SodaHead - Money Blogs

NYC National Debt Clock runs out of digits

2008-10-10T16:15:17Z

+4 raves

NEW YORK - In a sign of the times, the National Debt Clock in New York City has run out of digits to record the growing figure. As a short-term fix, the digital dollar sign on the billboard-style clock near Times Square has been switched to a figure — the "1" in $10 trillion. It's marking the federal government's current debt at about $10.2 trillion. The Durst Organization says it plans to update the sign next year by adding two digits. That will make it capable of tracking debt up to a quadrillion dollars. The late Manhattan real estate developer Seymour Durst put the sign up in 1989 to call attention to what was then a $2.7 trillion debt. http://news.yahoo.com/s/ap/20081009/ap_on_re_us/odd_national_...

Some state unemployment funds drying up

2008-10-10T06:44:58Z

PLANETEATER

+2 raves

By Emanuella Grinberg CNN (CNN) -- The demand for unemployment benefits across the country has put a strain on state unemployment funds, with such funds in at least 10 states facing insolvency in 2009, according to a policy group. Lines form at a job fair in Fort Lauderdale, Florida, in August. Nationwide, unemployment reached 6.1 percent, or roughly 9.1 million people, in August, up from 4.7 percent in 2007, and is expected to continue rising. The U.S. Department of Labor said that in August, claims for unemployment benefits reached their highest levels since 2001, in large part because of hurricane activity on the Gulf Coast. With a weekly average of 474,000 new applicants in August, in a system already looking after about 3.5 million people each week, the growing rate of recipients has nearly depleted unemployment funds in several states. "There are some real serious problems with unemployment funding that need to be addressed," said Andrew Stettner, deputy director of the National Employment Law Project, a policy group that advocates on behalf of unemployed and low-wage workers. The group, which tracks legislation and activity related to state and federal unemployment benefits, says that California, Michigan, Missouri, New York, Ohio, South Carolina, Wisconsin, Indiana, Kentucky and Arkansas have less than six months' worth of unemployment trust fund reserves, putting the funds at high risk of insolvency. On Tuesday, California state officials told lawmakers in a hearing that their unemployment reserve fund was on track to run dry by March based on the state's forecast unemployment rate, which hit 7.7 percent in August. Last month, South Carolina Employment Security Commission chief Ted Halley said his state's fund was also projected to run out by January. As of August, the state's unemployment rate was 7.6 percent. Eight more are on the cusp, based on a formula that projects the amount of money the state would need in a recession. "These states are not ready for a recession, and they're going to see a big hit if we have a protracted job slump," Stettner said. "We're going to see them seriously in the red, but they can take some action and not be swimming in red ink." Trust fund revenue comes from payroll taxes on employers, based on a tax system set at the state level. But, as the amount paid out in unemployment claims has risen, the terms set to generate revenue largely have remained static, combining with the current economic downturn to create a climate that economists say many states are ill-equipped to bear. Economists blame the situation on the failure of states to beef up their reserves when the economy was in better shape. "When times were good, instead of putting money into a trust fund, lawmakers gave in to anti-tax fervor and refused to raise taxes to build up a healthy trust fund," said Ross Eisenbrey, vice president of the Economic Policy Institute. "Now, as payrolls decline and tax revenue declines, there is less money going into funds that were already running low." Eisenbrey said he expects the health of state trust funds to worsen before it improves. "The economy has been hit hard the past year. Housing deflation, oil price shocks and flat wages have been reducing consumer demand, and now the credit crisis is causing businesses to lay off more workers, so it's kind of a negative loop that feeds back into the economy," said Eisenbrey, pointing out that median household income has declined since 2000, a first since the World War II era. When reserves run dry, states can borrow from the federal government's unemployment trust fund. Typically, states have a year to repay the loan without accruing interest. Michigan, which has the country's highest unemployment rate, at 8.1 percent, is already borrowing from the federal government, even though it is not in the red just yet, according to a spokesman. "We've been attempting to borrow money and pay it back as soon as we can," said Norm Isotalo, a spokesman for the Michigan Department of Labor and Economic Growth. He attributed rising unemployment claims to the embattled automotive industry and its ripple effect across the state. "We want to be able to have enough money to cover our forecasts," said Isotalo, adding that the state borrowed from the federal government in the mid-1990s for similar reasons. But the forecast is not all doom and gloom, provided the states shore up their reserves, with the help of the federal government and through initiatives of their own, Stettner said. Historically, first and fourth quarters are low periods for generating revenue that state trust funds so desperately need. But Stettner's group advocates an increase in the tax base that contributes to state trust funds, a move that could be a hard sell considering the timing. The group has also pushed for legislation that would allow the federal government to transfer funds from its reserve to the states, provided they put programs into place that would loosen the requirements for unemployment benefits eligibility among low-wage workers and part-time workers. "Many of the states facing solvency challenges could be going into red as early as 2009, but it's still early enough for them to get out of it," he said. "The trick is to make a system that's self-financing."

The Road to Serfdom by Hayek

2008-10-10T01:40:38Z

KGW

+2 raves

I would have to say that this is one of the few things that turned my thinking around about my views. I am re-reading it now and would like to hear what any of you that have read it think of it and encourage those that haven't read it to do so. Hayek was a pretty engaging writer who doesn't waste time getting to the point. I think Friedman is a very interesting speaker, but honestly I don't enjoy reading his works. (for any of you that unfamiliar with these ideas--the usage of the term "liberal" in this film means libertarian or classic liberal in American terms or 19th cent. liberalism as opposed to modern or social liberalism.) these aren't complete, but enough to give a point about the book.

GM shares drop to 58-year low, global risks eyed

2008-10-10T00:06:05Z

HairlessKat

+2 raves

Isnt it ironic? Lets see,, they flooded the housing market... and now it appears the car market too. What a great opportunity for GREEN vehicles to fill the void, that would be the smart way to go because if people refuse to buy gas powered cars they have no other choice except to go out of business. Quit fooling around GM give America the clean GAS FREE cars we want! Do what Obama is talking about and CREATE JOBS to fill this market! -------------------------------------------------------------... DETROIT (Reuters) - General Motors Corp shares plunged to their lowest level since 1950 on Thursday as concerns mounted that an industry decline that started in the United States was spreading and a leading forecaster warned global auto demand could "collapse" in 2009. GM shares fell as much as 33 percent to $4.65, driving its market capitalization to its lowest level since 1929, according to California-based Global Financial Data. The stock closed down 31.11 percent at $4.76 on the New York Stock Exchange. Shares of Ford Motor Co hit a 26-year low, shedding as much as 24 percent. The stock closed down 21.8 percent at $2.08. Shares of major auto parts makers also declined. At its low, GM's market capitalization stood at $2.6 billion, compared with a market capitalization of about $4 billion in March 1929 before the stock market crash that preceded the Great Depression. J.D. Power and Associates, a forecaster used by many in the industry to prepare their own outlooks, warned that no region was immune to financial turmoil, which has been hitting mature automotive markets harder than the emerging areas. Standard & Poor's said on Thursday it could cut GM and Ford's credit ratings deeper into junk, saying that both automakers had enough liquidity through 2008, "but the accelerating deteriorating industry fundamentals will be a serious challenge to liquidity during 2009." GM's decline accelerated after the S&P; warning, and it was one factor that contributed to a sharp slide in the Dow Jones Industrial Average, of which GM is a component. Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, said sinking consumer confidence was probably the biggest reason for the decline in GM and Ford shares. "Outside of the financial sector, there are issues with big ticket, discretionary consumer purchases like vehicles, so yes, auto stocks are absolutely among the most vulnerable," Mikelic said. U.S. auto sales have fallen nearly 13 percent through the first nine months of 2008 and forecasters expect the worst year for sales since the early 1990s, and further declines in 2009 as the industry buckles under weak consumer demand. The reports added pressure on U.S.-based GM, Ford and Chrysler, which are deep into restructuring plans and looking for ways to conserve cash until sales rebound. Analysts say that other automakers in the U.S. market, led by Toyota Motor Corp, have deeper pockets to withstand the sales downturn. Toyota made an unprecedented interest-free loan offer on 11 vehicle models after posting a 32 percent drop in sales in September. The program may be extended, North American sales chief Jim Lentz told Reuters on Thursday. Of GM, Fitch Ratings managing director Mark Oline said: "There are heightened concerns that the economic conditions and the credit crisis will take a deepening cut out of volumes." GM has announced plans to try to increase liquidity by $15 billion through cost cuts, asset sales and new borrowing. GM spokeswoman Renee Rashid-Merem said the automaker remains focused on its liquidity plan and declined to comment on its stock price movements. An investment banker who declined to be named because he is not authorized to comment on the record attributed the share decline to elimination of short-selling restrictions on the shares that had put the equity value out of balance with bond and credit-default swaps values. "It all has to rebalance now," the banker said. GLOBAL AUTO OUTLOOK IN QUESTION Oline said GM's main difficulty was in the deteriorating domestic U.S. market, but there was concern that a global downturn in demand could hit GM's international operations as well, particularly in Western Europe, Russia and China. "A further cut in volumes calls into question the adequacy of their liquidity and raises concerns about trade credits throughout the supply chain," he said. GM, the largest U.S.-based automaker, posted a $15.5 billion net loss in the second quarter and plans to increase production of more fuel-efficient cars in North America to adjust to dropping demand for pickups and SUVs. Striking the right production balance between cars and trucks is hard. Credit Suisse believes GM and Ford may have to dial back on passenger car production in the coming months. GM could be expected to update its liquidity plans when it posts third-quarter results. It has not said when it will report its earnings. Analysts and auto executives cut U.S. light vehicle sales forecasts for 2008 and 2009 as high gas prices buffeted sales of large vehicles earlier in the year and the credit crisis further weighed on consumer confidence. More recently, there have been signs of slowing in mature European markets and more moderate growth expectations for emerging markets where automakers had aimed resources. GM, which posted a 1.9 percent sales decline in Europe through the first nine months of 2008, and Ford have relied, to some extent, on growth outside North America to support them as they restructure at home. Industry forecasters J.D. Power and Global Insight have lowered expectations for 2008 U.S. light vehicle sales and predict a slow recovery. They have also questioned sector growth in key regions overseas. "While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse," said Jeff Schuster, J.D. Power's executive director of automotive forecasting. In the United States, J.D. Power expects 2009 industry sales of 13.2 million, while Global Insight expects 13.4 million. U.S. auto sales were roughly 16.15 million units in 2007. http://news.yahoo.com/s/nm/20081009/ts_nm/us_autos_outlook

3 former Fannie Mae executives who have brought down Wall Street

2008-10-09T12:55:24Z

rushforpres

0 raves

Here is a quick look into 3 former Fannie Mae executives who have brought down Wall Street. Franklin Raines was a Chairman and Chief Executive Officer at Fannie Mae. Raines was forced to retire from his position with Fannie Mae when auditing discovered severe irregulaties in Fannie Mae's accounting activities. At the time of his departure The Wall Street Journal noted, 'Raines, who long defended the company's accounting despite mounting evidence that it wasn't proper , issued a statement late Tuesday conceding that 'mistakes were made' and saying he would assume responsibility as he had earlier promised. News reports indicate the company was under growing pressure from regulators to shake up its management in the wake of findings that the company's books ran afoul of generally accepted accounting principles for four years.' Fannie Mae had to reduce its surplus by $9 billion. Raines left with a 'golden parachute valued at $240 Million in benefits. The Government filed suit against Raines when the depth of the accounting scandal became clear. http://housingdoom.com/2006/12/18/fannie-charges/ . The Government noted, 'The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how t hey submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.'These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the miss-stated Fannie Mae profits. Tim Howard - Was the Chief Financial Officer of Fannie Mae. Howard 'was a strong internal proponent of using accounting strategies that would ensure a 'stable pattern of earnings' at Fannie.. In everyday English - he was cooking the books. The Government Investigation determined that, 'Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,' On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to investigate his allegations that two former Fannie Mae executiveslied to Congress in October 2004 when they denied manipulating the mortgage-finance giant's income statement to achieve management pay bonuses.Investigations by federal regulators and the company's board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004. Howard's Golden Parachute was estimated at $20 Million! Jim Johnson - A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. A look at the Office of Federal Housing Enterprise Oversight's May 2006 report on mismanagement and corruption inside Fannie Mae, and you'll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson's 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million.' Johnson is currently under investigation for taking illegal loans from Countrywide while serving as CEO of Fannie Mae. Johnson's Golden Parachute was estimated at $28 Million. WHERE ARE THEY NOW? FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor TIM HOWARD? Howard is also a Chief Economic Advisor to Obama JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama's Vice Presidential Search Committee IF OBAMA PLANS ON CLEANING UP THE MESS - HIS ADVISORS HAVE THE EXPERTISE - THEY MADE THE MESS IN THE FIRST PLACE. Would you trust the men who tore Wall Street down to build the New Wall Street ? Come on.

IT AIN'T GONNA WORK

2008-10-09T05:55:56Z

PLANETEATER

+1 raves

By every historical measure the equity markets slipped into a secular bear market in 2000. As a result, we began to see efforts by the powers that be to keep the market afloat. I have stated all along that manipulation, will ultimately not work. I have also stated all along that all this will do is make matters worse in the end. Well, I would think that everyone can now see, matters are indeed much worse. Yet, the Fed, the Treasury and the politicians continue to think that they can “fix” the problem by throwing more money at it. They do not understand that they can’t “fix” this economic crisis. They also do not understand that it is their trying to “fix” things in the past that has created the current situation. All markets as well as the economy must both inhale and exhale. They are trying to prevent the exhaling and it ain’t gonna work. What we are dealing with is the wrath of Kondratieff Winter, which is about the purging of excess credit. Along with that comes deflation and along with that global stock markets enter into extended declines. Real estate declines, economic growth slows, commodities decline, bankruptcies accelerate as the excess credit is purged from the system, the banking system is shaken, the free market is blamed and we move toward national fascist political tendencies. We are now seeing each and every one of these symptoms of K-wave winter. For the record, I did not make up these symptoms to fit the current situation. I have original writings by Nikolai D. Kondratieff and the signs of K-wave winter were quoted from a book by David Knox Barker titled, The K-wave and was published in 1995. Don’t think the powers that be aren’t aware of Kondratieff Winter. They know full well what we are facing and that is why they have tried to hold back its wrath as diligently as they have, since 2001. Now, from a Dow theory perspective, I have been saying that when the averages moved below their August 2007 secondary low points, on November 21, 2007, that under classical Dow theory a primary bearish trend change occurred. According to William Peter Hamilton, the great Dow theorist of the 1920’s who called the 1929 top, said that when the averages move below their previous secondary low points the stock market barometer is forecasting stormy conditions. Interestingly enough, most major averages around the world also topped and entered into primary bearish trends in conjunction with this Dow theory primary trend change. Let’s now move to the Dow theory chart below. When the non-confirmation between the averages occurred in July, many insisted that that non-confirmation was bullish. I even read articles claiming that the primary trend was bullish in accordance to Dow theory. I have maintained that under orthodox Dow theory nothing has changed the primary bearish trend that was confirmed on November 21, 2007 and that the non-confirmation was merely a warning of a possible trend change, but that it was NOT in and of itself bullish. This has since proven correct. This topic was also addressed here in mid-September. There are many that view the Dow theory as some antiquated relic of the past that is no longer relevant. There are others that claim to be Dow theorists, yet they have never read the writings of our Dow theory founding fathers, which again were Charles H. Dow, William Peter Hamilton and Robert Rhea. Anyway, I guess my point here is that the Dow theory first signaled stormy conditions last November and it has proven correct once again. It has also helped me to guide my subscribers through this economic disaster and it is anything but an antiquated relic of the past. If someone says this, then they don’t truly understand Dow theory. The great Dow theorists of the past also wrote about manipulation. The following text on this topic is by Robert Rhea: “Manipulation is possible in the day to day movement of the averages, and secondary reactions are subject to such an influence to a more limited degree, but, the primary trend can never be manipulated. Hamilton frequently discussed the subject of stock market manipulation. There are many who will disagree with his belief that manipulation is a negligible factor in primary movements, but it should always be remembered that he had, as a background for his opinions, a most intimate acquaintance with the veterans of Wall Street, and the advantage of having spent his life in accumulating facts pertaining to financial matters. The following comment, taken at random from his many editorials, affords convincing proof that his views on the subject of manipulation did not vary: ‘A limited number of stocks may be manipulated at one time, and may give an entirely false view of the situation. It is impossible, however, to manipulate the whole list so that the average price of 20 active stocks will show changes sufficiently important to draw market deductions from them.’ (Nov. 29, 1908) ‘Anybody will admit that while manipulation is possible in the day-to-day market movement, and the short swing is subject to such an influence in a more limited degree, the great market movement must be beyond the manipulation of the combined financial interests of the world.’ (Feb.26, 1909) ‘…the market itself is bigger than all the ‘pools’ and ‘insiders’ put together.’ (May 8, 1922) ‘One of the greatest of misconceptions, that which has militated most against the usefulness of the stock market barometer, is the belief that manipulation can falsify stock market movements otherwise authoritative and instructive. The writer claims no more authority than may come from twenty-two years of stark intimacy with Wall Street, preceded by practical acquaintance with the London Stock Exchange, the Paris Bourse and even that wildly speculative market in gold shares, ‘Between the Chains,’ in Johannesburg in 1895. But in all that experience, for what it may be worth, it is impossible to recall a single instance of a major market movement which depended for its impetus, or even for its genesis, upon manipulation. These discussions have been made in vain if they have failed to show that all the primary bull markets and every primary bear market have been vindicated, in the course of their development and before their close, by the facts of general business, however much over-speculations or over-liquidation may have tended to excess, as they always do, in the last stage of the primary swing.’ (The Stock Market Barometer) ‘…no power, not the U. S. Treasury and the Federal Reserve System combined, could usefully manipulate forty active stocks or deflect their record to any but a negligible extent.’ (April 27, 1923) ‘The average amateur trader believes the stock market is guided in its trends by a certain mysterious ‘power,’ this belief being the one factor, next to impatience, most responsible for his losses. He reads tipster sheets avidly; he scans the newspapers industriously for news likely, in his opinion, to change the trend of the market. He does not seem to realize that by the time the news of real importance is printed, its effect, so far as the basic trend of the market is concerned, has long ago been discounted.’ ‘It is true that a flurry in the price of wheat or cotton may influence the day to day movement of stock prices. Moreover, sometimes newspaper headlines contain news which is construed as bullish or bearish by market dabblers, who collectively rush in to buy or sell, thus influencing or ‘manipulating’ the market for a short period. The professional speculator is always ready to help the movement along by ‘placing his line’ while the little fellow timidly ‘lays out’ a few shares; then, when the little fellow decides to increase his commitments, the professional begins to unload and the reaction ends, and the primary movement is again resumed. It is doubtful if many of these reactions would ever be caused by newspaper headlines alone unless the market was either overbought or oversold at the time---the ‘technical situation’ so dear to the hearts of financial news reporters.’ ‘Those who believe the primary trend can be manipulated could, no doubt, study the subject for a few days and be convinced that such a thing is impossible. For instance, on September 1, 1929, the total market value of all stocks listed on the New York Stock Exchange was reported to have amounted to more than $89,000,000,000. Imagine the money which would have been involved in depressing such a mass of values even 10 per cent!’ Yes, it is true that this is not the early 1900’s. We also know that today the Fed has more tools available to influence the market as well. But, at the same time the markets are much, much larger than they were in the early 1900’s. So, even though the Fed has more tools available, this fact is over ridden by the fact that the market is now many, many times larger than it was then. Personally, I think that the powers that be helped to make matters worse by postponing the inevitable and that they are now facing checkmate because the die has now been pretty much cast. October 4, 2008 I have begun doing free Friday market commentary that is available at www.cyclesman.info/Articles.htm so please begin joining me there. Should you be interested in more in depth analysis that provides intermediate-term turn points utilizing the Cycle Turn Indicator, which has done a fabulous job, on stock market, the dollar, bonds, gold, silver, oil, gasoline, and more, those details are available in the monthly research letter and short-term updates. We have called every turn in commodities, the dollar and the stock market. I will be covering the details as to what’s next with the stock market, the dollar and commodities in the October research letter. Don’t be fooled by the hype. A subscription includes access to the monthly issues of Cycles News & Views covering the Dow theory, and very detailed statistical based analysis plus updates 3 times a week.

'Economic 9/11' exacting grim psychological toll in US

2008-10-09T05:40:37Z

PLANETEATER

0 raves

LOS ANGELES: The murder-suicide of a Los Angeles financial manager who shot dead five members of his family before killing himself has highlighted t he psychological toll of the economic meltdown. The bodies of Karthik Rajaram, a 45-year-old business school graduate, and his wife, three children and mother-in-law, were discovered at his home in an upmarket gated community on Monday. In a letter to police, Rajaram said he had been driven to murder because of his dire economic situation: already unemployed for several months, his remaining finances were reportedly wiped out by Wall Street's collapse. Rajaram's tragic case has become a grim symbol of the US financial crisis. Or as Los Angeles deputy police chief Michael Moore put it, "a perfect American family destroyed by a man stuck in a rabbit hole of absolute despair." The Los Angeles case came less than a week after a 90-year-old woman in Ohio shot herself as she was about to served an eviction notice on the home she has lived in for the past 38 years. The two harrowing incidents have drawn attention to the mental-health impact associated with the most serious US financial crisis since the Great Depression of the 1930s, experts say. Chicago-based psychologist Nancy Molitor told AFP the numbers of people seeking help because of finance-related anxiety had skyrocketed. "In my 20 years of practice I have never seen anything like this, the anxiety is through the roof," Molitor said, estimating she had seen a 50-percent increase in volume of calls. The sense of bewilderment caused by financial crisis was comparable to the effect of the September 11, 2001 terrorist attacks, Molitor said, impacting people of varying ages and backgrounds. "This compares to 9/11 in terms of the impact, definitely. And it's significant that it isn't a Wall Street crisis as I see it -- it's affecting the entire consumer economy, and almost every individual that I see. "It's not just affecting adults, it's affecting the children. I had one 14-year-old who came to see me and said 'I'm worried my parents are going to go broke, because they're arguing more.' "It's filtered down to almost every household I deal with. I've never seen something that has affected such a wide range of people." Molitor said the problems varied greatly: affluent people who had lost a million dollars; couples fretting over the ability to pay for college tuit ion, or in one case, a 79-year-old woman who "couldn't afford to die." "I thought she was kidding," Molitor said. "But she told me 'I used to have a pretty good inheritance that I could leave my three children. If I die tomorrow they're going to get half of what they were going to get.'" Judith Bardwick, a professor of clinical psychiatry at the University of California, San Diego, said the tidal wave of grim economic headlines had exacerbated widespread feelings of impotence in an era of job insecurity. "It is a sense of fear, depression and anxiety that says no matter how hard or well I work, I have no control over my future," Bardwick said. "So the present stinks and the future will be worse. And there's no one to help me. "In a period of fiscal crisis, in which very visibly major institutions fail or are bailed out, and the market is riding a rollercoaster, the number of people who have these despairing views of life will naturally increase." The fact that the macroeconomic causes of the meltdown were not easily explained added to the sense of impotence, Molitor said. "It's a perfect storm because what breeds anxiety is a fear of the unknown," she explained. "I had a very bright person with a PhD in economics who said to me 'Even I don't get it. And if I don't get it, how is the average person managing a household supposed to get it?'" "There's a sense of total helplessness, which if it goes on long enough becomes hopelessness. And if that goes on long enough it becomes depression." In Los Angeles, authorities are urging anyone in despair to seek professional help immediately. Ken Kondo, a spokesman for the Los Angeles County Department of Mental Health, said a 24-hour service was available for anyone seeking help. "One in five people in the United States will experience mental illness and these stressors from the economic crisis could trigger that," Kondo said. "What we're saying is that people should talk to friends and family members, don't try and handle it by yourself. And if they feel chronically depressed or suicidal, seek professional mental health help right away."

Toward an Islamic gold standard

2008-10-09T01:07:06Z

PLANETEATER

+1 raves

Toward an Islamic gold standard- Part III By Cedric Muhammad -Guest Columnist- Updated Sep 9, 2007, 02:22 pm Editor’s note: Parts 1 and 2 of this series were published in The Final Call in 1998.] The end to the enslavement of the Muslim masses does not require a jihad in the traditional sense, but a struggle to obey Allah, restore Zakat, the fallen pillar of Islam…and abolish usury.” —‘Umar Ibrahim Vadillo, “The Return Of The Gold Dinar” “The fleeing of Mary with her son to Egypt and Joseph’s aiding her to make haste to Egypt (Matthew 2:13) is a beautiful sign of the so-called American Negro fleeing out of America to the open arms of the Muslim world.” —The Honorable Elijah Muhammad, “Our Saviour Has Arrived” The news of The International Conference on Gold Dinar Economy, “A Blueprint for the Ummah,” (http://www.dinareconomy.com/home.html) held July 24th and 25th in Kuala Lumpur, Malaysia; and the effort of the Islamic world to move away from use of the United States dollar or toward the use of gold in financial transactions and economic trade, caused me to reflect over some thoughts and experiences I have had related to this subject for several years. One memory is a conversation I had in December of 1997, with the late Jude Wanniski, economist, former associate editor of The Wall Street Journal, and a friend of the Nation of Islam and the Honorable Minister Louis Farrakhan. For months we had been having a running dialogue about the various economic blocs around the earth that could possibly enact a gold standard. Jude’s great hope was that the United States of America would set the example. My position was that the Islamic world would lead the way. On this morning, the subject of how a gold standard in the Muslim world could work was raised. Jude emphasized some of the statistics, theory and actual ‘engineering’ essential for this to happen, while I focused on connecting important aspects of the Hadith (sayings) and Sunnah (conduct) of Prophet Muhammad (Peace Be Upon Him) with the teachings of the Honorable Elijah Muhammad, and certain legal arguments among the various schools of thought maintained by respected Islamic scholars (ulama). It was quite a conversation. Right in the middle of it, Jude left the phone, came back and told me he had to interrupt our conversation because of another phone call he received. It was from Minister Farrakhan, he explained. Jude told me he would call me back. He did, informing me, “Cedric, I told Minister Farrakhan that you and I were having a great conversation about him, and, he asked me what we were talking about.” Curious, and a bit nervous, I asked Jude, “What did you tell him?” He said, “I told him that you and I were talking about the Islamic world embracing a gold standard, and that I think that (if) he visits Tehran for the Organization of Islamic Conference (OIC) meeting, he should call the leaders of the Muslim world together to do this.” In February of 1998, in Chicago, Minister Louis Farrakhan raised the idea and possibility of an Islamic gold standard—whereby, all of the nations of the Islamic world would tie their currencies together in a monetary union establishing one currency backed by gold. As far as I can document, through audio, videotape and written statement, since the departure of the Honorable Elijah Muhammad in 1975, Minister Farrakhan has been the most prominent and consistent advocate in the entire Muslim world, for a return to stable money. The Minister has periodically, publicly and very beautifully articulated the benefits of a gold standard that would flow to the entire world, through either the return to such by the United States of America or, through the establishment of a gold-backed currency in the Muslim world. I have one videotape of a younger Minister Farrakhan doing so, relative to the United States, in 1979! His exhortations have also been warnings. Members of the global Islamic community, the Ummah, are looking to gold, as a means of stability and definition in economic transactions should come as no surprise to students of history. The idea of a fiat currency, or a paper currency backed by nothing is contrary to Islam. The Islamic Caliphate, for quite some time, was actually on a bi-metallic standard of gold and silver—established at a “par” of 15 units of silver to one unit of gold. The United States and Britain were on the very same standard, until the 19th century, and by default, so was the entire world. The ratio was eventually moved to 16:1 prior to silver’s eventual demonetization (when it was no longer legal to use it in financial transactions.) And when both countries left the bi-metallic and gold standard, the world (with the qualified exception of China, which continued to use silver), which had tied, pegged or fixed its various currencies to these two great economic powers, moved away from the use of precious metals as a unit of account. It was a fatal mistake or error, depending upon whose opinion you trust. In the mid to late 1960s, around the time that the London gold pool disintegrated, Nation of Islam leader, the Honorable Elijah Muhammad wrote the following about that fateful decision: “...The English pound and the American dollar have been the power and beckoning light of these two great powers. But when the world went off the gold and silver standard, the financial doom of England and America was sealed… …Today, the currency of America is not backed by any sound value—silver or gold. The note today is something that the government declares it will give you the value in return, but does not name that value. They definitely are not backing their currency with silver or gold. That is the number one fall, and it is very clear that the loss of power of the American dollar means the loss of the financial power of America. What will happen, since there is no sound backing for her notes, we do not know. What should we expect even in the next 12 months under the fall of the power of America’s dollar? This means that we have 100 percent inflation. What could happen under 100 percent inflation? Your guess is as good as mine. The power of gold and silver was once abundant in America. But the touch of the finger of God against the power of so mighty a nation has now caused the crumbling and fall of America.” Any learned Muslim could recognize the Honorable Elijah Muhammad’s spirit and prescience on this subject. His words exemplify the guidance of Muhammad of 1,400 years ago, and embody sound economic principles and a forecast that absolutely has been proven to be true. Others, non-Muslims, including wise economists also recognize that wisdom.

Bernanke could lead America to fulfill the words of Elijah Muham

2008-10-08T23:51:29Z

PLANETEATER

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Bernanke could lead America to fulfill the words of the Honorable Elijah Muhammad By Cedric Muhammad BlackElectorate.com Updated Feb 2, 2006, 11:47 am President George W. Bush announces the nomination of Ben Bernanke as Chairman of the Federal Reserve, replacing Alan Greenspan who retires today January 31, 2006. White House photo by Paul Morse In The Muslim Program of the Nation Of Islam and the Honorable Elijah Muhammad, the ninth point of the "What We Believe" half of that program which reads in part, "…We do not believe that America will ever be able to furnish enough jobs for her own millions of unemployed, in addition to jobs for the 20,000,000 black people as well." Over the last few years I have thought of that part of The Muslim Program in terms of the role of the Federal Reserve in influencing the United States economy. More narrowly I have considered this in terms of a unproven, outdated and harmful economic concept called NAIRU for short, or the (the non-accelerating inflation rate of unemployment), which essentially holds that at a certain level of unemployment, there is a direct correlation between inflation and employment. Also referred to loosely as the "Phillips Curve", the idea is that, any unemployment level below, say, 5%, will result in a higher rate of inflation. On Wall St. and in economic circles some reduce the theory to the idea that the American economy "overheats" when the unemployment rate goes below a certain level. So, yes, in other words, too low of a rate of unemployment or too few Americans out of work, is bad for the economy because it would lead to too much inflation. This embodies the premise, proposition and conclusion of the argument. If one follows the logic of NAIRU and "The Phillips Curve", one should be able to see how the words of the teacher of Minister Louis Farrakhan, Muhammad Ali, Imam Warith Deen Mohammed and others – "We do not believe that America will ever be able to furnish enough jobs for her own millions of unemployed, in addition to jobs for the 20,000,000 black people as well"- ring true. Many individuals, including Federal Reserve Vice-Chairman, Roger Ferguson, a Black American, do not support a role for NAIRU in U.S. monetary policy and have publicly said so. In a January 8, 2002 speech called, "Why Central Banks Should Talk", Mr. Ferguson said (italics and boldface emphasis is mine): "When the central bank's mandate includes multiple goals, the quantification of objectives becomes even more problematic. For example, the Federal Reserve's mandate includes the long-run goal of maximum employment as well as price stability. How does one measure maximum sustainable employment? As several economists have noted, estimating the non-accelerating-inflation-rate of unemployment (NAIRU), one possible measure of a full-employment objective, is even more controversial than selecting a target for a specific price index. Associated estimates of an output or employment gap would have an uncomfortably wide confidence interval. Some economists doubt the validity of the concept of NAIRU altogether. Thus, the uncertainty involved with setting such a real-side target and the temptation to hold the central bank accountable for achieving any numerically specified unemployment goal at all times should discourage quantifying an unemployment target for those economies with that goal. In any event, historical evidence suggests that maximum employment is best attained in the long run by ensuring price stability and not by attempting to achieve a pre-announced quantitative employment objective." Although many believe otherwise, until the Federal Reserve rids itself of the influence that NAIRU has historically had on its decision-making, it will always be susceptible or vulnerable to decision-making that slows the economy down right at the moment when those who have been the hardest to employ would find opportunities. When the announcement came last Monday that President Bush had selected Federal Reserve Board Member Ben S. Bernanke, to replace Fed Chair Alan Greenspan, whose term expires at the end of January 2006, speculation immediately centered around another controversial monetary policy philosophy – inflation targeting- and Ben Bernanke’s allegiance to it. Inflation targeting, although it comes in more than one form, boils down to the idea that a central bank, like the Federal Reserve, can effectively control the rate of inflation in an economy by explicitly stating it will target an acceptable rate or range of inflation (say, 2 to 3 percent) as defined by some measure (like the consumer price index, ‘CPI’) and use its monetary policy instruments – interest rates, reserve requirements , and the purchase and sale of bonds to control the amount of cash on the balance sheet of banks – to accomplish its objectives. So, if the central bank announced it would target an inflation rate of 2.5 percent annually, if the rate was estimated to be around 4%, the central bank could raise interest rates - if it preferred that instrument - in an attempt to slow down the economy and as a result, supposedly, lower the rate of inflation. The only problem is that for a variety of reasons – whether an inadequate definition or measure of inflation; the difficulty in determining the demand or velocity for money in an economy; or because it can take as much as 9 months for instruments like interest rates to work their way through the economy – inflation targeting, from my perspective, does not work. Back in 2002, I co-authored a writing with Matt Sekerke which explained how, at that time, inflation targeting was a dismal failure in South Africa. So, I too, among others, last week, was very interested in determining how serious Mr. Bernanke is about ‘officially’ instituting inflation-targeting, using it to guide the American economy. What I found is that for Mr. Bernanke, inflation targeting is no mere academic exercise. I believe he deeply believes in it, is even fascinated by it, and I suspect he is very anxious to see if it works as he hopes. One reading that persuaded me of Mr. Bernanke’s passion for inflation-targeting was his March 25, 2003 speech, "A Perspective On Inflation Targeting" delivered at the annual Washington Policy Conference of the National Association of Business Economists, in Washington, D.C. If a Federal Reserve Chairman Bernanke is guided by the philosophy he embraced while a Fed Governor, I believe that it could represent an important aspect of a developing ‘perfect storm’ for the American economy. At a time when high gas and oil prices are running through the economy; concerns about the U.S. deficit coupled with its dependence on foreigners to finance that debt continue to grow; and the possibility that the U.S. housing market may crash soon; not to mention the realities of wars and natural calamities; if the Federal Reserve were to target inflation and do so by raising interest rates, it runs the risk of not only failing in its attempt (for reasons already mentioned) but also of raising interest rates so high that they make mortgages unattractive, slowing down that market, as well as the mortgage backed securities market. As for jobs, trying to fight inflation, with the NAIRU philosophy still lurking in the background somewhere, a Fed Chairman Bernanke would probably make it impossible for the United States economy to grow fast enough to “furnish enough jobs for her own millions of unemployed, in addition to jobs for the 20,000,000 black people as well,” as the Honorable Elijah Muhammad put forth some forty-plus years ago. Remember, with NAIRU and inflation-targeting, economic growth is ultimately an enemy. The United States finds itself in this precarious position because of monetary policy blunders made by England and America over the last 130 years, and particularly for America, monetary and political policies instituted from the mid 60s to the early 1970s – mistakes and errors which resulted in the ultimate - a decision to sever the dollar from the gold standard. Of these decisions and policies, the Honorable Elijah Muhammad wrote the following: The stronghold of the American government is falling to pieces. She has lost her prestige among the nations of the earth. One of the greatest powers of America was her dollar. The loss of such power will bring any nation to weakness, for this is the media of exchange between nations. The English pound and the American dollar have been the power and beckoning light of these two great powers. But when the world went off the gold and silver standard, the financial doom of England and America was sealed. The pound has lost 50 percent of its value. America’s dollar has lost everything now as power backing for her currency, which was backed by gold for every $5 note and up. All of her currency was backed by silver, from a $1 note up. But today, the currency of America is not backed by any sound value—silver or gold. The note today is something that the government declares they will give you the value in return, but does not name what the value is. But they definitely are not backing their currency with silver or gold. This is the number one fall, and it is very clear that the loss of the power of the American dollar means the loss of the financial power of America. The United States - a creditor nation just 20 years ago - today owes the world $2.5 trillion (if you net out American owned assets from abroad with foreign-owned assets in the U.S.) It now finds itself almost at the mercy of China - the second-largest holder of U.S. Treasury securities with $243.5 billion of U.S. government securities as of May 2005. If China ever exchanges its holdings of U.S. Treasury securities, it could single-handedly bring down the U.S. housing market. This worst-case scenario, once seen as a wild conspiracy theory, was taken more seriously when China announced it would no longer tie its currency to the dollar, but rather would replace the dollar with a basket of currencies. What does that mean? According to a July 25, 2005 Wall St. Journal article called, "Revaluation May Cause Drop In U.S. Bond, Housing Prices; 'Shot Heard 'Round the World'?": The most immediate -- and potentially most significant -- result of China's move has been to force U.S. bond yields higher. With China pegging the yuan to a basket of foreign currencies and with the dollar floating down, China could feel less need to buy dollars to hold the yuan down. That would limit Chinese buying of Treasury bonds, pushing bond prices down and yields up. It is little wonder that one of the sharpest moves after China's announcement was in the bond market. Higher bond yields would spill over into other sectors, pushing up mortgage rates and the costs of some corporate borrowing. That is why some analysts believe higher bond yields, with their negative impact on stocks and the broader economy, could be the single biggest result of China's move. One of the sectors most affected by higher bond yields could be real estate, whose surge has been fueled by inexpensive mortgages. Could China prick the housing bubble? "This could be the shot heard 'round the world, in the sense that it could start that significant move higher in interest rates that could ultimately curb housing activity," said Jeffrey Kleintop, chief investment strategist at PNC Advisors, the investment advisory unit of PNC Bank. As a result of this potential that China has to hurt the American economy, as well as the dependence that Americans have on Chinese imports (The U.S. trade deficit just reached a record $18.5 billion with China) the United States government has been pleading with China – privately and publicly to – to revalue its currency against the dollar, to make the dollar less valuable and Chinese goods more expensive. The amount by which the American government wants China to revalue is ridiculously high – 20% - enough to cause enough economic misfortune and poverty to throw the country of 1 billion plus into a depression. Toward this end I have supported economist Steve Hanke’s efforts to bring sanity and realism back to economic policy makers in this country. His most recent Forbes magazine column entitled, "China’s War Chest" continues to make the case that what America is asking China to do, in order to help it out, is suicidal and counterproductive. When looked at from the perspective of the last few decades, America’s inflation problem has spiraled out of control. A new Federal Reserve Chairman aiming to curb the problem by targeting an officially acceptable rate of inflation, is not only too little too late, it is another nail sealing this country’s financial and economic doom. If Mr. Bernanke is serious about finding the right target, he should turn to gold, the only standard that I believe will delay or ward off the economic doomsday, the Honorable Elijah Muhammad pointed to.

IMF sees greatest shock since 1930s

2008-10-08T23:11:49Z

PLANETEATER

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IMF sees greatest shock since 1930s By Alan Beattie in Washington Published: October 8 2008 16:14 | Last updated: October 8 2008 16:14 The financial crisis will drive down global economic growth to its lowest since 2002 with a big risk it will drop even further, the International Monetary Fund has warned. Though Olivier Blanchard, the fund’s chief economist, said that the chance of another Great Depression was “nearly nil”, the IMF said that the US and European economies were mainly already in or close to recession. “The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s,” the IMF said. “The situation is exceptionally uncertain and subject to considerable downside risks.” The fund said that global growth was likely to slow to 3.9 per cent growth in 2008 and 3 per cent in 2009, sharply down from 5 per cent growth last year. Some economists regard 3 per cent or 2.5 per cent global growth as equivalent to a world recession, given the trend rates of growth in the global economy, but Mr Blanchard said that such definitions were unhelpful. Mr Blanchard said that Wednesday’s co-ordinated interest rate cuts from the major economies were “definitely a step in the right direction”, though declined to say whether more reductions would be needed in the short term. “More may be needed, and if so we hope it is done,” he told reporters. “Fifty basis points [cut] is not nothing.” The IMF chief economist’s optimism that the world would avoid a repeat of the Great Depression of the 1930s was based on an expectation that governments would follow the right policies. European governments were having difficulty in coordinating their response to the crisis and more action was needed to shore up their shaky financial systems, he said. The fund reduced its forecast for global growth next year by nearly a full percentage point, compared with its previous projection in July, with expected US growth for 2009 cut by 0.7 percentage points to 0.1 per cent – hovering just above a “full recession” of a year-on-year fall in growth rather than the narrower definition of “technical recession” of two successive quarters of a shrinking economy. Predicted growth for the eurozone in 2009 was cut by a percentage point to an increase of 0.2 per cent. Emerging market economies, which have seen rapid falls in asset prices this week but have yet to bear the brunt of the slowdown in the real economy, would fare somewhat better, the fund thought. The projection for Chinese growth next year was cut by half a percentage point to a still-healthy 9.3 per cent, and India was forecast to grow at 6.9 per cent. Charles Collyns, the deputy director of the IMF’s research department, said that India, being less open an economy than China and many of the industrialised economies, had strong internal drivers of growth which should shield it from the worst of the economic downturn. Growth in sub-Saharan Africa, being also less exposed to financial turmoil, would slow to 6.3 per cent next year from 6.9 per cent last year, the fund said. Copyright The Financial Times Limited 2008