Venezuela’s Bolivarian Revolution: “Our inspiration comes from historical struggles”

  

The Guardian (Australia): Nelson Davila is not your usual diplomat. He does not come from a comfortable bureaucratic position but rather from the revolutionary struggle, from the struggle of students and teachers and ultimately the process of building the Bolivarian revolution. Even before the start of the revolution he had been under the command of President Hugo Chavez. In the 1960s he was involved in the guerrilla struggle. During the ’60s and up to 1974, universities were attacked and closed down by “democratic” governments.

On June 24, Mr Davila presented his credentials to the Governor General Quentin Bryce to become officially the Bolivarian Republic of Venezuela’s Ambassador to Australia. It was no slow news day — the new Prime Minister Julia Gillard and her deputy Wayne Swan were also sworn in at Government House. The day after Anna Pha had the privilege of interviewing him for The Guardian. In part 1 of the interview, Mr Davila describes the historic continuity of the Bolivarian revolution and the associated process of integration taking place in Latin America against great resistance from the US and internal reactionary forces:

Bolivar’s 200-year vision

The topic of the bicentenary is not just a formal remembrance of an historical fact as often people think of history, that history is dead and past. For us this event has an historical significance. The process of independence that took place 200 years ago was interrupted. That project was part of the revolutionary process of the 19th century, which was to create the Great Colombia, the great homeland that was an entire, united continent.

For us at this moment, that historical process of independence (and this is why we are telling the world) is of a significance equal to that of the French Revolution. From that process of independence in America many nations arose. It showed the rejection of an imperial system. It was a rejection of colonialism. It was a process of struggle that brought about unity in the continent. For that reason several countries in Latin America are celebrating the bicentenary, because it was in 1810 the declaration was made by several countries.

In the case of Venezuela it was on April 19, 1810, on which the Venezuelans organized around a progressive junta and resolved not to continue as a colony and declared against the kingdom of Spain. After that declaration was the process that we are going to celebrate next year — the act of independence. That was not an easy process. The imperialist forces of the time did not want to accept that independence.

It was necessary to go to war. In Venezuela we organized a patriotic army that was there to defend the interests of America and one of the leaders of that process of formation of the army was Simon Bolivar. That army was able to defeat the empire. The Bolivarian army fought the imperial army. They came from winning wars for the Spanish empire and our army was one that was made up of peasantry, derived from the ordinary people and was capable of defeating the imperial army.

The Spanish empire sent large numbers of troops to America and despite that the continental army was able to defeat it. There were many deaths but, in the end, we triumphed. Of course the project of developing this great continental alliance was impossible to materialise. Bolivar died in 1830, and there were several contradictions that prevented that project from being consolidated. Divisions between those nations developed.

The same process

That seems like a tale from the past, but it happens that today we are passing through the same process. We are fighting against an empire and that empire has another name — the empire of the United States, the government of the United States. There are countries in Latin America that are allies of the empire and the Bolivarian revolution has taken up the historical link from that process that happened 200 years ago and we are creating a new Latin American unity. That is the reason why the Bolivarian revolution is under attack, not just in the media but also economically and even militarily.

For example, in 2002 there was a coup d’etat against President Chavez. That was a movement supported by internal forces allied with the US and other countries seeking to stop the Bolivarian revolution from advancing.

These threats developed on a daily basis. For example, the presence of the new US bases in Colombia is a threat against the Bolivarian revolution. Those bases are not destined to prevent drug trafficking but are to put a brake on the advance of revolutionary forces on the continent.

That revolutionary struggle is happening in several parts of Latin America. All those geopolitical and strategic changes in the continent, for example what is happening in Bolivia and Ecuador, everything historical that is represented by the revolution in Cuba, the process of change in Nicaragua, all of that means the plans of the empire are not being complied with.

The Bolivarian revolution is trying to keep the unity of the continent advancing for which reason it has created different forms of unity. For example we have created this strategic alliance called ALBA [the Bolivarian Alternative for Latin America]. We have strengthened the creation of UNOSUR [the Union of South American Nations], we have also created the Bank of the South and we have been trying to become incorporated into MERCOSUR [a common market of several South American countries], but going back in history there are internal enemy forces on the continent.

In the same way that Bolivar had enemies during the process of independence, in this new independence we also have enemies. For example, two days ago the Congress of Paraguay rejected the incorporation of Venezuela into MERCOSUR. This decision has thus been postponed until 2011. Despite this, Venezuela continues to advance in the process of unity, and that continental unity is not just words.

Latin American integration

It is an historical project that can be achieved. It is extended on the basis of solidarity and all those mechanisms are to provide mutual help among all the countries of Latin America. For example, Venezuela has created mechanisms of solidarity using its natural resources of oil. We have been able to create Petrocaribe which aims to create accords with Latin American countries. It is to administer oil at a different price to the international market, so as to help those countries without those natural resources.

That is Latin American integration. But that integration is not seen as positive by the United States. In this mechanism of integration there are other important countries involved, such as Argentina and Brazil. So all that current process of independence is developing at a different level rather than war. Two hundred years ago we had to fight with guns, but now we are fighting politically. We are struggling against the forces of the economy, against the mass media that every day portrays the Bolivarian revolution as a threat to the continent; that portrays President Chavez as a dictator.

This process of development of the revolution is part of the whole that we have called the Simon Bolivar Plan. It guides the Bolivarian revolution and we are beginning the process of building something new on the continent, where we are mixing elements of our history, from our predecessors, from our historical roots, and also theoretical elements of what is our political practice and historical materialism to interpret reality today. We are showing the world that capitalism is not the system that will fix the great problems of humanity. We have been saying that socialism is the political model that can help us fix the great problems that currently face humanity.

At an international level we are carrying that message as well to defeat the smear campaign against the Bolivarian Revolution. Two days ago, we had the president of the General Assembly of the United Nations in Venezuela as part of his trip to Latin America to establish which countries have fulfilled the challenges of the Millennium Goals and he congratulated Venezuela because we have fulfilled all the targets of the Millennium. That is exactly where the mass media does not say anything.

Smear campaign

Of course, all the multinational networks of the mass media like the BBC and CNN will not show any advances of the Revolution, neither all the development we have fulfilled internally in Venezuela, nor the multi-billion investments made in our society. We have always had that wealth from the oil, but the problem of the governments prior to the revolution was that money, the product of the oil sales, disappeared among the political parties that were in government, in corruption.

Now for example, most of the profits are invested in social services. In Venezuela for example, one of the biggest attacks we face at the international level, accuses Venezuela of not having freedom of expression. That version is very difficult to believe because in Venezuela there are hundreds of newspapers, radio and TV stations belonging to the political opposition and every day they broadcast everything they want; all the lies against the revolution. There is no repression on the part of the government and they keep on saying that in Venezuela there is a dictatorship.

In a dictatorship there is no freedom of the media, there are no community TV or radio stations as was the case in the dictatorships in Latin America in Chile, Brazil or Argentina. For that reason, on all of those points on which they attack the revolution they do not have any solid argument.

Venezuela´s Election 26-S:International guests arriving in the country

Översättning från spanska till engelska

Caracas, September 24, 2010 (MPPRE) .- Members of social movements, representatives of leftist parties, writers, workers and intellectuals from around the world and are in Venezuela to participate as invited by the international political United Socialist Party of Venezuela (PSUV) in parliamentary elections this September 26.

As pointed out in the rules and regulations of the National Electoral Council (CNE), the group of guests will play an agenda for the day of the Parliamentary Elections of September 26, 2010 that includes a conversation about the Venezuelan electoral system and parliamentary elections will be delivered by deputy rector of the CNE, Andres Brito.

Also participate in a meeting with the chief command of the PSUV campaign, Aristobulo Isturiz, made the rounds of the media and visits to various polling stations in the central region will witness the first newsletter issue of the election, among other activities .

Are confirmed by Antigua and Barbuda, Edward UPP Party representative Alem, Argentina: Andres Larroque, Secretary General of the Youth Group Campora-Front for Victory, Guillermo Quintero’s Frente para la Victoria and Rafael Foloniel Advisor UNASUR and the Front for Victory .

For Belgium Baudouin Deckers Head of International Relations

Workers Party of Belgium. The state of Bolivia involved: Pedro Montes of the National Executive of the Central Obrera Boliviana, Leonilda Zurita Vargas, Secretary of International Relations Movement Toward Socialism.

Altman Marx Brazilian journalist member of the National Secretariat of International Relations, Workers Party; Edival Da Silva Nunes Revolutionary Communist Party of Brazil, Fredo Junior Ebling Communist Party of Brazil, Ricardo Gebrin Movement of Landless Rural Workers.

For Chile: Juan Cuevas of the Platform for Solidarity with Venezuela, Daniel Nuñez, Member of the Political Committee of the Communist Party and Director of the Latin American School of Graduate Studies at the University of Arts and Social Sciences, ARCIS-Director of the Institute of Sciences Alexander Lipchutz , ICAL.

For the Republic of Colombia, Senator Piedad Cordoba. In Costa Rica part Antillon Dionisio Cabal, Former Candidate for Vice-President of the Republic of Costa Rica – Patriotic Alliance Party.

Eduardo Zambrano also assists Assemblyman Ecuador Country Alliance and Blanca Flor Bonilla President of the Council of Mayors of the FMLN in El Salvador.

Spain’s guests are José Antonio Barroso, Mayor of Puerto Real and Juan Sastre Internationalist Medical Spanish-Sandinista Army War

U.S. political passenger Radhames Rivera, vice president of the Union of Employees Service Providers New York State will be present in the activities.

The representation of Grenada is in charge of Wayne Sandiford, University Professor – Political Adviser, also a member of the National Democratic Congress party.

Another guest of the PSUV is Manuel Zelaya PARLACEN Central Member of Parliament and Chief Coordinator of the Political Council of Petrocaribe who will represent Honduras.

As for Lebanon will do the same: Ghassan Dibeh, Professor of International Economics.

From Mexico traveled to Venezuela as guest: Zapata Margarita Zapata Foundation President and Chair of International Forum in Defense of Human Rights of Women and Ana Esther Cecena Geopolitics of Latin American Observatory – Institute of Economic Research, UNAM.

Balbina Herrera of Panama goes, former candidate for President of the Republic (PRD) and Portugal, Paula Santos Portuguese Communist Party.

The United Kingdom will be present: Adrian Kane, member of the Labour Party

Irish trade unionist, Richard Gott, Writer, Jennie Bremner, British UNITE Union Leader and Member of the Organization of Solidarity with Venezuela.

For Uruguay Darío Sánchez Alejandro Pereira participating member of the Movement of Popular Participation (MPP) and Member of Central Committee of the National Liberation Movement Tupamaros.

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The Global Banks at The Edge of The Precipice. Trillions of “Toxic Waste” in the Global Banking System

The Global Too Big To Fail Banks are so precarious that literally anything can trigger a collapse in the coming months.

I have read recent commentaries on Basel III posted to various renowned websites and financial publication, but they missed (or deliberately misled) the underlying message of the proposals, the implementation of which will be delayed till 2017 and some till 2019.

Basel III is pure spin and its timing was to assuage the deep-seated fears that there are no solutions in sight to save the fiat money system and fractional reserve banking.

THE PROBLEM

The major global banks are all under-capitalised and this was all too apparent when Lehman Bros. collapsed. Banks were borrowing so much and so recklessly to play at the global casino that when the bets went sour, they were staring at a black-hole in the $trillions. In fact the banks are all insolvent.

The problem was compounded when the central bankers (all are corrupt without exception) and regulators turned a blind eye to how bankers defined what constituted “capital” so as to circumvent the need to maintain the capital ratio.

THE BASEL III SOLUTION

At its 12 September 2010 meeting, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced a substantial strengthening of existing capital requirements and fully endorsed the agreements it reached on 26 July 2010.
 
These capital reforms, together with the introduction of a global liquidity standard, deliver on the core of the global financial reform agenda and will be presented to the Seoul G20 Leaders summit in November.

The Committee’s package of reforms will increase the minimum common equity requirement from 2% to 4.5%.
 
In addition, banks will be required to hold a capital conservation buffer of 2.5% to withstand future periods of stress bringing the total common equity requirements to 7%.
 
This reinforces the stronger definition of capital agreed by Governors and Heads of Supervision in July and the higher capital requirements for trading, derivative and securitisation activities to be introduced at the end of 2011.

Increased capital requirements

Under the agreements reached, the minimum requirement for common equity, the highest form of loss absorbing capital, will be raised from the current 2% level, before the application of regulatory adjustments, to 4.5% after the application of stricter adjustments.
 
This will be phased in by 1 January 2015.
 
The Tier 1 capital requirement, which includes common equity and other qualifying financial instruments based on stricter criteria, will increase from 4% to 6% over the same period.

The Group of Governors and Heads of Supervision also agreed that the capital conservation buffer above the regulatory minimum requirement be calibrated at 2.5% and be met with common equity, after the application of deductions.
 
The purpose of the conservation buffer is to ensure that banks maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress.
 
While banks are allowed to draw on the buffer during such periods of stress, the closer their regulatory capital ratios approach the minimum requirement, the greater the constraints on earnings distributions.
 
This framework will reinforce the objective of sound supervision and bank governance and address the collective action problem that has prevented some banks from curtailing distributions such as discretionary bonuses and high dividends, even in the face of deteriorating capital positions.

A countercyclical buffer within a range of 0% – 2.5% of common equity or other fully loss absorbing capital will be implemented according to national circumstances.
 
The purpose of the countercyclical buffer is to achieve the broader macroprudential goal of protecting the banking sector from periods of excess aggregate credit growth.
 
For any given country, this buffer will only be in effect when there is excess credit growth that is resulting in a system wide build up of risk.
 
The countercyclical buffer, when in effect, would be introduced as an extension of the conservation buffer range.

These capital requirements are supplemented by a non-risk-based leverage ratio that will serve as a backstop to the risk-based measures described above.
 
In July, Governors and Heads of Supervision agreed to test a minimum Tier 1 leverage ratio of 3% during the parallel run period.
 
Based on the results of the parallel run period, any final adjustments would be carried out in the first half of 2017 with a view to migrating to a Pillar 1 treatment on 1 January 2018 based on appropriate review and calibration.

Systemically important banks should have loss absorbing capacity beyond the standards announced today and work continues on this issue in the Financial Stability Board and relevant Basel Committee work streams. [1]
 
THE LOOPHOLE & ADMISSION OF INSOLVENCY

Since the onset of the crisis, banks have already undertaken substantial efforts to raise their capital levels.
 
However, preliminary results of the Committee’s comprehensive quantitative impact study show that as of the end of 2009, large banks will need, in the aggregate, a significant amount of additional capital to meet these new requirements.
 
Smaller banks, which are particularly important for lending to the SME sector, for the most part already meet these higher standards.
 
The Governors and Heads of Supervision also agreed on transitional arrangements for implementing the new standards.
 
These will help ensure that the banking sector can meet the higher capital standards through reasonable earnings retention and capital raising, while still supporting lending to the economy.

THE IRON CLAD CONFIRMATION THAT BANKS ARE IN DEEP SHITS

Please read all the passages which I have highlighted in bold in the above paragraphs. If the banks were at all material times adequately capitalised and the central bankers in collusion with these banksters and fraudsters were prevented from manipulations, there would not be any need for Basel III regulations.

In saying this, I am not in anyway conceding that even with these new requirements, the banks will be adequately capitalised.

The simple truth is that as long as the derivative casino is still running and banks are allowed to continue their off balance sheet activities, nothing will be resolved.

The 2 tables below tell the whole story:

Source: Basel iii Compliance Professionals Association (B iii CPA)

How can the ultimate capital requirement of 8 percent be adequate when leverage under Basel III is still allowed at the astronomical rate of 33:1?

In the second table, and it is a no brainer to conclude that the banking crisis (if we are lucky) may be “resolved” by 2015 but it is most likely that it can be only resolved by 2017/2018 .

This is an express admission that all banks would require such a long transition period to comply with the new requirements!

The stark reality is that the Too Big To Fail Banks do not have the ability and or the means to raise capital at this critical juncture.

To use an analogy, the banking patient will be in Intensive Care until 2017, which is rather optimistic for the projection implies that the patient may be able to recover.

It is my view that Basel III is pure spin and is intended to convey the impression that the central bankers and regulators have things under control. This is a big lie!

I have said in my earlier article that the FED through QEI purchased toxic assets from the banks and part of the monies were used to shore up the reserves and part to purchase treasuries (to give an illusion of better quality assets in banks’ balance sheet).

There are so much more, $trillions more of toxic waste that no amount of QE (quantitative easing) can remove them. This situation does not even take into consideration the toxic waste in SPVs – the off balance sheet mumbo jumbos. The FED and Accounting Bodies have suspended accounting and regulatory rules that have enabled the banks to hide such toxic waste in SPVs and not having to account for them in the banks’ balance sheet.

LIFE SUPPORT

QEI has merely enable the Too Big To Fail Banks to continue some form of banking activities thus deceiving the public that they are solvent and prevent a bank run.

But the central bankers cannot have the cake and eat it as well. In trying to shore up public confidence in banks with the introduction of Basel III, they have inadvertently let the cat out of the bag and as the above two tables show, the banks are all insolvent.

Additionally, whatever reserves that have been accumulated are insufficient to stimulate further lending, because the banks have reached their limits under the fractional reserve system.  This is the reason for the contraction of credit and not as one commentator has postulated that Basel III would “contract credit”.

Two burdens are weighing down on the banks:

1)    inadequate capital to meet liabilities (borrowings); and

2)    inadequate reserves under fractional reserve banking.

  
This is a big mess!

THE CONFIDENCE GAME

At this moment, I cannot give a precise time-line as to how long the FED and the global central banks can prolong the confidence game, hoodwinking the public and sovereign creditors that all is well.

When confidence in banks evaporates for whatever reasons, the consequences will be ugly and there will be massive social upheavals across the globe.

The first indication that the game is up is when US treasuries are increasingly purchased by the FED to make up for the shortfalls by foreign creditors and to finance the ballooning US deficits.

All of a sudden, some entities may start to get real nervous and unload the treasuries, and the FED steps in to shore up treasuries. Then, the tipping point is reached and Hell breaks loose!

China is also part of this confidence game.

But, contrary to IMF and other renowned economists who are betting on China’s and Asia’s so-called economic strengths, I take the view that when US treasuries collapse, faith in all fiat monies will likewise evaporate and there will be massive capital flight to commodities, especially gold, silver and oil.

Asian stock markets will be devastated and there will be volatile gyrations in currency values.

Therefore, it is utter lunacy and recklessness for the Malaysian central bank (Bank Negara) and the government to even consider allowing the ringgit to be traded.

When confidence in dollar assets vaporises, China will be caught right in the middle. The third and final phase of the Global Financial Tsunami will devastate Asian economies and with it, the greatest depression in history will ensue.

Time Line?

Between now and anytime in 2011.

At the latest, 2012.

God help us.             

Monetary Reform Conference Challenges Dominant Institutions and Myths

The American Monetary Institute (AMI) will host its 6^th Annual AMI Monetary Reform Conference featuring many of the world’s finest experts and actors on financial reform from September 30^th through October 3^rd at the University Center in Chicago. 
           
The solution to American financialization is straightforward.  One need not be a policy wonk nor a Wall St. insider to understand and take action upon the simple concept of monetary power.  Today, the power to conceive new money is largely concentrated in few private hands.  Yet Article I, §8 of the Constitution reads “The Congress shall have Power…To coin Money, regulate the Value thereof, and foreign Coin, and fix the Standard of Weights and Measures.”  Were these powers to be monopolized by Congress, the root of the nation’s systematic monetary and fiscal problems would be eliminated.  The American Monetary Institute has authored the American Monetary Act, which would implement three key reforms- nationalizing the Federal Reserve, eliminating the private sector’s ability to create money, reclaiming the government’s ability to create money and invest it in infrastructure, including people. Founder of the American Monetary Institute, Stephen Zarlenga, details the reforms in the last chapter of his book The Lost Science of Money.
 
The Annual AMI Monetary Reform Conference has served to further the discussion of solutions to the monetary system since its inception in 1996.  Mr. Zarlenga will open with a presentation of AMI’s recent work.  Other notable speakers include top Australian monetary economist Steve Keen who won the inaugural (Paul) Revere Award for giving an early warning (2005) of the present debt-deflation collapse;  Prof. Michael Hudson, author of Super Imperialism and Global Fracture; editor, Debt and Economic Renewal in the Ancient Near East; distinguished Professor of Economics, University of Missouri, the first to publicly identify the mechanism of “Dollar Imperialism” through the U.S. balance of payments deficits; Dr. Michael Clark, of the United Nations, is the man who earlier this year sparked the recent issue of 240 billion new SDRs by the International Monetary Fund, though they had only issued 21 billion of them since inception in January 1970; Richard C. (Rick) Cook, a former federal government analyst, author of We Hold These Truths: The Hope of Monetary Reform; William Bergman, Federal Reserve whistleblower, who was a financial market analyst for the Federal Reserve, until he noticed an unusual surge in the currency component of the M1 money supply just prior to the 9/11 attacks, and raised a taboo question about it in the performance of his assigned counter-terrorism investigation, will speak on the present condition of banking after the massive bailouts- “Who won? At whose expense? Why won’t the banks lend? What must be done now to get money into circulation?” Geraldine Perry, who was on the organizing committee for the breakthrough 9/11 Revealing the Truth- Reclaiming the Future Conference and co-authored The Two Faces of Money ( http://thetwofacesofmoney.com/), will be on the Non- Partisan Efforts in Monetary Reform panel.  Carol Brouillet, publisher of the Deception Dollars, will speak on Strategy for the Monetary Reform Movement, looking at the movement through the lens of Bill Moyer’s MAP model, as she did for Truth Movement in Chicago in 2006. Speakers, panels, and social events will explore a number of issues and facets of monetary reform including understanding money creation, who should receive the seigniorage involved in a society’s money creation process, banking, the current international situation with a focus on Brazil, Britain, Latvia, and Iceland, actions and strategies for genuine reform, monetary effects on health and nutrition.
 
See the entire schedule and description of speakers, talks, panels at the America  Monetary Institute’s website ( http://www.monetary.org). A recent interview with Stephen Zarlenga on Carol Brouillet’s weekly Community Currency Radio Show is posted at
http://www.progressiveradionetwork.com/community-currency/2010/9/17/community-currency-091610.html  
- the Mythology of Money and the Story of Power

Dollar Devaluation, Debt Default, Austerity and Growing Inflation

As quantitative easing again gets underway the failure of QE1 becomes more obvious. The crisis worsens and the illusion of any recovery is light years away. Over the past three years almost $13 trillion that we know about has been thrown down a rat hole to bail out banking, Wall Street, insurance and selected elitist entities. The dollar figure is probably much higher. We will never know, because the privately owned Federal Reserve makes its own rules. Everything they do is a state secret. The five successful quarters were only a mirage. The funds have been vaporized among lending and financial institutions worldwide. There has been no accounting and there never will be as long as the Fed is not audited and investigated. We are in an inflationary depression and have been since February 2009. Massive injections of liquidity do not work, nor have they worked for centuries under these conditions. You cannot resurrect an insolvent country in a system that is corrupt. The controllers of the US economy are about to lead the American economy and financial structure into a great dark pit. The US and the world is soon to face a global breakdown deliberately engineered by the forces of darkness.

As usual the Fed was late in applying remedial therapy and that will prove costly. The funding of US debt by foreigners has become very costly and some are jumping ship and some are even using their dollars to buy gold. The game is changing, but will other countries risk a worldwide collapse by not rescuing the US economy? We don’t know but it doesn’t look promising. Monetization is coming and most nations are frozen in the headlights. Washington and NYC have applied pressure over and over again, but their arrogance has not gone unnoticed. There is a pretense of control as unemployment climbs and stability comes more into question. Headlining unemployment, U3, at 9-3/4% is dumb, when anyone with any sense can see U6 and the bogus birth/death ratio. Yes, unemployment is 21-5/8% and for those who want to see the truth it is visible worldwide. Real estate continues to descend, as the consumer reduces debt and consumption.

Much of the public is deeply disturbed and that has been borne out by the primary elections and the success of the Tea Party. We are hoping more than 50% of congress is thrown out of office. The more disturbed citizens that are involved in the sovereignty-secessionist movement, which has gained much traction over the past six months, the more people there will be stressing their 10th Amendment rights. People are thrashing around for answers with 14.3% living in poverty, 44 million on food stamps and every day more jobs are lost to free trade, globalization, offshoring and outsourcing. It is not surprising that Tea Partiers and secessionists want to dramatically change Washington and make radical changes in how the one party-two party system works. People have finally had it. They know full well where trillions of dollars went. That the US and European banking system were temporarily rescued. These were the same people who caused the problem in the first place and the public unceremonially is thrown a bone, like some stray dog. It is time for Americans to use their voting power to remove these criminals they voted into office. After January 2, 2011, America will have a lame duck president and a gridlock that will keep congress from creating any further damage. This will only be the beginning as people vent their anger at Wall Street and banking and its den of thieves. This tidal wave of rejection will really manifest itself when the elitist insiders in retribution collapse the stock and bond markets. Mark our words that will happen over the next few years, as will dollar devaluation and debt default. The ball has just started to roll and where it will all end up no one knows. The temple of the Federal Reserve and Wall Street could very well be doomed to destruction. The public now understands that Wall Street and banking own the Fed and they really make all the decisions and are the creators of all inside information. they profit on almost every trade. They cannot lose. They own the game. That is why for the last 18 months there has been an exodus of funds from the stock market to bonds, gold and silver and commodities. Naked shorting is rampant and the SEC and CFTC do nothing about it. Front running, known as flash trading, rigs every trade. More than 70% of trades are computer, black box driven by pros. Is it any wonder gold and silver hit new highs every day, Weiner & Waxman bring legislation to regulate coin dealers, when in fact they want to collect data on coin and bullion buyers. America has turned into a cesspool.

The reaction of the public to this crime syndicate will be staggering. Glass-Steagall will return and the wall between brokerage, banking and insurance will be re-erected. The system will be stripped in a way that 1933 and 1934 could never imagine. The system will be purged of malinvestment and banks, brokerage firms and insurance companies that are now broke will be allowed to fail. No more two sets of books. The Fed is responsible for all this debt and failure. It all lies at the feet of those who control the Fed. These are the people who have deliberately collapsed the system for more profit and power and the imposition of their dream of world government. The illusion of wealth that the Fed foisted on the public is over and the public is not ready to fall for it again. The public realizes they and the system are insolvent and they are very unhappy about it. Any effort to revive consumption will be futile. Veiled and overt threats to the public and Congress, as we saw from Henry Paulson and more recently by Ben Bernanke, are not going to work. The public is spoiling for a fight and when that happens a fight is sure to ensue. If these malevolent creatures take down Wall Street and banking you can be sure Paris, On July 14, 1789 will look like a picnic. Our aristocracy had best heed the message or they’ll end up like the 300,000 who lost their heads so long ago. Hell hath no fury like an enraged mob. The elitists had better wake up and stop their games robbery and extortion. They have to come to an end.

European bankers are terrified because they are equally broke. Their pursuit of austerity is commendable, but you do not raise taxes with 1% growth. This way you have austerity coming from both ends. This policy can only end in a very hard landing. They at least are smart enough to know that throwing money at the problem, stimulus, is not going to work. They realize the financial system is going to collapse and they are trying to find ways to ease the pain. Unfortunately there is no way to do so. They’ll take all the money and credit they can from the Fed, but they still believe those running the US from behind the scenes are suicidal. Like so many before them American elitists cannot entertain that their reign of power is over.

Early in 2011 the real fireworks will begin. In spite of stimulus of various kinds the economy will falter and unemployment will grow. The plight of what is really, truthfully, going on in the country and the world will become more manifest to the public via talk radio and the Internet. Government, Wall Street and banking will get little public support. The Fed will start to run into major opposition from foreigners in the funding of debt. As the lender of last resort, the injections of capital needed will grow exponentially.

What we will see is austerity and growing inflation at a level not seen since WWII. The people will become more and more disillusioned with the incompetence and growing impotence of the Fed and the administration. The public will become more and more enraged as they realize who has done this to them and why. That is why talk radio and the Internet will be so important in the future. They are almost the only way the public can learn the truth regarding their plight. More than 15% of Americans are experiencing what citizens experienced in the 1930s. Deficits will go exponential, but will not redevelop the economy. More and more funds will go to the destitute who will find it impossible to find work as our transnational conglomerates continue to move American jobs to foreign lands further crippling the economy. America is in a state of financial and economic collapse that will stretch out over years. Get ready to live like Americans did in the 1930s, 40s and 50s. The world that receives US dollars for its goods and services will no longer want to recycle them for worthless Treasury and Agency bills, bonds and notes. They will dump them on the market one way or another. The dollar now at 81.32 on the USDX will fall to 74, then to 71.18, and eventually to 40 to 45. In that process the dollar and many other currencies will be devalued and their debt defaulted upon. During that process the failure of these fiat currencies will, minute by minute, be reflected in the rising prices of gold and silver in markets that will eventually become free again. In reality no currency needs to be devalued. Gold and silver accomplish that daily. Why do you think since 1988 our government and those who control our government have suppressed gold and silver prices? Gold is the barometer of fear, the only real currency that owes no one anything. Gold and silver are the antithesis of fiat money. They are the only way to restore order out of chaos.

Europe’s problems are not going away. Yields on Irish bonds continue to rise as well as those of Portugal reflecting concern that they may be in a position similar to Greece. In fact the spreads are near the highs experienced last May. Ireland’s yields jumped almost half a point last week. These events can only mean Europe is headed into further financial trouble and those problems will effect bond and share markets worldwide.

Markets are looking for re-flation. Whether this is the case in Europe remains to be seen, but it sure is manifesting itself in European and US stock markets. European bond markets are showing pressure, but as yet it doesn’t seem severe. It looks like the markets are looking for a negative event and that could be in Greece in the form of a forced, change of government. In addition, we believe the markets are positioning themselves for a weaker dollar and to them that means gold and silver and commodities are headed higher. Most internationals believe that global government policy makers have the situation financially under control, when nothing could be further from the truth. Just how long do they think the public will tolerate severe austerity accompanied by inflation in the US and England and to a lesser extent in Europe? Greece could again prove a catalyst for problems that could spread worldwide.

Leverage is certainly in play in world markets, but not nearly to the extent that it once was. No one has a handle on the degree of leverage, but in time we believe we will find it was a fraction of what occurred 2-1/2 years ago. On the other hand, world speculators are convinced there will be quantitative easing in the US, which they believe will definitely be followed in England and Europe. Contagion continues in many phases. We might even call it a lemming process. Europe feels they have seen the worst and they Are wrong. Europe has many problems that have not been solved including the near bankruptcy of five major nations. Do not forget as well that Germany has said that is it. No more bailouts. Close to $1 trillion was enough. We believe far more will be needed. If Germany sticks to its announcements that could be the end of the euro, which is back trading above $1.30, having bottomed close to $1.19. Don’t forget as well the 8-month rally on European exports is over due to this higher euro. Bond dealers keep telling us the worst is over, but they do not have a very good track record, so we look at their statements skeptically, just as we do the dog and pony show called CNBC.

We see danger in liquidity borne prices of stocks and bonds. Even speculative paper is selling at its fastest pace this year. There are obviously those who think otherwise as gold, silver and commodities move higher. Investors are chasing yields and it is the worst possible thing they can do. That always leads to a quality trap and losses. We learned our lesson on that count many years ago.

The Fed and the Treasury have created an intolerable situation for those who need income. Retirees in their 70s and 80s should not be forced to chase yields.

Deflation certainly has been an underlying factor in the US economy for the past seven years, only to be offset by money and credit creation. The issue is very complex and it is a constant question and understandably so. The entire world has offset deflation with inflation over that period. There is no question in our minds that higher inflation is in the offering and the antics of the Fed could very well lead to hyperinflation, before deflation finally wins out over a broken system. The path we are following may be fascinating, but it will also be devastating. A robust inflationary bias burns off very quickly. Inflation once used, as an instrument of control has to be continued indefinitely. If it isn’t the system collapses into deflation. Even moving currencies around by treasuries’ is not easy in a $4 trillion daily market. Look at Japan last week they spent $500 billion to weaken their currency and got next to nowhere. This is a strong indication of the limits of power of governments’ in currency markets. Government controls of markets are nearing an end.

We do not have exact figures of the Fed’s intervention in the MBS, CDO, GSE and Treasury markets it has to have been at least $2.2 trillion over a one-year period plus the last stimulus package, which puts the number at $3 trillion. Unfortunately it looks like that will have to be done all over again for another year and perhaps two years. You say, where does it all end? Well it doesn’t – it just gets worse as purchasing power falls at least 7% a year, wages remain stagnant and unemployment rises, as government and the Fed cannot stem deflation even by creating $3 trillion, or so, a year. This should give you an idea of the trouble we are in. In this process unfortunately the dollar is being destroyed. Just think of what will happen if China, Japan and Korea have to sell or want to sell dollars? Are we to see competitive monetization? Of course we are. Alliances are one thing and reality is another. As we said 17 months ago what you are seeing is a battle between the US dollar and gold for supremacy and gold has already won. Those who realize and understand this know where we are headed. Those who do not could lose it all.

Swedes Protest on Streets as Anti-Immigrants Enter Parliament

Thousands of Swedes demonstrated against the Swedish Democrats as Prime Minister Fredrik Reinfeldt struggles to form a government that doesn’t have to rely on the anti-immigrant party after Sunday’s election.

About 10,000 people protested in central Stockholm late yesterday while in Gothenburg, Sweden’s second-biggest city, 5,000 took part in a “sorrow march against racism” after the Swedish Democrats got 5.7 percent of votes and their first seats in parliament. About 2,000 protesters gathered in the southern city of Malmoe.

Protesters waved banners that declared their support for multiculturalism, including placards that said: “Refugees — welcome!” and “No racists in our parliament.”

Reinfeldt, whose four-party coalition won 49.3 percent, has reached out to the Green Party, part of the three-party opposition bloc, to stop the Swedish Democrats from holding the balance of power. They have so far rejected his overtures. All groups in parliament have said they won’t work with the Swedish Democrats, who want to reduce immigration by 90 percent.

“The banner of tolerance has been hauled down and the forces of darkness have finally also taken the Swedish democracy as a hostage,” Sweden’s Expressen newspaper wrote in an editorial yesterday. “It’s a day of sorrow.”

‘Dismay’

Many Swedes prided themselves on the fact that anti- immigration parties had failed to get into parliament since 1994, in contrast with its Scandinavian neighbors, where the Danish People’s Party and Norway’s Progress Party are among the biggest groupings. Sweden has also criticized Switzerland’s ban on minarets at mosques and France’s deportation of Roma.

“While it’s hard to say that Sweden has woken up to a new self-image, one can say that this is more like a normal European situation and is similar to other western European countries with a proportional election system, where a populist right-wing party has seats in parliament,” said Carl Dahlstroem, a political science professor at Gothenburg University. “It’s the party that is the least liked among other voters, so it is not surprising that people have reacted with dismay.”

While Reinfeldt’s government will probably have to rule as a minority, it is only three seats short of a majority in the 349-member parliament. The ability of the Swedish Democrats to act as kingmakers may be diminished if Reinfeldt finds support among the opposition parties. The Green Party, which shares the government’s stance on business-friendly policies, may back some proposals and Reinfeldt may also find Social Democratic support in other areas, Dahlstroem said.

Minority History

Reinfeldt has a “relatively big” chance of securing a majority once all postal and foreign votes come in, Olle Folke, a political scientist at Columbia University in the U.S., told the Aftonbladet newspaper. The final count will be completed tomorrow, according to the Swedish Election Authority.

Sweden has been ruled by minority governments since the current one-chamber parliamentary system was introduced in 1971, with the exception of six years of majority coalitions starting in 1976, and the last four years under Reinfeldt.

“It is important to remember that a minority government is nothing unusual in a proportional election system and it is actually quite common in Sweden,” said Dahlstroem.

The country’s fiscal laws make it impossible to block a budget bill unless the opposition can muster a majority of lawmakers to back an alternative proposal. The other parties in parliament have said they will shun the Swedish Democrats, which also campaigned on promises to lower aid to foreign countries. It has called Islam the greatest threat to Swedish society since World War II.

Swastikas

In its election advertisement, an old lady with a zimmer frame walking toward a desk to get cash from the authorities is overtaken by a large group of women wearing black burqas pushing their kids in prams. A speaker says voters now have the choice to put the brakes on immigration, or on pensions.

Still, the party has improved its image. While swastikas and Nazi salutes could be seen at its rallies in the 1990s, the party’s leaders now dress in suits and ties and have distanced themselves from the early neo-Nazi roots.

Support for the party was strongest in the Skaane province in the southern tip of Sweden, where it got an average 10 percent of the vote and in neighboring Blekinge, where it got 9.9 percent.

That has angered many Swedes north of the region.

Some people are calling for Skaane to be cut off from the rest of Sweden and handed back to Denmark, where the anti- immigration Danish People’s Party is the third-largest party and has acted as an inspiration for the Swedish Democrats.

Support for the party in the south increased after an influx of immigrants in recent years, riots in immigrant- populated areas in Malmoe and after a Swedish pensioner was killed in a Landskrona parking lot.

It is “time for the Swedes to get themselves a new national self-image” as the election “created a new picture of Sweden,” Svenska Dagbladet daily said after the election in an editorial.

World Economic and Financial System Trending Towards a Serious Breakdown by Spring 2011

 

Economics / Financial Crash Sep 19, 2010 – 07:18 AM

By: Global_Research

GEAB writes: As anticipated by LEAP/E2020 last February in the GEAB No. 42, the second half of 2010 is really characterized by a sudden worsening of the crisis marked by the end of the illusion of recovery maintained by Western leaders (1) and the thousands of billions swallowed up by the banks and the economic « stimulation » plans of no lasting effect. The coming months will reveal a simple, yet especially painful reality: the Western economy, and in particular that of the United States (2), never really came out of recession (3). The startling statistics recorded since summer 2009 have only been the short-lived consequences of a massive injection of liquidity into a system which had essentially become insolvent just like the US consumer (4).

// //

 

At the heart of the global systemic crisis since its inception, the United States is, in the coming months, going to demonstrate that it is, once again, in the process of leading the economy and global finances into the « heart of darkness » (5) because it can’t get out of this « Very Great US Depression (6) ». Thus, coming out of the political upheavals of the US elections next November, with growth once again negative, the world will have to face the « Very Serious Breakdown » of the global economic and financial system founded over 60 years ago on the absolute necessity of the US economy never being in a lasting recession. Now the first half of 2011 will dictate that the US economy take an unprecedented dose of austerity plunging the planet into new financial, monetary, economic and social chaos (7).

Comparative progress of the CMI (red) and US GDP (green) growth indices (2005 – 2010) – Source: Dshort, 08/26/2010

In this GEAB issue, our team therefore anticipates for the coming months, different aspects of this new development of the crisis, especially the nature of imposed austerity process which will affect the United States, the development of the accursed « inflation / deflation » argument, the actual progress of real US GDP, the strategy of central banks and the direct consequences for Asia and Euroland. As we do every month, we set out our strategic and operational recommendations. And, specially, this GEAB issue offers an excerpt from the new book by Franck Biancheri « The Global Crisis: The Path to the World After – France, Europe and World in the Decade 2010-2020 » : the French version will be published on 7 October next by Editions Anticipolis and the English one later in December.

In this issue we have chosen to present an extract of the anticipation concerning the forthcoming austerity which will be imposed on the United States beginning Spring 2011: « Welcome to the United States of Austerity ».

« United States – the double whammy: no equity, no jobs » – Correlation of falling property prices and unemployment trends state by state (2006-2009) – Source: FMI / OIT / OsloConference, 07/2010

The coming quarters will be particularly dangerous for the world economic and financial system. The Chairman of the Fed Ben Bernanke passed on the message as diplomatically as possible at the recent meeting of world central bankers at Jackson Hole, Wyoming: even though the policy to revive the US economy has failed, either the rest of the world continues to fund US deficits at a loss and hopes that at some point the bet will pay off, avoiding a collapse of the global system, or the United States will monetize its debt and turn all the Dollars and US Treasury Bonds held by the rest of the planet into funny money. Like any power at bay, the United States and is now forced to introduce the threat of pressure to get what it wants. Barely a year ago the rest of the World’s leaders and financial officials had volunteered to « refloat the USA ship ».

However, today things have drastically changed since the noble assurance from Washington (the Fed’s, like that of the Obama administration’s) proved to be only pure arrogance based on the pretense of having understood the nature of the crisis and on the illusion of possessing the means of controlling it. However, US growth evaporates quarter after quarter (8) and turns negative again from the end of 2010. Unemployment hasn’t stopped growing and between the stability shown in official figures and the exit, in six months, of more than two million Americans from the workplace (LEAP/E2020 believes that the real unemployment figure is now at least 20% (9)); the U.S. housing market remains depressed at historically low levels and will resume its fall from the fourth quarter 2010; last but not least, as one can easily imagine in these circumstances, the US consumer is and will be absent on a permanent basis since his insolvency continues and even gets worse (10) for the one American in five without work. Behind these statistical factors hide three realities that will radically change the US and global political, economic and social landscape in future quarters as and when they dawn on the public consciousness.

Broad-based anger will cripple Washington from November 2010

First of all, there is a very depressing widespread reality, a real trip « to the heart of darkness », which is that tens of millions of Americans (nearly sixty million now depend on food stamps) who no longer have a job, no longer have a house, no longer have any savings, are wondering how they will survive in the years to come (11). The young (12), retirees, African-Americans, workers, service employees (13),… they constitute this mass of angry citizens who will speak violently next November and plunge Washington into a tragic political impasse. Supporters of the « Tea Party (14) » and « new secessionist (15) » movements… want to « break the Washington Machine » (and by extension that of Wall Street) without having feasible proposals to solve the country’s myriad problems (16). The November 2010 elections will be the first opportunity for this « suffering America » to express itself on the crisis and its consequences. And, won back by the Republicans or even the extremists, these voters will help to further cripple the Obama administration and Congress (which will probably swing to the Republicans), only pushing the country into a tragic gridlock just when all the signals turn red again. This expression of widespread anger will in addition, from December onwards, collide with the release of the Deficit Commission report set up by President Obama, which will automatically place the issue of deficits at the heart of public debate at the beginning of 2011 (17).

For example, we are already seeing a very specific expression of this widespread anger against Wall Street in that Americans have deserted the stock market (18). Each month, an increasing number of « small investors » leave Wall Street and the financial markets (19), today leaving more than 70% of transactions in the hands of major institutions and other « high frequency traders ». If one keeps in mind the traditional image that the stock exchange is today’s temple of modern capitalism, then we are witnessing a phenomenon of loss of faith comparable to people’s disaffection with official demonstrations experienced by the communist system before its fall.

The Federal Reserve now knows that it is powerless

Finally, there is a financial and monetary effect that is particularly tragic since the players are aware of their unenviable situation: the U.S. Federal Reserve now knows that it is powerless. Despite the extraordinary efforts (zero interest rates, quantitative easing, huge support to the real estate mortgage market, massive support to banks, tripling its balance sheet, …) that it carried out from September 2008, the U.S. economy will not restart. Fed leaders are finding they are only a part in the system, even if it is a vital part and, therefore, can do nothing against a problem that affects the very nature of the system, in this case, the US financial system, designed as the solvent heart of the global financial system since 1945. But the US consumer has become insolvent (20), the consumer who, during the last thirty years, has gradually become the central economic player of this financial heart (with more than 70% of U.S. growth dependant on household spending). It is this insolvency of US households (21) that has broken the Fed’s efforts.

Accustomed to the virtualism and thus to the possibility of manipulating the processes and dynamics of events, US central bankers believed that they could « mislead » households, once again giving them the illusion of wealth and thus pushing them to revive consumption and behind it the whole United States’ economic and financial machine. Until summer 2010, they did not believe in the systemic nature of the crisis or they did not understand that what was causing the problems was out of reach of the tools of a central bank, as powerful as it may be. Only in recent weeks have they discovered two pieces of evidence: their policies have failed and they have neither arms nor ammunition.

Hence the very depressed tone of the discussions at the central banks meeting in Jackson Hole, whence the lack of consensus on future action, whence the endless debates about the nature of the risks to be faced in the coming months (e.g. inflation or deflation, knowing that the system’s internal tools used to measure the economic consequences of these trends are no longer even relevant, as we analyse in this issue (22)), whence increasingly violent clashes between proponents of renewed growth via debt and followers of deficit reduction… and whence Ben Bernanke’s speech full of veiled threats to his central banker colleagues: in ambiguous terms, he passed the following message: « We will try everything and anything to avoid an economic and financial collapse and you will continue to finance this « everything and anything », otherwise we let inflation loose and thus devalue the Dollar whilst US Treasury Bonds will no longer be worth much » (23). When a central banker expresses himself like a common cash extortionist, there is danger in the house (24).

The response of the world’s major central banks will be unveiled in the next two quarters. Already the ECB has made it clear it thought that a new policy of stimulation through an increase in US deficits would be suicidal for the United States. Already China, whilst saying it would do nothing to rush things, spends its time selling US assets to buy Japanese ones (reflected in the historic level of the Yen / Dollar rate of exchange). As regards Japan, it is now forced to align itself simultaneously with Washington and Beijing … which will probably cancel out all its financial and monetary policies. In future quarters the Fed, like the federal government, will find that when the United States is no longer synonymous with juicy profits and / or shared power, its ability to convince its partners declines quickly and heavily, especially when the latter question the relevance of the chosen policies (25).

Index of mortgage applications (1990-2010) (4 week moving average) – Sources: Mortgage Bankers Association / Bloomberg / New York Times, 08/2010

The consequence of these three realities that are gradually making their presence felt in US and global consciousness will, therefore, for the LEAP/E2020 team, come to pass in Spring 2011 by the United States entering an era of austerity unprecedented since the country became the heart of the global economic and financial system. Fhederal political blockages in the context of an electorate sick and tired of Washington and Wall Street, heavy reliance on federal funding of the entire US economy and the Fed’s impotence against a backdrop of growing international reluctance to finance US deficits will combine to push the country into austerity. An austerity that has, moreover, already begun to affect at least 20% of the population head-on, and wich directly affects at least one in two Americans worried about joining the ranks of the homeless, those without work and other long-term unemployed.

For these tens of millions of Americans austerity is here and it’s called lasting impoverishment. What is going to come into play between now and Spring 2011 is, therefore, the shift into official speeches, budgetary policies and international awareness to the idea that the United States is no longer « the land of plenty », but « the land of few ». And beyond the domestic political choices, it is also the discovery of a new limitation for the country: the United States cannot afford a new stimulus (26). Rather than a multidecade collapse like the Japanese situation, many decision makers will be tempted by shock therapy … this same therapy that, with the IMF, the United States recommended to Latin American, Asian and Eastern European countries.

This is normally a good reason for the rating agencies, always so quick to see the straw in the eye of most countries in the world, to threaten the United States with a strong downside rerating if they not implement a comprehensive austerity plan as quickly as possible. But anyway, for LEAP/E2020, due to the internal and external conditions in the country described above, it is really in spring 2011 that the United States has an appointment with austerity, an appointment that the rest of the world will impose if it is paralyzed politically.

Until then, it is likely that the Fed will try a new series of « unconventional » measures ( a technical term meaning « desperate attempts ») to try and prevent arriving there because, at this stage, one thing is certain concerning the consequences of the United States entering a large-scale programme of austerity: that will be financial and monetary chaos in the markets accustomed for decades to the exact opposite, that’s to say, US waste; and an internal economic and social shock unparalleled since the 1930s (27).

Notes:

(1) In this regard, in the next GEAB issue in October, our team will prepare, as it does each year, its country risk and economic outlook list for 2011. What is already clear to our researchers is that the end of 2010 will be marked by a sharp downward revision of all current forecasts (including already reduced forecasts for the United States). Source: Reuters, 09/09/2010

(2) Sources: Bloomberg, 07/20/2010; Oftwominds, 07/15/2010; New York Times, 08/09/2010; CNBC, 08/12/2010

(3) The chart below illustrates how growth is already collapsing. The CMI growth index has been one of the most reliable leading indicators in forecasting the changes in US GDP. And 92% of Americans believe the country is still in recession. Source: GlobalEconomicAnalysisBlogspot, 09/09/2010

(4) As outlined by our team from the GEAB No. 9 of November 2006 onwards.

(5) To borrow the evocative title of Joseph Conrad excellent novel which especially inspired Francis Ford Coppola for his film Apocalypse Now.

(6) As LEAP/E2020 called the American economic crisis from April 2007 in the GEAB No. 14.

(7) Moreover, without even incorporating this anticipation in their analysis, even the OECD experts warn that global growth will suffer a setback between now and the end of 2010. Source: Marketwatch, 09/09/2010

(8) The Wells Fargo / Gallup index of US SMEs continues to fall month after month. Source: Gallup, 08/02/2010

(9) Even Wall Street continues to plan mass layoffs in the coming months. Source: Bloomberg, 09/07/2010

(10) Even high earners are now affected by the problem of foreclosures. Source: USAToday, 07/29/2010

(11) To clarify this alarming social situation, it is worth reading the joint IMF / ILO report initiated by the Norwegian Government on « The challenges of growth, employment and social cohesion » in the context of the current crisis. Source: OsloConference, 07/22/2010

(12) A very telling indicator showing the price that young Americans are paying because of the crisis.The number of summer jobs, a traditional feature of independence for young Americans for the following year, fell to its lowest level since 1948. Source: USAToday, 09/03/2010

(13) These images of drastic cuts in police numbers in Auckland are emblematic of what is happening countrywide in terms of public services. Source: DailyMotion

(14) On this topic USAToday of 08/16/2010 had a very interesting portrait gallery of the « Tea Party » movement’s supporters.

(15) See GEAB issue N°45

(16) The success of the « tea-partisan » gathering in Washington on 08/28/2010, organized by Glenn Beck, is an obvious example. Source: Washington Post, 08/29/2010

(17) Source: New York Times, 08/31/2010

(18) Stock exchanges have stalled or been declining for several quarters despite continuous attempts by the financial authorities to try to restore their shine … and once again are approaching a violent spasm tied to « the Hindenburg Omen » or the anticipation of global economic and financial conditions. Source: Telegraph, 08/27/2010.

(19) Source: New York Times, 08/22/2010

(20) Even when they manage to find a job, it’s usually a job much less well paid than the previous one. Source: CNBC, 09/01/2010

(21) Thus the foreclosure process is a reflection of an alarming phenomenon of a decline in the value of US households’ assets. Source: Foxnews, 08/23/2010

(22) If the prospect of deflation is that which officially « spoiled the mood » of the central bankers’ meeting in Jackson Hole in late August 2010, it is actually growing doubts about the Fed’s ability to select and implement appropriate measures to revive the US economy which makes the whole of the small world of central bankers so nervous. Sources: CNNMoney, 08/31/2010; FT, 09/10/2010

(23) It should be noted here that in front of the growing reluctance of the rest of the world to buy US Treasury Bonds and GSE, the Fed has not only officially begun to buy them for its own account (or more unobtrusively via its « primary dealers ») but it has begun to organize the massive sale of federal debt to US individuals operators. In effect it must seem easier to manage the plundering of many dozens of million people more or less unaware of the economic and financial nuances than that of the major strategic players such as China, Japan, the Gulf oil countries,…. (see chart in GEAB N°47):

(24) After explaining that the use of a moderately inflationary policy had been discussed but wasn’t on the agenda, Ben Bernanke said that however, if deflation risks grew, then the usefulness of some intervention methods could be reconsidered. Clearly, if nothing else works and if the other global players do not want to feed the US deficit machine, then debt monetization will be implemented on a large scale. At least, things are now clear. When LEAP/E2020 warned that it was the only option for the United States in the looming crisis it seemed outrageous. Today, it is the Fed Chairman himself who sets the tone. Source: US Federal Reserve, 08/27/2010

(25) The failure of the mammoth measures to support the housing market is well illustrated by the chart below.

(26) We are even beginning to hear voices suggesting « copy Europe » like Jim Rogers and Doug Noland who publishes the excellent « Credit Bubble Bulletin ». Sources: CNBC, 08/31/2010; Prudent Bear, 07/30/2010

(27) As the historian Niall Ferguson points out in this article published on 07/29/2010 by The Australian, « the sun can suddenly set on a superpower when debt bites ». An historical reminder that columnist Thomas Friedman, though very patriotic, doesn’t refute, who emphasized that the sharp decline of American power was due to the economic crisis in the New York Times on 09/04/2010.

United States Economy Caught in the Jaws of Death, Housing Market Mantra

 

The United States is facing both a structural and demand problem – it is not the cyclical recessionary business cycle or the fallout of a credit supply crisis which the Washington spin would have you believe.

It is my opinion that the Washington political machine is being forced to take this position, because it simply does not know what to do about the real dilemma associated with the implications of the massive structural debt and deficits facing the US. This is a politically dangerous predicament because the reality is we are on the cusp of an imminent and significant collapse in the standard of living for most Americans.

//  

The politicos’ proven tool of stimulus spending, which has been the silver bullet solution for decades to everything that has even hinted of being a problem, is clearly no longer working. Monetary and Fiscal policy are presently no match for the collapse of the Shadow Banking System. A $2.1 Trillion YTD drop in Shadow Banking Liabilities has become an insurmountable problem for the Federal Reserve without a further and dramatic increase in Quantitative Easing. The fallout from this action will be an intractable problem which we will face for the next five to eight years, resulting in the ‘Jaws of Death’ for the American public.

The ‘Jaws of Death’ is the crushing squeeze of a shrinking gap between incomes and a rising burden of the real cost of debt burdens. Many may say there is nothing new in this, but I would respectfully disagree. There is a widespread misperception of what is actually evolving that stops voters from forcing politicians to address America’s substantial underlying dilemma. It also stops investors from positioning themselves correctly.

Any solutions of real substance are presently considered political suicide. It is wiser to wait for a crisis event to unfold. As White House Chief of Staff and a primary Obama political strategist, Rahm Emanuel has said on numerous occasions: “You never want a serious crisis to go to waste”. It doesn’t take much intelligence to understand this also implies looking for a crisis as a political shield, for example from an almost insurmountable political problem such as a generational reduction in the US standard of living.

Before I delve into misperceptions of the ‘Jaws of Death’ and a reduced US standard of living, we need to briefly consider for a moment whether this is a planned outcome or just happenstance? President Franklin Roosevelt said:

“Nothing in politics happens by chance”.

Being in business I have always been very watchful of a slightly different variation of the same theme:

“Strategy is something that happens to you while you are looking the other way”.

Maybe Mark Twain said it better than both of us:

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure and just ain’t so!”

My point is that there is a strong possibility that the ‘Jaws of Death’ is an orchestrated plan to reposition America’s standard of living. A plan not for the good of Americans but for the good of the banks and those that control the $630 Trillion unregulated, off shore, off balance sheet, OTC derivative market. It is no secret that America’s standard of living is no longer viable, as evidenced by a continuous and chronic deterioration in the US Balance of Payments, Trade Deficit and Current Account funding. It must be addressed and this may already be happening in a stealth fashion.

What the above suggests is that we need to address what is perceived as ‘truisms’ but in fact are not; what is perceived as reality versus what is perception. These subtleties are the veils that hide the real dangers from us.

THREE MISPERCEPTIONS

1. Housing

Consider President George W. Bush’s ‘ownership society’ where it was heralded, along with the previous Clinton administration, that every American should own his/her own home. It is fair to say that our society bought into this ‘hook, line and sinker’. I used to hear the following statements endlessly, and disputing any of them fell on deaf ears with blank stares, as though you were an idiot to even challenge them.

I can’t remember how long it has been since I have heard any of these statements. How quickly accepted fact is found to be mistaken. Without this false mantra being sold to the public we would never have had a CDO driven financial crisis. Consider for a moment who is responsible for orchestrating this false belief system that the financial collapse was built on? Our government’s misguided public policy certainly holds some responsibility for this.

2005	2010

“The public and majority of investors are always wrong.”

What we now face is the reality that jobs have disappeared and housing has fallen in an almost mirror image of unemployment as shown by housing starts below.

According to a recent 3,400 households’ survey by Fannie Mae, a more realistic attitude towards homeownership has emerged as the American dream of owning a home has lost its allure. Only 67% felt housing was any longer a safe investment and 33% said they were likely to rent in the future. The Wall Street Journal recently cited an interesting illustrative example of shifting psychology in which a 26 year graduate student walked away from his down payment to purchase a condo because he felt homeownership was an “economic trap” and “being mobile and adaptable to the job market was far more important than homeownership”.

The National Association of Realtors is starting to show signs of panic because this shifting psychology is moving legislators to reconsider federal subsidies for homeownership. It has reacted by launching a campaign on the “value of homeownership”. I wonder if the National Association will get the same look I did when I questioned the housing statements listed above. Oh how quickly things change!

2. Inflation / Deflation

I am continuously troubled by the inflation – deflation debate. One of a number of issues in these debates that concerns me is no one ever defines ‘time’ in their analysis and predictions. Without time specified we could have inflation, then deflation, (or visa-versa) for exactly the reasons that both opposing views meticulously articulate. Maybe even more blatant is that seldom do analysts consider the possibility that we could have both. This is the school that I am a believer in.

I predict that over the next few years we will have inflation in the things we NEED and USE. These are the items we buy and consume every week, the items we buy and not finance, and the items we need ready and recurring cash for. Food, energy, consumables, and basic services are examples.

We will have deflation in the things we WANT and OWN. These are the items we strive for that we perceive will move our lives to an even higher standard of living. They are primarily assets like: housing, real estate, financial instruments, boats, exotic cars, art, collectibles, etc. – often the items we finance.

It may be as simple as Maslow’s Hierarchy of Needs; until our survival needs are met we won’t move towards the ultimate state of self actualization. We won’t think of luxury goods when we are hungry, cold and tired. But what is pushing us towards the ‘survival’ end of Maslow’s spectrum? If we live on debt and it becomes harder to secure or service, then this will accomplish that shift, despite new debt being cheaper than it previously was.

Money supply which is a driver of monetary inflation and deflation is now negative, as shown by the broader M3 money supply (which is no longer reported by the government). This illustrates that despite massive monetary intervention, forced deleveraging of mal-investments has come home to roost.

3. Credit Availability versus Credit Demand & Debt Servicing

Thirdly, only a few years ago interest rates were considered low and widespread refinancing was occurring. Home equity loans were all the rage to buy new boats, campers, vacation homes and every other imaginable toy that cheap money was felt to afford. Advertising was replete every evening with 0/0/0 financing offers: Zero down payment, zero payments for 48/60 months and zero interest. Who could refrain from taking advantage of these incredible offers?

Well guess what? Interest rates are now significantly lower and the products you bought previously are in most instances now even cheaper; yet few are clamoring for them. At the marina where my boat is moored, you can’t give away a boat; where only a few years ago no one could get a mooring or slip for their newly purchased boat. What has changed is we can generally no longer service our debt loads at even present historic 50 year low interest rate levels. Heaven forbid rates should go up!

The central issue may be not about whether rates go up, but rather if the above outlined housing weakness, concurrent inflation/deflation and weak credit demand persist for a protracted period.

I would like to show you exactly what this means if these trends persist, by using a fictional family as a way of illustrating what is now in store for the public.

THE SMITH FAMILY DILEMMA

The Smith family bought into all this mantra by purchasing a home. All their peers were doing it. Their family kept asking them why they hadn’t bought a home; and if they didn’t, they would surely never be able to afford one. They felt pressured to take on the debt obligations. Unlike many, they were relatively conservative and bought a home with a small down payment, securing a $200,000 mortgage at 6.5% fixed for 5 years. The mortgage was possible because they absorbed Private Mortgage Insurance (PMI) payments into their monthly budget. The family income was $50,000 annually. These are all nominal prices. To adjust for real values, we need to subtract the inflation rate from the mortgage rate. Inflation helps the Smith’s get ahead over the leveraged housing asset. The higher the inflation rate above 6.5% the more they win. The drawback is that their $50,000 income diminishes in real value. The salary therefore needs to be adjusted for real terms by subtracting the inflation rate from the $50,000. Here are the theoretical results for various Deflation, Inflation and Hyper-Inflation scenarios.

As bad as the above theoretical charts look, it is actually worse in reality. Why? Because as the pressures mount on unemployment, underemployment and competition for jobs, money becomes tougher and harder to earn. As disinflationary pressures shift to deflationary pressures, housing prices fall faster than the overall inflation/deflation rate. As a matter of fact they fall substantially faster. The following table represents the same numbers for the Smith family, but I have adjusted for the variance in house prices falling faster than the overall deflation rate. This is where it gets really scary.

What the charts tell us is that if present Monetary and Fiscal Policy is anything other than totally successful in arresting deflation and creating balanced inflation in both what we USE and OWN, we are in serious troubles. Any imbalances will be a disaster as shown on our charts. A failure to stop deflation will be devastating to those who are in highly leveraged assets.

If after reading the former example of the Smith Family you discarded it because you strongly believe elevated inflation is around the corner and you are a highly leveraged home owner, let me take you through a brief quiz published by The Daily Bell to further test your understanding of reality: “The Great Housing Bamboozle: A Look Behind The Numbers Shows Home Ownership To Be A Horrible Investment”.

WHAT ARE THE CHANCES OF HOUSING FALLING FURTHER?

As I mentioned previously, attitudes towards housing as an investment have changed. There has been enough written on the housing decline but surprisingly little on how much further it is likely to go or whether it should be considered an investment at all.

Even after massive assistance in the form of HAMP, over $1T of government purchases of Government Agency debt, 50 year low interest rates and Quantitative Easing, the Federal Reserve’s monetary policy and the US fiscal policy has been unsuccessful in reversing the housing decline. New Sales, Housing Starts and Building Permits continue to deteriorate as housing inventories once again resume their climb with untold amounts of ‘shadow’ inventory still being held back from foreclosure by the banks.

Karl Case, the co-founder of the S&P/Case-Shiller home-price index, believes “a common mistake of the housing bubble years was the desire to own something that goes up in value rather than to own something you can afford”. He feels “more Americans need to view homes as durable goods, such as cars, and not primarily as investments”.

Housing is not coming back soon and I suspect we are still in the middle stages of a longer term housing correction. Historically, major financial distortions always return to at least retest their long term trend support. By various comparisons we still have a fair ways to go over the next two years.

PEOPLE ARE STILL HURTING – IT ISN’T GETTING BETTER!

A recent convention in Palm Beach Florida (right) attracted over 50,000 people, estimated to be holding 25,000 problem mortgages. This is after the government placed Fannie and Freddie in conservatorship and bought over $1T in agency mortgages to keep the US mortgage system from imploding.

FHA will soon be in a similar untenable position as the government has become the holder of almost all new US mortgage product. If this is not sustained, despite it being a near impossibility to do such, US housing may not just fall further but collapse.

CONCLUSION

“The great enemy of the truth is very often not the lie – deliberate, contrived and dishonest – but the myth – persistent, persuasive and unrealistic.” ~ John F. Kennedy, 1962 commencement address at Yale University

A mericans must face the hard reality that the US is now in decline and rapidly relinquishing its hold as the world’s dominant industrial power. A serious failure in political leadership to recognize this and act upon it, along with misguided public policy legislation, has hastened the decline.

What this means is that America’s standard of living, which has almost been assumed as a birthright, is now in jeopardy and for the middle class is already in full erosion. America, like all great powers in decline, has become complacent and apathetic with an unjustified sense of entitlement. Americans somehow believe that bad things cannot befall America, as though it is preordained to always be a preeminent power with the corresponding highest standard of living.

The facts are that we are at the precipice of a crushing decline in our standard of living due to fifty years of wasteful spending and bad public policy. We are near or now possibly past the point of no return without bold and rapid change. We need change that can only come from the public’s understanding of what change specifically is required and not just a political billboard proclaiming the ‘change’ mantra at election time.

As we move more and more towards a “have” and “have not” society where the middle class is disappearing and the government is involved in all aspects of our lives and economic well being, we are becoming acutely aware that America is now different. Our perceptions of what America is no longer matches the reality around us on a daily basis. The middle class in America is rapidly disappearing.

Like housing being a good investment, much of what we hear or believe are false perceptions. We are distracted by these contrived and orchestrated misperceptions from the hard reality in taking the actions required to make real needed change. The US Standard of Living is now on the line.

 

Latin America News Round-up: Embargo Has Toughened Under Obama

September 15, 2010
Cuba Says U.S.

For the latest news and developments on Haiti, please see CEPR’s new blog, “Haiti: Relief and Reconstruction Watch“.

For archives of past Round-ups, please click here.

Argentina
Argentine Consumption Fuels Growth, de Narvaez Says. Bloomberg
Argentina in `No Hurry’ to Tap International Debt Markets, Cosentino Says. Bloomberg
Argentina elected president of G77 and prepared to act as ‘bridge” with G 20. Merco Press

Bolivia
Critics call Bolivia anti-racism bill media threat. Reuters
Bolivian President Calls For Elimination of Social Discrimination. Inside Costa Rica
Bolivian President To Attend Chile’s Bicentennial Celebrations. Santiago Times

Ecuador
Ecuador passes the hat for Amazon protection plan. Reuters
Ecuador wants you to smell the roses, and eat them. Reuters

Venezuela
Venezuela to Use Drillship to Develop Large Natural Gas Project. EFE

Andean Region
Colombia senator accused of paramilitary links. CNN
36 Colombian Union Leaders Slain in 2010. EFE
Strong Colombian peso debilitating exports and eliminating jobs. Merco Press
Colombia’s Internally Displaced People. Huffington Post
Peru’s Garcia Shuffles Cabinet Before Elections. Reuters
Peru Central Bank Raises Reserve Requirements to Avert Risk of Overheating. Bloomberg
U.S. Praise for Peru’s Economy Misses the Mark. NACLA
SURVEY: Chile Seen Raising Rates Again As Economy, Demand Thrive. Dow Jones
Former Chilean President to Lead New U.N. Agency. New York Times

Southern Cone
China State-Run Banks Plan to Invest in Brazil’s High-Speed Train Project. Bloomberg
Brazil on course to hit child mortality target as living standards improve. Guardian

Mexico, Central America and the Caribbean
Mexican Official Quits. New York Times
Letter from Mexico: In no mood for a fiesta. Washington Post
Funes: We must follow own path. Miami Herald
Cuba says U.S. embargo has toughened under Obama. Reuters
Cuba’s Big Layoffs: What to Do with the Unemployed? Time
Remittances to the Caribbean on the rise again – World Bank. Jamaica Observer

Region: Trade, Security, Economy and Integration
EU trade chief aims for Mercosur deal by mid-2011. Reuters
Study: Commodities can fuel Latin America’s growth. AP
Speakers: Innovative policies key in maintaining growth in the Americas. Miami Herald

Argentina [contents]
Argentine Consumption Fuels Growth, de Narvaez Says.
Eliana Raszewski. Bloomberg. September 13, 2010

South America’s second-biggest economy is growing at the fastest pace since 1992, fueled by a boom in consumption and accelerating inflation, Argentine opposition leader Francisco de Narvaez said.

Gross domestic product is currently expanding at about 11 percent and growth next year will be faster than the 6 percent forecast by the government, de Narvaez, who may run for president in 2011, said in an interview in Buenos Aires.

The central bank has said Argentina’s economy will expand by 9.5 percent this year while the median estimate of eight economists in a survey by Bloomberg put the rate at 8.25 percent. The economy grew 0.9 percent in 2009, the slowest since 2002, the national statistics agency said.

“We are growing at a Chinese rate,” said de Narvaez, 56. “Almost 75 percent of that growth is explained by consumption. There’s a huge push toward consumption that generates strong demand for goods and services.”

The current rate of growth will be stifled by a lack of confidence in the government and the judicial system, which is limiting investment to 19 percent of GDP, de Narvaez said.

Argentina needs to increase the rate to 25 percent over the next 10 years to sustain growth, de Narvaez said. Sooner or later consumption, which is creating inflation that former Economy Minister Orlando Ferreres said is more than double the official estimate of 11.2 percent, will run out of steam, he said.

The Colombian-born lawmaker, a former supermarket magnate, last year beat former President Nestor Kirchner in mid-term congressional elections to represent the province of Buenos Aires. Since then, de Narvaez has said he may stand as candidate for either the presidency or provincial governorship in 2011 elections.

To improve the business climate the next government will need to cut subsidies on energy, lower export taxes on farm goods and reach an accord with the International Monetary Fund and the Paris Club group of creditors, he said.
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Argentina in `No Hurry’ to Tap International Debt Markets, Cosentino Says.
Bloomberg. September 15, 2010

Argentina is in “no hurry” to return to international debt markets for the first time in almost a decade as economic growth accelerates, Finance Undersecretary Adrian Cosentino said.

Standard & Poor’s on Sept. 13 raised Argentina’s foreign and local debt ratings one level to B, five steps below investment grade, saying the country’s “strong” economic expansion is helping it make debt payments. The increase matches a move made by Fitch Ratings in July, one month after President Cristina Fernandez de Kirchner restructured $12.9 billion of bonds tied to the country’s 2001 default.

“The S&P move is good news for Argentina,” Cosentino said in an interview today at the LatinFinance forum in Beijing. “We’re in no hurry. We have a healthy macro position and that gives us the possibility to take a step-by-step strategy.”

The central bank has said South America’s second-biggest economy will expand 9.5 percent this year while the median estimate of eight economists in a survey by Bloomberg puts growth at 8.25 percent. The economy grew 0.9 percent in 2009, the slowest since 2002, the national statistics agency said.

The debt restructuring prompted Economy Minister Amado Boudou to say that Argentina has regained the ability to sell bonds overseas. Juan Pablo Fuentes, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said lawsuits from some of the remaining defaulted debt holders may still impede the nation from issuing international bonds.

‘Manageable Situation’

“The swap was really successful,” Cosentino said. He said the risk from lawsuits is a “manageable situation.”

Argentine companies and provinces have issued $1.03 billion of bonds in international markets this year. Sales were $3.65 billion in 2007 and $465 million last year, according to data compiled by Bloomberg.

While Argentine issuance is picking up this year, the country’s bond sales are a fraction of the $13.5 billion borrowed in 1999, two years before it defaulted on a record $95 billion of debt, according to data compiled by Bloomberg.

Argentine overseas borrowing this year also lags behind Brazil at $26.6 billion, Mexico with $22.3 billion and Chile at $3.4 billion. That standing is a reversal from 1999, when Argentina raised $13.5 billion, more than each of those countries.

Boudou delayed plans to issue as much as $1 billion in new bonds during the debt restructuring, saying the country would wait until yields fell below 10 percent.

The yield on benchmark 7 percent bond due in 2015 rose 5 basis points to 10.59 percent at 7:25 a.m. New York time, according to Bloomberg data.
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Argentina elected president of G77 and prepared to act as ‘bridge” with G 20.
Merco Press. September 15, 2010

The announcement was done during Tuesday’s meeting of UN Secretary General with Argentina’s Foreign Affairs minister Hector Timerman, ahead of the 65th UN General Assembly. The Argentine official also brought up the issue of the Falklands and South Atlantic islands sovereignty dispute with Britain.

Ban Ki-moon confirmed he would be present at the formal vote at the end of the month when Argentina is officially elected president of the G77 plus China, and which will also be attended by President Cristina Fernandez de Kirchner.

“Argentina is committed to G20 but also to the countries of the political ‘south’, so we are willing to take the voice of these countries to the G20 event”, said Timerman adding that the UN can count with Argentine support in the G20 meeting since “we are wholly committed to multilateralism and the international bodies that make it up”.

According to UN and Argentina sources Ban Ki-moon and Timerman went through the agenda of the coming G20 meeting in Seoul, Korea, which includes issues such as technology transfer, climate change, helping to achieve a world with clean and accessible energy for all.

However Timerman pointed out that the bill for the consequences of climate change can’t be shared with developing countries, which were not involved in causing the problem, but rather by developed countries “that should supply the funds and technology” to address the task.

Timerman congratulated Ban Ki-moon for having named former president Michelle Bachelet as UN Under Secretary for Gender Equality and the Empowerment of Women and praised the Secretary General initiative to have development issues included in the Seoul G20 meeting agenda.

Ban Ki-moon thanked Argentina for its commitment to humanitarian aid, mainly in Haiti but also in other parts of the world, as well as its support for ensuring nuclear security and the use of nuclear energy for peaceful means.

Argentina, following on a suggestion from US President Obama will host next December a meeting of nuclear security experts.

Finally Timerman said Argentina was grateful to Ban Ki-moon standing efforts for the resumption of sovereignty talks with the United Kingdom on the disputed Falklands, South Georgia and South Sandwich islands and adjoining maritime spaces, “which represent one of the most shameless colonial attitudes of the XXI century”.

The minister also said Argentina was much concerned with the “unilateral and illegal hydrocarbons activities” in Falklands’ waters and its possible environmental consequences.

G77 currently includes 132 countries, almost two thirds of UN members, all of them considered developing countries plus China. G77 addresses economic and social development issues but has included other topics such as the financial crisis, climate change, humanitarian aid and migration. It also basically promotes south-south cooperation and trade.

Bolivia [contents]
Critics call Bolivia anti-racism bill media threat.
Reuters. September 15, 2010.

LA PAZ – Bolivia’s leftist president, Evo Morales, vowed yesterday to forge ahead with an anti-racism bill that skeptics say could be used to stifle media criticism of his government.

The bill, which has been approved by the lower house, would allow authorities to close down news outlets if they are deemed to publish racist content. Critics want that article changed, but Morales appears unwilling to compromise.

“Since the new Magna Carta took force … there are no longer first-, second- or third-class citizens in Bolivia — we’re all equals,” Morales, the Andean nation’s first president of native Indian descent, told a news conference.

Morales won comfortable re-election last year, vowing to deepen his efforts to empower the poor country’s indigenous majority. In his first term, he reformed the constitution and promoted people of indigenous descent to high-profile jobs.

In order to become law, the anti-discrimination bill must still be voted on by the Senate, where allies of Morales also hold a majority.

Rightist Senator German Antelo said the controversial article of the law that could punish news outlets was similar to measures pushed by Venezuelan President Hugo Chavez, a close Morales ally who has repeatedly moved against critical media.

“We want a law that’s fair and just for everyone, that doesn’t use the struggle against racism as a pretext to impose a law to gag the press,” he told reporters.

Antelo hails from the eastern region of Santa Cruz, Bolivia’s economic powerhouse and an opposition stronghold. It is also home to leading television channels.

The controversial article also drew criticism from Bolivia’s National Press Association, which represents newspaper owners. It urged senators to scrap the controversial article, calling it “flagrant press censorship.”

It is not the first time Morales has been at odds with the media since he took office in 2006.

He frequently criticizes local newspapers and broadcasters and has lambasted reporters for being the puppets of media bosses he says are aligned with the opposition.

Hoping to strike back, he launched a state-run daily newspaper called Cambio (Change) last year under the slogan “The truth will liberate us.”
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Bolivian President Calls For Elimination of Social Discrimination.
Inside Costa Rica. September 15, 2010

LA PAZ – Bolivian President Evo Morales called on the Bolivian people Tuesday to eliminate racism and social discrimination in the country.

“I am sure that racism and social discrimination could be replaced by solidarity and complementary attitudes,” Morales told a press conference.

Morales pointed out that the best way to end discrimination is to restore the sense of identity and social values, as well as to correct biased attitudes in some sectors.

He also urged the promotion of the Bolivian Constitution, which is aimed at ensuring equality of all citizens.

On Friday night, the Deputies Chamber, or the lower house of parliament, approved an anti-racism bill, which was boycotted by the opposition.

“Since the new Magna Carta took effect in the Constitutional Referendum, there are no longer first-, second- or third-class citizens in Bolivia, (and) we’re all equals,” Morales said, comparing the new constitution to the historic Magna Carta, an English charter ensuring civilians’ rights.
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Bolivian President To Attend Chile’s Bicentennial Celebrations.
Kayla Ruble. Santiago Times. September 15, 2010

Piñera asks Morales to also attend service at San Jose mine.

Bolivian President Evo Morales confirmed Tuesday that he would travel to Chile for its bicentennial celebrations this coming weekend. Chilean President Sebastián Piñera is also pushing for Morales to visit the San José mine in northern Chile, where 33 miners, one of whom is Bolivian, have been trapped underground since Aug. 5.

After the bicentennial, Morales plans to go to New York City on Sunday to visit the United Nations’ General Assembly. However, Piñera has tried persistently to persuade Morales to stay in Chile to visit the mine.

Piñera plans to travel to the mine Sunday to attend a small bicentennial celebration. Chilean writer Isabel Allende, who recently won the National Literature Prize, is also expected to attend the ceremony. After the ceremony, Piñera plans to return to Santiago for a military parade in Parque O’Higgins.

Piñera’s efforts to persuade Peruvian President Alan Garcia to attend the celebrations do not appear to be successful. Garcia had declined an invitation last week, but the Chilean Foreign Ministry persisted. But the newspaper El Mercurio quoted sources as saying the Peruvian leader would definitely not travel to Santiago this weekend.

Garcia will instead announce changes to his Cabinet over the weekend. Peruvian Ambassador to Chile Carlos Pareja told the Chilean officials that the president of Congress, Cesar Zumaeta, would lead Peru’s envoy to Chile for the bicentennial.

Among other foreign government officials traveling to Chile is Mexican Foreign Minister Patricia Espinosa, who confirmed that she would be in Santiago to represent her country’s president, Felipe Calderon. Arturo Valenzuela, assistant secretary of state for western hemisphere affairs, will lead the delegation from the United States and will be accompanied by Alejandro Wolff, the newly appointed U.S. ambassador to Chile. Other international leaders expected to attend include Paraguayan President Fernando Lugo and Argentine Vice President Julio Cobos.

The weekend’s official activities will begin Friday with the raising of a giant Chilean flag at 11:30 a.m. and a bicentennial gala at the Municipal Theater at 6:30 p.m.

On Saturday, events planned in Santiago include a morning photo shoot with Piñera and his administration at the presidential palace La Moneda; the singing of the national anthem at noon in the main square, Plaza de Armas, which will be broadcast throughout Chile; and a light show projected on La Moneda at 8:30 p.m., which the president will watch in the company of other national leaders.

On Sunday, the military parade will run from 3 to 7 p.m. The main event Monday will be the naval review on the coast near the city of Valparaíso.

Ecuador [contents]
Ecuador passes the hat for Amazon protection plan.
Hugh Bronstein. Reuters. September 15, 2010

YASUNI, Ecuador (Reuters) – Ecuador is launching a one-of-a-kind initiative to protect a jungle reserve that contains not only a huge variety of plants and animals but 20 percent of the country’s crude oil.

In exchange for not drilling for crude in a 200,000-hectare area of Yasuni national park, the government is asking rich nations, foundations and individuals to give it $3.6 billion.

That’s about half of what President Rafael Correa says Ecuador would get from drilling in this part of Yasuni, where the Andes mountains intersect with the Amazon rain forest.

It is a new approach to conservation and officials recognize that they might not find enough support for the initiative. But if it works, Ecuador says 407 million tonnes of carbon dioxide would be kept from entering the atmosphere.

Ecuadorean officials are flying around the world this month — including trips to Japan, Germany and the United Nations — meeting with prospective contributors to drum up support.

Yasuni as a whole covers an area of 982,000 hectares and is home to a huge array of birds, monkeys and other wildlife including jaguars, giant armadillos and pink-colored dolphins.

The initiative applies to three oil fields called Ishpingo, Tambococha and Tiputini, and collectively known as the ITT section.

Other parts of the park are already being drilled for petroleum, but many residents support the government’s push.

“We don’t want more oil because of the contamination,” said 19-year-old Fani Imene, who is from the local Waorani tribe and lives just outside the ITT section.

Many in her 2,500-member indigenous group are afraid to drink from rivers if oil wells have been drilled nearby.

A $27 billion environmental damages suit is being heard in a neighboring province, where residents say that U.S. oil giant Chevron is responsible for polluting the jungle with faulty drilling practices.

This and BP’s recent Gulf of Mexico oil spill disaster could bolster Ecuador’s pitch for the ITT initiative.

FIRST CONTRIBUTIONS

Ecuador will issue certificates to contributors promising their money back, without interest, should the country ever decide to exploit the oil.

Officials say the first wave of contributions is likely to come from countries such as Germany and Spain. Chile is expected to contribute $100,000 this week, making it the first official donor to the initiative.

Other prospective contributors are expected to pay close attention to the certificates’ fine print given that Ecuador has a long history of political instability and defaulted on its international bonds in 1999 and 2008.

“You need a substantial legal framework that can give you the necessary assurances,” said Peter Linder, Germany’s ambassador in Quito. “We will start talking details this month. One of the main questions will be the guarantee that the project will be sustainable.”

Ecuador, a member of OPEC, has given itself until the end of 2011 to raise $100 million in seed money that the government says is needed to make the initiative viable.

“If we don’t have $100 million in the fund by the end of next year we go to Plan B, which would be to refund whatever money we have collected and proceed with exploiting the oil in the ITT section,” said Tarsicio Granizo, a senior official at Ecuador’s heritage ministry.

The fund is to be administered by the United Nations Development Program, which is encouraging oil-rich countries to refrain from drilling in environmentally-sensitive areas.

Ecuador wants to collect the full $3.6 billion by 2024.

MAGIC GARDEN

“There are more species of trees in Yasuni than in all of North America,” said Pablo Jarrin, director of the Yasuni Research Station, which is part of Ecuador’s Catholic University and monitors the region’s biodiversity.

The park is located on the equator and enjoys consistent sunshine and rain while the region’s complex network of rivers creates natural barriers that separate groups of plants and animals, encouraging them to break off into separate species.

The nearby Andean mountain chain makes for steep terrain that also promotes the differentiation of species.

“These three factors interact to give us a region that is probably the richest in biodiversity in the world,” Jarrin said. “The park can be seen as a kind of magic garden that contains plants that cannot be found anywhere else.”

The government says contributions to the ITT initiative would be used for conservation and reforestation efforts and to fund poverty reduction efforts in the Amazon, which is Ecuador’s poorest region despite the area’s vast oil wealth.

Money donated will also go toward fuel efficiency initiatives and developing alternative energy sources.

But these programs are not foremost in the mind of Imene, who says she just wants to bring up her six-month-old daughter the way she was, surrounded by the sounds and fresh air of the forest and with her Waorani culture intact.

“For us,” she said, “that’s what the initiative is about.”
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Ecuador wants you to smell the roses, and eat them.
Hugh Bronstein. Reuters. September 13, 2010

PUJILI, Ecuador (Reuters) – Ecuador has long been a major exporter of big bulbed, colorful flowers that please the eye and the nose. Now its farmers are exploring a new idea — roses that you can eat.

Restaurants from New York to Barcelona, looking to attract customers with novelty dishes, have started to serve food containing organic rose petals grown on farms like Roberto Nevado’s in Ecuador’s central highlands.

Nevado is a spritely septuagenarian who moved here from his native Spain to start a plantation in the perfect rose-growing conditions offered by this part of the country, and his Nevado Ecuador farm now has three million bushes under cultivation.

Only 100,000 of them are grown without pesticides and meant for eating.

“But we believe the market will grow,” he said over lunch at his plantation featuring starters, main dishes and desserts containing red, pink and white rose petals that left a bitter-sweet sensation on the palate

“It’s new, it’s interesting, and that’s what everyone wants,” Nevado said, his green eyes flashing as he rolled a dollop of passion fruit mousse over his tongue, crushed rose petals adding a tangy juxtaposition to the sweetness.

A mechanical engineer by training, the energetic Nevado works standing up in his office, even while at his computer or talking on the phone. He started growing organic roses four years ago as part of the “going green” trend in business.

“They are the same species as non-edible roses, but the fertilizers have to be organic and no chemicals can be sprayed on them, which means they need more human care,” Nevado said.

Many bugs that can damage roses do not like garlic, he explained, so workers spray garlic solution onto the organic bushes and plant garlic around his edible rose greenhouses.

A long-time rose trader in Europe, Nevado came here 12 years ago, attracted to the South American country’s high altitudes and position on the equator, conditions that provide the intense sunlight needed to grow the best roses.

His farms stand about 2,800 meters above sea level. He has 500 employees and ships 20 million stems a year. Edible petals are a tiny part of his business, for now.

Restaurants such as Per Se in New York, Zazu in Quito and El Bulli near Barcelona have started experimenting with rose petal dishes and desserts such as “Rose Souffle”.

“The waiters sometimes have to explain that we did not just pull these roses out of the flower vase, that they are grown especially for eating,” said Zazu assistant chef Daniel Pillon, a Brazilian with a reassuring smile.

The restaurant’s rose martini, made with petals soaked for a week in vodka, is becoming a favorite at Zazu’s bar.

BLOSSOMING TRADE

Ecuador’s flower industry has bloomed since the signing of the 1991 Andean Trade Preferences Act, which lowers trade barriers for countries in the region that help Washington fight drug trafficking. Most of the world’s coca, the main ingredient to make cocaine, is grown in neighboring Colombia and Peru.

Ecuador’s flower exports were worth $600 million last year. The industry has been growing by about 13 percent annually and now accounts for 2 percent of gross domestic product.

About 100,000 people are employed directly and indirectly by the flower industry, a substantial number for a nation with a population of only 14 million.

Edible roses account for only about 1 percent of flower exports, but growers say the market needs to be encouraged as the country pulls out of the economic doldrums of 2009.

“Every type of new market, even small boutique markets such as this one, can help promote Ecuadorean flowers in general and help the industry grow,” said Ignacio Perez, head of the Expoflores growers’ association.

He and other experts here say they know of no other country exporting edible roses, which offer nutritional benefits such as calcium and vitamin C.

The petals are certified by European Union authorities and the U.S. Department of Agriculture for import. Nevado is pushing the idea of edible roses at food shows. He says one challenge is to convince potential buyers that they are safe.

“It’s basically lettuce in rose form,” Nevado, a short and courtly man given to dressing in black, said during the recent lunch at his farm.

When a reporter noticed Nevado had not finished all the petals that wrapped a delicious tuna-stuffed tomato appetizer, he admitted, “I’m about up to here with rose petals,” drawing an imaginary line across his forehead with his finger.

“But finish yours,” he said, “please.”

Venezuela [contents]
Venezuela to Use Drillship to Develop Large Natural Gas Project.
EFE. September 10, 2010

CARACAS – Venezuelan state oil company Petroleos de Venezuela S.A. said a platform that sank earlier this year while being used to develop a huge offshore natural gas field will be replaced by a drillship, a move intended to give “continuity” to the project.

The company Petrosaudi Oil Services Ltd. reported Thursday that the Songa Saturn drillship had already left the port of Malta en route to Venezuela, PDVSA said in a press release Thursday, without indicating when it would arrive on the coast of the South American country.

The drillship will “give continuity to the Gran Mariscal Sucre project” and accelerate development of the “productive gas wells located in the Dragon, Patao, Mejillones and Rio Caribe fields, which will supply the gas needed by Venezuela’s domestic market,” PDVSA said.

“Petrosaudi Oil Services Ltd. submitted the best technical offer and was chosen in a bidding process held … after the sinking of the Aban Pearl platform in May,” the press release said.

The Aban Pearl, a semi-submersible platform built by India’s Aban Offshore Limited, sank on May 13 without causing fatalities or environmental damage.

That platform, the first offshore gas rig completely operated by PDVSA, had been incorporated in 2009 into the drilling plans for the Mariscal Sucre project, located off the coast of the northeastern state of Sucre.

Andean Region [contents]
Colombia senator accused of paramilitary links.
CNN. September 15, 2010

Colombian Sen. Javier Caceres, a former president of Congress, was arrested Tuesday for alleged links to right-wing paramilitary groups.

The country’s Supreme Court of Justice issued the arrest warrant.

According to local reports, Caceres was allegedly involved with the paramilitary chief Uber Banquez, known as “Juancho Dique.”

Banquez claims that Caceres asked him for money to finance his campaign.

In an interview with Caracol Radio after his arrest, Caceres denied that any meetings with paramilitaries were for the purposes of wrongdoing.

He did admit that in 2000 he met with Carlos Castano, then-head of the now demobilized United Self-Defense Forces of Colombia (AUC) paramilitary organization, but did not divulge any details about it.

“I have never met with any illegal group, in any part of the country, to do wrongdoing,” he told the radio station.

Caceres is the latest politician to be investigated for what is known in Colombia as “parapolitics.”

Other members of Congress and officials have also appeared before the court to face charges of links to the paramilitary groups.

Right-wing paramilitary organizations were formed in reaction to a longstanding insurgency against the government by the Marxist Revolutionary Armed Forces of Colombia, known as FARC, and the National Liberation Army, commonly called ELN. Each paramilitary group fought to protect local areas against the guerrillas. The AUC came into being in 1997 as the paramilitary groups’ national umbrella organization.

Colombia’s National Police said the AUC was responsible for more than 1,000 assassinations and hundreds of kidnappings and incidences of torture. The AUC said most of the victims were guerrillas or their supporters.

The United States classified the paramilitary group as a foreign terrorist organization in 2001.

Colombia started a program to disband the paramilitary groups in 2003, offering legal and financial concessions to members who quit.
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36 Colombian Union Leaders Slain in 2010.
EFE. September 14, 2010

BOGOTA – Thirty-six union leaders have been murdered in Colombia so far this year, compared with 26 during the first eight months of 2009, an official of the CUT labor federation said Tuesday.

Five of the 36 slain leaders were from a single organization, the Adida union representing teachers in the northwestern province of Antioquia, CUT human rights director Luis Alberto Vanegas said.

Paramilitary groups involved in drug trafficking routinely distribute flyers threatening union activists, he said.

“A high percentage of those who threaten and pursue unionists are the private armies of paramilitaries financed by landholding business-owners,” Vanegas said.

More than 2,700 unionists have been killed in Colombia since 1986, including 40 slain last year, making the Andean nation the world’s most dangerous country for organized labor, the CUT says.

Those statistics have prompted U.S. lawmakers to oppose ratification of the trade accord the Bush administration negotiated with Colombia, a pact that remains on hold.
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Strong Colombian peso debilitating exports and eliminating jobs.
Merco Press. September 15, 2010

Unemployment in Colombia stands at 12.6% but another 34.2% figure as under employed or partially employed. President Juan Manuel Santos in his inauguration speed in August promised to create 2.5 million jobs in four years.

“The strong appreciation of the currency impacts on labour intensive activities such as flower farming, and so far there are no compensatory measures” says Francisco Chaves, a stock exchange analyst.

According to the national Association of Flower Cultivators this year the sector has lost 5.000 jobs which must be added to the 18.000 gone in the last three years.

The budget deficit 4% of GDP and foreign credit to finance it is seen as one of the main causes behind the revaluation of the peso together with a considerable inflow of foreign investment.

Foreign investment in the first half of this year increased 20% compared to the same period a year ago, jumping from 5.3 billion USD to 6.4 billion.

Economist Roberto Steiner from a Bogotá think-tank points to the challenges the current inflow of investment represents for employment and jobs creation.

“The main attraction for foreign investors are mining and energy, which means Colombia is competitive in sectors which are not great generators of jobs, but punishing others that are such as the flower industry”, underlines Steiner.

Another economist, Carlos Ronderos also warns that agriculture and industrial exports are debilitating fast and the “fiscal budget is something which can’t be addressed immediately”.

Besides the “cheap” dollar has helped reconvert industry, with greater productivity and cost reduction which is good for the economy but not for jobs.

To tackle the problem Colombian economists suggest monetary measures and export incentives on a long term strategy.

“The problem is serious because the appreciation of the Colombian peso against the US dollar begun five years ago, and so far there has been no official reaction”, said Chavez.
However local brokers believe the Colombian central bank will buy dollars on the spot market to ease the pressure on the peso.

Two weeks ago central bank president Jose Dario Uribe said the institution would buy dollars in the spot market when it deems it “appropriate”.

Colombian central bank director Carlos Gustavo Cano said in an interview with La Republica newspaper that policy makers are considering capital controls in a bid to stem the appreciation of the peso. Cano said that the strengthening peso is a concern and the result of short-term capital inflows, according to La Republica.
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Colombia’s Internally Displaced People.
Michael Solis. Huffington Post. September 13, 2010

According to the Internal Displacement Monitoring Centre, approximately 26 million people worldwide have had to flee their homes for different locations within their countries as a result of conflicts, government policies, or human rights violations. In Colombia, the number of internally displaced people is approximately 4.9 million – nearly the population of Colorado. This makes Colombia the second largest internal displacement country in the world next to Sudan.

Internally displaced people in Colombia account for 11 percent of the nation’s population and 19 percent of all internally displaced people globally. Once displaced, they are exposed to violence, rights abuses, and limited access to food, education, and health care.

The driving cause of displacement in Colombia is the ongoing civil war, which began in 1964 when the leftist Revolutionary Armed Forces of Colombia (FARC) and National Liberation Army (ELN) guerrillas rose up in arms. Government-backed paramilitary groups emerged in the 1980s to combat the insurgents. Paramilitary forces remain active despite failed demobilization tactics between 2002 and 2006, and they continue to commit rights abuses.

Such abuses do not stop with the State-sponsored expulsion of people from their land. Human Rights Watch’s 2010 report on Colombian paramilitaries documents the widespread abuses of successor military groups to the paramilitary coalition that regularly commit massacres, killings, forced displacement, rape, and extortion. They often target human rights defenders, trade unionists, victims seeking justice, and community members who do not follow paramilitary orders.

According to women’s rights activist Ana Teresa Lozada, at the core of the Colombian conflict is deep social inequality. Half of the country’s population of 45 million people live in poverty. The territorial dispute has caused the dispossession and displacement of the poor and marginalized to the benefit of the powerful – the State and multinational corporations – who gain minerals, oil, and other natural wealth as a result of exploitation.

Forced displacement continues in countryside towns and cities, with indigenous and Afro-Colombians being the main target groups. Nearly half of the displacements that occurred in 2009 took place in Nariño, where paramilitary forces have assassinated indigenous peoples. An estimated 300,000 people were displaced in Colombia in 2009 alone.

Paramilitary organizations have helped facilitate the entry of multinational corporations in Colombia by doing the “dirty work” of removing farmers and their families from their land. Internally displaced people are excluded from the enjoyment of their economic and social rights, including the right to work. Approximately 11 percent of internally displaced people earned Colombia’s minimum wage of $260 per month, while the rest rely on informal work such as rummaging and selling things like cell phone minutes or tamales.

Recently, a delegation of Christian Peacemaker Teams (CPT) visited Colombia to meet with Colombian officials and activists about the internal displacement issue. The group visited the people of Las Pavas who have been displaced from their land by a former drug lord.

Stacey Carmichael, one of CPTs delegates, expressed her concerns with what the Colombian corporation Daabon that now resides in Las Pavas has done to the 123 local families and their land. “This corporation has disrupted a native burial ground and bulldozed the Las Pavas community’s crops to plant palm. The palm oil being harvested is mainly being sold to…get this…the Body Shop.”

The revelation is telling. The Body Shop is a corporation that claims to commit itself to defending human rights and campaigning against social injustice. According to its website, the Body Shop commits itself to “respect local, cultural, and political differences” and insists that their business activities adhere to basic human rights standards. Yet the corporation is profiting directly from policies that displace Colombians, extract resources, and deprive locals.

Unlike refugees, internally displaced people are not afforded the same protections as refugees under international law such as the 1951 Refugee Convention and the 1967 protocol. Instead, the government is chiefly responsible for addressing their rights. This is problematic when the Colombian State is largely responsible for the infringement of its people’s rights.

Hope for change exists, as a recent Constitutional Court ruling has deemed the government’s response to internally displaced people as unconstitutional. The Colombian government has begun a discussion process to address the dispossession of land. While the government of the former president Alvaro Uribe increased funding for programs to benefit displaced people, the initiatives did not result in improvements in their quality of life, nor did they seek to right the wrongs of the past by holding people accountable for rights abuses. It remains to be seen what the newly elected president, Juan Manuel Santos, will do to address this humanitarian concern.

Until then, it would not hurt to contact multinational corporations like the Body Shop to question them about the implications their business agreements have on Colombian people and native lands.
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Peru’s Garcia Shuffles Cabinet Before Elections.
Reuters. September 14, 2010

LIMA – Peruvian President Alan Garcia chose a new prime minister and economic chief on Tuesday in a widely expected cabinet shuffle to pave the way for his party to launch a candidate in next year’s presidential election.

He picked one of his longtime aides, Education Minister Jose Chang, to replace Prime Minister Javier Velasquez, who wants to become the ruling APRA party’s nominee for president ahead of a nationwide vote slated for April.

Ismael Benavides, a well-respected banker, was chosen to replace Mercedes Araoz as finance minister.

Araoz was recently criticized by the central bank for allowing public spending to rise too quickly in Peru, where the economy is forecast to surge 7 percent this year, one of the fastest paces in the world.

Garcia praised Chang for improving the quality of public education and said he “would guarantee continued economic stability and be neutral in the run up to elections.”

The cabinet changes had little impact on financial markets as Garcia’s centre-right government is not expected to abandon policies emphasizing free trade and foreign investment. Peru’s sol hovered near a two-year high of 2.79 against the U.S. dollar on Tuesday.

“This is a transitional cabinet. I don’t think there will be any major changes in economic policy, though Chang must guarantee that Garcia leaves office looking good and is well remembered,” said political scientist Alberto Adrianzen.

In August, three sources in APRA or the government had told Reuters that Araoz would leave in the cabinet shuffle and that Benavides would replace her, prompting Garcia to strenuously criticise the report and call it “false”.

PLANNING FOR ELECTIONS

Chang has worked for Garcia for years and, like Velasquez, is a core member of Garcia’s APRA party. The cabinet shakeup had been repeatedly postponed, as members of APRA jockeyed over who should be on its presidential ticket.

By law, Garcia, whose disapproval rating is a lofty 60 percent despite swift economic growth, cannot run for a second straight term. Many Peruvians feel left behind by the country’s economic boom and the poverty rate is around 35 percent.

Opinion polls have shown any APRA candidate will likely be trounced in the next presidential election by one of two conservative frontrunners: Lima’s mayor Luis Castaneda or Keiko Fujimori, a popular lawmaker and the daughter of former president Alberto Fujimori.

Earlier on Tuesday, a government source said Velasquez had asked the telegenic Araoz to be his vice presidential running mate in a bid to strengthen his chances of victory.

By choosing his old friend Chang to lead his cabinet, critics will likely accuse Garcia of manoeuvring to boost public spending so that APRA picks up seat in Congress during next year’s general election.

With a strong base in Congress, Garcia would have a better chance of winning the presidential race in 2016, the next time he will be eligible to run, said political analyst Fernando Rospigliosi. Garcia, whose first term was in the 1980s, has said that he would like to be president for a third time.

The lead up to elections in April has already provoked controversies about how to manage lingering social conflicts over natural resources and how to try people for human rights crimes committed during a 1980-2000 civil war.

The rights controversy contributed to the firing of Defence Minister Rafael Rey on Tuesday.
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Peru Central Bank Raises Reserve Requirements to Avert Risk of Overheating.
John Quigley. Bloomberg. September 13, 2010

Peru’s central bank increased the reserve requirement for short-term overseas loans as it seeks to prevent credit growth from fueling inflation in the South American country.

Banks must hold funds equivalent to 75 percent of borrowings abroad maturing in less than two years, up from 65 percent previously, the central bank said yesterday in an e- mailed statement.

The higher reserve requirement “reduces the possibility of short-term external capital inflows and other sources of transitory liquidity creating unsustainable growth in credit,” the statement said.

Rising private investment spurred Peru’s economy to grow 11.9 percent in June, the fastest since 2008, and led the central bank to increase its reference rate for a fifth straight month last week. Policy makers have also raised reserve requirements four times since June as they seek to avert inflationary pressures and prevent foreign inflows from destabilizing the local currency.

The bank increased its benchmark lending rate to 3 percent from 2.5 percent Sept. 9, citing robust domestic demand and “rapid” economic growth. Company and household borrowings may rise 20 percent this year, central bank President Julio Velarde said Sept. 9.

The sol has gained 3.5 percent this year, the second- biggest gain among seven major Latin American currencies tracked by Bloomberg. The Colombian peso has gained 13.6 percent over the same period.

The central bank this month increased the marginal reserve mandate to 120 percent of foreign banks’ short-term sol deposits, from 65 percent, to slow capital inflows.
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U.S. Praise for Peru’s Economy Misses the Mark.
Lisa Skeen. NACLA. September 13, 2010

The Peruvian economy has been enjoying something of a heyday lately, basking in the glow of the mainstream media. Currently being hailed as something of a Latin American wonder child, the Andean country has received increasing press coverage for its near decade of strong growth, which has continued despite the global economic downturn. But extensive coverage of fawning comments by President Obama have overshadowed the parallel narrative of a country potentially on the brink of disaster, with widespread voter discontent, sharp income disparity, and explosively divergent claims to land and resources.

After Peruvian president Alan García visited the White House early this summer, Obama praised the country during a press conference, stating “We’ve seen not only the solidification of a thriving democracy but also an extraordinary economic success story. Even over the last year in the midst of a very tough global recession, we saw that Peru was able to remain resilient.”

Meanwhile, outside the White House, a small group of activists protested the meeting. A Peruvian woman and her daughter were later charged with defacing government property after the daughter chained herself to a White House fence and the mother poured an oily substance on her.

The incident, which was meant to highlight the environmental destruction wrought by mining companies, was mentioned only in passing on an ABC news blog. Obama’s “economic success story” line, however, has reverberated through the mainstream media.

His comments, however, are as much a statement of faith in neoliberal trade policies as they are a statement of faith in Peru itself.

Certainly, the Peruvian economy has expanded. In May, the International Monetary Fund estimated that Peru’s economy would expand by 6.3% in 2010 – the largest increase in the western hemisphere – due mostly to foreign direct investment (FDI) in mining and energy and the soaring price of gold, Peru’s second-biggest export. Bank of America estimated that investment in the country would nearly double in 2011, to $8.4 billion, from $4.4 billion in 2009.

And yet, García’s approval ratings hover at around 31%, up slightly from an abysmal low of 26% in May. His ratings reflect the reality that there is often little, if any, immediate correlation between GDP growth and quality of life for ordinary citizens.

Former president Alejandro Toledo described an alternate reality in an interview with PBS Newshour: “[There are] millions of Amazonians, Afro-Peruvians, who don’t have the chance to have access to potable water and sanitation, to quality health care . . . ,[and] access to energy. And that’s a population that’s very discontented, and today getting together.”

A June report by Oxfam America paints a bleak picture of Peru. Throughout the 1990s, reports Oxfam, the country underwent a dramatic restructuring, with heavy emphasis on decentralization. As a result, local governments are now given 50% of royalties and taxes paid by extractive industries (called the canon minero), which in theory, should have been a boon to local communities, given the rapid growth of FDI. FDI inflows have nearly tripled in the last decade, from $1 billion during 1990-1999 to $2.7 billion during 2000-2009. As in the rest of Latin America, the exploitation of natural resources, particularly minerals and gas, is responsible for the majority of this investment.

Poverty indices, however, indicate that foreign investment and the current system of royalty distribution – hobbled by lack of institutional support and corruption – is highly ineffective at spreading wealth equitably. The García administration claimed the national poverty rate fell from 48.7% in 2005 to 34.8% in 2009, but Farid Matuk, a former head of the National Institute of Statistics and Informatics (INEI) – the organization responsible for these statistics – was highly critical of García’s conclusions, which have been widely reprinted in the media. According to Matuk, “The poverty figures are not a product of scientific measurements but an artistic creation . . . there is no math on earth that backs up INEI’s statistics.”

A closer look at INEI statistics indicates that poverty levels have actually increased in rural areas, particularly in rural areas associated with mining, agriculture exports, and the Amazon. They range from an astounding 70.3% in Apurimac to 56% in Cajamarca (Peru’s leading gold mining region) to a low of 13.7% in the Pacific coast region of Ica. Food poverty levels, considered a more accurate indicator of day-to-day hardship, have increased in rural areas, from 40.7% in 2005 to 45.8% in 2010.

Mining and gas concessions cover a staggering 70% of the Peruvian Amazon, many of which overlap with indigenous lands. Though many of the concessions are not being actively utilized, forecasts about environmental degradation are grim One recently released study offered a worse-case prediction that 91% of the Amazon would be deforested/degraded by 2041.

Rural discontent over land use, which has been simmering for years, boiled over in June 2009 with indigenous protests against the granting of exploration concessions to oil and gas companies in Bagua. Thus far, the protests have had little effect on García’s policies.

The potential for such deadly explosiveness has investors concerned that there is a “sizable danger” that Peru will elect a populist president in April 2011. The possibility is considered likely enough to warrant the suspension of anticipated credit ratings upgrades until after the elections.

The potential for the election of a president who appeals to the rural poor rather than the urban business class no doubt looms large in the minds of investors and U.S. officials. Under García, Peru has remained a critical ally of the United States, particularly for its strategic location among other coca-cultivating countries that are, at best, highly wary of U.S. foreign policy. The potential deepening of a military alliance between the two countries was alluded to in comments by U.S. Defense Secretary Robert Gates during an April visit to Lima.

But it is most likely Peru’s friendliness to foreign investors that goes the farthest to explain Washington’s insistent praise for Peru’s “growth” amid such stark evidence of domestic discontent. The United States – Peru Trade Promotion Agreement (TPA) went into effect on February 1, 2009, and according to the U.S. Trade Representative, trade between the two countries grew to $9.1 billion in 2009, up from $3.6 billion in 1999.

The TPA included a requirement that Peru protect labor rights, as well as a pledge of bilateral cooperation on the promotion of environmental protection. Under the agreement, Peru had 18 months from the February 1 implementation date to bring itself into compliance with this pledge. In July of this year, U.S. Ambassador Ron Kirk, expressed concern that Peru would not meet these obligations by the August 1 deadline.

Thus far, the Obama administration has not seriously addressed Peru’s noncompliance with those few parts of the agreement capable of positively impacting local communities. Meanwhile, the praise keeps flowing and foreign investors continue to profit as rural Peruvians sink deeper into poverty – and discontent.

Lisa Skeen is a NACLA Research Associate.
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SURVEY: Chile Seen Raising Rates Again As Economy, Demand Thrive.
Anthony Esposito. Dow Jones. September 14, 2010

TPM Rate History (annual percentage):

 Aug    July   June    May   April  March  2.0%   1.5%   1.0%   0.5%   0.5%   0.5%      

SANTIAGO–Chile’s central bank is expected to continue raising interest rates, lifting its key rate by half a point Thursday, as the economy thrives following last year’s recession and a massive February earthquake.

The bank in June raised the key overnight rate, known locally by the acronym of TPM, for first time in two years to 1% from a record low 0.5%, where it had stood for nine months. The monetary authority had slashed rates in response to the global economic crisis. As the recovery gained traction, it then raised the rate by 50 basis points in July and again in August.

In the midst of the global financial crisis last year, Chile slumped to its first recession in a decade. As the country recovered, an 8.8-magnitude earthquake rocked Chile’s central and southern regions in February, causing an estimated $30 billion in damage, which led the economy to contract in March.

Nonetheless, Chile’s economy has quickly rebounded on significant domestic demand and investments, posting 6.5% growth on the year in the second quarter, its highest rate in five years.

Also, for the first eight months of the year, Chile’s consumer price index gained 2.3%. The monetary authority has an inflation target of 3%, plus or minus one percentage point, in its 24-month policy horizon.

The central bank recently upgraded the Andean nation’s 2010 growth forecast to between 5.0% and 5.5% on the year as post-quake reconstruction kicks into high gear and demand is anticipated to remain firm.

“Domestic demand has grown beyond prior expectations and output gaps continue to be closed. Both have the potential to increase medium-term inflation,” said Diego Figueroa, economist with local investment bank and brokerage Larrain Vial.

Meanwhile, central bank president Jose De Gregorio recently said that “any way you look at it, 2% [TPM] is fairly off from being neutral,” adding that the central bank sees neutral interest rates for the Chilean economy at around 5% to 6%.

Despite the latest the consumer prices index retreating an unexpected 0.1% in August from the previous month, analysts said they believe that the central bank will raise the TPM a half-percentage point to 2.5% at its monthly monetary policy meeting Thursday, in line with the bank’s efforts to bring rates to a more neutral level next year.

“Consistent with the central bank’s language, the policy rate is far away from being neutral…considering strong domestic demand, there’s no need to maintain the extraordinary monetary accommodation,” said Goldman Sachs economist Alberto Ramos.

All 10 of the analysts surveyed by Dow Jones Newswires expect the central bank to increase the benchmark rate by 50 basis points to 2.5%.

However, the strength of the Chilean peso, which has recently traded at 35-week highs compared with the dollar, could play a role in the pace at which the bank withdraws its stimulus.

“The language in the central bank’s post-meeting communique could reveal less concern about short-term inflation as the appreciation of the peso has taken some pressure off of tradable goods and perhaps will moderate the current pace at which rates are being hiked,” said Larrain Vial’s Figueroa.

According to the central bank’s most recent monthly poll of local analysts, in the October meeting the bank will likely raise rates by another half point to 3.0%, and in December, the TPM is expected to be at 3.5%. Twelve months from now, the TPM will likely be at 5%.
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Former Chilean President to Lead New U.N. Agency.
Neil MacFarquhar. New York Times. September 14, 2010

UNITED NATIONS – Michelle Bachelet, famous for breaking gender barriers by becoming the first woman elected president of Chile, will head the new global United Nations agency created to advance women’s rights, Secretary General Ban Ki-moon announced Tuesday.

Mr. Ban said he chose Ms. Bachelet, 58, from 26 candidates for her political skills and ability to create consensus. She had been a front-runner from the start.

“We have to make sure that women’s issues are an essential element on the agendas of all heads of state, all governments,” Ms. Bachelet said in an interview.

The United Nations has been overshadowed on numerous issues by other global organizations in recent years, but Ms. Bachelet said the very fact that it was creating an agency to concentrate on women indicated the priority being given to “putting women’s issues in a higher position.”

New reports had suggested that Ms. Bachelet wanted to stay active in Chilean politics after finishing her term in March, but she said she had never commented publicly on the job. Still, she acknowledged, it was a tough choice to move away from Chile and her three children – her youngest daughter is just finishing high school while the other two are grown.

“I will always care about what happens in Chile, so it was not an easy decision,” she said, noting that she ultimately decided she wanted the challenge.

Ms. Bachelet comes with a “wealth of experience, global leadership, and global stature,” Mr. Ban said, and will bring to the post “a real force to meet the expectations of many women and girls and children around the world.”

It took four years of wrangling among member states to create the agency, which consolidates four smaller agencies whose work on women’s issues often overlapped. It has been given the rather unwieldy title of the United Nations Entity for Gender Equality and the Empowerment of Women, but in diplomatic shorthand it is often called the “Gender Entity.”

In 1995 in Beijing, United Nations member states signed off on a declaration to achieve women’s equality. Among other issues, it called on governments to end discrimination against women and close the gender gap in 12 fields, including education, employment, health, human rights and political participation. That platform will basically become the agenda for U.N. Women when it officially starts work on January 1, 2011.

Even before the General Assembly approved the new agency in July, Mr. Ban was focused on finding a women from the “south” to run it, worried that bringing in a leader from the richer, developed states might cause resentment that Western nations were using the United Nations to foist their values on the rest of the world.

Ms. Bachelet said she was aware that some of the socially groundbreaking policies she put forward in Chile might not have a universal application, that cultural approaches will vary. “In some places women have all the rights they deserve and in others there are big restrictions – in some countries they even mutilate women,” she said, referring to the custom of female circumcision. “In some places it will be faster and others it will take longer. It is not easy and it has a lot of controversial aspects.”

Having a board that represents all areas of the world and lots of women experienced in civil society will help speed the work, she said.

Ms. Bachelet, a pediatrician, has been nothing if not an iconoclast. A professed agnostic and single mother of three in a nation that only recently legalized divorce, Ms. Bachelet shattered the mold of traditional politicians in Chile, a Roman Catholic stronghold.

She initially divided her first center-left cabinet among 20 ministers – 10 men and 10 women – unprecedented gender parity for Chile. Her government legalized alimony payments to divorced women and tripled the number of free early-child-care centers for low-income families. Her popularity dove initially after she was elected in 2006 over some domestic issues, but her deft handling of the Chilean economy during the world financial crisis won her high approval ratings.

She left office facing some criticism that her government was slow to react to a devastating earthquake that hit just as her presidency was ending, but she denied that she had been reluctant to call out the military, which has a bloody past in Chile.

Her father, an air force general, died in prison after being tortured for months under the dictatorship of Gen. Augusto Pinochet. The regime also detained and tortured Ms. Bachelet and her mother in 1975 before they were allowed to seek exile in Australia. Ms. Bachelet returned in 1979.

Southern Cone [contents]
China State-Run Banks Plan to Invest in Brazil’s High-Speed Train Project.
Carla Simoes. Bloomberg. September 14, 2010

China Development Bank Corp. and the Export-Import Bank of China are ready to lend to a group of companies bidding for Brazil’s bullet-train project, according to Asian Trade Link, which is associated with the group.

China Railway Construction Corp. and China Northern Locomotive & Rolling Stock Industry Group Corp. are leading the bid group, said Marco Paulo Moreira Leite, chief executive officer of Asian Trade Link, a Brazilian firm.

“There’s no problem for China in terms of financing,” Leite said in a Sept. 8 telephone interview from Rio de Janeiro. “The Chinese banks are well-capitalized.”

The Chinese group, which has been studying the high-speed train project for a year, is waiting for details on a loan from Brazil’s state development bank, Leite said. The bank, known as BNDES, may finance as much as 60 percent of the project, Bernardo Figueiredo, head of the nation’s Land Transportation Agency, said last year.

The train will link the cities of Rio and Campinas via Sao Paulo and may cost as much as 33.1 billion reais ($19.4 billion), according to Brazil’s federal auditing court, known as TCU.

Officials at the Export-Import Bank of China and China Development Bank couldn’t be reached for comment.
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Brazil on course to hit child mortality target as living standards improve.
Tom Phillips. Guardian. September 14, 2010

Brazil slashed its infant mortality rates by 50% between 1990 and 2006 thanks to rising incomes and better healthcare.

The woman at the door furrows her brow and breaks into a giggle. “What’s broccoli?”

It’s early afternoon in Ipuca, a rural shantytown in one of the most deprived corners of Rio de Janeiro state, and Lucileide Alves Costa, a 25-year-old mother of two, is receiving a visit from members of the Pastoral da Crianca, an outreach group devoted to fighting infant mortality.

Pointing to 1-year-old Francisco, the visitors rattle off a list questions from their notebook: “Is he eating ok?” “Does he eat vegetables?” “Has he been vaccinated?” Costa responds in the affirmative – until broccoli is mentioned. “I use onions and pepper – and stock cubes,” Costa confesses. “But I’ve never cooked broccoli. What is that?”

Welcome to the frontline of a three-decade battle against infant mortality in Brazil, a country that has managed to drastically reduce death rates over the last 30 years, saving tens of thousands of young lives.

A 2008 study by Unicef found that Brazil had slashed infant mortality rates, those among children between 0 and 1 year of age, by over 50% between 1990 and 2006. According to the report the national death rate had dropped from 48 deaths per thousand live births to around 19.

Even in Brazil’s indigenous communities, some of the worst-affected areas, the government says things are improving. According to Brazil’s health agency Funasa, there was a 10% drop in infant deaths in indigenous areas between 2007-2009.

In 2000, Funasa claimed that the death rate in such areas was nearly 75 for every 1,000 children under the age of one. In 2009 that figure dropped to around 42 per 1,000.

All of which means that Brazil is on course to meet the fourth millennium development goal, which calls for a two-thirds reduction in the infant mortality rate by 2015. Other countries performing strongly include Bangladesh, Egypt, Indonesia, Mexico, Nepal and the Philippines. But elsewhere results are not so uplifting. In Somalia, Unicef figures show that the mortality rate among under-fives remained stable between 1990-2004, with around 225 deaths per 1,000. While Haiti managed to reduce its rate from 150 per 1,000 to around 117 deaths, it still remains on Unicef’s “off-track” list.

Globally the under-five mortality rate has fallen from 90 deaths per 1,000 live births in 1990 to 65 in 2008, according to a Unicef report published this month (Sept 2010). But the rate of decline means that overall MDG4 will not be attained, with sub-Saharan Africa and South Asia still lagging.

Lucileide, an immigrant from Brazil’s impoverished north-eastern state of Ceara, ranks among Rio’s poorest residents. Her house lacks running water – she uses a neighbour’s well – and the front door of her cramped home opens out onto a black river of raw sewage.

Yet even here a combination of government action and the work of community support groups such as the Pastoral da Crianca has drastically reduced child and infant mortality. Thirty years ago it was common for mothers in slums like these to lose their children during or soon after childbirth. No longer.

“It’s very rare nowadays,” says Leila Maria Rangel Soares Santana, 55, the Pastoral’s local organiser. “We had one death some time ago but it was because of something that happened at the hospital, not bad pre-natal care. Dehydration and diarrhoea – these are very common here and in the rest of Brazil. But here, infant mortality hardly exists any more.”

The plummeting number of child and infant deaths in the Rio favela tells a wider story of a improving living standards in Brazil. According to the Ministry of Health 43.601 Brazilian babies died in 2008 compared to 95,476 in 1990.

“The fall in infant mortality is the result of families having greater access to information, health services and income,” Brazil’s social development and hunger minister, Marcia Carvalho Lopes, says.

Lopes also attributes the continuing fall to recent government projects such as Fome Zero, or Zero Hunger, and Bolsa Familia, an income transfer project which conditions cash transfers to low-income families on the vaccination of children and their presence at school.

“Bolsa Familia mothers are breast-feeding more. Pregnant women are doing more pre-natal,” she says.

While government action has played a major role, the Pastoral da Crianca is widely credited with spearheading the drive to reduce infant mortality rates in Brazil.

The group, which aims to train mothers in basic healthcare and healthy eating, was founded in 1983 by Zilda Arns, a legendary Brazilian medic and aid worker, and now boasts a network of 260,000 volunteers across the country from the Rio favelas to the remote riverside communities of the Amazon jungle and the arid backlands of north-east Brazil, where Costa was born.

Arns was killed in Port-au-Prince earlier this year when the Haitian church she was speaking at was hit by January’s earthquake. Her group’s work, however, goes on – not just in Brazil but in countries such as Angola, Haiti and East Timor. Today the Pastoral says its volunteers care for nearly 2 million Brazilian children, while mortality rates among children within their reach is significantly lower than children who are not.

“Today rates [of infant mortality] among the children we support are under 10 [deaths per 1,000],” says Antonio Chaves, the group’s state coordinator in Rio. “Before in some areas the rate was over 70.”

“The healthcare system is still not of a first-world standard, but it has improved a lot,” he adds.

In Jardim Catarina the Pastoral helps around 550 children, using community “leaders”, usually local mothers themselves, to reach out to expectant mothers through monthly visits and weighing sessions. Each leader is responsible for around 15 children between the ages of 0 and 5 and around five expectant mothers.

Much remains to be done. While infant mortality rates in south-eastern states such as Rio and São Paulo have massively receded, the rate of infant deaths remains high in the poor north and north-east of the country.

Jorge Abrahao de Castro, the director of social policies at Brazil’s Institute for Applied Economic Research, a state-funded think-tank, says Brazil is still characterised by “very high regional differences” in social indicators, including infant mortality.

 ”This rate has been falling in Brazil… [but] we still have a very high [overall] rate of around 22.8 deaths per 1,000 [among 0-5 year-olds].”

“The worst areas are improving more quickly,” he says, adding that he is confident Brazil would achieve its millennium goal – which is to reduce its overall under-five death rate to 20 per 1,000 – one year ahead of schedule, in 2014.

Mexico, Central America and the Caribbean [contents]
Mexican Official Quits.
Randal C. Archibold. New York Times. September 14, 2010

MEXICO CITY – Mexico’s immigration minister resigned Tuesday, three weeks after 72 Central and South American migrants were killed in an attack that threw a spotlight on the often harsh treatment people endure while traveling through Mexico toward the United States.

A government announcement on Tuesday evening said that Cecilia Romero Castillo, the commissioner of the National Migration Institute, had resigned after nearly four years in the job, without giving a reason, though speculation had been building for weeks that she would step down.

President Felipe Calderón has met in the past week with the presidents of Guatemala, Honduras and El Salvador, where several of the migrants had begun their journey, to promise greater cooperation in fighting organized crime groups and more vigilance in protecting migrants. Human rights groups have assailed the government, saying it does little to protect migrants, who they say are regularly beaten, robbed and killed, sometimes by the police.

The authorities in Mexico have blamed the massacre on Los Zetas, one of the most feared gangs in Mexico, saying the gang sought to recruit the migrants to work for them, although family members have said the gunmen telephoned them demanding money.

Mr. Calderón said several of the people suspected in the massacre have been killed or captured in a series of confrontations with the police and military.

No replacement for Ms. Romero was announced.
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Letter from Mexico: In no mood for a fiesta.
William Booth. Washington Post. September 15, 2010

IN MEXICO CITY The government is promising “the most spectacular celebration in history” and throwing more than $40 million on the table for parades and fireworks to commemorate the country’s 200th anniversary this week. But on the eve of their bicentennial, many Mexicans confess they’re in no mood for a party.

As the country prepares to follow President Felipe Calderon in the traditional “grito,” or shout-out of “Viva Mexico!” on Wednesday night, the country’s historians, politicians and artists agree that the country is in a deep funk.

“It feels like Mexico is out of gas,” said Hector Reyes, a car dealer who with his wife and kids watched workers erect TV camera scaffolds in the capital’s central plaza to broadcast the events.

These days the news feels like an endless rerun of the same cop show as one midlevel drug capo after another is arrested or killed. Last month it was El Nacho. Then it was La Barbie. This week, El Grande. All of them – beefy thugs with fashionable sports shirts, living in nice big houses, with lots of guns and grenades – are quickly replaced.

“Because when one is captured, the next in line steps up,” said Jorge Romero, a representative in the National Congress.

A popular movie in theaters here to commemorate the bicentennial is called simply “Hell.” Billboards touting the film are a tragicomical tableau of the state of the state: the grinning narco in his cowboy hat and white suit standing alongside a fictional version of the real-life “El Pozolero,” the infamous Stewmaker, who disposed of corpses in a 50-gallon drum of lye.

The movie is gruesome but funny, and audiences laugh and gasp, as corrupt cops, mayors, dopers and even a priest are mowed down by AK-47s and dispatched with the newest symbol of Mexican macho – the chain saw.

“I hate to speak ill of Mexico, especially with those from abroad, but to be honest, Mexico has a number of problems that have become endemic, which have become part of our culture, our idiosyncrasies, and those problems are things such as corruption and impunity and social inequalities,” said Luis Estrada, the film’s director. “It is a sad conclusion, but as a society and country, we have very little to celebrate.”

In a poll published last week in the newspaper Reforma, 67 percent of Mexico City residents said they felt little or no excitement about the bicentennial. Nearly 6 in 10 said the money spent was not worth it.

“Mexicans are stoic, but we know how to rejoice in little things. We are very good at making fiestas, but the mood is very sour now – you could say it is almost sad,” said Enrique Krauze, author of some of the most popular histories of Mexico.

Even the church appears to be experiencing a moment of doubt. “We are a generous and hospitable people, but we are realizing with surprise and shame that we have become a people corrupt and murderous,” the Catholic Archdiocese of Mexico concluded in a recent editorial.

The church was attacking the criminal gangs engaged in human smuggling and the many Mexican officials uninterested in protecting the rights of passers-through. Many here were shocked by the massacre of 72 illegal migrants from Central and South America, including women and teens, whose bodies were found in an abandoned barn in northern Mexico last month. The killings prompted Mexico’s top immigration official to resign Tuesday.

Though many north of the border might assume that Cinco de Mayo is Mexico’s Fourth of July, it is actually the anniversary of the Mexican military’s upset victory over French troops at the Battle of Puebla on May 5, 1862 – an event not much remembered here in Mexico, though Mexico’s Jose Cuervo tequila empire certainly benefits from its sales in the United States on that day.

On Monday, Calderon attended an annual reenactment by hundreds of Mexican troops – dressed in costume – of the glories of Mexico past, the kind of mingling of myth and airbrushed history that every country rolls out to celebrate its anniversaries. Mexico’s bicentennial honors two revolutions, two wars for independence.

The first from Spain, which was sparked by an uprising of peasant farmers in 1810. Led by a priest with big ideas, Miguel Hidalgo, the insurrection was quickly crushed and Hidalgo executed.

The second Mexican revolution began in 1910 and saw Pancho Villa and Emiliano Zapata wage war against the federal forces of velvet-gloved dictator Porfirio Diaz, who decamped to his beloved Paris in 1911 after stealing his last election. But the fighting dragged on for seven more years. Hundreds of thousands died violent deaths or succumbed to plagues of malaria, influenza and typhus.

“This is a moment where we don’t know where we are and we don’t know where we are going,” said historian Lorenzo Meyer, who hosts a popular evening roundtable on television.

Meyer said the holiday has its enthusiasts, “but it’s a bureaucratic enthusiasm, a staged and not very sincere enthusiasm.”

For weeks, anonymous e-mails have encouraged citizens not to participate in the government-sponsored celebrations. And the presidential candidate who lost to Calderon in a contested election in 2006, Andres Manuel Lopez Obrador, is hosting an alternative celebration a few blocks away from Calderon’s.

Public events in besieged cities such as Ciudad Juarez on the border have been canceled, others have been scaled back, as extreme security precautions are implemented to confront feared acts of narcoterrorism.

To make matters better – or worse? – alcohol sales ended Tuesday at midnight.
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Funes: We must follow own path.
Jim Wyss and Tim Johnson. Miami Herald. September 15, 2010

Staking out a middle ground in a highly polarized region, El Salvadoran President Mauricio Funes said he was not interested in U.S.-style capitalism or Venezuela-inspired socialism but policies that made his nation “effective and efficient.”

Speaking at the Americas Conference in Coral Gables on Tuesday, Funes brushed off the idea that his government might try to adopt the “21st century socialism” that Venezuela has tried to export to allies such as Nicaragua and Bolivia.

“In El Salvador, it’s not possible to build socialism and much less 21st century socialism, which I really cannot define and is not clear to me,” said Funes, 49. “I don’t think [the model] is clear to many of the political actors in the region.”

With the backing of former leftist guerrillas of the FMLN, Funes broke the stranglehold on power of his country’s political right-wing in elections last year.

While the FMLN has its own ideas, Funes described himself as the president of all El Salvadorans “even those who didn’t vote for me.”

Since taking office, Funes has walked a fine line. He has restored ties with Cuba and was among the first presidents in the region to blast the 2009 coup in Honduras that ousted President Manuel Zelaya, a staunch ally of Venezuela’s Hugo Chávez.

But he has also pushed for Honduras to be readmitted to the Organization of American States, has maintained cordial ties with the United States and been a vocal critic of presidents who push for constitutional changes to extend their terms — a category that includes both Venezuela’s Chávez and former Colombian President Alvaro Uribe.

When Colombia’s Supreme Court earlier this year blocked Uribe from running again it “fortified the democratic process in that country,” Funes said. “It would be healthy for Venezuelans if Chávez did the same. I have no doubt.”

In his luncheon address at the annual conference, Funes also talked about the thorny issue of illegal immigration. He said no matter how many massacres await undocumented migrants from Central America as they cross into Mexico, they will continue to flow northward to the United States.

Funes described migration waves as virtually unstoppable and called on the Obama administration to alter its policies to help bring greater social justice to Central America.

“Our region is without doubt one of the poorest and most unjust on the planet,” said Funes, a former television journalist.

Funes said nearly three million Salvadorans have migrated from their homeland, or about a third of the nation’s population.
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Cuba says U.S. embargo has toughened under Obama.
Nelson Acosta. Reuters. September 15, 2010

HAVANA (Reuters) – The U.S. trade embargo against Cuba has gotten tougher under U.S. President Barack Obama, not more lenient as many had expected when he took office, a top Cuban official said on Wednesday.

Foreign Minister Bruno Rodriguez, in the Cuban government’s annual update on the 48-year-old embargo, said the United States is levying bigger fines, applying sanctions more firmly and pursuing embargo-busting financial transactions more vigorously under Obama.

“The embargo policy in the last two years, which is to say under the government of President Obama, has not changed at all,” Rodriguez said in a press conference. “In some aspects, it has even hardened.”

In terms of U.S. policy toward Cuba, Obama had performed “below expectations that had been created in the international community and American public opinion,” Rodriguez said.

Rodriguez said the embargo has cost Cuba $751 billion over the years, adjusted for inflation and the changing value of the dollar.

“It is, without any doubt, the primary obstacle to the economic development of our country,” he said.

The United Nations is scheduled to hold its annual vote on a resolution condemning the embargo on October 26. Last year, only three countries — the United States, Israel and Palau — voted against the measure.

The embargo, said Rodriguez, “is a museum piece of the Cold War. It is, moreover, a failed policy.”

The embargo was fully imposed in 1962, with the aim of toppling the communist government put in place by Fidel Castro after he took power in a 1959 revolution.

The embargo prohibits most trade with Cuba, with exceptions for agricultural products and medicine.

Obama spoke early on of improving relations with Cuba, but insisted the embargo — which Cuba calls a “blockade” — would stay in place until the Caribbean island improved its human rights and released political prisoners.

He has eased the embargo slightly by removing restrictions on Cuban Americans traveling to the island and the amount of money they can send to their family members in Cuba.

There has been more leniency, too, in granting of licenses for visits by U.S. performers and academics, but progress has stalled since Cuba detained a U.S. contractor in December on suspicion of espionage.

The contractor, Alan Gross, remains behind bars in Cuba, without formal charges. The U.S. says he was not a spy, but was in Cuba installing Internet services for Jewish groups.

Rodriguez was questioned about Gross, but he responded only that the embargo is a unilateral act by the U.S. and must be lifted immediately and without conditions.
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Cuba’s Big Layoffs: What to Do with the Unemployed?
Tim Padgett. Time. September 14, 2010

As a layoff notice, it was more blunt than what even corporate America puts out these days. But it’s hard to sugarcoat letting half a million workers go – which is what Cuba’s communist government, via its official labor union, announced on Monday. “Our state cannot and should not continue maintaining enterprises with inflated payrolls, losses that pull down our economy and make us counterproductive, generate bad habits and distort worker behavior,” said a statement by the Cuban Workers’ Central (CTC), making it known that some 500,000 government jobs will be eliminated by next spring. It also suggested something fairly anathema to socialism’s collectivist dogma: how the unemployed find their way after the mass dismissal “depends in large part on the private management and initiative of the individual.”

Rumors had been swirling all summer that Cuban President Raúl Castro was planning to trim the state’s workforce by as many as 1 million. Still, now that it’s official that half that many jobs will be lost, “it has the potential of being an earthquake,” says Marifeli Pérez-Stable, a sociologist and Cuba expert at Florida International University in Miami. The CTC insisted that the layoffs, which represent almost one-tenth of Cuba’s total labor force, are meant simply to “make the Cuban production model more efficient.” But to most Cuba watchers, it signaled an acknowledgment that “the contract Cubans had with the revolution doesn’t work anymore,” says Pérez-Stable.

If so, what Castro left unanswered is: What will replace it? He insists that socialism is “irrevocable” in Cuba and that the country is not moving toward capitalism. But even he groused over the summer that Cuba seemed to be “the only country in the world where you can live without working.” And it’s clear he’s counting on private enterprise to help dig Cuba out of its economic sinkhole, the result of epic inefficiencies as well as this year’s 35% drop in crucial tourism revenue and the effects of a 48-year-old U.S trade embargo. Former President Fidel Castro, 84, who handed power to his brother Raúl four years ago because of failing health, mused to the Atlantic Monthly recently that the Cuban economic model “doesn’t work for us anymore.” He then said last week that his quote was misinterpreted as an admission of that model’s failure when in fact he meant “exactly the opposite,” that the system simply needs repairs. (See pictures of Fidel Castro’s years in power.)

Either way, Monday’s declaration opens the door to a significant expansion of the Cuban self-employed, from mechanics to hairstylists, which Havana has allowed to varying but always limited degrees since the collapse of the Soviet Union left the revolution without its main economic prop two decades ago. But given that almost 90% of Cuba’s 6 million workers are employed by the state, it will take Horatio Alger on steroids to revive the island’s economic growth anytime soon. About 600,000 Cubans are privately employed today – more than 100,000 of them as cooperative farmers tilling land leased from the government – and Havana hopes to double that number in the next couple of years. (Will the White House fight to end the Cuba travel ban?)

But more important than augmenting Cuba’s entrepreneurial ranks will be broadening the kind of enterprises they can run. Taxi drivers and barbers do not an economy make – and those minor service sectors cannot absorb all the pink-slipped state employees who are about to hit Cuba’s streets. And so the big question is whether Raúl and his government will change Cuban law and allow the self-employed to not only hire workers outside their families but also acquire private investment and credit that can promote small manufacturing. Sources with knowledge of the negotiations tell TIME that European governments and the Roman Catholic Church are in discussions with Havana about establishing microloan projects in Cuba to help seed small enterprises like bodegas and furniture-making shops. (Comment on this story.)

The U.S. can play a role in that effort as well. The Washington-based Cuba Study Group, a nonprofit headed by Cuban-American business leaders, has already proposed, along with Mexico’s Banco Comportamos, a $10 million microloan program for Cuban entrepreneurs. Study Group executive director Tomás Bilbao says the Obama Administration should explore something similar, as well as a change in embargo regulations to let Americans invest in private Cuban businesses. (See visions of Cuba through an artist’s drawings.)

Anti-Castro hard-liners in the U.S. oppose the idea, saying it will only give the communist regime an economic crutch. Bilbao acknowledges that “the Cuban regime is certainly going to weigh any potential reforms from here on out based on what they believe to be the greatest economic benefits with the smallest political costs.” But, he insists, “if we support economic reform in Cuba as a means of empowering the Cuban people, then we have to help create the conditions to realize that objective.”

Up until now, Raúl – long considered more reform-minded than Fidel but criticized internationally for moving too slowly – has adopted only minor changes, like letting Cubans have cell phones. “Raúl is very methodical,” says Pérez-Stable, “and unlike his brother he needs consensus to do something as dramatic” as the layoffs – or as stunning as this summer’s release of 52 political prisoners jailed in 2003 during one of Fidel’s harshest crackdowns on dissidents. If Raúl does indeed have the backing of Havana’s communist hard-liners to move ahead, Pérez-Stable adds, he’s likely to call a Cuban Communist Party Congress for next year, at which Cubans and the outside world might finally see real economic alterations.

One hurdle, says Mark Weisbrot, co-director of the left-leaning Center for Economic and Policy Research in Washington, remains Havana’s fears that too liberal an opening could usher in a U.S. economic takeover of Cuba like the one that helped prompt the Castros’ 1959 revolution in the first place. “You’re still going to see a lot of debate and discussion about what to do next,” says Weisbrot. “They don’t feel like they can just turn around and adopt a China model,” a hybrid of communist governance and capitalist economics, “because they’re [situated] too close to the U.S.”

Which is all the more reason for the U.S. to drop its utterly failed economic embargo against Cuba. It wouldn’t lead to a Yanqui conquest of Cuba – but it could help energize, as Cuba’s communist labor union put it this week, “the initiative of the individual.”
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Remittances to the Caribbean on the rise again – World Bank.
Jamaica Observer. September 14, 2010

WASHINGTON, USA – After what was considered to be a “rough 2009″, the World Bank says remittances are on the rise again in the Caribbean.

A briefing paper by the Washington-based financial institution said remittances “began to bottom out during the last quarter of 2009″ and, as a result, “money transfers now appear to be on the rise” in Jamaica, Haiti and other places.

The briefing paper said remittances to Latin America and the Caribbean didn’t fall as sharply as private capital flows to the region, as investors pulled out of emerging markets.

The bank said remittances to Latin American and Caribbean nations sank 12 per cent as the US and global economies “hit the skids” last year.

Overall, World Bank researchers said remittances to the region are expected to increase this year by an estimated 5.7 per cent and would also grow in 2011.

The World Bank said remittances to Haiti are expected to increase this year as relatives abroad seek to assist those at home.

It said the post-earthquake decision by the United States to grant temporary protected status to 200,000 Haitians living in the country illegally could also increase remittances by as much as US$360 million this year.

The bank said the Haitian Diaspora sent an estimated US$1.32 billion in remittances to their homeland last year. In 2008, remittances accounted for a fifth of the Haitian economy.

Region: Trade, Security, Economy and Integration [contents]
UPDATE 2-EU trade chief aims for Mercosur deal by mid-2011.
Raymond Colitt. Reuters. September 14, 2010

BRASILIA, Sept 14 (Reuters) – The European Union hopes to reach an accord with South American trade bloc Mercosur by mid-2011 as negotiators iron out details on tough issues such as farm aid and intellectual property, the EU’s trade chief Karel De Gucht said on Tuesday.

Both sides relaunched in May talks that had been on hold for six years with the aim of creating the world’s largest free-trade zone with 750 million people and goods trade valued at 65 billion euros ($82 billion) a year.

“These were very positive discussions, not neglecting the difficulties there are,” De Gucht said after meeting with Brazilian Foreign Minister Celso Amorim and Industry Minister Miguel Jorge.

Strong opposition from European farmers, particularly in France and Ireland, is one of the main obstacles. They fear cheap imports from their South American competitors.

“We know some member states are critical about this negotiation and they’ve made it known. On the other hand, it’s the EU Commission that negotiates,” De Gucht told reporters.

Another potential stumbling bloc is South American resistance to strict rules on intellectual property.

“We would like to go very far and obviously Mercosur has a somewhat different idea,” he said in reference to intellectual property rights.

Still, the overall climate has improved since talks first faltered in 2004, when all hopes were still pinned on progress in the Doha round of global trade talks.

“There is a readiness to discuss all topics and then we’ll see where we get,” de Gucht said before leaving for Sao Paulo and later Buenos Aires.

Stronger economic growth in Mercosur countries in recent years had made the region more attractive to Europeans, he added.

Mercosur is made up of founding members Brazil, Argentina, Uruguay and Paraguay.

Venezuela, whose application to become a Mercosur member still requires approval by the Paraguayan parliament, is participating in the talks as an observer.

Analysts said the EU would insist on a special chapter on investment safeguards to protect European interests in Venezuela, which has nationalized various industries as part of President Hugo Chavez’s self-proclaimed socialist revolution.
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Study: Commodities can fuel Latin America’s growth.
Christine Armario. AP. September 14, 2010

MIAMI – Commodity wealth, long considered a trap holding back sustainable growth in Latin America and the Caribbean, could be the foundation for future prosperity, a new World Bank study concludes.

Examining the recent growth in commodity exports and the shift in destination markets, the World Bank report states that the increased demand from countries like China could serve as a key driver of regional economic expansion – if the current windfall is properly managed and invested.

“It could leave the region in a more vulnerable situation, but it needs not,” said Augusto de la Torre, chief economist for Latin America and Caribbean at the World Bank.

The study was presented Monday in Miami on the eve of the Americas Conference, an annual event held by the World Bank and The Miami Herald that convenes leading policy makers in Latin America. Those expected to attend include Mauricio Funes, president of El Salvador, and U.S. Assistant Secretary of State Arturo Valenzuela.

De la Torre said the region’s emergence from the global economic crisis can be partly attributed to the growth of commodity exports to emerging Asian countries. From 1990 to 2008, China’s share as a destination market for Latin American natural resources grew tenfold, from 0.8 percent to 10 percent of total commodity exports, while the United States’ share declined from 44 to 37 percent in the same period.

That includes demand for soy products from Argentina, copper from Chile and fish from Peru.

“China offers the opportunity because it’s demanding commodities,” de la Torre said in an interview with The Associated Press. “But the policies in Latin America need to seize that opportunity.”

More specifically, he said, the region needs to ensure that commodity-based integration with China does not result in an undiversified trade structure and weak institutions.

World Bank projections show how significant commodities remain to Latin America: 97 percent of its GDP is produced in net commodity-exporting countries. In 2008, commodity exports reached a high of nearly $400 billion in the seven largest countries in the region. Most Latin Americans live in countries that benefit from high commodity prices.

This dependence has persistently been characterized as a detriment to the region’s economic success, making it vulnerable to booms and busts in the world market.

De la Torre said there are three main concerns policymakers must address: The way in which commodities are produced; maintaining competitiveness; and ensuring commodities don’t negatively affect institutions. He said this can be done, in large part, by not wasting the present bonanza.

The economist said that requires discipline and the ability to save.

“The ability to save requires certain rules, certain institutions, and a political will to do so,” de la Torre said. “Which is not easy because, of course, the moment you start accumulating savings the political system wants to use it today while they are in power. So it requires a sort of implicit contract between the current generation and the future generation. Someone has to speak for the future generation.”

He said the bank sees positive signs this is taking place, giving Chile and its copper mines as one example.
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Speakers: Innovative policies key in maintaining growth in the Americas.
Mimi Whitefield and Frances Robles. Miami Herald. September 15, 2010

The countries of the Americas are at a crucial juncture. With economic institutions in many countries reformed and a commodities boom filling coffers, sustained economic growth is a real possibility.

But speakers at the 14th Annual Americas Conference, organized by The Miami Herald and the World Bank, said Tuesday that a prolonged period of prosperity depends on nations adopting sound government practices and innovative policies.

The conference, which is being held at the Biltmore Hotel in Coral Gables, concludes Wednesday.

Buoyed by high prices for their commodities, which helped them recover sooner than expected from the global economic crisis, the economies of the Americas are poised to grow by as much as 6 percent this year, said Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean.

“The opportunities have presented themselves and the stars have aligned themselves in a way we haven’t seen in 50 years,” de la Torre said.

BETTER SHAPE

Latin America is in better shape economically than many of the rich countries, which are dogged by slow growth and troubled balance sheets, he said.

In the 1990s, Latin America was plagued by heavy debt and economic instability. A “silent revolution” took place: Countries such as Mexico, Colombia and Chile strengthened their fiscal and financial institutions and now boast Central Banks as credible and professional as those of rich nations.

Instead of being a debtor region as it was in the 1980s, Latin America is now an international creditor, de la Torre said. During the 2001-08 commodities boom, countries of the region built up their international reserves and invested them abroad.

But to keep the growth going, the region needs to “save out of the windfall” it has received from its gold, silver, copper, oil, natural gas and agricultural exports, he said.

Regional economies also need to move beyond just relying on the export of commodities to more diversified exports and value-added manufactured products, speakers said.

Ricardo Hausmann, director of the International Development Center at Harvard’s Kennedy School, pointed to Venezuela, where non-oil exports collapsed when the price of oil spikes.

Bucking the regional trend, Venezuela’s economy is expected to decline by 3 percent this year. “It spent its boom,” Hausmann said.

In contrast, he said, is Chile, which kept saving during the boom and managed to parlay its copper wealth into a stimulus for the entire economy. In Chile, both commodity exports and non-commodity exports have boomed and its economy is expected to grow by 4.5-5 percent in 2010.

During a morning panel, former Peruvian President Alejandro Toledo pointed out that 62 percent of the foreign revenue of the region comes from exporting natural resources.

The economic reforms over the past decade have helped, he said, but the countries of the Americas also need to invest commodities wealth in health and education, strengthen their democratic institutions and judicial systems, safeguard the environment and make innovation a priority.

“Latin America is ready to make the jump” to knowledged-based economies, he said.

Still, too few of the nations riding the wave of good economic times have managed to translate those gains to the poor and working class, experts said.

“Is all that growth expressed in changes in the quality of life?” asked Gerardo Morales, an Argentine Senate leader. “Some of our nations have eight straight years of growth and still have 30 percent poverty rates.”

Morales is a member of Argentina’s Radical Civic Union. A former candidate for the vice presidency, he was secretary for Social Development for former President Fernando de la Rúa and has been a member of the Senate for about a decade.

Bolivia’s Finance Minister Luis Alberto Arce credited his country’s socialist economic model — which includes the nationalization of oil, gas, telecommunications and other key sectors — with insulating it from the global downturn. The Andean nation saw economic growth of 3.4 percent last year and had unemployment near 7.9 percent — both strong results in South America.

“There’s not one recipe for all countries and we decided to rethink our own economic model,” Arce said. “This is [policy] made by Bolivians for Bolivia.”

Speaking at the conference luncheon, President Mauricio Funes of El Salvador called on the Obama administration to put greater emphasis on reducing the gap between rich and poor in Central America.

REDUCING POVERTY

Funes hailed the economic policies of outgoing Brazilian President Luiz Inacio “Lula” da Silva, saying Brazil’s sustained economic growth combined with the Brazilian leader’s emphasis on poverty alleviation serve as a new model for the region.

But Brazil hasn’t always been a model, said Larry Rohter, a New York Times reporter and author of the newly released book Brazil: A Rising Power. Even though it has long been touted as the country of the future, “no matter what Brazil did, it always seemed to fall short of the prophecy,” he said.

It is only in the past 16 years that Brazil has been characterized by political and economic stability, Rohter noted.

Jeanine Pires, director of Brazil 2016 — an organization that is helping coordinate preparations for the 2016 Olympic Games in Rio de Janeiro, pointed out that today about 103 million Brazilians fall into the middle class. By 2014, that number is expected to climb to 130 million, or around 56 percent of the population.

She attributed Brazil’s recent economic success to “domestic market dynamism,” public investment and redistribution of income.

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The US monetary system is in serious trouble

There is no question the US monetary system is in serious trouble and the situation continues to deteriorate. The smug elitist owners of the system are not getting the desired results and there is great consternation among the players. Since 1913 in running US monetary policy the Fed has had one recession after another and two depressions. The second one is the one we are now in. The Fed’s creation was mainly to end recessions and depressions, something obviously they have been quite unsuccessful at. The reason is they never intended to be successful. The fed was created by its owners to bring them staggering profits, but more importantly, to control the nation politically, economically and financially. The owner’s goal has always been to implement world government and the Fed’s control was designed to bring that about.

True political control of both major parties began in the 1930s and had General Smedly Butler not exposed what this cabal was up too, the final attempt at world government would have happened much sooner. As we moved through the 1960s and 1970s, the political control became manifest with the purchase of most politicians in the house and the Senate. The difference between both parties became almost indistinguishable, as the flow of money grew greater and greater. It’s so bad now that lawmakers do not even read the bills they vote for or against. As Mrs. Pelosi says, “Vote for the bill and we will tell you later what’s in it.” What a novel way of conducting government. The Fed runs the government; the monetary and fiscal policies and the economy make no mistake about it. Yes, they control every facet of policy in every branch of government. In this process they have neutered the Constitution and the Bill of Rights, and they make no bones about it. The separation of powers no longer exists; at least for now they control everything. The Fed owners, JPMorgan Chase, Goldman Sachs and Citigroup and other domestic players, as well as foreign owners, dictate exactly what is going to happen. The idea is to continually strengthen the corporate control over government and to make sure of the direction of the corporate elitists’ government becomes ever more powerful in the hands of these monopolists.

The fed was not only set up to end recessions and depressions, but to be able to create money and credit as needed in the economy. Since its inception it has created booms and busts just as the Treasury Department did before it. As usual the problems have been greed and politics. Although privately owned the Fed has acted as a branch of government. It was not created to serve the public, but to serve its masters, banking and Wall Street and as an afterthought government. They have also been there to fund government when necessary through monetization, which resulted in inflation.

The results of the actions of the Fed have been a decline in the value of the dollar since 1913 of some 98%. This is what the unbridled issuance of money and credit has done to purchasing power over the past 97 years. A very poor and unenviable record and certainly justification for eliminating the Fed. That has not happen. As we saw recently all those bought and paid for representatives and senators made sure an audit and investigation of the Fed was stopped in its tracks.

The current era of the destruction of the dollar by the Fed began on August 15,1971, when President Richard Nixon closed the gold window. Ever since then dollar purchasing power has plunged and Americans have been stuck with a fiat currency. Those actions culminated in a fall in the value of the dollar, 14-3/8% inflation, $50.00 silver and $850.00 gold in 1980. That was followed by a monetary purge for three years, which was followed by the Fed doing the same thing over and over again. All we saw was debt piled upon debt by the Fed and the Treasury and the same thing happened universally worldwide. A world of Keynesians had been created to march lock step with the Fed. The result of these monetary machinations is a condition that is now irreversible. It’s called deep systemic depression.

Since 1971 we have been enveloped in stagflation, a term created by Harry Schultz, the guru and father of all financial writers. You might liken the roller coaster ride of the past 39 years to planned chaos. Some called it business cycles. We call it Fed manipulation. The Fed switched from targeting money supply as we approached 1980, because it constrained their ability to issue vast amounts of money and credit thus they used interest rates as a manipulative device. Paul Volcker, Fed Chairman, learned a very important lesson in the 1980s and that was gold had to be suppressed if monetary policy were to work. In August of 1988 President Reagan signed the Executive order creating the “President’s Working Group on Financial Markets,” which has been used to suppress gold and silver prices ever since and manipulate markets worldwide ever since. This mechanism allowed the Fed to do anything they pleased. The result was during the late 1990s and into today’s markets, we see banks that within the fractional banking system not only lend nine times underlying assets, which was considered normal, but they lent up to 70 times. That was truly a banking system out of control. There is no banker in his right mind that would have done such a thing if not instructed to by the Fed. That puts us right where we are today with banks still extended at 40 times assets. We are now learning that creating money and credit does not create real wealth. The result has been three years of credit crisis or as referred to as GFC, the Global Financial Crisis. There are many things that created such a crisis, but the main ones are unbridled creation of money and credit, a socialist-fascist welfare state, war and the absence of a gold standard, whose restraints would have prohibited what we have seen.

The last year of budget surplus was 1960. Bill Clinton’s claim to surplus never happened. The build up of debt particularly since August 15, 1971, has been colossal. What kept the game going longer was the serial theft of Social Security funds.

The answer to these problems by the Fed has been, as we predicted, a new phase of quantitative easing. The legislature won’t assist the administration by passing another stimulus plan so close to the election; thus, the administration has proposed a number of measures they hope to pass between November 5th and the end of the year. Remember, 95% of Congress and the Senate have already been paid off, so they’ll pass anything their benefactors want whether they are returning or they are not. Congress felt it safe to pass an unemployment extension of $34 billion. The insider’s quick fixes are as follows: allow companies to write off 100% of new investments in plant and equipment for 2011, plus $100 billion in research tax breaks. Big business has well over $1 trillion in cash, so this is a blatant attempt to buy votes. The cost will be $200 billion. Then there is to be $50 billion for infrastructure and $50 billion for underwater mortgages. That comes to $434 billion. Mr. Obama is yet to announce tax relief for low-income households and a payroll holiday tax for small businesses, which we estimate to be close to $200 billion. That puts social spending at $634 billion and he plans to get this all passed between November 5th and the end of the lame duck period after the election. We might add among this political largess nowhere is there a mention of creating jobs. As we have found out in sports, steroids eventually kill the user. In finance and economics the same is true. Ignoring the bogus birth/death ratio in employment is a perilous decision. We are seeing declines in full-time employment and the increase in part-time status. The litany goes on as we jump from one crisis to another.

We have identified the current malaise as depression. It’s been 33 months since a recession began. It’s been 18 months since the inflationary depression began. For those of you who do not believe that we are in a depression ponder the following. These numbers are from the peak until now. retail sales are off 4.5%; corporate profits 20%; compensation 3.7%; real GDP 1.3%; exports 9.2%; industrial production 7.2%; employment 5.5%; manufacturing orders 22.1%; shipments 12.5%; housing starts 63.5%; new home sales 68.9%; existing home sales 41.2% and commercial construction 35.7%.

Government transfers to households are up 31% over three years. Thirty percent of personal income comes from government. How can people buy homes with still falling prices, fear of unemployment and wages, which in real terms have fallen 8.4%. Everywhere you look major company profits are up, but sales are off. The higher bottom line has been achieved by laying people off, because they make up 70% of operating costs. Workers who are terrified of losing their jobs are working harder, but by the looks of last months productivity figures, minus 1.8%, that may have come to an end. Consumers are buying only what they have to buy. Consumers previously making up 72% of GDP now make up 69-1/2% and that number could go back to the mean since WWII of 64.5%. Those cutbacks mean more unemployment, fewer house sales and a downward spiral. Is it any wonder Americans are borrowing against their 401k’s, and cashing out cash value life policies and annuities? There are systemic and secular changes going on. We are headed back to a lifestyle of the late 1940s, 50s and 60s, so prepare yourself.

The bottom line is the only solution banking, Wall Street and the Fed have left is to substantially increase demand and put people to work and the only way that can happen is for the government to spend more, tax less, and for the Fed to increase money and credit – otherwise it is over. That is not really the right thing to do, but that is what they have to do – otherwise it is a deflationary depression. This is what the US has done over and over since WWII, only this time it’s different. The flip side of such policy positions is the tremendous debt that is created. Not only is debt piled up on debt, but the value of the dollar suffers as the world’s reserve currency, not only against other currencies, but even more so versus gold. Does the rest of the world really want to accumulate a currency of declining value? Over this past year China has sold $100 billion of US Treasuries. Could it be that the exodus from the dollars has already begun? Of course it has.

Many people would like to believe this terrible situation is the result of incompetence. The bureaucrats and others who run economic and political policy knows what they are doing won’t work. They have been playing for time only a game of musical chairs. Just look at what the Fed is doing. It wants to sell toxic waste back to the banks it bought it from, supposedly to clear its books. That may very well be true, but it doesn’t want the public to know what they paid and then sold for. If that ever hits the market the market for MBS and CDOs would collapse. It’s nothing more than a 3-card Monte game. We know one of the excuses for creating the fed was the ability to have an elastic currency, but this is going a little too far. We believe Fed losses are well over $1 trillion and other central banks, or other parties are holding losses.