in the 21st century. Parents will start to spend immediately instead of presently being almost financially paralyzed with skyrocketing education costs.

2- Obama says we need to be leaders in Energy. OK. Where are the programs? Where are the 50,000 new university teaching and research positions ( 50,000 X 75K = $3.8B)? At $3.8B this is a rounding error compared to the banks TARP program.

3- 99% of all jobs in America are created by small business with less than 500 employees. Stop treating them like they are last on the ‘to help’ list after the banks, financial institutions and S&P 500 but first on the taxation list. S&P 500 paid almost net zero taxes, reduced US hiring, yet received the bulk of the governments bailouts. Small business is the golden goose that every administration seems determine to cook. What has the government done for small business other than burden them with Obamacare and the potential removal of the Bush tax cuts (most small business are directly affected proprietorships)? If you can’t immediately recite what the government has done to help small business as THE US employer (versus what they have done for the bank and financial lobby), then you understand the problem.

4- The number of Government employees, in addition to their salaries and benefits (federal, state & local) can best be described as out of control. According to a new study from the Heritage Foundation, U.S. government workers earn 30 to 40 percent more money than their private sector counterparts on average. So, in essence, the ‘servants’ make substantially more money than the taxpayers who employ them. Isn’t the system great? In fact, according to the study, if you add in retirement and health care benefits, the average federal employee now earns nearly twice as much as the average private sector employee.

5- Make Social Security and Medicare financially sound so Americas can believe and budget that it will be there for them. The public will spend and invest if they know they have a nest egg that really exists. The government is fooling no one. Kids learn that Social Security and Medicare is unfunded before their college freshman year today.

The stark reality of the shift from defined benefits to contributory benefits over the last decade is just now sinking in with the US consumer. They now have no retirement like their parents had. Retirement savings is something when added to college costs is leaving them frightened. Worried people don’t spend money and when the economy is 70% consumer spending you have an economic crisis.  Political denial and the government attempting to paper it over with policies of extend and pretend are misplaced and will make the inevitability even more difficult to effectively address.

6- When did the American people decide to fund military operations in over 130 countries around the world? With 40.8M people on food stamps, something is seriously out of balance here but there is no public debate thought to be required by either party.

7- The US has no full scale strategic growth programs being initiated by the present administration. We have only financial stimulus or austerity programs. There is a big difference that seems wasted on Washington.

8- Washington and the lobbyists that control it have taken control of our government. Obama campaigned to stop earmarks which ranged in the area of approximately 10,000 annually prior to his presidency. In his first year they increased to the 11,000 range. This is not the change he promised as more pork increasingly flows.

9- For those that actually read it, Obamacare is not a solution for healthcare. It is a stealth income tax we will all soon get hit with. The Dodd-Frank Act is not a fix to what caused the 2008 financial crisis but rather is the most dramatic shift in centralized US government planning and control since the 1930’s. Both these bills were over 2000 pages compared to landmark bills historically being 25 – 45 pages. Indications are that few of our elected representatives actually read either of these documents. They simply voted party lines. As Sarbanes-Oxley dictates, CEOs must sign their corporate 10-Q reports to the government and are liable for it. It is a felony not to. Every elected official should also sign that he or she has personally read the entire act prior to being allowed to vote on it or it likewise will be a felony.

10- The Supreme Court recently over-turned major elements of the Campaign Contribution Reform bill. Washington and the media have now gone completely mute on this subject as politicians scramble for mid-term campaign money for media expense coverage. Maybe our elected officials should vote with the same urgency on this matter as they are presently on giving billions of ‘candy’ away almost daily to every financial disruption, state budget problem, unemployment benefit problem or sign of increasing housing default and foreclosure rates during this run up to the fall elections.

 I could go on, but I think you get the message. America is afraid to be bold! We have no strategy, no plan, no funding and no leadership! In my days as a VP of Engineering you were fired for just one of these shortfalls.

Maybe we the public need to start doing some firing!

“The biggest political change in my lifetime is that Americans no longer assume that their children will have it better than they did. This is a huge break with the past, with assumptions and traditions that shaped us.”

Peggy Noonan: America Is at Risk of Boiling Over

Feature Wall Street Journal Op-Ed article – 08-07-10 

For the complete research report go to: Tipping Points

Sign Up for the next release in the Preserve & Protect series:  Commentary

Gold and Silver Protection From Economic Cancer.The inminent destruction of the dollar based assets

History is being made. The American public has never been no nervous, perhaps fearful of something dreadful and imminent. The global monetary system is crumbling. The typical stimulus has failed to jumpstart the USEconomy. The 20 months of near 0% short-term official interest rate has failed to revive the moribund US housing market. The phony FASB accounting rules has failed to accomplish anything except a stay of execution for the big US banks, which do not lend much. In fact, the US banks are largely dead entities showing enough life for to receive USGovt largesse aid. Witness the failure of the US financial sector. Witness the climax chapter of failure for the Fascist Business Model.

The US banker brain trust, which possesses only a modicum of economic wisdom, analytic prowess, or foresight, finds itself in a desperate corner. Their talk of an Exit Strategy in the last several months was summarily dismissed as nonsense, propaganda, and wishful thinking by the Jackass here on a consistent irrefutable basis. The US Federal Reserve is ready to embark on the second round of Quantitative Easing. The monetization of US$-based bonds of many types will be done on a second initiative, on cue. Here is the irony, the stupidity, the insanity, the recklessness, the tragedy. What failed, they will do again, maybe even bigger! At risk is global confidence and trust, hardly a zero cost item.

The urgency of the QE2 Launch will be made quite clear by the Hologram Leaders occupying positions of power, after they digest the latest housing data. The July existing housing sales fell by 27.2% in a single month. The July new home sales fell by 12.4% in concert. Few analysts operating with USGovt service badges anticipated that the empty-headed home buyer credit of $8000 would rob forward sales and leave an autumn vacuum in home demand. It did. Check out the silver price, which touched $19 today on Wednesday. And at $1240, the gold price is poised to make new highs any day. My near-term targets are $23.5 for silver and $1300 for gold. Energy prices are soft but precious metals prices are strong. Think heterogeneity!

The QE2 is pure cancer within the monetary body. Foreign creditors are walking away, making distance from the USTreasurys, and especially the USAgency Mortgage Bonds. The USFed and USDept Treasury are therefore being isolated. Their USTreasury auctions are often disguised failures, but with the benefit of a falling US stock market, the bond demand has risen. The cancer of QE2 cannot be emphasized enough. My forecast a few months ago was for NO Exit Strategy implemented. The USFed balance sheet will NOT be reduced. Interest rates will NOT be permitted higher. My forecast was for an embarrassing About-Face in policy, and a hasty desperate announcement and implementation of a powerful new round of Quantitative Easing. We are seeing it unfold, exactly as forecasted. In fact, my call is for ZIRP and QE, the cancerous twins of Zero Interest Rate Policy and its Printing Pre$$ twin, to become permanent residents of the White House and USFed, an incredible pox, blemish, and badge of shame to the nation. The twins scream rot and ruin.

These shills and carnival barker policy makers need a fresh new education. The two most important indicators in my book are continued home foreclosures and renewed rising jobless claims. The rest of the forecasting challenge is remarkably easy. The nitwit barkers prefer to focus on inflation expectorations, encouraged by the wondrous USTBond rally. What nitwits, unable to read simple signals! What charlatans, pretenders to the thrones! What heretics, ignorant of economic principles! See the August special report that criticizes, exposes, and castrates the clueless cast of American economists. The latest revelation was the $120k payment to Frederic Mishkin for writing about the “Financial Stability In Iceland” in March 2006 whose title was changed to “Financial Instability In Iceland after Iceland collapsed. Mishkin did no research, almost admitted as much in an ugly exposure to these clowns operating in economist suits. See the Zero Hedge video (CLICK HERE). My contention is that Mishkin has no economic skills, and does not understand what money is, just like many on the Federal Reserve Board, whose misguided brain stems extend to most regional governors. Mishkin appears in this instance to be a bonafide whore. One exception might be Hoenig, who has warned of the perils of new monetary expansion. He recently said, “I wish free money was really free, and that there was a painless way to move from severe recession and high leverage to robust and sustainable economic growth, but there is no shortcut.” Hoenig of the Kansas City Fed has emerged as an ideological rival to Bernanke. Hoenig might soon need to be ousted for lack of patriotism and obedience to the fascist throng.

Let me make a paradoxical point: THE UNITED STATES WILL BEGIN A RECOVERY WHEN THE TOO BIG TO FAIL BANKS ARE PLOWED UNDER. They are blocking remedy and restructure. They are resisting liquidation of badly impaired assets. They do not lend money, as their credit engines are broken, since they are dead entities that occupy space in the US financial sector. They cast large long shadows. Their removal from the scene of the crime would surely light a fuse of credit derivative accidents, the likes of which the world has never seen. Let’s try THAT experiment!! Why the leading economists cannot see that credit is down since the big banks are dead is beyond me. One might regard the conclusion is too ugly to contemplate. The entire US financial chapter since 1996, when Greenspan proclaimed irrational exuberance had taken hold of the land, has been ugly, perverse, and ruinous. The nation had its chance to right the US Ship of Financial State in 1987, and instead chose to produce, nurture, encourage, justify, and bless as good a sequence of asset bubbles, while the industrial base was dispatched to Asia. The USEconomy thus replaced legitimate income with grandiose debt sources, followed by national insolvency.

GOLD & SILVER DIVERGE FROM COMMODITIES

The impact from the cancer and desperation of QE2, the next undermine of the USDollar (and other major currencies), can be seen in the price of Gold. Better yet, watch the price of silver, whose price movement has actually been leading gold upward. This week, for the first time in perhaps a decade, silver defied the industrial metals and economically dependent energy sector. Silver is money. Both copper and crude oil fell in price, but silver rose strongly. By the day’s end, gold was pulled up by silver. And this happened on a week that features options expiration, which usually sees a strong naked short pounce by JPMorgan, of course to make America strong and liberty exportable. Witness the beginning of outright visible lost control by the syndicate.

Watch the Gold/Oil ratio, which is poised to rise noticeably. Gold is the commodity king, since money. The galloping recession will take down the crude oil price, as demand falls. The natural gas price fell 3% just today on Wednesday. Hedging against the USDollar risk aside, the energy prices have been weak. By contrast, the gold price has risen from direct demand in response to monetary system risk and lost confidence in that monetary system. The global revolt against the USDollar continues quietly. The government bonds are gradually being considered trash backed by yet more bad paper dispensed by government approved printing houses. My analysis has long pointed to the advantages of silver over gold. Gold fights the political wars, but silver rides in on a shiny white glowing horse to win most gains. The supply factors favor silver. The demand factors favor silver. The shortage is acute for silver.

Again, basic economic thought process not within the mental caverns of US economists. The desperate action to launch QE2 will be quite evident in the coming weeks. It will even become a national priority. The bankers and politicians will rush to destroy whatever credibility remains in the USDollar, or any fiat paper currency. The challenge to banking leaders will be to conceal their desperation and panic. They have had no options or alternatives for almost two years, now painfully evident. The impact of the launch will be extremely damaging to the prestige of the USFed in general and Chairman Bernanke in particular. He has not understood much of any events, surely has proffered a string of errant views and obtuse forecasts. Witness the discredit of the central bank franchise system. Fiat paper money is dissolving before our eyes. Notice the assaults on sovereign debt in Europe, a trend which will hit the US shores, all in time. Economists do not expect it, since the American bankers possess the Printing Pre$$. They will be blindsided by Gold, which pulls the carpet from under the US$-based foundation inside its very structure. The Gold bull market will outlast the USTreasury Bond bubble run. The key word to be heard in the next few months will be CONFIDENCE, as in the absence of it when viewing the US financial helm.

The Powerz in charge will choose inflation over any combination of reform, restructure, and replacement of the helm. A recovery could have possibly been in our grasp, maybe in the future after much pain from adjustment. Unfortunately for the bankers in unchallenged power, the respect, prestige, and faith in the US Federal Reserve will fade like a sea mist after the QE launch. Its christening will be done in deep shame with a bottle of acid. The level of respect is approaching rock bottom, the lowest in decades. Even Alan Greenspan expects slippage and sputters as the housing market resumes its powerful decline. The next recession for the USEconomy could very easily result in a USTreasury default. Scenarios for precisely such a default are mapped out in the August Hat Trick Letter.

IMMINENT GOLD & SILVER PRICE MOVES

Gold & Silver are entering the most favorable season of the year, autumn. Big gains should be expected. Signals are omnipresent for substantial price gains. Shortages exist and are profound. Demand is on the strong rise on a global basis. Lost confidence and faith in the fiat paper system is slowly vanishing. It would be nice to see the investment community add to positions and put on new positions before the breakout, not afterwards, and be more successful. The return of the USEconomic recession and the simultaneous QE2 Launch will mark a major turning point for gold & silver. Fear is on the rise. The precious metals offer an alternative to conventional nutball strategies, a successful one. Check out the track record for gold, the best asset in the 1990 decade. That fact is not mentioned or cited much by the financial press networks. Their sponsors object.

MANY SIDES OF MONETARY CANCER

Cancer is a strong word. It conjures up images of internal broken functions, nasty growths, blockage of organs, twisted lives, pain, and death. Yes, that sounds right for describing the USDollar and its flagship the USTreasury Bond, with the accompanying destroyer in Fannie Mae. The word cancer fits perfectly. It has brought a removal of US industry. It has brought a wave of bond fraud centered upon mortgages. It has brought endless war, paid by foreigners. It has brought insolvency to US households. It has brought insolvency to the US banks. It has brought a tumor of REO homes seized by foreclosures and put the US bank balance sheets. It has brought a bloated wrecked USFed balance sheet. It has brought chronic $1.5 trillion USGovt deficits. It has brought a mass of Food Stamp recipients. It has brought Wall Street control of the USGovt finance ministries. It has brought a Black of Hole of tainted money. It has brought diverse toxic bonds. It has brought blockage of any independent audit of the USFed assets or activity. Yes, that qualifies as the many sides of cancer.

Consider the next new cancerous faces of the Quantitative Easing. They new policies and features will be so ugly as to reshape the entire American landscape. They will do to the US financial and economic pastures what the Gulf of Mexico oil volcano did to the Southern Shores. These concepts are covered in the August issue of the Hat Trick Letter in greater detail. They are bizarre complicated concepts. They strike dead the heart of US capitalism, and offer a unique brand of fascism and collectivism as a result, with an overtone of desperation. They paint a path toward systemic failure. At the end of that bitter road and death march is the USTreasury Default event, forecasted by the Jackass in September 2008. It earned ridicule, but soon will earn respect, like several other important past forecasts. The path was clear almost two years ago that the US banking system died that month. The obituary cited Lehman Brothers, Fannie Mae, and American Intl Group as pall bearers. The banking system death is undeniable to the enlightened. It will soon be clear enough to the masses after the next leg down in housing.

1) Stiglitz urges another USGovt stimulus program. The last one was hollow. The next should be lackluster and meager, but maybe more on the mark. True reform and broad liquidations are pre-requisites, as they will not be done for preparing the economic topsoil. Bankers will block it. Expect USGovt “beans & rice” handouts rather than conditions for job creation. They should really try capital expenditure immediate writeoffs and job creation tax credits instead, with a slew of obtrusive federal regulations swept aside. Too much capitalist wisdom with such ideas. More ineffective wasteful federal programs and misdirected altering of parameters on the control panel will only aggravate the effect of the QE2 Launch, a typical preface.

2) Former Treasury Secy Rubin argues against a large scale stimulus plan, and instead for deficit reduction. This economic Rasputin presided over the removal, lease, and sales of the national gold treasury. He led the deregulation movement that opened the door to profound bond fraud. He sat on the Citigroup board when it expanded recklessly into many domains, resulting in the wreckage of the corporation. That qualified him to serve as mentor and chief puppeteer to Geithner and Summers, who run the USDept Treasury and White House Council of Economic Advisors. Clearly, Rubin has a different agenda. A constant state of sluggishness might work best for Rubin. He advocates deficit reduction as his main priority, and proclaims a goal of restoring confidence. The nation is way past deficit reduction concepts, but should focus rather on collapse avoidance. Confidence can be restored, and better economic performance enabled, only if the current Elite banks are plowed under, much of their impaired assets are liquidated, Goldman Sachs is removed from control of the USDollar altogether, and stern prosecution of colossal criminal bond fraud occurs. That would produce confidence.

3) QE2 will be more cancerous than QE1, as full dependence upon monetary inflation will come. The official interest rate cannot be reduced. QE2 will produce three major effects, all ruinous. All debt is subject to coverage by new money, all to be eligible. Next comes hyper-inflation, as confidence in all things paper evaporates and a great tipping point is breached. The arrival of QE2 will produce three major effects. A) The reliance upon new money growth to monetize rapidly growing debt in the US financial system will undermine all things US$-related. The continued artificial support of the USTreasury Bonds will transfer risk to the USDollar. B) Whatever respect and prestige in the USFed will vanish quickly. The bravado of helicopter drops will seen hollow, amateurish, and invite mockery in the open among respected brain trust. C) The smartest people in the room will begin to declare that the current global monetary system is irreparably broken, and that past and future response, even if amplified, will be doomed to fail. We are on the doorstep of hyper-inflation.

4) The FDIC will soon launch what could grow into a vast securitization initiative. It is better described as the QE2 from the rear guard, not well noticed. Since broke, the FDIC has resorted to selling packaged credit assets from failed banks in order to raise cash, new securities with USGovt guarantees. Apparently, viable banks are harder to find for buying much of any assets. The FDIC two years ago served as an investment banker harlot for Wall Street acquisitions. Then it became a matchmaker, finally a liquidator, now a bond issuer. All the while the Deposit Insurance Fund runs more negative each month. Be sure that the Printing Pre$$ of monetization is behind the scheme, no longer well disguised, since the FDIC is so closely aligned with the other engineers of bond management within the USGovt (see Fannie Mae). The FDIC bond securities are more monetization.

5) Mortgage relief might be the destination for the next mammoth monetary expansion. The StLouis Fed was permitted to leak the story. James Bullard of the St Louis Fed wrote a breif white paper entitled “Seven Faces of The Peril” in he urged the USFed should immediately restart the purchase of USTreasurys if the deflation scenario takes deeper root, as in QE2. He correctly concludes the high risk of a Japanese-style deflationary outcome in the United States. Next came the speculation by both Morgan Stanley and Merrill Lynch in their concurrent release of analyst reports. They surmised that Fannie Mae and the Federal Housing Admin might be preparing an imminent launch of broad sweeping initiative. The proposed plan would feature an instant automatic refinance program for troubled mortgage loans. It would take millions of borrowers to current market rates overnight. It would stop short of reducing the loan balances of under-water mortgages, those suffering negative equity. In the process, $46 billion of consumer savings per year would be created, from basic reduction of monthly payments.

6) The loan modification pathways will possibly be expanded, maybe meaningfully. Operations have expanded whereby fraudulent home loans have been warehoused in Fannie Mae, under the USGovt roof and aegis for two years. Even the bankers might give pressure to revamp home loans in a skein of modification plans, in reaction to widespread non-payment from strategic default. A major challenge must be dealt with. They must avoid the close examination of massive mortgage bond fraud for at least $2 trillion on home loans. Such scrutiny might uncover a multi-$trillion Fannie Mae clearinghouse of fraud that links several major fraud schemes. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to the failed fat duo Fannie & Freddie, pledging an unlimited credit line. The sewage treatment plant will surely devise more clever projects to handle the toxic waste, since very large liquidity plumbing is promised.

7) QE2 will feature Fannie Mae rental homes, a new vibrant toxic business. Except a major blemish will build further, as defiant non-payment of mortgages will flourish, from strategic voluntary defaults. Look for Fannie Mae to gather in hundreds of thousands, even millions of broken mortgages. They will attempt to build a business subsidiary of the most queer type. An ulterior motive is to bail out big banks but not reveal doing so. A desperation is sinking in with USGovt proposals, perhaps in direct response to open fear of civil disobedience. Consider that 250 thousand Bank of America mortgage holders are paying nothing on self-driven strike actions. My forecast made in 2004 and 2005 was for the advent of a bizarre perverse Fannie Home Rental program. Now we see people forfeit title to their homes, lose their equity, but remain in the same home as renters making small monthly payments. The housing market would prevent the dumping of properties on an already bloated housing market. The Fannie Mae investors could have earned a dividend from rent payments, except that FNM stock issues were de-listed. Homeowners are increasingly not making monthly payments, daring the bank to foreclose on the property, challenging them to produce the property title. In many cases, the banks cannot produce the title, because the MERS database is a nightmare of spun spaghetti. The courts have ruled MERS has no legal standing in any foreclosure displacement of occupants. Rumors swirl with gathering strength and persistence. The USGovt might soon take over all failing home mortgages, and have their titles signed over to the USGovt. Then people would lease the properties to the people who occupy them according to pay scales, in collectivist fashion consistent with the presidential ideology.

Gold and Other Investor Protections Against a Double Dip Recession

The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real. Indeed, with each passing week, and with every new economic report that comes out, the possibility that the U.S. economy will backslide into a double-dip recession seems to become more of a probability – or even a likelihood.

“For me a ‘double-dip’ is another recession before we’ve healed from this recession [and] the probability of that kind of double-dip is more than 50%,” Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor’s S&P/Case-Shiller home price indexes, told Reuters. “I actually expect it.”

Will That Be a Single, or a Double?
Technically speaking, a recession is defined as two consecutive quarters of economic decline. A “double-dip” recession occurs when one recession is separated from a second by a short period of GDP growth.

In our current circumstances, however, GDP may not be the only factor that determines whether the country makes a return trip to recession-land. In fact, despite the U.S. economy having enjoyed four consecutive quarters of positive growth since July 2009, the National Bureau of Economic Research (NBER) – the official arbiters of U.S. recessions – have yet to classify the country’s latest downturn as done.

And for investors, the technical definition may not matter. In this three-part series, part of Money Morning’s ongoing look at defensive-investing strategies, we’ll explore three safe havens from the country’s current plight – whether a double-dip downturn is declared or not.

If nothing else, it’s time to take precautions. And there are three easy ways an investor can brace for a double-dip recession. Over the next several days, in each installment, we’ll focus on one of these strategies. Simply put:

Part I: Buy Gold.
Part II: Go Global.
Part III: Acquire U.S. stocks that are “recession proof.”

Why even bother with such precautions?

Just look at the facts.

The world’s No. 1 economy lost 8.4 million jobs during the recession that got its start in December 2007, making it the worst national downturn since the Great Depression and the biggest loss of employment since the end of World War II.

The U.S economy shrank a larger-than-expected 4.1% from the fourth quarter of 2007 to the second quarter of 2009, the Commerce Department recently reported. Household spending fell 1.2% last year – the biggest decline in 67 years and double what was previously believed, the government said.

Like its 1930s predecessor, the 2007 downturn has left the country psychologically scarred: More than seven of every 10 Americans say the country is still stuck in the recession, a recent Bloomberg National Poll concluded.

While 70% of the country says that joblessness remains the key problem to fix, that early July poll also found that Americans are highly skeptical of the Obama administration’s stimulus program, and are fearful of additional spending. Indeed, more than half of those polled say the U.S. deficit is “dangerously out of control.”

It’s All About Jobs
If the consumer caution that leaps from such sentiments isn’t the perfect recipe for a double-dip downturn, consider these additional ingredients: The unemployment rate remained unchanged at 9.5% in July, as the economy shed 131,000 jobs. What’s more, the number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week to 484,000 – the highest level nearly six months.

This information only corroborated what U.S. Treasury Secretary Timothy F. Geithner and U.S. Federal Reserve Chairman Ben S. Bernanke have already acknowledged: Unemployment will shackle economic growth for years to come.

“Unemployment is the most important problem we have right now,” Bernanke told the House Financial Services Committee. He expects the unemployment to remain above 7% thoughout 2012.

Yet the solutions Bernanke has offered to keep the economy from crumbling have created a separate obstruction to growth – and a fearful paralysis among the all-important U.S. consumer.

The Fed has “pushed monetary stimulation to the highest point in American history” and “tripled our balance sheet,” Bernanke said.

Unfortunately, unlike previous pump-priming Fed forays, the present stimulus hasn’t jump-started job growth.

“The economy is muddling through,” Ethan Harris, head of North America economics at Bank of America-Merrill Lynch Global Research in New York (NYSE: BAC), told Bloomberg News in a recent interview. “We’re probably not going to see a really strong number for a while. We need to see some pickup in job growth.”

A Slow-Growth to No-Growth Economy
So far, the sovereign debt crisis in Europe has been the only thing that’s saved the dollar from the kind of percipitous decline it experienced in 2007 and 2008. That’s because investors viewed the greenback as more of a safe haven than the European euro – despite the increasingly rickety state of U.S. finances.

But with a national debt that totals about 60% of gross domestic product (GDP), it won’t be long before the United States gets infected with the same virus – and experiences a sovereign debt crisis of its own. In fact, the government’s gross debt of $13.3 trillion already equates to about 91% of GDP.

Indeed, like a high-performance engine that’s been wound up way past the redline, the U.S. economy is threatening to sputter, and may actually stall. After zooming along at superspeedway-like 5% in the 2009 final quarter, U.S. GDP advanced at a slower 3.7% pace in the first three months of the New Year – before skidding to a much-slower-than-expected 2.4% pace for the second quarter.

That stumble prompted economists to slash their U.S. growth forecasts to 2.3% (from 3.3%) for the current quarter, and to cut their full-year targets to 2.9% for 2010 and 2.6% for 2011. As we’ve already seen, however, those projections are overly optimistic, ignoring the very real possibility of another full-blown downturn – the textbook definition of a double-dip recession.

The stock market bull market that began in March 2009 appears to have run out of steam, as both the Dow Jones Industrial Average and Standard & Poor’s 500 Index are down this 1% and 3%, respectively, since the start of the year.

And that means it’s no longer advisable to stand pat. Investments exist that can meet the dual objectives of creating a safe haven from an economic maelstrom – while at the same time providing investors with some major capital gains.

Gold is one such investment. Let’s take a closer look.

Step One: Buy Gold
Face it, the U.S. dollar is in deep trouble.

The anemic economy recovery has forced the Fed to continue its stimulus measures at the expense of the greenback. The Fed’s latest announcement – that it would reinvest the proceeds from expiring mortgage-backed securities into longer-term U.S. Treasuries – is just the latest piece of evidence that the dollar is doomed.

In fact, the consumer price index (CPI) rose 0.3% in July, it’s first increase in four months, and a move that signals a marked shift in inflationary expectations. Producer prices rose 0.2% for the month.

In the long run, given the recent actions of spendthrift governments like that of the United States, inflation is the likeliest possible outcome. And gold offers investors a tangible asset that has inherent value, compared to a fiat currency that’s only as good as the word of the government that issued it.

There are numerous ways an investor can stock up on the yellow metal – the most straightforward of which is to own coins or bullion.

“There’s nothing like holding a gold coin or gold bar in your hands. This is the oldest and most direct form of gold ownership,” said Peter Krauth, a well-known commodities expert who is also the editor of the Global Resource Alert. “Bullion dealers are the easiest way for most investors to buy smaller quantities of gold. Do some homework to check them out before you buy.”

Most dealers charge premiums of about 3% to 6% above the “spot” price for physical gold. But you’ll pay much more if you wait for the economy to tank before stocking up.

“When things get hairy – as they were back in November 2008, in the depths of the global financial crisis – premiums can go up by three to five times, with some dealers charging 10% to 15% above spot,” says Krauth. “Obviously, you’ll be better off buying gold on price dips and under calmer circumstances.”

A few dealers that have an established reputation are:

•Kitco.com: Premiums are fair and the selection is usually quite good. They have offices in both New York and Montreal.
•Asset Strategies International Inc. (assetstrategies.com): This dealer is located in Rockville, MD. Asset Strategies also offers gold storage options outside U.S. borders.
•Camino Coin LLC (caminocompany.com): Burlingame, CA.
•American Precious Metals Exchange (apmex.com): Oklahoma City, OK.
•The Tulving Co. (tulving.com): Newport Beach, CA
•Gainesville Coins (gainesvillecoins.com): Lutz, FL.

Depending on your situation, gold exchange-traded funds (ETFs) may be a more practical way of gaining exposure to the gold market. But remember, ETFs don’t give you gold, per se; they give you a claim on gold. It’s not quite as safe as owning physical bullion, but it’s a whole lot better than nothing – and you don’t have to worry about shipping or storage.

One of the easiest ways to buy such a claim on gold is through the SPDR Gold Trust ETF (NYSE: GLD). With a total value of $50 billion, GLD is now the largest physically backed gold ETF in the world, holding 1,300 metric tons (or 42 million ounces) of the yellow metal in a London vault. GLD shares, which represent one-tenth of a gold ounce, can easily be bought and sold by investors through their brokerage account.

Another option to acquire paper gold is through Perth Mint Certificates (PMC). Locked away in a vault and insured, this is the only bullion-storage program that is government-backed, with the state of Western Australia standing firmly behind it.

You’ll need to commit at least $10,000 to get started in PMCs. There are also small-but-reasonable fees to obtain your certificate and trade your holdings. It’s also a great way to gain some international diversification for your gold holdings, by owning it outside of your home country. For more information, go to Perthmint.com (note that Kitco and Asset Strategies also offer the PMCs).