Infinite Unknown

The following statement is written by Congressman Paul about the pending financial disaster.

He will introduce this statement as a special order and insert it into the Congressional Record next week. Fortunately, we have the opportunity to debut it first on the Campaign for Liberty blog. It reads as follows:

I have, for the past 35 years, expressed my grave concern for the future of America. The course we have taken over the past century has threatened our liberties, security and prosperity. In spite of these long-held concerns, I have days-growing more frequent all the time-when I’m convinced the time is now upon us that some Big Events are about to occur. These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed.

Though the world has long suffered from the senselessness of wars that should have been avoided, my greatest fear is that the course on which we find ourselves will bring even greater conflict and economic suffering to the innocent people of the world-unless we quickly change our ways.

America, with her traditions of free markets and property rights, led the way toward great wealth and progress throughout the world as well as at home. Since we have lost our confidence in the principles of liberty, self reliance, hard work and frugality, and instead took on empire building, financed through inflation and debt, all this has changed. This is indeed frightening and an historic event.

The problem we face is not new in history. Authoritarianism has been around a long time. For centuries, inflation and debt have been used by tyrants to hold power, promote aggression, and provide “bread and circuses” for the people. The notion that a country can afford “guns and butter” with no significant penalty existed even before the 1960s when it became a popular slogan. It was then, though, we were told the Vietnam War and a massive expansion of the welfare state were not problems. The seventies proved that assumption wrong.

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- Jim Rogers: Avoid The Dollar At All Costs
- Ron Paul on Iran and Energy June 26, 2008
- Marc Faber: ‘Misleading’ Fed Should Let Banks Fail

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Tags: Alan Greenspan, bubble, civil liberties, Congress, crash, Depression, Dollar, Fed, Federal Reserve, financial crisis, Gold, Government, Hyperinflationary Depression, Inflation, Meltdown, Military, Monetary System, Recession, Ron Paul, Stagflation, Stock Market, U.S., Unemployment, Wall Street

FRANKFURT: The European Central Bank, spooked by soaring prices for food and fuel, raised interest rates Thursday, joining several other central banks in battling a global eruption of inflation.

The quarter-point hike, which the bank had signaled last month, had little initial effect on markets, with the euro treading water against the dollar and stocks staying relatively steady. Central banks in Sweden and Norway also raised rates this week, citing inflation. On Thursday, Indonesia raised its key interest rate for the third time this year, while India raised its key lending rate twice last month.

The Federal Reserve in the United States, where short-term interest rates are only half of those in Europe, has so far declined to join them.

The European Central Bank’s decision deepens a recent divergence in monetary policy across the Atlantic, ending a long period when it tended to follow the course set by the Fed.

But the sharp rise in inflation has put Europe’s bank into a policy bind because it has been accompanied, in recent days, by evidence that the economy here is deteriorating much like that of the United States.

Manufacturing activity in the 15 countries that use the euro shrank in June for the first time in three years, according to a survey of European purchasing managers. In Spain and Ireland, where a collapse in housing prices has magnified the problems, there is a real risk of recession.

Still, the European Central Bank, hewing to its inflation-fighting mandate, pressed on with the expected increase, moving the benchmark rate to 4.25 percent from 4 percent. Among other things, it is intended as a warning to unions not to use higher inflation as a lever to demand hefty wage increases.
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Say goodbye to the Dollar and to Wall Street.
Got Gold and Silver? - The Infinite Unknown

Related articles and videos:
- Dow suffers worst 1st half since ‘70
- Fortis Bank Predicts US Financial Market Meltdown Within Weeks
- Barclays warns of a financial storm as Federal Reserve’s credibility crumbles
- Jim Rogers: Avoid The Dollar At All Costs
- Ron Paul on Iran and Energy June 26, 2008
- Marc Faber: ‘Misleading’ Fed Should Let Banks Fail

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It was not clear, before an afternoon news conference chaired by the bank’s president, Jean-Claude Trichet, whether the rate increase would be a one-time gesture or the start of a cycle of tighter monetary policy.

Several economists said they doubted the bank could tighten much further, given the parlous economic situation.

“The ECB is hiking at a time when confidence is plummeting,” said Thomas Mayer, the chief European economist at Deutsche Bank. “The question is, ‘what do you do when asset prices fall at the same time that consumer prices rise?’ The central bankers seem to have reached the end of the line.”

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Tags: Bank of America, Dollar, ECB, euro, Fed, Federal Reserve, Germany, Inflation, Ireland, Nicolas Sarkozy, Norway, Oil, Oil Prices, Recession, Spain, Sweden, Trichet

Related articles and videos:
- Dow suffers worst 1st half since ‘70
- Fortis Bank Predicts US Financial Market Meltdown Within Weeks
- Barclays warns of a financial storm as Federal Reserve’s credibility crumbles
- Jim Rogers: Avoid The Dollar At All Costs
- Ron Paul on Iran and Energy June 26, 2008
- Marc Faber: ‘Misleading’ Fed Should Let Banks Fail

Shares of General Motors are trading at prices last seen in the 1950s.

(Consider that the Dollar today is worthless compared to 1950! - The Infinite Unknown)

America’s automobile industry may be facing the biggest turnaround challenge in its history, a problem punctuated Tuesday as the carmakers released monthly sales results.

Times were tough enough in Detroit before gasoline hit $4 per gallon, but in the past two months the outlook has taken a turn for the worse.

Shares of General Motors are trading at prices last seen in the 1950s, their value cut in half in just eight weeks. Ford and Chrysler are in even worse shape, analysts say.

The sobering implication: The Big Three may have to become the Big Two, and even survivors will have a tough road ahead.

Bankruptcy is not a near-term threat, but the three carmakers are fast burning through cash reserves. And while government assistance - or perhaps an energy policy that supports new automotive technologies - could become a lifeline, it can’t substitute for the hard work of transforming product lines.

Reporter Mark Trumbull discusses the current situation for car manufacturers.

“The rate of cash usage is alarming,” says Gregg Lemos Stein, an auto analyst at Standard & Poor’s in New York, which has put all three carmakers on “credit watch” to review the default risk on their debts. “They’ve never been lower than this,” he adds, referring to S&P’s current B rating on their debt.

The current debt ratings place the Detroit automakers in what’s known as “junk bond” status, below the typical quality range known as investment grade. The good news: Bankruptcy or default isn’t an imminent risk, Mr. Lemos Stein says, because the companies headed into this crisis with cash on hand.

But the credit watch, in place as of June 20, means that analysts are concerned about a deteriorating outlook.

“We believe all three companies currently have ample liquidity for at least the rest of 2008 as measured by cash balances, available bank facilities, and … unencumbered assets” that could be sold, S&P analysts said in their recent report.

The cash-flow problem could reach “undesirable” levels by the second half of next year, they said.

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Tags: Barack Obama, Crysler, Dollar, Ford, General Motors, John McCain, Oil, Oil Prices, Recession, Stock Market

Related articles and videos:

- Fortis Bank Predicts US Financial Market Meltdown Within Weeks

- Barclays warns of a financial storm as Federal Reserve’s credibility crumbles

- Jim Rogers: Avoid The Dollar At All Costs

- Ron Paul on Iran and Energy June 26, 2008

- Marc Faber: ‘Misleading’ Fed Should Let Banks Fail

NEW YORK (Reuters) - The Dow and S&P 500 were little changed on Monday on the final trading day of the second quarter as record oil boosted energy shares, offsetting weak financial stocks amid nagging concerns of further credit losses.

But even with the pause on Monday, the Dow and S&P posted their worst one-month drop since September 2002. The Dow also suffered its worst first half since 1970.

The Nasdaq ended the session lower, hurt by a drop in the shares of Yahoo as it battles with shareholders after takeover talks with Microsoft fell apart.

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Tags: Citigroup, Dow Jones, financial crisis, Lehman Brothers, Meltdown, Morgan Stanley, Mortgages, Oil, Oil Prices, Recession, Stock Market, U.S.

LONDON/TOKYO (Reuters) - Soaring commodity costs are denting manufacturing activity in Asia and Europe and the outlook looks bleak as new orders drop off in the face of rising prices, surveys showed on Tuesday.

Manufacturing activity in the euro zone contracted in June for the first time in three years while business confidence in Asia’s largest export markets is buckling and output has likely contracted further in the United States.

Purchasing managers indices showed manufacturing activity in the euro zone fell to 49.2 in June, China saw its index fall to a near three-year low of 52.0 while in Britain it contracted at its sharpest rate since December 2001.

The 50.0 mark separates growth from contraction. Factories worldwide have struggled in the face of soaring raw material and energy costs — oil hit over $143 a barrel on Monday.

Meanwhile, the Bank of Japan’s tankan corporate index of big manufacturers’ sentiment dropped to plus 5, from 11 in March, showing their mood has not been darker since 2003.

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Tags: ABN Amro, China, Commodities, ECB, Germany, Inflation, Japan, Oil, Oil Prices, Recession, Singapore, U.K., U.S.

LOS ANGELES (Reuters) - Starbucks Corp (SBUX.O) said on Tuesday it plans to close another 500 underperforming stores and eliminate as many as 12,000 fill- and part-time positions.

The company, which now plans to close a total of 600 underperforming stores, will take related charges totaling more than $325 million.

The majority of the stores will be closed by the end of the first half of its fiscal year ended September 2009, the company said.

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Tags: corporations, economic downturn, Recession, Starbucks

Related article: Fortis Bank Predicts US Financial Market Meltdown Within Weeks

Strategists at Barclays accuse Ben Bernanke of a policy blunder

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall “below zero.”

“We’re in a nasty environment,” said Tim Bond, the bank’s chief equity strategist. “There is an inflation shock under way. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.”

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. “This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility,” said Mr Bond.

The grim verdict on Ben Bernanke’s Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank’s dovish policy statement on Wednesday. Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of “anti-dollar” and as a market reproach to Washington’s easy-money policies.

The Fed’s stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2 to 5pc over the last year. Mr Bond said the emerging world is now on the cusp of a serious crisis. “Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s,” he said.

“They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box.”

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Tags: Ambac, Barclays, Ben Bernanke, Depression, Fed, Federal Reserve, Inflation, MBIA, Recession, U.S.

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BRUSSELS / AMSTERDAM (DFT) - Fortis expects within the next few days to weeks to complete the collapse of the U.S. financial markets.

That explains the bank insurers interventions of the series Thursday at dealing with € 8 billion.

“We are ready at the last minute. It goes in the United States much worse than thought, “said Fortis chairman Maurice Lippens, who maintains that CEO Votron to live. Fortis expects bankruptcies of 6000 U.S. banks that now lack coverage. “But Citigroup, General Motors, there begins a complete meltdown in the U.S..”

Fortis took yesterday € 1.5 billion with a share issue. At the end of last year was the Belgian-Dutch group € 13 billion of new shares for the takeover of ABN Amro, for which it paid € 24 billion. Lippens bases its concern on interviews with bankers. “Two months ago we knew not so bad that it is in America. And it will be much worse. We have a thick mattress needed for the next eighteen months to come when we can bring to ABN Amro. ”

Two weeks ago reported the U.S. investment bank and adviser to Fortis Merrill Lynch certainly € 6.2 billion in additional capital was needed. The VEB yesterday demanded clarification of Fortis: CEO Jean-Paul Votron stopped in late april Fortis maintains that after the purchase of ABN Amro does not need on the capital market. In one year € 30 billion in market capitalization destroyed. After Votron last confession kelderde the share price by 19.4%, although yesterday climbed by 4.4% to € 10.65.

The massive unrest around the bank insurers, especially with our neighbours in Belgium as a bomb broken. While the fuss arose in the Netherlands to the limited financial world, it is with our neighbours the call of the day. Not only is the bank dominates the streetscape, but by the mokerslag for the Belgian volksaandeel are also hundreds of thousands of small investors hit hard.

All Belgian newspapers opened yesterday with real rampenkoppen, where the free fall of the bank insurers was wide coverage. ‘Fortis crashes, “” Rampdag for Fortis’ and’ Fortis loses 5.3 billion, “opened three leading newspapers.

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Tags: ABN Amro, bank failure, bankruptcy, Citigroup, crash, Depression, Dollar, Economy, Gold, Meltdown, Merrill Lynch, Recession, Silver, Stock Market, U.S., Wall Street

Vincent Quinones works on the floor of the New York Stock Exchange Wednesday after the Federal Reserve issued a mixed assessment of the economy. Yesterday, the Dow Jones industrial average closed down 358 points. (By Andrew Harrer — Bloomberg News)

So much for that second-half rebound.

Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.

It ain’t gonna happen. Not this summer. Not this fall. Not even next winter.

This thing’s going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We’re caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.

Only this will be a different kind of recession — a recession with an overlay of inflation. That combo puts the Federal Reserve in a Catch-22 — whatever it does to solve one problem only makes the other worse. Emerging from a two-day meeting this week, Fed officials signaled that further recession-fighting rate cuts are unlikely and that their next move will be to raise rates to contain inflationary expectations.

Since last June, we’ve seen a fairly consistent pattern to the economic mood swings. Every three months or so, there’s a round of bad news about housing, followed by warnings of more bank write-offs and then a string of disappointing corporate earnings reports. Eventually, things stabilize and there are hints that the worst may be behind us. Stocks regain some of their lost ground, bonds fall and then — bam — the whole cycle starts again.

It was only in November that the Dow had recovered from the panicked summer sell-off and hit a record, just above 14,000. By March, it had fallen below 12,000. By May, it climbed above 13,000. Now it’s heading for a new floor at 11,000. Officially, that’s bear market territory. We’ll be lucky if that’s the floor.

In explaining why that second-half rebound never occurred, the Fed and the Treasury and the Wall Street machers will say that nobody could have foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is a hardy perennial. That’s what Jimmy Carter and Fed Chairman Arthur Burns did in the late ’70s, and what George H.W. Bush and Alan Greenspan did in the early ’90s. Don’t believe it.

Truth is, there are always price or supply shocks of one sort or another. The real problem is that the underlying fundamentals had gotten badly out of whack, making the economy susceptible to a shock. The only way to make things better is to get those fundamentals back in balance. In this case, that means bringing what we consume in line with what we produce, letting the dollar fall to its natural level, wringing the excess capacity out of industries that overexpanded during the credit bubble and allowing real estate prices to fall in line with incomes.

The last hope for a second-half rebound began to fade earlier this month when Lehman Brothers reported that it wasn’t as immune to the credit-market downturn as it had led everyone to believe. Lehman scrambled to restore confidence by firing two top executives and raising billions in additional capital, but even that wasn’t enough to quiet speculation that it could be the next Bear Stearns.

Since then, there has been a steady drumbeat of worrisome news from nearly every sector of the economy.

American Express and Discover warn that customers are falling further behind on their debts. UPS and Federal Express report a noticeable slowdown in shipments, while fuel costs are soaring. According to the Case-Shiller index, home prices in the top 20 markets fell 15 percent in April from the year before, and Fannie Mae and Freddie Mac report that mortgage delinquency rates doubled over the same period — and that’s for conventional home loans, not subprime. United Airlines accelerates the race to cut costs and capacity by laying off 950 pilots — 15 percent of its total — as a number of airlines retire planes and hint that they may delay delivery or cancel orders of new jets from Boeing and Airbus. Goldman Sachs, which has already had to withdraw its rosy forecast for stocks, now admits it was also too optimistic about junk bond defaults, and analysts warn that Citigroup and Merrill Lynch will also be forced to take additional big write-downs on their mortgage portfolios.

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Tags: Airbus, airlines, Alan Greenspan, bank failure, Boeing, China, Citigroup, Depression, Fannie Mae, Fed, Federal Reserve, Freddie Mac, G. W. Bush, General Motors, Goldman Sachs, hedge funds, India, Inflation, Jimmy Carter, Lehman Brothers, Meltdown, Merrill Lynch, Mississippi, Oil, Oil Prices, Rate Cut, Recession, Stock Market, Unemployment, Wall Street

June 27 (Bloomberg) – European confidence dropped more than economists forecast this month and retail sales plunged, signaling that economic growth is continuing to cool even as the European Central Bank prepares to lift interest rates to a seven-year high to tackle inflation.

An index measuring sentiment in the euro area fell to 94.9, the lowest since May 2005, from 97.6 the previous month, the European Commission in Brussels said today. Separate reports showed European retail sales plummeted, while inflation accelerated in Germany and Spain.

Stocks fell in Europe today as oil climbed to a record above $140 a barrel and Carrefour SA, Europe’s biggest retailer, scaled back its earnings forecast. With soaring food and energy prices boosting inflation, ECB President Jean-Claude Trichet has said the bank may raise the benchmark rate next week by a quarter point to 4.25 percent.

``The economy has hit the wall,” said Ken Wattret, senior economist at BNP Paribas SA in London. ECB officials “run the risk of tipping the euro area into a recession” as the inflation outlook increases the risk that the central bank “may need to go beyond one rate rise.”

Confidence among the manufacturing, construction and retail industries across the 15 nations that share the euro declined this month, as did consumer sentiment, according to today’s commission report.

The Bloomberg retail index, based on a survey of more than 1,000 executives compiled by Markit Economics, fell to 44 this month from 53.1 in May. A reading below 50 indicates contraction. Europe’s manufacturing and services industries also contracted this month.

Export Growth

The euro has increased 17 percent against the dollar in the last 12 months, threatening export growth, and was at $1.5770 today. The Dow Jones Stoxx 600 index fell 1.3 percent to 284.67 as of 11:29 a.m. in Brussels.

Separate figures today showed France’s economy expanded less than initially estimated in the first quarter as household spending, the driving force of growth, stagnated. U.K. first- quarter growth was revised lower today.

ECB council member Miguel Angel Fernandez Ordonez said today a July rate increase is not a certainty.

“Nothing is inevitable in life,” Ordonez told reporters in Rome today. “What we said was that the increase is not certain, but possible.”

Still, the ECB remains focused on consumer-price growth, according to ECB Executive Board member Juergen Stark. He said yesterday the bank sees its primary aim as being to “firmly anchor inflation expectations.”

16-Year High

Euro-area inflation reached a 16-year high of 3.7 percent in May. In Spain, inflation accelerated to 5.1 percent this month, the fastest on record, according to data today. Inflation in four German states also accelerated this month.

Oil prices have doubled in a year and Libyan National Oil Corp. Chairman Shokri Ghanem said yesterday that $150 a barrel may be “around the corner.”

Companies expect to raise prices more than previously anticipated to recover soaring costs, the commission report showed. A gauge of companies’ selling-price expectations rose to 18 in June from 16 in May, which compares with an average reading of 6 over the last 18 years. Consumers also expect prices to rise more sharply than they did last month.

The “worrying combination” of falling confidence and rising price expectations, “will add to fears of stagflation in the euro zone,” said Martin van Vliet, an economist at ING Group in Amsterdam.

`Remain Elevated’

“Inflation is likely to remain elevated for a longer period than we initially expected,” EU Monetary Affairs Commissioner Joaquin Almunia said in London today. It “should only begin to show a significant deceleration around the end of this year, although further possible rises in the price of oil and agricultural products cannot be ruled out.”

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Tags: Consumer Confidence, Dollar, Dow Jones, ECB, EU, euro, Inflation, Oil, Oil Prices, Recession, Stagflation, Stock Market