Archive for July, 2010

Full article on The Automatic Earth

Inflation is the expansion of the supply of money and credit versus available goods and services. Some 95% (or more) of our money supply is credit, and by no means all of it was created by any central bank. There have been numerous engines of credit expansion during the mania years – fractional reserve banking, the whittling away of reserve requirements, lack of attention paid to credit-worthiness, securitization, derivatives, the development of the shadow banking system, conflict-of-interest at the ratings agencies, fraud etc. When the all-inclusive credit Ponzi scheme crashes – meaning that the overwhelming supply of virtual wealth disappears and we are left with only real wealth – we will have insufficient money to run our global economy.

When the money supply is inadequate, we will be trying to do the equivalent of running a car with the oil light on, which is to say that we will be trying to run an economy with insufficient lubricant in the engine. Money is the lubricant in the engine of the economy in the same way that oil is the lubricant in the engine of a car. Without enough lubricant, the engine will seize up, and then it will not be possible o connect buyers and sellers purely for want of money, exactly as happened in the Great Depression.

The credit contraction we are seeing is an early warning signal for the real economy. Since the large-scale trend change of late April (counter-trend rallies not withstanding), we are witnessing a change of perspective among the commentators, reflecting a loss of confidence and increased fear. Confidence IS liquidity in a very real sense, and as the contagion of fear spreads, liquidity will disappear. The suspension of disbelief that the long rally brought is over, and that will lead to the next phase of the on-going liquidity crunch.


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Why? Greek truckers’ strike. Not that you would know it from the mainstream press. How about the fact that police are breaking up the strike today with tear gas under emergency legislation usually reserved for times of war and natural disasters? Why is this not being widely reported? Other than in the Guardian and buried on the Financial Times website I have yet to find even a mention of this event (or the strike which has been going on for four days now) in any mainstream North American outlet (ok wordpress has generated a related link for CNN but at the time of this posting the link was dead). Oh but wait…that would panic the markets.. Now why would the media not want to panic the markets? Because they are being held up by a thin tissue of lies..(well actually it’s more like a 12 trillion thick wad of Federal Reserve Notes) No. That could never be.

When Jail Threats Don’t Work: Greek Government Punctuates Case Against Strikers By Firing Tear Gas At Them

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“The leaders coming out of a crisis are rarely the same as those that entered it and the ability to add capacity into a downturn will define the winners on the other side. We must reward those who saved, incentivize those who are motivated and punish those who’ve transgressed. Until there is culpability for wayward decisions, there won’t be motivation to change behavior and rebuild society from the inside out.

Therein lies the rub of our current course; innovation and entrepreneurialism are integral parts of the solution but many of those in a position to effect positive change don’t have access to capital. While credit worthy borrowers may be a rare breed—and lowering those standards were the root of the problem—the obligations of many have muted the aspirations of most.”

Also from the same post:

“I’ve repeatedly offered that the financial crisis hasn’t disappeared; it simply changed shape. It–for lack of a better analogy–has gone airborne, migrating from the tangible to the amorphous, from Wall Street to Main Street, from a distant coexistence to an emerging class war. It, like most viruses, will arrive in waves and infect those who haven’t been inoculated with a steady stream of financial consciousness.”

Read the rest of this most excellent post by Todd Harrison HERE

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A very salient point about energy use in China: While China has recently surpassed the U.S. as the world’s largest energy consumer one must not lose site of the fact that a substantial proportion of that energy consumption is in the service of manufacturing cheap goods for export to your local box store. In other words we have not only exported our labour to China, we have exported our energy consumption as well. The post below, taken from www.gregro.us, also makes the point that China’s energy use is still mostly in the form of coal. Their consumption of oil is but a fraction of the potential consumption implied by the rapid pace of China’s industrial development.

Oil in the US represents nearly 39% of total energy use from all sources. But in China, oil barely represents 19% of total energy use. Most important of all: China’s coal use is four times its oil use.

Read the full article HERE

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Whatever recovery is underway in the U.S. it certainly isn’t because of the real estate market…read on for some chilling perspective on the “real” health of the U.S. economy.

Posted by Keith Jurow on www.realestatechannel.com

“With the expiration of the first-time buyer tax credit on April 30, there are now two main props keeping the housing market afloat. One is the growing percentage of home sales financed by Federal Housing Administration (FHA) loan guarantees. The other is the refusal of banks to put on the market foreclosed homes over $300,000.”

In this article, we will take a look at the second factor. A future report will examine the role of the FHA in keeping the market from collapsing.”

Read the full article HERE

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“Why does the military of a country convinced it’s becoming ungovernable think itself so capable of making another ungovernable country governable? What’s the military’s skill set here? What lore, what body of political knowledge, are they drawing on? Who do they think they represent, the Philadelphia of 1776 or the Washington of 2010, and if the latter, why should Americans be considered the globe’s leading experts in good government anymore? And while we’re at it, fill me in on one other thing: Just what has convinced American officials in Afghanistan and the nation’s capital that they have the special ability to teach, prod, wheedle, bribe, or force Afghans to embark on good governance in their country if we can’t do it in Washington or Sacramento?”

Full book review on www.commondreams.org

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Will subscriptions ever surpass downloads? Skype Technologies founders Niklas Zennstrom and Janus Friis are banking on it. Their latest San Francisco, Calif.-based music startup called Rdio sells subscriptions that give access to more than five million songs for $5 to $10 a month, depending on the devices used. Friis told BusinessWeek that they are betting consumers will opt for cloud-based music services over storing music on various devices. Fris: “The whole download model is going away.”

Full article from paidcontent.org here

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