"The more power a government has the more it can act arbitrarily according to the whims and desires of the elite, and the more it will make war on others and murder its foreign and domestic subjects. Power will achieve its murderous potential. It simply waits for an excuse, an event of some sort, an assassination, a massacre in a neighboring country, an attempted coup, a famine, or a natural disaster, to justify the beginning of murder en masse."
R. J. Rummel, Mass Murder and Genocide, 1994
This was reported on Bloomberg television by Eileen Brennan.
A&P Said to Consider Filing for Bankruptcy Protection By Lauren Coleman-Lochner, Jeffrey McCracken and Jeff St.Onge
December 10, 2010, 10:15 AM ET
Great Atlantic & Pacific Tea Co., the once-dominant grocery-store chain founded in 1859, may file for bankruptcy in the coming days to restructure debt, two people with knowledge of the matter said.
A filing to reorganize under court protection may come as soon as this weekend, said the people, who declined to be identified because the matter is private. A&P hired law firm Kirkland & Ellis LLP to represent it in negotiations with creditors and in any Chapter 11 proceeding, the people said.
Lauren La Bruno, an A&P spokeswoman, didn’t immediately return an email and a call seeking comment.
The Montvale, New Jersey-based grocer has struggled to cope with mounting competition from discounters such as Target Corp. and Wal-Mart Stores Inc., which are offering more fresh food to attract customers. A&P, which operated almost 16,000 stores in the 1930s, now runs about 400 locations under its namesake banner as well as SuperFresh and Food Emporium. In 2007, it bought the Pathmark Stores supermarket chain for $678 million.
The grocer in October said sales in the quarter ended Sept. 11 fell 7.1 percent to $1.9 billion and its net loss almost doubled to $153.7 million in that period. A&P had $94 million in cash and short-term investments as of Sept. 11, a 63 percent decline from $252 million as of the end of February.
The company had about $1.5 billion in net debt as of September. It had an $876 million net loss on $8.8 billion in 2009 sales, its third straight annual shortfall.
‘Illiquid’
A&P “may be illiquid at some point in the near term,” Standard & Poor’s said in July, issuing a downgrade of the company’s corporate credit rating to CCC.
Chief Executive Officer Sam Martin was hired in July to help lead a turnaround, replacing Ron Marshall, who had held the job for about six months. Martin has said then that A&P is examining its business in an effort to improve results.
The company announced a $89.8 million sale-leaseback of six stores last month. In August, A&P said it will close 25 stores in five states as part of its turnaround plan.
The Fed and Treasury appear to be attempting to blow a bubble in US equities. Considering that it has little underpinning it, on a significant event it could fold rather handily. Still, better to stay out of their way while they try to print their cronies way to prosperity while beggaring the many, and of course, their bondholders.
These sorts of wide swings in sovereign debt can be extraordinarily profitable for the trading desks of the banks and hedge funds, especially if the boss has the ear of the Treasury and the Fed. But they play hell with planning and execution in the real economy.
The boys threw a threat on the table today, as Larry Summers, ombudsman for the pigmen, predicted that if the Congress did not pass the President's deal with the Republicans the US economy would suffer a double dip.
I thought it was a rather neat trick how Obama took an obstructionist Republican minority and cut a deal with them, thereby placing the onus on his own party and holding their feet to the fire with some particularly high-handed moralisms and snippy rhetoric on top. No Clinton he who called the Republican bluff and let them shut down the government. Wall Street shill or nincompoop, hard to decide.
Wall Street financials rallied into the close as AIG filed a recapitalization plan to pay back the huge amounts of capital it borrowed from the Treasury and Fed to pay Goldman and its ilk the full amounts of their leveraged bets.
And then Bloomberg TV cut away and spent the next twenty minutes talking about the imperative to cut 'entitlements' like Social Security and Medicare.
See the commentary provided today on the Gold intraday futures chart here.
"You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings." … Professor Wilhelm Hankel, Frankfurt University, The Telegraph, November 25, 2010
I am just thankful that Goldman and its Wall Street cronies did not have to take any losses or suffer cutbacks or austerity because of their dealings with AIG, thanks to the timely actions of their friends at Treasury and the NY Fed.
American International Group, Inc.
Wednesday December 8, 2010, 3:52 pm
NEW YORK--(BUSINESS WIRE)-- American International Group, Inc. (AIG) announced it had filed a Form 8-K earlier today announcing the signing of the Master Transaction Agreement among ALICO Holdings LLC, AIA Aurora LLC, the Federal Reserve Bank of New York, the United States Department of the Treasury, the AIG Credit Facility Trust and AIG, regarding a series of integrated transactions to recapitalize AIG, for which trading on the New York Stock Exchange was briefly interrupted.
Regarding the filing of the Master Agreement, AIG issued the following statement:
"Our filing today that we have signed the definitive recapitalization agreement with the government marks an important step forward in our progress toward completely repaying taxpayers. We remain committed to executing the steps and meeting all conditions in the agreement as soon as possible."
There is an ebb and flow to all markets. While the primary trend is in place these intraday fluctuations are of most concern to speculators and traders with a very short term focus. That is natural.
But there are also those hedge funds and trading desks that seek to spread either panic or euphoria, to promote short term trend changes and churn the market for easy but too often illicit gains through price and information manipulation. This is what I euphemistically call the 'technical trade.' And unfortunately sometimes these trade manipulators are very large and influential with the exchanges, the regulators, and even the politicians. Corruption is corrosive of society and must be contained.
Transparency, position limits, leverage constraints, and trading rules such as the uptick and curbs on frequency and tape painting help to maintain legitimate price discovery and efficient capital allocation. Secrecy, back room insider deals, and self regulation are the allies of corruption.
As was shown in the Congressional investigations following the Crash of 1929, quite a few of the analysts and financial news people covering the Street were implicated by the cancelled checks in the suitcase of a Mr. A. Newton Plummer, who delivered payments from the pools and large trading syndicates to manage perceptions as it were among the thought leaders and purveyors of information to the public. Nowadays checks are out of favor and information, sinecures, and grants are the currency among the white collar criminals.
There are few such investigations today, perhaps because that net is likely to catch quite a few fish larger than red faced analysts, economists, and news people, and some even who may have had a held a long and auspicious tenure in important positions of trust, public and private. Mr. Madoff is not a lone outlier unfortunately. And too often the 'CEO defense' of benign non-involvement or an admission of simple error, plausible deniability as it were, and a self-effacing apology are enough to cover and excuse heinous acts of false stewardship and even betrayal.
After all, we sophisticates no longer believe in the capacity for evil among 'people like us,' but rather in the natural goodness of ourselves and of course others. And so we can suspend common sense and even rational skepticism can be turned against the truth while things are falling down all around us. There is historical precendent for the big lie and a self-destructive loyalty to its bitter end.
For those with the intermediate view one sells strength and buys weakness as indicated on the trend charts. And so this is what I do in one of my accounts with a more intermediate to short term focus.
Those portfolios with the long view do nothing but ride the trend and reap the reward, selling when the fundamental conditions that provoked the bull market no longer remain in place.
To clarify some questions I received, I do not forecast 1455 as a 'top.' It is the minimum measuring objective for the cup and handle formation that will likely be met as long as the financial markets do not undergo a liquidity panic selloff. I would like to reiterate my view that gold and silver will continue to rally while the fundamentals remain unchanged. I do not think 2800 is unlikely but there are too many exogenous variables and no active chart formation to justify a forecast higher than 1455 at this time. But the top trend line on the chart below certainly points the way.
We saw the trend reversal today that I was expecting, as silver in particular was getting rather overextended based on the uptrend it has been following. I do not think this was anything more than profit-taking and a bit of a romp by the perma-bears who were licking their wounds and came back in for another go at the bulls.
So what next? Stocks really did not pull back much, except from the utterly unrealistic rally at the open, closing relatively unchanged. Treasury wants to sell its CITI stock and the Street wants the Chinese IPOs out the door.
Bonds got clipped pretty much on the same trend reversal theme although the 3 year auction did provide a spark by having a weak showing.
This market is without fundamental underpinnings, short term and transactionally oriented, rather like the American president, so let's give it a day to show us what is really going on.
The longer term outlook calls to mind an old quote from Norman Mailer:
"There's a shit storm coming like nothing you ever knew."
Washington Post Obama, Republicans reach deal to extend tax cuts, unemployment benefits By Shailagh Murray
December 6, 2010; 6:40 PM
President Obama and congressional Republicans have agreed to a tentative deal that would extend for two years all the tax breaks set to expire on Dec. 31, continue unemployment benefits for an additional 13 months and cut payroll taxes for workers to encourage employers to start hiring.
The deal has been in the works for more than a week and represents a concession by Obama to political reality: Democrats don't have the votes in Congress to extend only the expiring tax breaks that benefit the middle class. The White House estimates that the proposed agreement would prevent typical families from facing annual tax increases of about $3,000, starting Jan. 1.
Obama was able to extract an agreement from GOP leaders to support an additional 13 months of jobless benefits, a 2 percent employee payroll tax cut and extensions of several tax credits aimed at working families that were included in the stimulus bill.
The deal also would revive the estate tax, but it would exempt inheritances of up to $5 million for individuals and $10 million for couples. Democrats on Capitol Hill are strongly opposed to setting the cap at that high a level and to the 35 percent rate discussed by Obama and Republicans that would apply to the taxable portion of estates.
The White House is preparing for significant opposition from Democrats and will send Vice President Biden to meet with Senate Democrats on Tuesday. Later on Tuesday, House Democrats are schedule to discuss the proposed deal.
The Street is pricing three big Chinese IPO's this week, and the US Treasury has just announced its intentional to try and unload the rest of its position in Citigroup. So we might see equities hold together a little longer at what appears to me at least to be a lofty level.
I was taking some of my short term gold and silver trading positions off the table today, but added a few equity shorts so net-net came into the close weighted to a light expectation of a trend change in the next five days, in the form of at least a pause or a correction.
My overall portfolio weighting remains heavily invested in bullion as it has been since 2001, with a hedged position now long the US dollar. I do not like US equities here at all, but am trying to keep an open mind since we are so close to all our targets in equities and bullion.
Gold and Silver virtually hit our intermediate targets today. With gold at 1425 it is close enough to the forecast of 1455 we made at around 1150 to take some profits.
Therefore we took some of the short term positions off into the close and adjusted the hedges accordingly, leaving us slightly net short equities.
We do not touch our long term positions here as we are still far from the long term targets. We will hold bullion until the currency war is abating. To put this in perspective, that puts us in about round three of a fight that could easily go the twelve round distance.
The US stock market as deflated by gold has never really recovered from the financial crisis. This is a better reflection of the real economy in which unemployment and underemployment is running at the 17+% level.
The only progress we have seen in stocks is due to the monetary expansion of the Federal Reserve balance sheet. And most of that expansion has been channeled to the financial sector where it is being consumed by bad debts, enormous personal bonuses, and speculation.
Here are the latest Money Supply Figures from the St. Louis Fed.
I start with the narrowest measure, the Monetary Base and widen out to M2 which is the broadest measure of US money supply currently available, with MZM serving a similar function for the short term.
Previously I have commented on the 'shadow M3' figures done by a few enterprising fellows. As you may recall the Fed stopped publishing M3 a few years back. M3 itself was not the issue but rather the Fed chose to stop reporting a key component of M3 called 'eurodollars' or US dollars held offshore in Europe or anywhere else. The rationale was that it was too expensive to obtain this data. There are those who found this to be a bit disingenuous for a non profit seeking organization that operates on a cost plus budget.
Those who are attempting to estimate M3 gather what actual remaining data they can, and estimate eurodollars by 'modeling' them based on trends and correlations as they were in place when the Fed stopped reporting.
As I cautioned before from my own work in the BIS currency reports, there were huge flows of dollars into Europe during what I called the eurodollar short squeezes. The problem with BIS however is that their reporting lags by almost nine months, so the figures are never really current.
I suspect that as these figures unfold we will see that the Fed has created and made available large amounts of dollars that were presented to European institutions, and that this money is not being captured in any of the existing money supply figures, except perhaps the Monetary Base, and that estimates of M3 are likely to the low side because of this change in trend of eurodollars.
So what does all this mean, what is the important 'takeaway?' It means that deflation is not occurring at the moment because the Fed has taken those actions which it said it would do, plain and simple. On the other hand there is some inflation appearing but nothing notable with the exception of health care, service fees particularly financial, and a few hard assets. This could start changing even in the face of slack aggregate demand, but not in the face of another significant economic collapse such as in Europe or China.
And unfortunately recent evidence suggests strongly that the Fed has been misrepresenting what it has done in the financial crisis. This is unfortunate because it suggests that not only other things were misrepresented, but that there is an ongoing coverup of what has been done, and likely what is being done today. Coverups tend to feed on themselves, and provoke other new abuses of the public trust. Also it calls into question all that a private and guarded institution has said in the past based on their reputation. I do not think people fully realize the implications of this yet.
In this stage of the Currency War we seem to be in something like the phase of WW II called the 'Phoney War' that occurred between September 1939 and May 1940. But it does seem to be heating up.
Those who wish deflation to occur badly enough will find it where they will, whether it be in M3 estimates or credit figures. I find it highly ironic that when estimated M3 recently seemed to be showing deflation it was embraced by a particular chatboard site who previously had forbidden its mention when it had showed inflation some years ago. Further, credit is not money. Credit is a source of money creation as is the Fed's balance sheet. The Fed's Balance Sheet is not 'money' per se. It is a source of money creation.
It should also be remembered at this point that a fiat currency is backed by the economy of a country and its official cashflows (primarily taxes) as well as its reserves. As a country's GDP and cashflow deteriorates the soundness of its currency can deteriorate even if the nominal levels of money remain unchanged. I think we are seeing quite a bit of this today. This deterioration in the backing of a currency is no different from a devaluation in its effect.
Can deflation occur? Absolutely. Give me control of the Fed and I will give you a rip snorting deflation by raising the overnight rate to 20 percent and calling in the reserves so to speak.
But one cannot deal in possibilities when investing, merely safeguard or hedge against them based on the estimates of probability. Well, you can deal in possibilities, but this is largely a means of self-deception, a means of continuing to embrace a theory or investment strategy that has been proven incorrect when it is too difficult to give it up and admit your error. That difficultly may arise from practical matters, but it is my experience that it is normally attributable to stubbornness, or pride, and sometimes even corruption.
"Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof." John Kenneth Galbraith
Obviously gold and silver and some other things have been rallying smartly for the past ten years in response to the decisions made by the Fed and the US government of both political parties, whether they will admit it or not. When this changes, when the dilution of the currency stops and begins to recover to strength, then I would think it appropriate to change my own particular investment strategy, which is hedged against the unexpected even now. But not until then. I do not expect inflation to obtain serious traction until foreign governments start rejecting the dollar in size, or the velocity of money begins to obtain some traction in the real economy. The Fed assures us that they will act to control the spread of inflation when the time comes. But for now the banks appear overstuffed with cheap liquidity, something I like to call hot money.
This type of abundantly cheap, hot money tends to seek higher beta or risk, often in the form of equities and dodgy financial schemes and investments, rather than productive lending. As the CEO of a Fortune 500 was heard to observe in private, having paid an absolutely eyebrow raising sum for another company in the heady time of the tech bubble, "Yes I paid a high price, but my currency (company stock) is cheap." He was willing to take an outsized risk because he believed that his overvalued currency was going to become worth a lot less. He just did not realize at the time that it would eventually become nearly worthless. It did and he was sacked. I think the analogy to Ben and his Fed, and the way in which they are throwing dollars around, to private and especially to foreign banks, is quite analogous. The looting will continue until the value of the overpriced stock is depleted. That Wall Street will be taking about 8 percent of the total short money supply as its bonuses this year speaks volumes about the value of the dollar and its future.
I saw this coming in 2001 but have to admit I was terribly wrong on timing in 2004, having underestimated the Fed's willingness to obtain international banking cooperation, primarily from Japan the UK and Europe, to generate a massive housing bubble. I will not make that mistake again I hope.
And if you have been wrong in your assumptions or assessment, it is never a shameful thing to admit it, gather yourself together, and go forward from there, because all this indicates is that you have received new information and that you accept it, which is the high mark of intellect and objective science.
Even the mighty Nobel laureate Paul Krugman has recently expressed his disillusionment with Mr. Obama's Hooverism, Freezing Out Hope.
"What’s even more puzzling is the apparent indifference of the Obama team to the effect of such gestures on their supporters. ... Mr. Obama almost seems as if he’s trying, systematically,... to convince the people who put him where he is that they made an embarrassing mistake."
Contrast this with his earlier chastisement of those who were already recognizing that Barry the reformer was either an ineffective nincompoop or an establishment shill.
"Look, Obama didn’t pose as a Nation-type progressive, then turn on his allies after the race was won. Throughout the campaign he was slightly less progressive than Hillary Clinton on domestic issues — and more than slightly on health care. If people like Ms. [Naomi] Klein are shocked, shocked that he isn’t the candidate of their fantasies, they have nobody but themselves to blame." Paul Krugman, NYT June 16, 2008
I am not going to get into the relative merits of one course of public policy decision or another here. My point rather is to demonstrate once again that with a fiat currency the matter of inflation or deflation, within a range of exogenous constraints, is a public policy decision tied intimately into the form of government that one holds as its objective and the nature of the society that you wish to encourage.
I do not wish to single out Krugman with the tautological indictment of being human. He almost appears as a Diogenes, a beacon of objectivity, compared to his ideological counterparts. Too often economists cloak themselves in the robes of a quantitative and objective science, with such canards as the efficient markets hypothesis, supply side economics, the inefficiency of regulation versus unregulated markets, and bailoutism as hard facts, when they are nothing more than arguments in favor of one set of government policies or another.
And far too often they are doing it for pay it appears, which is intellectual dishonesty, malpractice if you will, that is inexcusable and contemptible, one of the reasons why economics is considered by some a disgraced, although not irredeemable, profession these days. But since these fellows are generally associated with the 'greed is good' school, which elevates the ends above all else, once ought to expect to hide the silverware, whiskey and women when they come to town.
Many things are possible, but not all things are equally probable. As Walter Bagehot famously observed, 'Life is a school of probability.'
For a nation that is a net debtor, deflation is tantamount to suicide. But other nations, most recently Germany in the past century, committed a form of national suicide in service to hubris, and an elite few, and a mistaken understanding of what constitutes a civil society and what it means to be human. They are certainly not the only society to have done this, and I would not presume that they are the only people who will have fallen prey to this self-destruction in the future.
So there is some precedent for disaster. Germany was certainly not the only society to have done this, given the examples of China, Russia, Japan, and Italy, and I would not presume that they are the only people who will fall prey to this self-destruction as well. Having high ideals or having previously suffered oppression is no guarantee of future goodness. Rather it is the attitude of yourself in relation to the 'other.' That is the whole of the law.
Indeed, such a temptation to dehumanisation is tailor made for a generation raised on the notion of their natural goodness, accepting themselves as they are, rejecting and tearing down any external standards of goodness and worth in other people. They see no need to change and work together, but rather to give in, to wallow, in their basest and most selfish impulses, self-centeredness, the greed-is-good meme of the me generation, in a time of general apostasy to all but the lowest form of our self. Class War and the Decline of the West
The madness of crowds seems to have been all the rage in the twentieth century, and what I see now are people who are more technically proficient, more cunning, more skilled in the ways of mass deception and intrigue, but alas, perhaps not more compassionate and wise, and understanding of what it means to be human, truly content with themselves, and simply happy.
So bear these things in mind and protect yourselves as best you can despite the temptations and deceptions of our all too human frailties. It will not be easy, but it was not easy for our parents or grandparents, and theirs and those before them, because it never is. That is the nature of this world. And even the once triumphant West at some point must learn to pull together again, or founder in a new season of infamy.
"For we wrestle not against flesh and blood, but against principalities and powers, against the rulers of the darkness of this world, against spiritual wickedness in high places." Eph 6:12
Reality briefly penetrated the fog of appearance this morning as US Non-Farm Payrolls came in at 39,000, a significant miss from the expected 150,000. Unemployment ticked up higher from 9.5% to 9.8%.
An analysis of the data showed a slight indication that the recovery has stuttered and stopped, but it will take a few more months data to confirm this.
The adjustments seems to dampen the potential headline number but are within bounds of the prior six years. The Birth Death Model actually came in negative which was a bit of an outlier but certainly a refreshing nod to reality.
Looking at the historical Oct-Nov growth in the unadjusted numbers for the past six years shows a clear downward trend from the high in November 2005, with the low coming in November 2008. The growth as it stands in 2010 is roughly the same as it was in 2004, although the 2010 numbers will likely be revised in the next two reports.
Stocks and the Dollar initially plunged on the news while gold rallied threatening to take out psychological resistance at 1400. I guess we now know why gold and silver were obviously hit by sharp manipulative selling yesterday, in order to take the prices down below breakout levels. Be on watch for shenanigans in the markets today, especially the SP futures markets.
There can be no sustained economic recovery until the median wage and employment improve and this requires specific reforms and programs to repair the damage caused by twenty years of irresponsible monetary, regulatory, and fiscal policy and a growing imbalance in the balance sheets of the middle class. Repairing the status quo merely restores the unsustainable.
The Fed's approach to quantitative easing is nothing more than an adjunct to the trickle down, supply-side approach. Provide money to the banks and the people will borrow; provide subsidies and tax cuts to those who have the most already and the condition of the many will improve. Trickle down, supply side, and efficient markets hypothesis are at best mistaken economic theories, and at worst coldly calculated propaganda by the same people who co-opted the political process and brought forward the control frauds that led to the financial crisis.
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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