Short interview of Bill Haynes, President of CMI Gold and Silver

King World News weekly wrap included a short interview with Bill Haynes which is worth a quick listen.  The link can be found here and the interview runs from 1:15 into the MP3 to 4:24.  Skip everything before the 1:15 mark unless you like to listen to commercials.  After the 4:24 mark the discussion changes to silver levels in the COMEX which might be interesting but which are beyond the scope of today's blog post.

It's a fast paced discussion of basic material which is why I think it is worth the time to listen to.  The salient points are the societal impacts of funny money and those listed by Haynes are remarkably similar to what I have been observing and writing about for years.  The quick summary is:

• Hyperinflation destroys society
• The road to hyperinflation begins with inflation.
• Inflation turns people into speculators.
• It distracts them from producing things of economic value.
• When the hyperinflation arrives it changes the mores of society. 
• People who were previously honorable begin to default on contracts.
• People living on fixed incomes then call for the government to confiscate other people's wealth to make up for the wealth they lost because of the deteriorating investment market.
• Government is the cause of the problem and government intervention will make it worse.
• Dollar will not go away over night but it will certainly happen over time.
• Only a small percentage of the people will be prepared for hyperinflation by having their assets in tangible assets.
• Hyperinflation makes it difficult for businesses to operate.  That includes the business of farming.  Massive shortages are the historical result of hyperinflation.
• Food shortages lead to riots.  People say it can't happen here but yes it can.  People are people no matter where they live.

Note that Haynes is not calling for immediate hyperinflation and neither am I.  The credit destruction and de-leveraging is reducing the global money supply faster than Ben Bernanke can print up new money from thin air to take its place.  This reduction in credit produces a net reduction in the global money supply relative to the stuff that is for sale (i.e. production) and that is the definition of deflation, not inflation.  Alan Greenspan, master con man and architect of the global credit bubble, is on record saying that there will be no lasting bottom until housing recovers.  Unfortunately, housing has not recovered and in fact the data suggests that it has another 20-30% to drop before a bottom is found.  Even more unfortunately, each time we hit one of those milestones, the data suggests that we have another n% of drop ahead of us.

Having said all of that, there will come a day when the bad credit and debt are wiped out and that's when the massive inflation is likely to kick in.  Government has been printing up all this money - tripling the monetary base in the past 4 years.  When banks begin to lend again it will be on top of a much larger monetary base and so credit expansion will be faster than we have ever experienced in this country before.  Speculators will not want to get left out of the feeding frenzy and so, as Haynes recounts, they will avoid honest work in favor of the chance to make a lot of money for doing very little real work.  In other words, they will be leveraged gamblers.  All the new credit they take on will increase the money supply relative to the stuff for sale and that is going to be massively inflationary, and perhaps even hyperinflationary.

To recap, society is nothing more than people working and living together for the common good.  Sound money is required in order to retain the basic fairness principle of economics which is that if you work hard to produce something of value that you are the beneficiary of the fruits of your labor.  When this principle breaks down then society breaks down because people begin to believe that they would be better off on their own.  When government comes in with a dishonest money system, there have to be winners and losers.  Government picks the winners based on those who support the reelection and funding of government and everyone else is a loser in the deal.  The end result is a breakdown in societal mores, civil unrest and in extreme cases civil war and the breakdown of the federation.

The worst part about all of this is that the breakdown tends to "go AIG".  In other words, the breakdown tends to happen quite rapidly with most people left saying "we never saw it coming".  But the signs are all around us right now.  The honesty of the money supply is being called into question on many fronts.  Utah has made gold and silver coins legal tender again.  Ron Paul wants to audit the US gold supply.  Banks continue to fail on a regular basis in the US and abroad.  The Eurozone is a house of cards waiting for a stiff wind to blow.  Good honest people are strategically defaulting on their homes and other forms of credit debt while at the same time housing prices continue to fall.  Banks are holding trillions in shadow inventory in both residential and commercial real estate.  Government is on a mission to obfuscate the extent of the problems.

This is not a sustainable healthy situation.  It is a scam in the collapse phase; a slow motion train wreck of the economy and very likely of American society.  The only way to fix this is to go after the root cause which is the gross unfairness which is imposed upon society by scam laden fiat currency and fractional reserve banking.  No amount of patching and mending will fix what ails us until we make the money supply honest again.  Unfortunately, perhaps 1 in 10,000 understands this.  Most people are distracted by the symptoms that they do not see the root cause.  In America, the solution must start with a complete audit of the gold supply and of the Federal Reserve and then the Federal Reserve must be shut down and our money must be made honest again through some commodity backing with gold and possibly silver at much higher prices as the backing commodities.  You can argue Dem vs. GOP until you are blue in the face but things will only continue to get worse until the basic task of returning to an honest money supply is completed.  The best way for Americans to do their part in making this happen is to elect Ron Paul in 2012.  None of the other candidates are focused on fixing the dishonest money supply because none of the rest of them want it to be fixed.  They all intend to cash in on the scam before it collapses under its own weight.

Merkel hints at the real fear regarding Greek defaults

There has been a lot of talk about the coming Greek default and the likelihood of default of the rest of the PIIGS.  But when you look at the numbers involved you have to wonder what the big deal is.  Bernanke has printed up $1.6 trillion dollars from thin air over the last few years, tripling the monetary base of the US.  If the PIIGS default on $800 bn of debt, why can't someone -perhaps even Bernanke- print that up too?  After all, it's just funny money anyway, right?

Well, there is a lot of truth to that thinking and so perhaps there is a another deeper, underlying cause of fear which the Euro-heads are not talking about.

And so there is.

Warren Buffett called them weapons of mass financial destructions.  We are talking about the completely unregulated derivatives market - the largest insurance/gambling pit ever devised.  Nobody knows what this mass of globally intertwined contracts actually holds and that is the real reason for Euro-concern about the fall of Greece.  Angela Merkel recently said as much, "nobody around the globe knows exactly who holds those papers, who will have to pay how much."  More importantly, the article goes on to say, "those credit default swaps have a significantly higher face value than the debt itself".

And so in the final analysis, much of the to-do about Greek debt is really concern about the elitist-driven global Credit Default Swaps, derivitives and other highly leveraged Wimpy Promises that form the backbone of the global debt Ponzi.  Tiny Greece isn't the real problem.  The real problem is all the tens of trillions being bet on the lack of pay-ability of their debt and of the debt of all global sovereigns - the side bet if you will.  At the end of the day the concern is not as much about money that can be printed up from thin air as it is about loss of power and control that will come when sovereigns are brought down by their own economically corrupt system of debt and leverage and, yes, fractionally reserved morals and honesty.

USA Today: States that "make things" are economic losers.

USA today reports on how individual states have fared on a relative basis as the economy has been winding down.  Their conclusion: states that make things are the big losers.  After reading that I was almost left speechless.  Manufacturing is now an economic sin according to whatever completely incompetent moron wrote that "piece".  I guess if we all stop manufacturing stuff then we will all win, huh?

Well, here's the real truth of it: labor is the source of all future value and manufacturing is the quintessential expression of labor.  Manufacturing is not for losers, it's essential for a consumption based life as we know it.  No amount of misinterpretation of the data by economic children will ever change that fact. 

Saying that Michigan is a loser state because it had manufacturing is like saying that capitalism failed.  What a crock!  We haven't had honest capitalism in the US since well before Nixon.  The so called military industrial complex that Ike carefully warned us to be diligent and educated about in his retirement speech is the basis of a good old boy system that is not real capitalism but rather crony capitalism.  Likewise, Michigan manufacturing wasn't true, free market manufacturing.  It was debt financed Ponzi manufacturing which could only happen in an economy which is infested with the plague of fiat currency and fractional reserve lending.  Period.  No way could the Detroit boom/bust have occured under a system of honest money and honest credit. 

Detriot didn't fail because it didn't have good cars, it failed because the debt related with the purchase of the manufacturing facilities along with the Ponzi obligations / Wimpy Promises to the union good old boy network took it down.  Toyota will suffer the same fate in time.  It makes fine cars but it has $155 bn in debt and only $43 bn in cash.  Its world class manufacturing was financed.  In addition, its employees have the unrealistic expectation of lifetime employment.  How different is it really from the Detroit 3?  Nobody is saying this today but I think the odds are very high that Toyota will eventually collapse under its own weight as it continues to bleed cash over the next decade. At some point the Japanese government will no longer be able to give it loans under the table and then it will most likely default and collapse.

Of course boom and bust is what you have to do in a fractional reserve banking society if you ever want to be competitive.  How can an honest investor who first earns and saves before investing compete in any way against someone who is allowed to borrow obscene amounts of money in order to go into business?  You either play the game or you are irrelevant from the start.  As Chuck Prince put it, you have to dance while the music is playing.  This is how the fractional reserve banking system (and the fiat currency monetary base) not only allows but encourages stupidly risky behavior from its participants.

Michigan was the American version of Germany and France (even if those two countries have not yet "gone Michigan").  Michigan's automotive-centric businesses took on lots of leverage in order to create manufacturing capacity not for the purpose of honest trade but rather for the purpose of trying to use debt in order to make a profit.  Building debt based manufacturing capacity is what killed them, not the simple fact that they were manufacturers.  We need to be very careful what we listen to from main stream media pundits like USA Today because their stupid conclusions can lead people down the wrong path.  Real manufacturing is based on the spending of SAVINGS.  Real manufacturers create capacity whose goal is to enhance the lives of those who work hard enough to earn what they acquire.  This is a far cry from the scam of leveraged debt based manufacturing which chases only profit with no thought to the consumption requirements of the marketplace and with no Austrian feedback loop to keep capacity in check.

Michael Panzer: "Scrap yards are the new pawn shops"

Michael Panzer is one gloomy dude.  So much so that he almost makes me appear to be upbeat on the economy in comparison.  While you might not like his facts (can you handle the truth or not?), you just can't argue with them as he reports that scrap yards are the new pawn shops.  What in essence is happening with these scrap metal criminals is the same thing that happened with global corporations: people decided that it was OK to piss away big money that belonged to someone else if it meant that they could make pennies on the pissed away dollars.

Seriously.  If you look at many corporations, a lot of the moves made by the upper brass during the boom were clearly designed to make the profit numbers look better for a year or two or even a quarter or two so that the CEO and his cronies could make a few more millions in bonuses.  Too bad if the decisions meant long term problems for the corporations or perhaps even their eventual demise.   And so it is with the metals thieves.  They steal power lines and water pipes that they turn in for 4 measly dollars a lb while the infrastructure they are tearing down is worth 100x or even 1000x that amount. 

Unfortunately, it's no different with government.  Government starts wars so that it can bomb bridges that it will later borrow money to pay Halliburton et al. to repair (Dick Cheney is as much a traitor as is Alan Greenspan).  Government also paid people a few dollars to destroy perfectly good working used cars in the cash for clunkers program.  It wasn't enough that people turned the cars in and bought new ones.   Ohhhh, nooooo.  The government had to make sure the engines were completely ruined as part of the program (caution, loud video).  It was utter waste of economic value in order to get a few fake quarters of benefit for the auto industry in order to IPO GM again.  Scam, scam, scam.

In an unkind revelation of the truth, it so happens that the places which can least afford this kind of waste are the ones which are seeing the most of it.  The desperate, disenfranchised residents of these places are beginning to figure out that the establishment is not their friend.  Once this realization is made there are no further barriers to flip into predation mode.  Think about it.  Let's imagine something impossible sounding for a second.  Let's say you are a law abiding citizen and the cops kick your door down without a warrant and attempt to kill you in the middle of the night in front of your wife and child.  If you live (ummm, Guerena didn't), what is your mindset going to be from then on?  Play by the rules as stated by the state or do unto others before they do unto you?  And so it is with the recent economically disenfranchised.  Any target is fair game now.  Things that we would normally only associate with 3rd world countries are becoming daily practice in the USA.

It's only likely to get worse before it gets better.   Bernanke has been propping up the economy starting at the top.  Yes, his actions have postponed the massive middle class layoffs that must eventually come but only at the expense of letting the elite steal us blind as a nation.  The end result will be much worse economically than if the free market had just gotten on with the depression without the banker bailouts.  The bankers took all of the stimulus and paid themselves ridiculous bonuses for doing no economically useful work.  When the collapse arrives they will hoard that cash waiting for the deflationary crash to increase their buying power four fold. 

They are laughing now for having fleeced the sheeple so boldly but I actually feel sorry for them because they do not fully understand the anger that they have incited in the general population.  I'm talking Reeve Valkenheiser type anger towards moneymen.  Once the collapse hits then it will be open season on con men and bankers.  Perhaps I will be proven wrong but at this point I suspect that bankers and moneymen will have a very difficult time enjoying their stolen prosperity into old age. When you get a scammer like  Lloyd Blankfein smugly telling the people that Goldman Sachs is "doing God's work" one can only imagine the thought processes this set off in some of the less stable, less economically fortunate among us.

Is time running out for the Eurozone?

In 2005, Milton Friedman said, "The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states.
There have been unions based on gold or silver, but not on fiat money — money tempted to inflate — put out by politically independent entities."

What Friedman was saying was that prior economic unions were based on honest money.  The EU on the other hand was based on dishonest money - fiat currency and fractional reserve banking - right from the start.  The difference?  The unions based on honest money were done to increase honest trade leading to a better lifestyle for the workers of the union -from whose labor all future economic value is derived- whereas those based on dishonest money are mainly done for the benefit of the elite parasites who install themselves as kings and Caesars to whom tribute must be paid.  Tribute is extracted from the people via inflation of the scam ridden fiat currency until the people get wise to the con and send the whole thing swirling down the toilet bowl.  Knowing all of the above, Friedman famously predicted that the Euro would not survive its first economic crisis.

To say that Friedman was ahead of the game was an understatement.  However, in my view there is no way he could have known about the coming crisis of Euroland without first understanding that the whole concept of fiat currency is a con game.  Of course, it is not politically correct to use such coarse language as "con man", "grifter" and "scam artist" when talking about the global elite and so no mention of the real underlying issue was ever made by him.   And so let me fill in the gaps that he left open.  Friedman knew the Euro could not work over the long term because he knew it was a con job.  He knew that as people caught onto the con they would join the con in the ever present human desire to achieve something for nothing.  At some point there would become too many con men fleecing the patsies (AKA honest, hard working but economically unenlighted citizenry).  When this happens, an economic crisis develops and the con collapses under its own corrupt weight. 

Having been fleeced too close to the skin by those who would be kings and dukes and other forms of elite ruling royalty, the sheeple begin to lose their desire to consume which eventually negatively affects productivity.  With less surplus value available to steal from the sheeple through guile and cunning, the con men begin to turn on themselves as they in-fight over the dwindling scraps of stolen prosperity.  In other words, the cancer kills the body and the cancer dies as a result.  That's the truth of it folks.  If the body does not flush the parasite then body and parasite both eventually die off.  Thus, it's important to find parasites early on before they become so interwoven into the daily operations of the body that there is no way to eliminate them without killing the host ("too big to fail, anyone?).

Recently, John Mauldin wonders if the Eurozone could break up and how that might look.  Mauldin has always been a glass half full sort of guy even if his glass has been getting emptier over the last year or so.  Thus you can expect him to position a break up as a "muddle through" type event.  At the same time it is foolish to just expect that things will end up "badly" and then we will all recover and move on.  Things could also end up catastrophically and it could change the entire direction of the human race.  Much depends on how badly the people have actually gotten screwed this time around and that is something that is not yet known.  The Federal Reserve and other global elite moneymen have been running full out trying to hide the problems because they know that their lives could literally be at stake.  If this sounds overly dramatic, consider the likely fate of one Hosni Mubrak who is now being held by the Egyptian people he once served as lord over.  They want to try him for corruption and conspiring to kill demonstrators, charges which if "proved" in a monkey court of public opinion could easily lead to a swift hanging a-la-Saddam Hussein.  Those are the stakes for all failed kings and Caesars.

Having said all that, I want to get back to Friedman's statement about unions based on gold and silver but not fiat money.  The United States was conceived as a union of independent states that revolved around gold and silver as money.  It was so important to the founders that this be the case that they specifically wrote in the constitution: "Section. 10.No State shall...make any Thing but gold and silver Coin a Tender in Payment of Debts".  They did not allow fiat currency.  Heck, they did not even allow paper currency operated under a gold standard.  They only allowed physical gold and silver coin to be used as the money of the land.  This may seem quaint and backward but the framers of the US constitution knew how little deviations from honesty invariably turn into large ones.  They knew that if some path to gaming the system were left open then many would be those who choose to take it and that it would be done to the detriment of the new United States.

So here we are, a couple hundred years down the road.   We have no gold standard.  We have no real money.  Few people hold physical gold or silver. What I fear is that Friedman's intuitions about the lack of viability of unions based on fiat currency -dishonest money if you prefer- will eventually apply to unions that started off with honest money but which were allowed to morph into a union based on fiat money by the complacent and unenlighted populace over time.  In other words, how is the USA any different from Euroland with respect to the likelihood of eventual breakup?  In my view, the risks are equal and in fact a breakup of the EU is likely to get a lot of disenfranchised patsies in the US thinking the same way. 

Along these lines, one thing I have always cautioned to be on the lookout for is if states begin printing their own currency.  California is doing this in a fashion today with the issuance of IOUs and Utah has recently reinstalled gold and silver coin as legal tender to compete with Federal Reserve Notes.  These things are potentially much more important to the future of the US than many can even imagine and they should be watched closely going forward by those with eyes to see the implications.  The next things I expect to see in this progression are Federal attacks on the states (and anyone else) who is/are moving away from the Federal Reserve note.  This will be a mistake by the Feds because it will only give the dissenters more global visibility but I suspect that the control freaks and con men at the federal level will have a difficult time restraining themselves in this regard. 

Mish: EU contagion is a certainty

Once again I have to go back to the well which is Mish's blog.  Few people get it like Mish does and Mish is now observing that Euroland is scrambling to contain the uncontainable economic contagion.  Having said that, Mish is not quite as clear on an important point as I think he needs to be when he talks about economic contagion in Euroland being "certain".

To be more specific, I object to applying the word "contagion" to the current mess because it misleads people from the truth.  When you get ill you sort of consider it an act of God or perhaps random chance or perhaps simply not being careful enough.  For example, say it's flu season and Jenny Soccer Mom comes into work looking like crap and coughing and sneezing, etc.  She's around young kids all the time and so she gets sick often.  She has to come into work because she needs the money.  You know all of this and you know you should be careful around her because she is contagious.  Thus, if you get sick from her it's really partially your fault for not being careful.

That is the implication of "contagion" which I don't like because I think it's misleading.  When the PIIGS go down and France and Germany swirl the bowl it will not be because of "contagion" but rather because the whole situation was structurally and unequivocally a stinking rotten economic scam from day one.  The PIIGS wanted to consume on credit and the exporters to them -Germany and France- greedily went along with the vendor finance scheme in the hopes that exporting products to deadbeats was a get rich quick scheme.  Those who engaged in the practice early on and then got out left the debt Ponzi wealthy men.  Those who thought it was a real, viable, workable long term system (aka Patsies) are sinking fast.  ALL OF THIS WAS PREDICTABLE for anyone with a dose of common sense who could think independently.

All of this drivel about "contagion" is simply whitewash and smoke screen in order to obfuscate the fact that people can or should have known all along that the Eurozone was a con job from day one.  In fact, many smart people like Nigel Farage have been saying exactly that for many years now.  It's not a contagion; it's a stinking con game people.  It's high time to just stop with the political whitewash and call it what it is.   Failure to do this will allow the con men to re-start another massive debt Ponzi as soon as the abuses of the existing one have worked themselves out in a massive collapse that is very likely coming.

I do want to take a second to make one thing clear: I am not down on Europeans.  I pick on "Euroland" a lot only because I think that, under the guideline that those on the margin will get hurt the first and the worst, that those in the Euro zone will get whacked first and more severely than the US (and I was writing this a looong time before there were Euro-riots).  This is not because the European people are less moral or less intelligent in any way.  I have nothing but the greatest respect for the European worker.  However, they are up against the US which clearly has the best con men in the world and of course our warmongers have made sure to augment political guile and economic scammery with a healthy dose of flagrant militarism.  Put it all together and it will likely spare the US from all of the pain it rightly deserves for its role in The Royal Scam/The Grand Illusion or whatever 80s rock album title you wish to refer to the great credit con by.  The main thing we the people of the world need to do is to learn a little about how money works so that once it all collapses we can avoid letting the con men, wherever they might be, from running the show for the next 50-100 years.

Repeat after me: after it all comes tumbling down, no more fiat currency or fractional reserve lending, ever.

Hacktivist group "Anonymous" targets the Federal Reserve

By now you have probably heard of this relatively new thing called hactivism.  In short, hactivism is political activism and civil disobedience using computer hacking "skillz" instead of traditional activism in the form of petitions, in-person demonstrations, signs, sit-ins and riots.  In either case, the goal is to bring down the corrupt con men at the top who have stolen control of the people through guile, sophistry and money scams.  The hactivism/activism strategy for achieving this goal is simple: pile more political weight onto the backs of the liars and scum bags until their system of control collapses under the load. 

Traditional activism seeks to bring political pressure by getting more people aware and involved.  If sufficient numbers of people stand up and say “no mas” then the con game is over.  Corrupt and immoral government con men and strong men cannot stand when the masses have turned against them.  Just ask Ben-Ali, Mubarak, et al.  In Greece, the 2008 shooting death of a teenage boy by government thugs served as a catalyst for riots.  In Tunisia, the sheeple-awakening catalyst was the self-immolation of a street vendor in response to heavy handed government treatment against him. 

The problem with activism is that it is costly and risky to those engaged in it.  In fact, history shows that it can be deadly to the protestors.   Government scammers don't like to be made fools of.  Accidents happen.  People get "heart attacked".  Activism is a difficult path to walk.  Activists have to, by the very nature of their tactics, be very visible.  They are easy targets.  Few are those in the herd with the stones to lead change in this manner and so the abuses continue, mainly unchecked, until the stench of the elitist corruption becomes too great for even the most weak kneed in the herd to bear.  Until that happens, the herd members see others getting screwed to the left and to the right but since they themselves have not gotten really screwed yet they don't see any reason to get involved.  Even as the situation escalates prior to hitting critical mass, most people are so intimidated by government that they won't even talk about it and they will oftentimes shout down those who do.  Activists must:

• Put themselves out there and expose themselves and their families to state retribution
• Expose themselves to ridicule by others in the herd who are benefiting from the status quo
• Spend lots of time and money convincing others to join the cause.  This is generally only effective after the symptoms of the underlying corruption are too great/affect too many people to ignore anymore.  See Greece and the PIIGS.
• Overcome hurdles of getting people to self organize and to agree on anything.  The larger the group, the more difficult this becomes.  Government and the elite rely heavily on the historical inabilty of unfunded groups to organize effectively in their own defense, even if the lives of those affected are at stake.
• Waste countless time and energy in fund raising operations.
• Risk becoming unemployable.

The list goes on and on but perhaps worst of all they risk doing a lot of work that really has no real effect on the ruling elite. Activism is analogous to early American independence militia (AKA "farmers and traitors" if you happened to be British at the time) confronting the well trained, well equipped, well managed British army in the middle of a lonely field somewhere during the US war for independence and shooting it out at 50 paces.  This head to head numbers game may be brave but it's not too smart.

Enter hactivism.  This 21st century innovation has the potential to address all of the above shortcomings of traditional activism and more.  Hactivists do not bravely (stupidly?) march out onto the field of battle and duke it out against a superior fighting force.  Instead, their fortified castles are computers.  Their moats are Internet communications links.  Their foot soldiers are other people's computers which they have taken over with root kits and other 'bot” software to do their bidding on demand.  Their spies and allies are the very computer systems of their enemies.

Hactivists are intelligent and they are patient.  They can afford to be patient because they remain Anonymous.  They pick their targets and they pick their times.  They do not fight on the terms dictated by the ruling elite but instead they control the battlefield and the rules of engagement.  Hactivists use leverage.  They fight battles in cyberspace where a few very intelligent people can outwit and overpower masses of government minions.  Hactivists are like snipers with very high powered, very accurate cyber weapons.  Their greatest ally is the built in weakness and imperfection of people because an imperfect person cannot write perfect software and hactivists leverage these imperfections to their advantage.  

Unlike activists, hactivists do not need to convince the masses of the value of their cause.  Overt attempts to do so are part of the strategy of misdirection.  Hactivists might call for but do not actually need public support. They do not need to seek donations.  They do not need to spend time carrying signs in the sun or rain or to risk arrest or to risk being tracked and potentially even eliminated by the state.  Hactivists hold full time jobs and good paying ones at that.  They are not on the outskirts of society barely scraping by which is the condition of many activists. Their families are at little risk from their activities.  Hactivists never engage in violent physical clashes with police.  Their understanding of computer systems, communications systems and modern automation give them power far beyond that which is available to any traditional activist group. 

Government and the elite establishment rely heavily on computerization and automation in order to maintain control.  By disrupting these systems, hactivists are able to draw attention to their cause while forcing government to spend time, energy and money that it potentially does not have into reacting to the attacks.  Being an elitist con man is not easy when the con is collapsing - just ask Merckel and Sarkozy and Trichet.  You could ask Obama too, but wait a couple years because the collapse has not yet impacted the US like it is hitting the Eurozone or MENA.  Yet.  Hactivism is just one more thing for these con men to worry about.

There are many other ways that hactivism is far more effective than traditional activism.  For example, hactivists have an easier time gaining access to intelligence.  They break into government computers to steal the incriminating or embarrassing documents.  These documents can be distributed globally in a matter of hours (Wikileaks, anyone?).  Once out on the Internet, there is nothing that can be done to stop the dissemination.  The Internet never forgets. 

However, the real threat of hactivists is that it they can disrupt the control mechanisms which keep the majority of the people on the sidelines.  Imagine, for example, if someone hacked into the welfare system and took it down.  Millions of people would go without their government supplied free lunch.  No money = no food and no rent payment.  This would bring millions of sheeple to the streets in the US every bit as effectively as did the shooting of a child in Greece or the self immolation of a street vendor in Eygpt.  If Los Angeles riots of 1992 happened just because the electricity went out, just imagine what would happen if the government subsidized living cash disbursement system went down for 2 months.  We are talking major chaos and chaos is oftentimes the best if not only catalyst for change.

Of course, the hactivists already know all this to say the least.  In fact, they know it so well that they are smug in their communications.  They know that their little hacking of websites, etc. to date are just the tip of the iceberg of their potential capabilities.  Bringing down the welfare payment system would cause carnage but imagine the damage to elite that would be caused by wiping out electronic accounts all over the world.  All they have to do is put the fear of being “electronically erased” into the sheeple in order to cause a run on all major world banks.  That would bring down the global financial system in short order.

But the hactivists in their self assured smugness are not jumping directly to that “nuclear option”.  Instead they are ratcheting up the stakes in a controlled manner which I take to be a sign of strength.  They likely have a lot more ammunition in reserve should smaller efforts not produce the desired change.  However, the stakes are rising rapidly as I type.  The current big target of the hactivists is the Federal Reserve.  Anyone with a brain knows that the Fed is a massively corrupt scam.  Now, perhaps the leading hactivist organization -which calls itself Anonymous- has brazenly demanded that Ben Bernanke step down "or else".  They even gave him a 90 day grace period to leave.  The 90 day grace period has expired and Anonymous is now promising an attack on the Fed. 

It’s put up or shut up time for the hactivists.  The Fed is a very powerful organization with literally unlimited funds at their disposal given that they control the printing presses.  They currently do not fear Anonymous.  This is a big mistake IMO.  The Fed relies on computers and communications systems as much as anyone and likely even more than most.  The Fed does not have a big anti-cyber attack team.  It is a sitting duck which thinks that it is an eagle.  If Anonymous is successful in doing any significant level of damage to the Federal Reserve’s operations then it could and likely would shake global financial markets like a 9.0 magnitude earthquake.  It's a big "if", but such a demonstration of cyber power would send many more people who currently feel helpless into the ranks of Anonymous.  Their power and political clout would grow.

The cyber battle has just started.  It will likely be a long and drawn out affair.  Get a bag of popcorn and watch the show.

France and Germany are no better off than anyone else in Euroland.

I've been writing for a long time about how "export economies" are nothing but vendor finance scams.  By this logic I suggest that France and Germany are in as bad a shape as the PIIGS that they so loudly complain about.   Recent news is proving me right as  Moody's prepares to cut the credit ratings of big French banks based on their exposure to Greek debt.  I assure you that it will only get worse for France as the reality sinks in that sovereign debt bond holder haircuts are unavoidable.  And it won't stop at France.  Germany is in just as bad of shape as everyone else in Euroland.  They will just look better on paper until the money they are owed is defaulted on and the customers who have been enriching their economies with debt notes have to scale back future purchases.  

When this happens, future export sales will dry up and Germany and France will be left with big debt that they took out to increase manufacturing capacity so that they could become over productive, greedy pigs.  That debt will eat them alive and they will end up dumping it on the people of those nations.  At the end of the day it is quite possible that they will be exposed to be even bigger pigs than the PIIGS.  Their sin: belief that you can make a legitimate, sustainable profit being a so called export economy.  The operative syllable in economy is CON.  By the way, very, very few besides The Economati currently think this fate for France and Germany is likely.  Time will tell who is right but I like my odds more and more each day. 

I maintain, as I have for years now, that France and Germany created the EU and the Euro for the express purpose of creating seemingly credit worthy customers for their exports in order to increase near term sales (i.e. pull in demand) by those who historically would inflate away their debts.  By pushing the PIIGS into a single currency it was sold to the world that the credit rating of PIIGS was somehow "magickly" better.  Of course, the illusionists conveniently ignored that, without the ability to inflate, the debtors would eventually have to default.  The grifters who set this all up wanted to sell the con that sovereign default was next to impossible even though math and history showed time and again that the only thing that stopped past defaults was the ability to inflate!  It was necessary to create this illusion of debt security in order to justify such large extensions of credit to those who could not possibly repay the debt.

Here's the deal: anything except straight across trade leaving a zero trade deficit is a con.  It doesn't matter that you might be really, really good at making something.  If your trading partners aren't just as good as making something else that you want to trade them for then you are being overproductive in order to turn a paper profit and that is an unsustainable economic scam.  It doesn't work because it cannot work mathematically in aggregate; by definition not everyone can be a net exporter.  Trade imbalances generally do not work like the tides with an ebb and flow where the debt is a sort of long term shock absorber for the imbalances.  They tend to just get worse and worse until the debts associated with multiple years of trade deficits are defaulted on.

OK, this probably sounds like heresy since most of the global economists and government "leaders" talk at length about the importance of exports to an economy's "growth" but their drivel does not stand up to common sense.  In truth, they push the concept of exports in order to support false arguments for subsidizing this industry or that - whichever industry comes up with the best bribes and campaign contributions (is there really any difference anymore between the two?).

Here is the common sense of it: a nation can only fairly produce what it can itself consume in near real time.  Sure, it can fairly and honestly overproduce a little bit today for its own future consumption in case of a future rainy day so to speak but it makes no sense to overproduce and store lots of goods.  Storage costs money.  Also, technology changes so rapidly that cars which are just 3 years old are not as good from an economic standpoint as cars built today.  Jeans and dresses from a year or 2 ago are out of style.  And too much food stored in silos is subject to wastage by natural events and pests.

Because of the above, justification for excess production is always found in trying to sell it to the neighbors even if said neighbors have nothing of value to pay for it with.   The con part comes in when people begin to borrow money in order to create more overproduction.  In their greed to turn a short term profit they enter into business which is completely unsustainable from a mathematical and economic point of view.  They never use their own money for this because the understand that it will collapse in the fullness of time.  It is always done using debt.  It should be noted that fiat currency and fractional (fictional) reserve banking are the primary enablers of the con men.  Take away this ridiculous fraud and all of the scams collapse for lack of capital to fund them with.

In general, the nation with better credit uses that credit to build out more unneeded/unjustified production capacity which it then "sells" to some other nation that does not have the production capacity to trade back in like kind.  The difference is made up in IOUs that will never get repaid.  The con men pay themselves outsized bonuses for such great sales performance at the start of the con even though all of the sales are effectively vendor financed.  The general population, who do not understand math or economics, end up getting the debt dumped on them after the scam eventually collapses.

Why is it a scam?  Simply because anyone who receives more goods from their trading partner than they themselves have goods to trade back is doing so because they don't have the ability to produce the goods represented by the deficit.  So they provide IOUs for future goods instead even though they have no ability to repay the "loan" of goods and no plan for ever acquiring such ability.  What cannot be repaid will eventually be defaulted on.  It really is that simple.  Now hear this government and academic economist con men:  The only honest, true and globally sustainable value of trade is the diversification of consumption, not the generation of profit.   The so called profit of a trade imbalance is always a fake profit since it is guaranteed to be defaulted on at some point.  The con men driving this agenda know this and so they play the game as long as it appears to the unaware that it is a viable game.  When the scam is near collapse under its own corrupt weight, the con men sneak out the back door leaving the inevitable losses on the backs of the patsies - generally the bottom 85% of the population.

Ever hear a government or academic economist or a politician state this simple truth (besides Ron Paul of course)?  No??  Of course they don't say these things because it will prove that focus on trade as a profit mechanism or a mechanism for economic stimulus is a load of crap.  Instead, the obvious is ignored and policies are put in place to stimulate something in the wrong direction.  Such are the wages of allowing central management of the economy by con men. 

So why do the ignorant sounding economists and politicians continue to talk, talk, talk about stuff they appear to have no clue about?  I believe that for every thing there is a reason even if you might not know what it is.  In this case I think the reason for seemingly stupid politician complicity with the scam is that they are on the take and that highly visible economists (i.e. those working in academia or for government) are simply salesmen for government policy.  They are part of the Grand Illusion, the Great Con. 

Having said that, I concede that there are plenty of honest, truth telling economists out there working in relative obscurity.

Big trouble in big China

Mish is always on top of the best global economic news.  No way can small bloggers compete with him on that front but we can potentially add some opinions and insight that might be of value.  Today he reports on more Chinese problems looming.   To sum it up, social unrest is rising in more Chinese urban locations and serious fraud is being uncovered in significant sized Chinese companies.

It comes as no surprise to me that China is in trouble because it is part of the global debt Ponzi.  You cannot get as big as China has become as fast as it has happened unless high leverage and scammery is involved.  A fraudulent money system has pushed honest people to the sidelines.  They have been bulldozed by the force of money that doesn't have to be worked for before it is spent.  You either get in line with the con or you become irrelevant.  This is the lesson of the last 70+ years and especially so since 1995 when the criminal traitor Greenspan removed all the safeties on bank reserves with respect to leverage.

The coming problems for China are obvious.  The people are poor.  They have no fat on their bones literally or economically to weather hard times.  When their economic Ponzi collapses the people are going to take to the streets in force and the Chinese leaders will be in great fear for their lives.  No amount of military presence is going to matter.  We've already seen worker-slaves kill themselves in many ways including throwing themselves out of factory windows to protest working conditions and this was/is happening when the boom has not yet turned to bust.  People with that mentality are not going to be put down by any amount of military presence.  Huge masses of hungry people with nothing to lose cannot be swept aside so easily.

We've all heard China referred to as an "economic miracle".  Well, as I have posted in the past many times, that phrase is elite-speak for "debt Ponzi".  Lots of people think China is rich because the US owes it trillions but it is as broke as anyone else.  If a deadbeat owes you money that will never be repaid, are you rich?  China has used the illusion of wealth to borrow money from others in order to fuel its real estate bubble.  This was needed in order to create otherwise unneeded jobs for workers.  Without those jobs the workers will spend their energy in other ways.  Bad ways.

An underreported problem regarding the coming Chinese bust is that it is the last great hope of the world that we will have a "soft landing".  Everyone knows that Euroland, Japan, and even the USA are all screwed economically but as long as China is growing like crazy people believe that there is hope for the global economy.  A good example of this is the big spending going on in Australia and Canada based on Chinese commodity purchases.  If these commodity exporters had one Troy ounce of historical perspective they would be saving during this time with the clear and certain knowledge that it is a bubble.  Boom will turn to bust.  Those who spent their commodity earnings as if a boom was normalcy will be very sorry in the coming years.

If you still don't understand what is really going on globally then now is a good time to pay attention because the truth of the matter is so very simple.  It's only a sea of noise that makes it hard for the rank and file to understand.  The world is in the trouble that it is in because of one main thing: a dishonest money supply that is based on fiat currency and fractional reserve lending.  PERIOD.  Get rid of that one element of global living and the free market will sort out 90% of the remaining problems on its own in short order.  The dishonest money supply forces good people to be dishonest.  It forces them to take a "me, me, me" attitude.  It sends signals to the herd that bad behavior is rewarded and good behavior is for suckers. 

When you see Ron Paul focusing on ending the Federal Reserve, his goal is to create an honest money supply because he knows that dishonest money is the major cause of our problems globally.  It creates wars, bubbles, imbalances, fraud and poor moral values.  It is the destroyer of families and of faith.  It leads people to worship money and power and to wrap their whole lives around the pursuit of same.   None of the other candidates are saying this.  They do not want to end the Fed.  They want to work within the scam and to prosper personally from it.  They laugh and roll their eyes at Dr. Paul for having such lofty ideals.  They don't want change, they just want a different spin on the status quo. 

Please keep this in mind at the presidential polls in 2012.  If you don't vote for Ron Paul then you can simply expect another lost decade for America because that is what the statists want to happen.  They want to hang onto the power and prosperity that they have stolen from the American people through guile and sophistry.  Seriously folks, you will have no grounds to complain about anything if you don't support the only honest person who is running for presidential office; the only honest person in congress who has been telling us for decades that this day of reckoning would come.  Without a doubt, that person is Dr. Ron Paul.  Nobody else can touch his long running congressional track record for voting on principle.  He walks the walk.  Ron Paul is a life long champion of honest money, liberty, personal privacy, small government and of course, the US constitution.

China "stupidly" buys Japanese debt

Well, I go on vacation for a week and the world unraveling begins to accelerate.  The easily visible stories are available all over the web so I will pick away at things that are more speculative yet potentially more troubling.  One of them is Mish's reporting:"China plows into absurd bet on long term Japanese debt".  In it, Mish explains why such an investment is basically a lose-lose bet from an economic standpoint.  His conclusion: "So what is China thinking? The answer is they aren't thinking.".  As much respect as I have for Mish's economic insight and money-savvy, posts like that one show that he doesn't think as much as he should about the bigger picture.

That China loaned money to the US in order to keep the vendor finance scam running is obvious.  In other words, Chinese purchases of US treasuries were/are clearly explainable in money terms which is why Mish "gets" that.  But Japan isn't in the same position as the US relative to China and so when China buys Japanese debt it fails to register with Mish.  

So here's The Economati view on the situation.  The whole world is a debt Ponzi which will eventually fail.  I can't say when but I can say that it will fail.  I believe that "unexplainable" or "stupid" moves by the big players are most likely setups/self positioning for after the big collapse.  When the collapse happens we can expect that the US will default in some form or fashion.  In order to avoid outright default it will probably inflate massively and potentially hyperinflate.  Either way does not matter because the net will be that the US' ability to bully everyone with the power of money will collapse.  The US will not be in immediate danger of being invaded because of strong residual military and because we control the NorthAm continent which is protected by moat Atlantic and moat Pacific BUT neither will we be in the position to project power into the far east.  We simply will not have the money to do it.  Our military will have to downsize massively as we begin, once again, to live within our means.

"Stupid" China knows it will not be repaid in kind from the US and that there is no immediate retaliation possible.  The US will claim that the Chinese losses are "a global problem" and justify its way out of long term in-kind payments (i.e. actual repayment of debt).  So China can just sit there waiting to become the global patsy or it can execute its own self interest strategy. 
Given that China is far from stupid, it looks to me that this strategy is to get the big players around it to owe it.  After the big collapse, some of those players will then run to China for protection under the Chinese military umbrella (Australia?) while other debtors get invaded and absorbed by China.  Japan is looking particularly weak right now.  Perhaps China is buying worthless Japanese debt knowing that it will eventually default at a time when the US is too weak to defend Japan from invasion.  This is what I would do if I were China and I think there are thousands of Chinese strategists who have been thinking about this for years now.

Think about it:
- Japan is broke and in massive debt.
- Japan has something worth invading for: technology and manufacturing prowess
       - The final analysis will show this is better than invading for oil!!
- Japan has aging demographics.  Those old people might benefit from a new master in charge.
- Japan has no military to speak of.  The Chinese could walk right in unless the US or someone else defended them.
       - The likely defenders would be the US and NATO, all of which are going broke.
- Japan invaded China during WW2 and treated Chinese badly and I mean world class badly.  Chinese warmongers have not forgotten this and probably want to get even.  Nobody has forgotten anything on that score.  Nobody.
- Japanese default on treasuries would give some moral high ground for invasion.  Chinese could even declare the Japanese government "irresponsible, reckless, and incapable of leadership".  They could claim that Japanese people will be better off under Chinese rule.  Once their foot is in the door then all bets are off and the abuses/WW2 payback will begin.

So, Mish, perhaps there is more to the Chinese purchase of worthless Japanese debt than meets the eye.  If the Japanese had any sense they would not sell to the Chinese.  They would expose the move early on for what it not unlikely is and they would begin building their military again.  They would ask for money from the US and Euroland to do this with and they would justify the buildup as the creation of a post collapse military buffer between China and the west.

The great awakening continues

The herd continues to get showered with scary news as the New York Times reminds us today that nothing has been fixed by all the presidential talk of recovery, bank bailouts and calls by the con men to consume more, borrow more.  The article quotes a spokesman for the Peterson Institute, “That government debt will grow to dangerous and unsustainable levels in most advanced and many emerging economies over the next 25 years — if there are no changes in current tax rates or government benefit programs in retirement and health care — is virtually beyond dispute.”

Learned as this spokesman might be, let me make a few corrections to his quote.  Instead of government debt "will grow", it should read "has grown".  Japan is > 200% of GDP.  The US debt is nearing 100% GDP and the ratio is probably a good deal higher then government con men are letting on.  These are not historically numbers that warn of future problems but rather trigger levels that indicate the point of no return has already been crossed.  And 25 years?  Does someone really think we have 25 years to sort all of this out?  Mathematically speaking, the collapse must occur before the majority of the boomers get all their benefits.  Think well under 10 years.  Also, the concept that there is some course correction that can be done today to avert disaster is ridiculous.  How are government con men going to raise taxes on the people as we enter another downturn?  Doing so invites a street level necktie party. What cannot happen will not happen.  People need to stop factoring impossible things into their future plans.  Who do they think they are bull$hitting, anyway?

Cutting back on benefits is also not a panacea.  All of that debt based government spending must continue lest the economy roll over.  It's a catch 22.  With government spending now 45% of the economy and 42 cents of each dollar they spend being borrowed there is no way they can just stop borrowing (or printing) and hope for a soft landing.  A crash landing is assured.  The only question is when and 25 years down the road (i.e. after the con men die) is not going to happen.  Sooner or later the partial truths from the major media outlets will turn into full truths and the herd will finally realize that the big con is ending.

Europe at the abyss

Mish (always a good read) quotes another source who discusses the issues in Euroland but does so by spewing conventional wisdom which is totally incorrect (as conventional wisdom often is).  More specifically, the source quotes some bonehead economist (Desmond Lachman of the American Enterprise Institute): "The markets failed. All this would not have occurred if banks in Germany and France had not lent so much...It was like the U.S. housing market. Both American and European banks went overboard in relaxing credit standards."

Like Mish, I want to scream and pinch this guy's head off for making such comments.  "The market" might have failed but the free market did not fail because markets were not free.  They were held hostage by the con men at the federal reserve and by a fundamentally flawed (and purposefully so) global monetary system.  Chuck Prince said it best.  He said you have to dance while the music is playing.  This meant that if you were going to be a banker and if you were going to be accountable to shareholders then you had to do everything under the law (and then some) to make a profit.  Bankers make money by loaning money, lots of money even if you know damned well that you are making liar's loans that will never get paid back.  If you fail to do that then you are a failure and you are fired.  If you succeed then you are a hero and you are paid hundreds of millions of dollars of money without doing any real work for it.  The crony capitalism system demands that everyone be a shifty con man or become poor on a relative basis.  Clearly the majority of Americans are not shifty con men!

The other conventional wisdom foolishness from that article is the spew about the EU and the Euro: "Launched in 1999, it aimed to foster economic and political unity. For a while, it seemed to succeed.".  Again, what a load of CRAP that the EU and the Euro were launched for the good of the people or any sort of "political unity".  WHAT A STINKING LOAD OF PUTRID CRAP!  What a bold faced lie!  How's that unity working out for you, con men?  Is the lunch time unity special served with a Molotov cocktail these days?  Here is the real and actual truth: the Euro was launched for the benefit of the strong exporters in the region whose wanted to ramp up exports but who were tired of getting their debt inflated away by PIIGS who had control of their own money.  PERIOD.  They believed that if debt were denominated in a currency that the exporters had control over that said exporters could lend incredible amounts of money for the purpose of consumption and then stop the associated debt from being inflated away thus making debt slaves of anyone stupid enough to become indebted to them.

Those exporters would be Germany and France.  Unfortunately, you can't squeeze blood from a turnip and the con men running the show knew it.  But hey the plan sold tickets and, as the article says, it appeared to work for awhile.  But folks, any good scam has to look legit for awhile or insufficient numbers of suckers will not be found to fleece.  So of course it had to appear to work for awhile. German exports went up and the food being dumped into the PIIGS consumption trough got better.  But the whole thing was surreptitiously financed by a debt Ponzi scheme financed by German and French taxpayers.  They will never be repaid and they will never get the benefits they were promised.  They were conned right along with the PIIGS.

I have been saying this very thing for years.  Mish has written many times that the EU fiscal and economic policy is mainly set up for the big exporters (and he mainly singles out Germany).  That's why regarding EU fiscal policy he always writes "one size fits Germany".   Yes, people, the EU was and is a total scam that was set up for one reason only: so that German and French politicians and bankers could make huge short term gains on the back of fake, vendor financed exports that delivered short term and unsustainable prosperity.  Before this is over, all that fake prosperity will collapse and the situation will be worse than when it started.  The difference in prosperity levels after vs. before can be accounted for by emptying the pockets of bankers and politicians who cashed in on the fake prosperity while the debt Ponzi was spinning up.  That's where the delta in wealth will be found.

Yes, it's as simple as that. It was no accident.  Politicians and bankers are not stupid, foolish or whacky.  They are intelligent and experienced and clever in the ways of fleecing over-trusting people who are just living their lives, raising their families and attempting to do the right thing for themselves.  Politicians and bankers are wolves.  They work in packs.  Don't ever forget it or think of it any way except that lest you be rightfully considered a fool living among patsies.