Category Archives: Dollar Crisis

Feingold Challenges Jeffrey Immelt On New Position

Immelt-Obama
GE CEO Jeffrey Immelt and President Barack Obama
We actually applaud this surprising move by former Wisconsin Democratic senator Russ Feingold (recall that Feingold was swept out of office last year in a tsunami of Tea Party expression). Just in case you're keeping score, here's the opening shot in the corporate corruption wing of the Obama School of Economic Whatevers:

Friend,

IT'S EVERYTHING THAT'S WRONG with corporate power today: News broke last week that General Electric, America’s largest corporation, made $14,200,000,000 in profits last year and paid $0 in taxes—that’s right, zero dollars in taxes. At the same time, C.E.O. Jeffrey Immelt saw his compensation double. Now I hear that GE is expected to ask 15,000 of their unionized workers to make major concessions in wages and benefits.

But what really adds insult to injury is the prestigious and influential position Jeffrey Immelt holds as chair of President Obama’s Council on Jobs and Competitiveness. That’s wrong. Someone like Immelt, who has helped his company evade taxes on its huge profits—and is now looking to workers to take major pay cuts after his compensation was doubled—should not lead the administration’s effort to create jobs.

We cannot stand by and watch while we are led down this road. Mr. Immelt must step down from the president’s jobs panel—and if he won’t, President Obama needs to ask for his resignation.

Help us build public pressure on GE’s Jeffrey Immelt to step down or President Obama to get his resignation from the jobs council: Sign our petition at www.ImmeltMustGo.com today!

Jeffrey Immelt is a crook and a thief. There are many like him, but for now, we are criticizing this one. He and the president seem to have a lot in common, and appear to be the best of buds.
How can someone like Immelt be given the responsibility of heading a jobs creation task force when his company has been creating more jobs overseas while reducing its American workforce? And under Immelt’s direction, GE spends hundreds of millions of dollars hiring lawyers and lobbyists to evade taxes. All of this at a time when Fox News and the right wing are demonizing public workers, like teachers, as the cause of our economic problems.

It’s time for policymakers to stop coddling corporate interests, and get to work creating jobs and wealth for Main Street. We shouldn’t reward wealthy CEOs and Wall Street for behavior that undermines the nation’s economy.

Be a part of this meaningful fight. Help us tell President Obama that if GE isn’t paying taxes or treating workers well, Immelt Must Go!

President Obama has been talking about how we must “win the future,” and I agree with him in that goal. Jeffrey Immelt is not the person for that job.

Thanks for uniting as a progressive,

Russ Feingold
Founder
Progressives United

Feingold, despite his generally far leftist stance on most issues, this time is right on the mark. Serenedipity. Sort of like when far leftist Dennis Kucinich and libertarian Ron Paul find themselves arguing for the same crucial point in the House. As aggressive constitutionalists, we usually find Mr. Feingold's progressive recipe for success instinctively less than desirable, having no faith in Big Government to look after my own best interests, for richer or poorer, in sickness or in health, but when it comes to the wildly dishonest, greed-gorged antics of corporate raiders who loot the land and its people without conscience, I have no choice but to drop my shoulders just enough to service my own burden and to join the call for immediate corrective measures. We call for simple and plain considerations. This just looks bad.

Jeffrey Immelt is a crook and a thief. There are many like him, but for now, we are criticizing this one. He and the president seem to have a lot in common, and appear to be the best of buds.

This nation, however, struggling against a global economic bully called the deficit, might stand a fighting chance to recover from what ails us if both men retired to their next roles as men of leisure, formerly of a certain public prestige. But since it is easier to dismiss Mr. Immelt from his awkward position right now, dismissal is exactly what should be done.

Just look at the numbers.

Pulverizing the American Promise Into 2 camps

WITH ARTICLES LIKE THIS COMING OUT of Time magazine, it is inevitable that in the immediate future, the United States will be split into two partisan camps. However, this will not be the traditional schism of republicans vs. democrats, contrary to Mr. Barney Frank’s attempt to start ideological partisan warfare.

The real split will be of naive, easily-manipulated, small-time mom and pop investors, who only care about looking at their daily Yahoo finance screens and 401(k) statements, seeing more black than red, and only focusing on what happened in the immediate past, and the forward looking taxpayers, who see the upcoming budget deficit fiasco, the social security ponzi scheme, the Medicare/Medicaid debacle, the ridiculous underfunding in public and corporate pension funds, the rising city and state taxes, the shuttering factories, the rising unemployment, the plummeting American production base, the “seasonally” upward-adjusted economic data coupled with consistently downward revised prior economic releases, the increasing savings rate and the multi trillion discrepancy in consumer purchasing power.

The taxpayers are becoming angrier and angrier at the net present value destruction of future opportunities of being a U.S. citizen, while investors cheer every piece of information (whether or not supported by facts) that provides a push to their current net worth, ignorant of what this may mean for the future.

There will come a point where this schism reaches a boiling point, in the meantime, the paradox is that so many of the taxpayers are also investors, who are caught in a tug of war with themselves on what the proper response to the crisis should be: happy as a result of bear market rallies, or sad when they put the facts into perspective.

Valley Of Virtual Decision Making

"Why do the heathen rage and the people imagine a vain thing?"

Valley Of Virtual Decision Making
Yea, though I walk through the lonesome valley of virtual decision making, I shall lead from on high, and I shall fear no embarrassment...

These things are only to be expected in the life cycle of an empire. The forces striving to bring about World Government are responsible for this. Empires expand and seek to incorporate differing peoples, tribes, states and nations within their growing boundaries. Private religion is no problem in a world with no borders. All empires must have an official policy or mechanism to provide stability.

There is a rush towards the "end of history". Any thought that endangers peace and stability must be removed by the controlling interests of power or the ruling elite, if you will. The transformational period that we are witnessing and living in will continue in earnest for probably another 15 years.

This time will be fraught with increasing crisis, chaos, conflict, and creative destruction. It is the desire of powerfull men and kings of the earth to bring their order out of the chaos of the old order. The only thing to be done is to remain true to the first and greatest commandment and the second which is like unto it. Your enemy wants to divide and cause hatred so he can step in to control. Be angry and sin not.

—Woodpecker, CO

As my engineering teacher said, engineering is a quiet profession. He told us that the styrofoam containers McDonalds used to put their quarter pounders in did less damage than the new cardboardy ones. He also said there were more single car accidents involving little cars, than big ones (comfort problem?). If earth was that fragile, it would not have been able to support life. I would suggest to anyone with about an hour to tune into Michael Crichton's complexity theory lecture on his website. He does an excellent job of walking through the failure of us humans to understand and accept the complexity of our busy, active planet. If nothing else, look at the USGS website on earthquake stats. Here is just one that will surpise a lot of people:

Alaska is the most earthquake-prone state and one of the most seismically active regions in the world. Alaska experiences a magnitude 7 earthquake almost every year, and a magnitude 8 or greater earthquake on average every 14 years. The number of hurricanes, earthquakes, tornadoes, lighting strikes, etc. that happen on our planet mean it is continually changing and very active. We only hear about the ones that are huge, or effect our own lives.

—Beckett, DE

Crichton's complexity theory is a valuable read for anyone still confused by FA Hayek's defense of capitalism against statism.

Devalue The Dollar, Kickstart America

Strengthen The Dollar
The Melting Dollar
Dollar Devaluation To Fix The Great Recession
Frank Beck, Forbes Magazine, 12.09.08, 1:00 PM ET

What began as government social tinkering—with implied threats to banks and mortgage companies to extend home loans to even the most marginal of borrowers—led to a greed-blinded mortgage banking business and the meltdown we are experiencing today. Now we are asked by the same congressional leadership to go along with taxpayer-funded bailouts of the very banksters who, while making millions, created the mess..

Despite the trillions of dollars already expended recapitalizing banks, there is very little, if any, progress to show. Will a few trillion more do the trick? That seems to be the consensus among Congress and the banks. "They are simply too big to let fail," or are they really just too big to save? We can go back to "Plan A" and buy the toxic assets. If so, at what price? What if a few trillion does not remove enough toxic waste from the system or doesn't get credit flowing again and the economy bustling?

Some argue that it is time to help Main Street, not Wall Street. So, we should "forgive" some of the mortgages for those who are 90 days or more behind on their payments. Have you quit paying yet?

If we are to save bankers, shouldn't we at least distinguish between those who possess the intelligence to renegotiate their loans to workable terms? If we are to save homeowners, should not we first define the term "homeowner?" Perhaps it is not only someone who agreed to and signed a mortgage and is living in a house. Just perhaps, it should also include the stipulation that this individual paid some amount of a down payment: 20%, 5%, a dollar. I can tell you who is not a homeowner. It is not someone who paid zero down and ridiculously low payments for two years; that, my friend, is a renter.

The problem with all these ideas is the money is only directed at those who created or benefited from the problems. Why not attack the situation in a manner that will benefit most everyone, an approach that has been successful before and, when compared to the current course, has little downside?

Here it is. Stand back. World currencies should be devalued overnight.

It can be done on a country-by-country basis, but a coordinated devaluation would work best. A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments. Both the homeowner and the bank are immediately better-off.

Banks would be paid with devalued dollars, but they made millions creating the mess. The current use of government stimulus through the creation of dollars will certainly lead to a similar or worse devaluation, so this is likely a net gain for the banks too.
It would even benefit those who purchased their homes responsibly, as the value of their homes would rise by the same 43%. The current course of throwing trillions of dollars at the culprits is without any benefit to those who acted responsibly.

Admittedly, this is not a solution without the price of inflation, but the inflation would be short-lived. The current course will ultimately cause massive inflation that cannot be accurately estimated, and it may not even solve the problem. Currency devaluation proved effective in ending the Great Depression. In 1930, Australia was the first to leave the gold standard, immediately devaluing the aussie by more than 40%, and the economy quickly recovered. New Zealand and Japan followed suit in 1931, each with the same result. By 1933, at least nine major economies had enacted a devaluation of their currency by removing it from the gold standard, all of whom emerged from depression.

In 1933, through a series of gold-related acts, culminating in the Gold Reserve Act of 1934, America realized a dollar devaluation of 41% when the price of gold was adjusted from $20.67 per ounce of gold to $35 per ounce. America, like the others before, had its economy bottom and recover as a result. Of the larger economies, only the French and Italians continued to adhere to the gold standard, and their economies remained depressed until finally, in 1936, they allowed their currencies to devalue, and their economies then recovered.

I see no reason to believe we would have any different result today. Only debt would remain the same. All other assets would immediately be worth more (in nominal terms), whether it be a home, a stock, an ounce of gold or a used car. Bank balance sheets would immediately improve, as many loans would be moved from non-performing to performing status. Banks would be paid with devalued dollars, but they made millions creating the mess. The current use of government stimulus through the creation of dollars will certainly lead to a similar or worse devaluation, so this is likely a net gain for the banks too.

Businesses would instantly become more profitable, and workers' pay would increase, allowing each to pay their debts more easily, even while sending more tax dollars to Washington, without raising tax rates. As assets are sold, the capital gains would send even more taxes to Washington. States and locales would receive more revenue via sales and property tax, improving the fiscal condition of school districts and local governments. The national debt would effectively be reduced by the same 25%, giving future generations a chance. Combine the move with a congressional pledge to only raise the budget by half the devaluation, and we could be on track for a balanced budget and paying down the debt.

As the old Saturday Night Live skit said, "Think of inflation as your friend. Wouldn't you like to wear $1,000 suits and smoke $100 cigars?" I know I would.

Frank Beck is Chief Investment Manager of Capital Financial Group and ProPlayer Investing in Austin, Texas, an affiliate of Partnervest Securities of Santa Barbara, Calif. Mr. Beck may be reached at Frank@FrankBeck.com.

Big Oil's Long Goodbye To The Dollar

In an article by Robert Fisk published in THE INDEPENDENT, the crisis of the American dollar in oil dealings is explained a little deeper than was known the last time we visited this topic. More former allies have agreed to leave the dollar, thus hastening its demise.

china-rise-of-a-superpower
Rise Of A Superpower

IN THE MOST PROFOUND financial shift in recent Middle East history, Gulf Arabs are planning—along with China, Russia, Japan and France—to end all dollar purchases for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place—although they have not discovered the details—are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil—yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

dollarbroke
Can't Print Enough To Put Humpty Dumpty Back Together Again

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power—along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system—which has prompted the latest discussions involving the Gulf states. After a while, familiarity breeds contempt, and thus allegiances tend to change. And we are seeing that sort of thing here.

Read it all.

But here is a more sober take from a poster whose handle is Solomon2, posting on Debbie Schussel's blog covering the same story within the context of a book review. This leveled advice smiles upon the survival of dollar, but cautions that all is not well. Read on...

It is possible for these parties to destroy the dollar, but by doing so they would sacrifice a great deal of their own wealth (in dollar-denominated assets) and future income (because of the worldwide depression caused by such a crash.)

After WWII the U.S. accounted for 50% of the world’s GNP. Thus there was really little alternative to using the dollar—that the British pound held its own for two more decades can be attributed to the economic influence of its fading Empire. Now the U.S. represents under 30% of world GNP and is no longer the world leader in providing capital, so it makes sense to revive the 1970s mechanism of the SDR for capital growth. Eventually the dollar will come down and manufacturing revive compared to the financial and services sector. It’s all quite natural—though we will have to get used to the fact that we cannot enjoy the benefits of great seignorage much longer.

A Few Dollars Short

A FEW DAYS AGO Press Secretary Robert Gibbs stated that the $100M dollars in cuts the White House is requesting being made is a LARGE sum of Money.

Yet, a short while ago we were told 8 Billion dollars in earmarks is a small amount. And Mr. Gibbs even restated this just a few weeks ago. So, can someone please demonstrate or explain how $100 million is larger than eight billion dollars? I am sure if someone can come up with the answer, it will make an interesting mathematical equation...

China Continues To Leverage Resources

mining-boom-2013
China Buying Up World Resources...

SHANGHAI—bustling Chinese companies have been on a shopping spree in the past month, snapping up tens of billions of dollars' worth of key assets in Iran, Brazil, Russia, Venezuela, Australia and France in a global fire sale set off by the financial crisis.

The deals have allowed China to lock up supplies of oil, minerals, metals and other strategic natural resources it needs to continue to fuel its growth. The sheer scope of the agreements marks a shift in global finance, roiling energy markets and feeding worries about the future availability and prices of those commodities in other countries that compete for them, including the United States.

Just a few months ago, many countries were greeting such overtures from China with suspicion. Today, as corporations and banks in other parts of the world find themselves reluctant or unable to give out money to distressed companies, cash-rich China has become a major force driving new lending and investment.

On Feb. 12, China's state-owned metals giant Chinalco signed a $19.5 billion deal with Australia's Rio Tinto that will eventually double its stake in the world's second-largest mining company.

Nn three other cases, China has used loans as a way of securing energy supplies. On Feb. 17 and 18, China National Petroleum signed separate agreements with Russia and Venezuela under which China would provide $25 billion and $4 billion in loans, respectively, in exchange for long-term commitments to supply oil. And on Feb. 19, the China Development Bank struck a similar deal with Petrobras, the Brazilian oil company, agreeing to a loan of $10 billion in exchange for oil.

On Saturday, Iran announced that it had signed a $3.2 billion agreement with a Chinese consortium to develop an area beneath the Persian Gulf seabed that is believed to hold about 8 percent of the world's reserves of natural gas.

Even as global financial flows have slowed sharply overall, China has dramatically stepped up its outbound investment. In 2008, its overseas mergers and acquisitions were worth $52.1 billion—a record, according to the research firm Dealogic. In January and February of this year, Chinese companies invested $16.3 billion abroad, meaning that if the pace holds, the total for 2009 could be nearly double last year's.

Worldwide, the value of mergers and acquisitions transactions so far this year has dropped 35 percent to $384 billion. By comparison, the United States had $186.2 billion in outbound mergers and acquisitions in 2008 and Japan had $74.3 billion.

China's state-run media outlets are calling the acquisition spree an opportunity that comes once in a hundred years, and analysts are drawing parallels to 1980s Japan.

"That China started investing or acquiring some overseas mineral resources companies with relatively low prices during the global economic crisis is quite a normal practice. Japan did the same thing in its prime development period, too," said Xu Xiangchun, consulting director for Mysteel.com, a market research and analysis firm.

It's not just Chinese corporations that are taking advantage of the economic crisis to help others while helping themselves.

The Chinese government also has come to the rescue of ailing countries, such as Jamaica and Pakistan, that it wants as allies, extending generous loans. Even Chinese consumers are taking their money abroad. In a shopping trip last month organized by an online real estate brokerage, a group of 50 individual investors from China traveled to New York, Los Angeles and San Francisco to purchase homes at prices that have crashed since the subprime crisis.

Read it all.