Hope Springs Eternal... Usually

Congratulations to Senator Obama on his remarkable and historic victory...

Condolences to Senator Obama on his remarkable and historic victory...

I am a hopeful guy, an optimist at heart. I would not trade places with Barack Obama for all the money and power in the world.

I think we are in for some tough sledding, because as I've continuously mentioned (to the point of monotony), the US government has created and continues to create, more money than at any time in our history, by a huge margin, and this massive influx of dollars MUST either be re-absorbed back into the Treasury before it gets into circulation, or it MUST find its way into circulation where the laws of economics dictate that each dollar will decline in value proportionate to the percentage increase in the numbers of dollars.

All things being equal, if the Fed doubles the number of dollars in circulation, the value of each dollar will decline by 50%, and your $4.50 loaf of bread will cost you $9.00, and soon.

Some economists, analysts and talking heads on CNBC and elsewhere are pointing out that we are actually in a massive DEFLATION, and that inflation is only a remote threat at this point. I agree that most of our assets are deflating rapidly right now, but as regards inflation, I think they are fooling themselves. Don't you be fooled.

I believe that the "deflation of assets" they speak of is actually a "devaluation of assets." The portfolios of Special Investment Vehicles, Collateralized Debt Obligations and other Mortgage-Backed Securities ARE plunging in stated value, but the truth is, THEY WERE NEVER WORTH AS MUCH as the sellers or holders of these investments said they were. We are going through a painful readjustment period where these asset values are being "marked to market," which is to say, "revealed to be worthless."

If your managed individual retirement account or your company pension plan or your municipal bond fund, etc., etc., ever invested in these types of securities in order to increase the profit-potential of your holdings, you are now finding out the cold hard truth about how bad government regulations will usually result in a thorough screwing of the people.

But don't worry! Under the fine, upstanding and fabulously ethical reign of Nancy Pelosi, Barney Frank and Henry Waxman in the House, Chris Dodd, Harry Reid and Chuck Schumer in the Senate over the President-elect Obama, you WILL find out what more and more ill-conceived government regulation, intervention and redistribution is going to do for the American people.

Don't forget to bring your personal tube of KY Jelly...

The Power of Positive Thinking...

Just got around to reading the Oct 2008 Vanity Fair article by
Christopher Hitchens. I can't really argue with anything he says.

http://www.vanityfair.com/politics/features/2008/10/hitchens200810

I've used the terms Kleptocracy myself in my own writings on what's going on in America. We are enduring several abominations at once -- the fleecing of the middle class by the politically elite, and the evaporation of our remaining hard-earned wealth (IRAs, Retirements, Savings, Investments) through the efforts of the Treasury and Fed and their socialist, inflationary policies.

On a personal note, my household net worth, measured conservatively, has declined BY HALF since the year 2005, and I'm not a wild-eyed day-trading speculator -- I'm a buy-and-hold-for-the-long-term sort. What a Chump! (Keep that in mind as you read the rest of my opinions and recommendations...)

You ain't seen nothin' yet. When all the TRILLIONS of dollars in bailouts (far more than simply "the Bailout Package") actually hit the marketplace, we will have an inflationary bout of devaluation the likes of which have never been seen in America, and which could rival the German Wiemar Republic of the 1920's. Wheelbarrows were required to carry enough money to buy a loaf of bread (just as in Zimbabwe today). All this bailout money is being created from nothing -- it represents only "America's promise to pay" -- and that promise gets weaker with every phony fiat dollar we print.

We ALREADY have NO HOPE WHATSOEVER of paying off our national debt. To use language appropriately strong enough to convey the peril we each face in the next five years, we're fucked.

It will take a couple of years for all the downward momentum to really work up a head of steam, unless something triggers a sudden spasm of global economic hurling -- such as a decision, or even an announcement, that a country, especially a G-7 country, is considering de-coupling from the US Dollar and going over to another currency such as the Euro as a measure of reserve or as a mandatory standard for selling or purchasing oil. Whether sooner or later, we are in for VERY tough times.

Personally I have taken measures to have physical access to a store of cash (several months-worth of living expenses), gold and silver bullion coins & bars, guns, ammo, fresh water, vegetable garden seeds, and preserved (canned, dehydrated) food to last at least three months. Six months would be better, and I'm working toward that.

Having this stuff on hand for the next five years will not hurt me financially, except for the opportunity-cost of not having the value of these items invested in other forms in the stock market, etc. during the coming sucker-rallies. Who wants to be invested in the markets right now anyway? I realize that if everything was to magically turn around today, then I would miss out on one of the best investment climates in history. But looking at all the evidence -- I just don't see that happening. The peace of mind that I currently have, believing that at least some of my wealth will remain after the meltdown, is worth the cost to me.

If you haven't gone to Chris Martenson's unbelievably excellent website and watched his riveting "Crash Course on the Economy" I cannot recommend it highly enough. If I didn't have any dignity left at all I'd get down on my hands and knees and plead with you and beg that you go watch this free presentation in its entirety -- it's that good.

Chapter 20 of his "Crash Course," the last chapter, lays out a clear, logical method for any individual to decide how best to proceed into the near future, and why they should do so.

http://www.chrismartenson.com/crash-course

Flashback on Gasbag Rupture in Southern Oregon

May 19th, 2008
Southern Oregon University
Following an appearance by Bill & Chelsea Clinton

~~~~~~~~~~~~~
Yep! Hillary has really had to step up and "wear the pants in the family..." After all, Bill apparently couldn't keep his on...

But Slick-Willy was here today, with daughter Chelsea, fully-clothed at Southern Oregon University, and my olfactory membranes were straining at the oddness. What WAS that? It wasn't Teen Spirit, not exactly a skunk, though pungent, not all the pollen in the air... it was more like natural gas. Yeah, that was it.

A giant gasbag had once again ruptured in southern Oregon, spewing it's annoying fragrance across the landscape. "I was reading the latest poll just today," Bill said matter-of-factly to the adoring-crowd-plus-one, "...which indicates that Hillary has a better chance against McCain in the fall than any other Democratic candidate..."

"Any other Democratic candidate..." Why doesn't he just come out and say what he means to say? "A Black Man cannot be elected."

"Yaaaay!" cheered the crowd. "WTF?" I thought -- these people are eating their own young. They will say anything to destroy the opposition and step up to assume their "birthright of greatness."

Have you ever stopped to wonder why the Elite, the "great families of America" who control the media and the banks, and who go poop in the morning and put their pants on one leg at a time (except Bill of course) just like you and me, have destroyed the candidacy of Ron Paul?

Why would the major media go to such extremes as to stage live television debates, complete with questions from the average American "just like you and me" coming in from all over the country via video (ala YouTube) over the Internet, where the very first of only two questions directed at Ron Paul, from some "average Joe American" opens with the preface, "Look, Ron, you and I both know that you don't have a snowball's chance in hell of EVER getting elected, but I was wondering..."

What is it about this guy that engenders so much fear and loathing among the powers-that-be? Why has his campaign been unable to gain any traction? Could it be that he represents the "anti-Christ" to the fiat-money faithful? Could his ideas run counter to the goals of the one-worlders?

Is there any doubt that implementation of his "True Money Act, his "Read the Bill First Act," his support of the first amendment, the second amendment, the ninth amendment, the tenth amendment, or any of his other publicly-stated positions would literally eviscerate the power base of the people who move quietly behind the scenes, deciding who will be the next president here, prime minister there, what rate of exchange today, price per barrel tomorrow, currency of choice next year... what target of our aggression when the need for diversion arises...?

The principles that drive Ron Paul are not compatible with the principles that drive the other three candidates, nor with the principals who direct their fates.

This should tell you something significant about the man, other than, "He doesn't have a snowball's chance in hell of ever winning the election."

It should tell you that he's the ONLY one of the whole lot worth voting for.

Throw the bums out.

Vote Ron Paul.

Foreign Companies Bailed Out by US Taxpayers

12 Noon Pacific Time Friday Oct 3rd...

CIBC just announced that it has sold a $1.05 Billion mortgage asset investment to US-based Cerberus Capital Management. This announcement came less than an hour after the US House passed the "Bailout Bill" and Bush signed it.

CIBC and Cerberus have had a long-standing investment relationship.

In this transaction, CIBC rids itself of all risk associated with these $1.05 Billion Dollars worth of failed mortgage assets, and Cerberus will get bailed out by you and I and all other taxpayers when these bad assets are finally vetted.

Canadian Bank takes the first Big Bite of the US Taxpayer Bailout Apple.

Frankly, I thought it would be a Chinese or Middle-Eastern bank or sovereign wealth fund who acted first...

Here's My "Economic Bailout Plan"

Here's a Plan I can live with...

(with credit to G. Edward Griffin)

Stop the creation of federal reserve notes (FRNs).
Disband "Legal Tender" laws.
Audit & publish the gold and silver in the US Treasury vaults.
Define the US Dollar as 371.25 grains of silver.
Start minting Silver Dollars, half-dollars, quarters & dimes.
Start printing 100% silver/gold-backed money.
Divide the $ in US silver & gold by all outstanding FRNs.
Exchange all FRNs for good 100% silver-backed Dollars.
Dissolve the Federal Reserve System.
Outlaw fractional reserve banking.
Deregulate banks and cancel their federal insurance.
Demand deposit accounts (checking/debit) earn NO interest.
CDs are only deposits that earn interest.
Review and cancel most alliances.
Get out of the U.N. Sell the building. Evict the tenants.

How We Got Here, And What To Do About It

You know,

I didn't love the high interest rates that Paul Volker, the 12th Chairman of the Federal Reserve Bank of the USA imposed on us back in the late 70's and early 80's, but I loved that he had the political will and the backing of Carter (and later Reagan) to "get the job done."

The interest rate hikes were long overdue by the time Volker instituted them, and that's what made them so painful. I submit that the alternative -- milder rate hikes over a longer period of time -- would have failed to control the runaway inflation, and the pain/suffering of the poor and downtrodden masses would have been much worse than it was.

In order to explain why I feel so strongly that Volker's actions were necessary then, and are once again necessary today (if we desire to preserve the present, evil money system we have), I need to tell a long-winded story. It starts with this simple table::

Low interest rates => Too much credit.
Too much credit => Too many loans.
Too many loans => Too much debt.
Too much debt => Too much money.*
Too much money => Inflation.
Too much debt => Inflation.
Too many loans => Inflation.
Too much credit => Inflation.
Low interest rates => Inflation.

High interest rates => Less credit.
Less credit => Fewer loans.
Fewer loans => Less debt.
Less debt => Less money.*
Less money => Deflation
Less debt => Deflation
Fewer loans => Deflation
Less credit => Deflation
High interest rates => Deflation.

* The concept of Debt = Money, or, "all money comes from loans," is true, and is key to understanding what the hell is going on in our economy.

These characteristic relationships are always true for a fiat-money, fractional-reserve central banking system like ours.

By dramatically raising interest rates, Volker cooled off the massive, runaway inflation we had that was threatening to move us to hyperinflation and total economic collapse.

The relationship between these characteristics and boom/bust/recession/depression are less simple, because business cycles are influenced not only by the basic inflationary/deflationary mode of the Fed, but also (and largely) by malinvestment.

Malinvestment is caused by government intervention in the form of tax breaks, subsidies or other favored-status actions, and is wildly variable depending upon which dept/branch of the government is subsidizing what particular business/sector of the economy.

We will always have these types of boom/bust cycles with our current, corrupt system, because of the unethical partnership between the Fed and Congress, which was designed in 1910 (and enacted in 1913) to work in the following manner:

Congress directs the Treasury to issue Bonds. Another way to say this is that Congress authorizes a certain debt-ceiling for the USA -- the national debt, and Treasury Bonds are the certificates used to issue that debt to whomever wishes to buy it, hold it and earn the stated interest rate on it over the stated period of time.

Some individuals, pension funds, businesses and foreign governments buy these bonds directly from the Treasury, but the majority are sold to the Federal Reserve Bank of the Unites States of America. In return for these bonds, the Fed writes a check to the Treasury.

The "money" used by the Fed to purchase T-Bills "comes from nowhere."

It is invented, and exists only "on the books" as a promise by the Treasury to "pay it back."

The government then takes the Federal Reserve Checks ("money") they received for their Bonds (T-Bills) and issues checks to customers and dependents, who then deposit them in commercial banks throughout the country. They are classified as "reserves" at this point. Those Bonds initially issued by the Treasury, become the "reserves" that every bank is required to keep on hand in our "fractional reserve" banking system.

The banks then take most of the deposits they now have, make loans with this money, and begin to realize an income stream of interest payments on these loans. Banks are making interest every day on loaned capital that they did NOT have to earn. The loaned money can be traced all the way back to the Bonds that Congress ordered the Treasury to issue -- the national debt.

WE wage-earners and taxpayers pay the national debt through the mechanism of taxation, either directly, or more unethically and immorally, via the hidden tax called inflation.

Inflation is built into this system. It has to exist, in order to constantly keep creating the money that people use to pay interest on their debts.

Congress just "raised the debt ceiling" again last week up to 10.9 Trillion Dollars. This is the "official government-declared" national debt, which you now understand from www.chrismartenson.com Chapter 16 of the Crash Course on Economics, "Fuzzy Numbers," represents only about one-fifth to one-tenth of the real debt that we, our children and our grandchildren MUST pay.

Ironically, since all money is created by the making of loans, then if all debts were to be paid off, all money except that used to pay interest on debt, would disappear. This is true.

This means that our system REQUIRES DEBT in order to have money, and in fact, REQUIRES that this debt NEVER BE PAID BACK, otherwise all money would disappear from whence it came, which means VANISH INTO NOWHERE.

I believe that the REAL reason we have income taxes is as a diversion. The same legislature that established the Federal Reserve also managed the ratification of the Constitutional Amendment (#16) establishing the IRS and the Income Tax. Income taxes are not necessary for the Congress to run government. All they have to do is "raise the debt ceiling," authorizing the creation of more funny-money, and voila! They have all they need. If the American People really, truly understood what their government is doing to them with all this flim-flammery, blood would be running in the streets of Washington DC.

We are paying a HUGE tax, far beyond the paltry amounts that are withheld from our paychecks each week. It is called inflation, and it is built into our system.

If the government were to confiscate every penny of every paycheck of every worker in the USA, it would not be enough to pay back the national debt.

To illustrate how insidious this hidden tax really is, I need only to point out the FACT that today, a Dollar will buy only what FOUR CENTS would buy in 1913.

We don't need another Volker, really. What we NEED is to abolish the Fed, and all FAKE Dollars, and go back to a gold/silver-based money system, where Congress CANNOT create money out of nothing for the purpose of lining its own pockets via political contributions from banks, based on interest payments from you and me, that they did not earn.

Clear as mud?

Thus I conclude that all the political haggling over what party "stands for this," and which candidate "stands for that," is all meaningless crap. NONE of it matters, until we crash the system and start over with something that doesn't depend on corruption for its continued success...

Massive Evidence of Precious Metals Market Manipulation -- By Our Own Government...

Well, how interesting! No sooner did I ask my question (Do Large Institutional Investors Avoid Precious Metals -- posted earlier today) then this link comes across my desk. It is a speculative analysis (is there any other kind?) of the recent events in the gold and silver markets by Ted Butler, for Investment Rarities:


TED BUTLER COMMENTARY

September 2, 2008

Fact Versus Speculation

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

What’s happening in the silver and gold markets is, without a doubt, the most sordid scheme in the history of finance. It makes a mockery of financial regulation and the rule of law. It allows a large financial entity, or entities, to rip off the investing public and gouge them for obscene profits.

It is cronyism, back-room dealing, market fixing and inside information at its worst. I am terribly disappointed and dismayed that such a thing could happen in our great country.

In the following paragraphs I will outline and explain how a major bank or banks, in likely concert with the U.S. government, pulled off financial shenanigans that will literally take your breath away. This is an outrage that cannot be allowed to stand.

The recent revelations in the CFTC’s Bank Participation Report for August provided stunning proof of concentration and manipulation in the COMEX silver and gold futures markets. Two U.S. banks held a short position in COMEX silver futures, as of August 5, of 33,805 contracts, or almost 170 million ounces, an increase of 138 million ounces in one month. That increase is equal to 20% of the world mine production. If one or two entities bought or sold 20% of the annual world production of oil or wheat in a month, it would bring about a congressional feeding frenzy.

In gold, no more than 3 U.S. banks sold short in one month more than 10% of world annual mine production. This was the largest short position in gold and silver ever recorded by U.S. banks. After the massive and concentrated silver and gold short position was established by these U.S. banks, the markets experienced a historic decline in price. It all took place during the first widespread retail silver shortage in history. It is completely at odds how the law of supply and demand works.

The facts are so clear that the CFTC should have provided an immediate explanation as to why this doesn’t constitute manipulation. They should move against the manipulators just as promptly. Silence is not an option. The U.S. banks (or bank) in question are at the top of the financial food chain when it comes to size, power and importance. They are publicly owned by millions of investors. These banks are generally open about their financial dealings, which are closely scrutinized. There is an archaic rule that prevents the CFTC from revealing the identity of these banks. But there is no rule preventing these banks acknowledging they were responsible for these silver and gold short sales and explaining the economic justification behind them. These are material transactions that should be disclosed to their shareholders. Apparently transparency does not apply to manipulative transactions.

One U.S. Bank?

While the report lists two U.S. banks in silver and three in gold, it may be that only one bank, and perhaps the same bank, held the greatest amount of the total short position in silver and gold. The published data is not specific enough, but objective analysis raises the strong probability that just one bank held 30,000 or more short silver contracts (150 million ounces), and 75,000 gold contracts in the current report. What are the odds of two or three banks suddenly deciding to short unprecedented amounts of silver and gold contracts spontaneously? If it were two or three banks it would raise the issue of collusion. If it was just one U.S. bank, it would mean that bank held 34% of the entire COMEX silver market and 30% of the gold market. Such a concentration would be manipulation to any reasonable person.

The Bank Participation Report is a monthly snapshot on a predetermined single date. Therefore, it is unlikely to capture the extreme high or low holdings of participants. Based upon the weekly Commitment of Traders Report (COT) for positions as of July 22, the 4 largest traders, including the big U.S. banks, held a record net short position of 63,740 silver contracts, or 7,779 more contracts than they held for the COT and Bank Participation Reports of 8/5. Thus, it is almost certain that the big U.S. bank(s) held a substantially larger position on 7/22 than it held in the Bank Participation Report of August 5. That would mean the true net percentage of the entire market possibly held by one U.S. bank could be even higher than 34%, and may in fact, exceed 40%. That is truly shocking.

I have a simple solution to determine if what I am suggesting is true. Let the CFTC tell us. I’m not asking them to violate the rule that they and the big traders hide behind, the one that protects the identity of the traders. I’m asking something else entirely. Instead of telling us what two or three U.S. banks held, as they do in the Bank Participation Report, or what the 4 or 8 largest traders may hold, as they do in the COT report, just tell us what the one largest trader held in silver and gold. That will settle the matter. Let them protect the identity, just tell us how many contracts the big U.S. bank held on July 22 and August 5.

This is a perfectly reasonable request. There is no taxpayer cost involved. It will take one employee only a few minutes to determine this. There is no valid reason why the CFTC, in the interest of monitoring concentration and preventing manipulation, should not disclose what the very largest trader in every market held. The CFTC should answer forthwith. If they don’t, we must make them, through our elected representatives. They will try to weasel out of this reasonable request. We can’t let them.

A U.S. Government Silver Intervention?

For many years, I have openly alleged an ongoing manipulation in the silver (and gold) market. As that message became more believable to growing numbers of readers, their feedback indicated that their most popular motive behind the manipulation was some type of U.S. Government involvement. I rejected these "conspiracy" theories, preferring instead my simple explanation of control by big financial firms.

There were a few things I didn’t report on in my previous article, "The Smoking Gun" (By the way, since so many have referred to that article, let me acknowledge and thank Carl Loeb for his valuable contributions to that article.) It wasn’t just that 2 U.S. banks were short almost 34,000 silver futures contracts, as of August 5. It was also that they replaced what the other big financial entities had been short. The key here is the replacement angle. The data in the weekly COTs, and in the monthly Bank Participation Report, confirm this. What does this data mean?

I am going to speculate based upon the known facts. Maybe I will be proven correct, maybe not. However, the nature of this speculation is so disturbing, that I hope I am wrong. But I need to state it because if I am close to the mark, the implications for the silver market are profound.

I think the data in the COT and the Bank Participation Reports indicate that the U.S. Government may have bailed out the biggest COMEX silver short by arranging for a U.S. bank to take over their position. This coincides with JP Morgan’s takeover of Bear Stearns. In fact, it would not surprise me if the bailout was JP Morgan taking over Bear Stearns‘ short silver position, at the government‘s request. While this silver bailout (if it happened) was no doubt undertaken with financial system stability in mind, it has disturbing implications of legality and equity.

JP Morgan has been mentioned as a possible big silver and gold short. If it’s not them, it is someone like them. How many big U.S. banks fit the profile? Certainly, if JP Morgan isn’t one of the big silver or gold shorts, they can instantly dismiss such talk by stating so.

Logically, there would appear to be no way that a big money center U.S. bank would choose this time and place to suddenly decide to short 150 million ounces of silver and 7 million ounces of gold voluntarily. The banks are hemorrhaging losses due to poor quality mortgages and other ill-advised bets. They’ve cut back credit and are circling the wagons. A CEO, like Jamie Dimon, is not going to risk the wrath of shareholders with a massive and dangerous impromptu bet on the short side of precious metals. No bank CEO would, as it is too reckless to contemplate. And no CEO would do it without prior approval from the regulators.

I believe the bank involved did not seek approval, but merely followed the request of the U.S. Government to sell quantities of silver and gold to bailout the former big short. If that former big short bought back this position, we would have seen $50 or $100 silver in a flash. If my speculation is correct, someone in the government wished to prevent that. Worse, the government (most likely Treasury and the Federal Reserve) allowed the new short to further rig the market to the downside with a variety of dirty tricks.

In other words, it was the U.S. Government that arranged and sanctioned the sell-off. That the government might undermine confidence in our markets and sanction manipulation and illegal market behavior for any reason is beyond my understanding. I love this country. But I certainly don’t love our government. Nor do I trust them. What to do about it?

Well, a start is to insist that the CFTC disclose how many contracts the largest trader held short in COMEX silver and gold futures on 7/22 and 8/5. Ask them and ask your elected officials to ask them. I’m including the e-mail addresses of the commissioners and the Inspector General.

Wlukken@cftc.gov
Mdunn@cftc,gov
Bchilton@cftc.gov
Jsommers@cftc.gov
Alavik@cftc.gov

Now that the Chicago Mercantile Exchange Group is the new owner of the NYMEX/COMEX, they should be notified of the alleged manipulation and also asked to provide the number of contracts held net short by the largest short position holder on 7/22 and 8/5. I’m including the e-mail address of the Chief Regulatory Officer. Dean.payton@cmegroup.com

If my speculation is close to the mark that the U.S. Government is now involved in the silver manipulation, does this mean the manipulation can be extended indefinitely? In my opinion, the answer is no. In the end, what will terminate the manipulation will be a lack of adequate wholesale supplies of silver to the industrial users. It’s similar to what is now happening in the retail market. Uncle Sam does not have any silver, and is powerless to secretly subsidize the users. Additionally, the government is more subject to scrutiny than others. The single inevitable solution to this manipulation is higher prices; sharply higher prices.

What I’ve explained here, if true, cannot be condoned for any reason. It’s illegal and contrary to everything that America stands for.

Jim Rogers Predicts Bigger Financial Shocks Loom...

The following appeared August 19th, 2008 as a two-part interview of Jim Rogers by Keith Fitzgerald, the Investment Director for Money Morning:

Keith Fitz-Gerald
Investment Director
Money Morning/The Money Map Report

VANCOUVER, B.C. – The U.S. financial crisis has cut so deep – and the government has taken on so much debt in misguided attempts to bail out such companies as Fannie Mae (FNM) and Freddie Mac (FRE) – that even larger financial shocks are still to come, global investing guru Jim Rogers said in an exclusive interview with Money Morning.

Indeed, the U.S. financial debacle is now so ingrained – and a so-called “Super Crash” so likely – that most Americans alive today won’t be around by the time the last of this credit-market mess is finally cleared away – if it ever is, Rogers said.

The end of this crisis “is a long way away,” Rogers said. “In fact, it may not be in our lifetimes.”

During a 40-minute interview during a wealth-management conference in this West Coast Canadian city last month, Rogers also said that:

• U.S. Federal Reserve Chairman Ben S. Bernanke should “resign” for the bailout deals he’s handed out as he’s tried to battle this credit crisis.
• That the U.S. national debt – the roughly $5 trillion held by the public– essentially doubled in the course of a single weekend because of the Fed-led credit crisis bailout deals.
• That U.S. consumers and investors can expect much-higher interest rates – noting that if the Fed doesn’t raise borrowing costs, market forces will make that happen.
• And that the average American has no idea just how bad this financial crisis is going to get.

“The next shock is going to be bigger and bigger, still,” Rogers said. “The shocks keep getting bigger because we keep propping things up … [and] bailing everyone out.”

Rogers first made a name for himself with The Quantum Fund, a hedge fund that’s often described as the first real global investment fund, which he and partner George Soros founded in 1970. Over the next decade, Quantum gained 4,200%, while the Standard & Poor’s 500 Index climbed about 50%.

It was after Rogers "retired" in 1980 that the investing masses got to see him in action. Rogers traveled the world (several times), and penned such bestsellers as "Investment Biker" and the recently released "A Bull in China." And he made some historic market calls: Rogers predicted China’s meteoric growth a good decade before it became apparent and he subsequently foretold of the powerful updraft in global commodities prices that’s fueled a year-long bull market in the agriculture, energy and mining sectors.

Rogers’ candor has made him a popular figure with individual investors, meaning his pronouncements are always closely watched. Here are some of the highlights from the exclusive interview we had with the author and investor, who now makes his home in Singapore:

Keith Fitz-Gerald (Q): Looks like the financial train wreck we talked about earlier this year is happening.

Jim Rogers: There was a train wreck, yes. Two or three – more than one, as you know. [U.S. Federal Reserve Chairman Ben S.] Bernanke and his boys both came to the rescue. Which is going to cover things up for a while. And then I don’t know how long the rally will last and then we’ll be off to the races again. Whether the rally lasts six days or six weeks, I don’t know. I wish I did know that sort of thing, but I never do.

(Q):What would Chairman Bernanke have to do to “get it right?”

Rogers: Resign.

(Q): Is there anything else that you think he could do that would be correct other than let these things fail?

Rogers: Well, at this stage, it doesn’t seem like he can do it. He could raise interest rates – which he should do, anyway. Somebody should. The market’s going to do it whether he does it or not, eventually.

The problem is that he’s got all that garbage on his balance sheet now. He has $400 billion of questionable assets owing to the feds on his balance sheet. I mean, he could try to reverse that. He could raise interest rates. Yeah, that’s what he could do. That would help. It would cause a shock to the system, but if we don’t have the shock now, the shock’s going to be much worse later on. Every shock, so far, has been worse than the last shock. Bear-Stearns [now part of JP Morgan Chase & Co. (JPM)] was one thing and then it’s Fannie Mae (FNM), you know, and now Freddie Mac (FRE).

The next shock’s going to be even bigger still. So the shocks keep getting bigger because we kept propping things up and this has been going on at least since Long-Term Capital Management. They’ve been bailing everyone out and [former Fed Chairman Alan] Greenspan took interest rates down and then he took them down again after the “dot-com bubble” shock, so I guess Bernanke could try to start reversing some of this stuff.

But he has to not just reverse it – he’d have to increase interest rates a lot to make up for it and that’s not going to solve the problem either, because the basic problems are that America’s got a horrible tax system, it’s got litigation right, left, and center, it’s got horrible education system, you know, and it’s got many, many, many [other] problems that are going to take a while to resolve. If he did at least turn things around – turn some of these policies around – we would have a sharp drop, but at least it would clean out some of the excesses and the system could turn around and start doing better.

But this is academic – he’s not going to do it. But again the best thing for him would be to abolish the Federal Reserve and resign. That’ll be the best solution. Is he going to do that? No, of course not. He still thinks he knows what he’s doing.

(Q): Earlier this year, when we talked in Singapore, you made the observation that the average American still doesn’t know anything’s wrong – that anything’s happening. Is that still the case?

Rogers:Yes.

(Q): What would you tell the “Average Joe” in no-nonsense terms?

Rogers: I would say that for the last 200 years, America’s elected politicians and scoundrels have built up $5 trillion in debt. In the last few weekends, some un-elected officials added another $5 trillion to America’s national debt.

Suddenly we’re on the hook for another $5 trillion. There have been attempts to explain this to the public, about what’s happening with the debt, and with the fact that America’s situation is deteriorating in the world.

I don’t know why it doesn’t sink in. People have other things on their minds, or don’t want to be bothered. Too complicated, or whatever.

I’m sure when the [British Empire] declined there were many people who rang the bell and said: “Guys, we’re making too many mistakes here in the U.K.” And nobody listened until it was too late.

When Spain was in decline, when Rome was in decline, I’m sure there were people who noticed that things were going wrong.

(Q): Many experts don’t agree with – at the very least don’t understand – the Fed’s current strategies. How can our leaders think they’re making the right choices? What do you think?

Rogers: Bernanke is a very-narrow-gauged guy. He’s spent his whole intellectual career studying the printing of money and we have now given him the keys to the printing presses. All he knows how to do is run them.

Bernanke was [on the record as saying] that there is no problem with housing in America. There’s no problem in housing finance. I mean this was like in 2006 or 2005.

(Q): Right.

Rogers: He is the Federal Reserve and the Federal Reserve more than anybody is supposed to be regulating these [financial institutions], so they should have the inside scoop, if nothing else.

(Q): That’s problematic.

Rogers: It’s mind-boggling. Here’s a man who doesn’t understand the market, who doesn’t understand economics – basic economics. His intellectual career’s been spent on the narrow-gauge study of printing money. That’s all he knows.

Yes, he’s got a PhD, which says economics on it, but economics can be one of 200 different narrow fields. And his is printing money, which he’s good at, we know. We’ve learned that he’s ready, willing and able to step in and bail out everybody.

There’s this worry [whenever you have a major financial institution that looks ready to fail] that, “Oh my God, we’re going to go down, and if we go down, the whole system goes down.”

This is nothing new. Whole systems have been taken down before. We’ve had it happen plenty of times.

(Q): History is littered with failed financial institutions.

Rogers: I know. It’s not as though this is the first time it’s ever happened. But since [Chairman Bernanke’s] whole career is about printing money and studying the Depression, he says: “Okay, got to print some more money. Got to save the day.” And, of course, that’s when he gets himself in deeper, because the first time you print it, you prop up Institution X, [but] then you got to worry about institution Y and Z.

(Q): And now we’ve got a dangerous precedent.

Rogers: That’s exactly right. And when the next guy calls him up, he’s going to bail him out, too.

(Q): What do you think [former Fed Chairman] Paul Volcker thinks about all this?

Rogers: Well, Volcker has said it’s certainly beyond the scope of central banking, as he understands central banking.

(Q): That’s pretty darn clear.

Rogers: Volcker’s been very clear – very clear to me, anyway – about what he thinks of it, and Volcker was the last decent American central banker. We’ve had couple in our history: Volcker and William McChesney Martin were two.

You know, McChesney Martin was the guy who said the job of a good central banker was to take away the punchbowl when the party starts getting good. Now [the Fed] – when the party starts getting out of control – pours more moonshine in. McChesney Martin would always pull the bowl away when people started getting a little giggly. Now the party’s out of control.

(Q): This could be the end of the Federal Reserve, which we talked about in Singapore. This would be the third failure – correct?

Rogers: Yes. We had two central banks that disappeared for whatever reason. This one’s going to disappear, too, I say.

(Q): Throughout your career you’ve had a much-fabled ability to spot unique points in history – inflection points, if you will. Points when, as you put it, somebody puts money in the corner at which you then simply pick up.

Rogers: That’s the way to invest, as far as I’m concerned.

(Q): So conceivably, history would show that the highest returns go to those who invest when there’s blood in the streets, even if it’s their own.

Rogers: Right.

(Q): Is there a point in time or something you’re looking for that will signal that the U.S. economy has reached the inflection point in this crisis?

Rogers: Well, yeah, but it’s a long way away. In fact, it may not be in our lifetimes. Of course I covered my shorts – my financial shorts. Not all of them, but most of them last week.

So, if you’re talking about a temporary inflection point, we may have hit it.

If you look back at previous countries that have declined, you almost always see exchange controls – all sorts of controls – before failure. America is already doing some of that. America, for example, wouldn’t let the Chinese buy the oil company, wouldn’t let the [Dubai firm] buy the ports, et cetera.

But I’m really talking about full-fledged, all-out exchange controls. That would certainly be a sign, but usually exchange controls are not the end of the story. Historically, they’re somewhere during the decline. Then the politicians bring in exchange controls and then things get worse from there before they bottom.

Before World War II, Japan’s yen was two to the dollar. After they lost the war, the yen was 500 to the dollar. That’s a collapse. That was also a bottom.

These are not predictions for the U.S., but I’m just saying that things have to usually get pretty, pretty, pretty, pretty bad.

It was similar in the United Kingdom. In 1918, the U.K. was the richest, most powerful country in the world. It had just won the First World War, et cetera. By 1939, it had exchange controls and this is in just one generation. And strict exchange controls. They in fact made it an act of treason for people to use anything except the pound sterling in settling debts.

(Q): Treason? Wow, I didn’t know that.

Rogers: Yes…an act of treason. It used to be that people could use anything they wanted as money. Gold or other metals. Banks would issue their own currencies. Anything. You could even use other people’s currencies.

Things were so bad in the U.K. in the 1930s they made it an act of treason to use anything except sterling and then by ’39 they had full-exchange controls. And then, of course, they had the war and that disaster. It was a disaster before the war. The war just exacerbated the problems. And by the mid-70s, the U.K. was bankrupt. They could not sell long-term government bonds. Remember, this is a country that two generations or three generations before had been the richest most powerful country in the world.

Now the only thing that saved the U.K. was the North Sea oil fields, even though Prime Minister Margaret Thatcher likes to take credit, but Margaret Thatcher has good PR. Margaret Thatcher came into office in 1979 and North Sea oil started flowing. And the U.K. suddenly had a huge balance-of-payment surplus.

You know, even if Mother Teresa had come in [as prime minister] in ’79, or Joseph Stalin, or whomever had come in 1979 – you know, Jimmy Carter, George Bush, whomever – it still would’ve been great.

You give me the largest oil field in the world and I’ll show you a good time, too. That’s what happened.

(Q): What if Thatcher had never come to power?

Rogers: Who knows, because the U.K. was in such disastrous straits when she came in. And that’s why she came to power…because it was such a disaster. I’m sure she would’ve made things better, but short of all that oil, the situation would’ve continued to decline.

So it may not be in our lifetimes that we’ll see the bottom, just given the U.K.’s history, for instance.

(Q): That’s going to be terrifying for individual investors to think about.

Rogers: Yeah. But remember that America had such a magnificent and gigantic position of dominance that deterioration will take time. You know, you don’t just change that in a decade or two. It takes a lot of hard work by a lot of incompetent people to change the situation. The U.K. situation I just explained…that decline was over 40 or 50 years, but they had so much money they could have continued to spiral downward for a long time.

Even Zimbabwe, you know, took 10 or 15 years to really get going into it’s collapse, but Robert Mugabe came into power in 1980 and, as recently as 1995, things still looked good for Zimbabwe. But now, of course, it’s a major disaster.

That’s one of the advantages of Singapore. The place has an astonishing amount of wealth and only 4 million people. So even if it started squandering it in 2008, which they may be, it’s going to take them forever to do so.

(Q): Is there a specific signal that this is “over?”

Rogers: Sure…when our entire U.S. cabinet has Swiss bank accounts. Linked inside bank accounts. When that happens, we’ll know we’re getting close because they’ll do it even after it’s illegal – after America’s put in the exchange controls.

(Q): They’ll move their own money.

Rogers: Yeah, because you look at people like the Israelis and the Argentineans and people who have had exchange controls – the politicians usually figured it out and have taken care of themselves on the side.

(Q): We saw that in South Africa and other countries, for example, as people tried to get their money out.

Rogers: Everybody figures it out, eventually, including the politicians. They say: “You know, others can’t do this, but it’s alright for us.” Those days will come. I guess when all the congressmen have foreign bank accounts, we’ll be at the bottom.

But we’ve got a long way to go, yet.

Part Two Follows:

VANCOUVER, B.C. - Despite its many problems, China remains such a strong long-term profit play that giving up on that country now would be like selling all your U.S. stocks at the start of the 1900s - before America created massive wealth by evolving into a world superpower, global investing guru Jim Rogers said in an exclusive interview with Money Morning.

“I have never sold any of my Chinese companies,” Rogers said. “You know, selling China in 2008 is like selling America in 1908. Sure, let’s say the market goes down another 40% - so what! You look back over 100 years, you look back from the beauty of 1928, or even 1938 [in the depths of the Great Depression], and there is somebody who bought shares in 1908. He was still a lot better off having not sold in 1908.”

During a 40-minute interview during a wealth-management conference
in this West Coast Canadian city last month, Rogers also said that:

* The anti-travel policies China has put in place to reduce gridlock and slash pollution during the Summer Olympic Games may
actually have created a “bottom” in China stocks - possibly creating a great entry point for long-term investors.
* The 34-day worldwide Olympic torch relay leading up to the opening ceremonies likely re-awakened China’s deeply felt nationalism - which will be key as that country strives to build demand for its domestically produced products.
* And noted that the country must still deal with such problems as pollution, rising inflation and an overheated economy.

A long-time China bull, Rogers first made a name for himself with The Quantum Fund, a hedge fund that’s often described as the first real global investment fund, which he and partner George Soros founded in 1970. Over the next decade, Quantum gained 4,200%, while the Standard & Poor’s 500 Index climbed about 50%.

It was after Rogers “retired” in 1980 that the investing masses first really got to see him in action. Rogers traveled the world (several times), and penned such bestsellers as “Investment Biker” and the recently released “A Bull in China.” He also made some historic market calls: Rogers predicted China’s meteoric growth a good decade before
it became apparent to everyone else, and he subsequently foretold of the powerful updraft in global commodities prices that’s fueled a year-long bull market in the agriculture, energy and mining sectors.

Rogers’ candor has made him a popular figure with individual investors, meaning his pronouncements are always closely watched. Here are
some of the highlights from the exclusive interview we had with the author and investor, who now makes his regular home in Singapore:

Keith Fitz-Gerald (Q): There’s a lot of talk that the Chinese will
use the Olympics to launch a new wave of nationalism and to move ahead. Are the Olympic Games as relevant as some
people think?

Jim Rogers: They’ve already got tremendous nationalism. But the international reactions about Tibet and the Olympic torchbearers re-awakened it.

And the politicians, of course, need it because they’ve got their own problems with
inflation and overheating and [pollution and] the rest of it.
So, like politicians throughout history, they fan it - do their best to say: Hell, it’s not our problem. It’s the evil farmers. It’s the French. See that store over there: It’s their fault. It’s the Americans.”

So that is happening, anyway.

As far as the Olympics themselves, they’re irrelevant.

America had the Olympics in
‘96 and it had no effect on the American economy - before or after. Some people in Atlanta were affected before and after. And some people who were involved with the Olympics were affected before and after.

America at that time had 270 million people. China’s got five times as many people, and it’s a much bigger country geographically.

Sydney, Australia had the 2000 Olympics. It had virtually no effect on the Sydney, or on the Australian economy - even though Australia had 18 million people. It’s tiny … nothing. Yes, it had an effect on some people.

Greece, in 2004, had the Olympics. You haven’t heard stories of a major collapse or a major revival of Greece in 2005, because the fact is that the Games didn’t have much of an effect - not a noticeable effect, anyway. It had spot effects only, so I ignore the Olympics as far as the Chinese economy - and its stock market - is concerned.

(Q): Are you still bullish on China?

Rogers: Oh, yeah. I never sold anything in China. In fact, I bought more. I bought Chinese Airlines (PINK: CHAWF) last week. I flew one coming here. Maybe I made a mistake [with the investment], because it was emptier than I thought it would be.

(Q): Any thoughts why?

Rogers: One thing, you know, is that China’s made it extremely difficult to get a visa right now. In the past, it’s been hard to get a seat because Chinese airlines were so full. On this flight there were empty seats.

That brought home to me that they are cutting back enormously on visas right now. Discouraging travel, trying to clean the air, trying to protect against somebody blowing up the Forbidden City, et cetera. So the fact that planes are empty right now may be smarter than I thought.

Maybe I did get the bottom on the airlines, because if they are going to reissue the visas again, after all this, after September [after the Olympic Games have concluded], then the planes are going to fill up pretty quickly again. I would have picked the stock up at a bottom.

(Q): Yes.

Rogers: Anyway I’m still around China. I have never sold any of my Chinese companies. You know, selling China in 2008 is like selling America in 1908. Sure, let’s say the market goes down another 40% - so what! You look back over 100 years, you look back from the beauty of 1928, or even 1938 [in the depths of the Great Depression], and there is somebody who bought shares in 1908. He was still a lot better off having not sold in 1908.

Do Institutional Investors Avoid Precious Metals?

I have often wondered about the fact that institutional investors are very light in precious metals. In talking with others about this, it is often pointed out that "big money" avoids investing in gold and silver for two main reasons:

1) the perception among owners of pension funds that gold and silver are not "productive positions" (they don't "do" anything to increase value like a stock might)

2) the perception that gold prices in particular are subject to manipulation.

Companies (stocks) typically exert some form of "control" over their own price destiny to the extent that they can make decisions to do things that will increase their value. Precious metals are simply commodities without any inherent control over their own price, nor do they have any ability to stop the perceived manipulation of naked short sellers, central banks, or other speculators.

"Big Money" institutions such as retirement pension funds may never jump into gold because gold prices do not always demonstrate the expected "rational behavior" in the marketplace. They evade reliable predictability.

They may also be considered "only a defensive position" used to preserve wealth in time of financial crisis and declining paper-asset values.

Just look at the latest trends in gold and silver prices (as of Sept 5th) and it's clear that something is affecting prices other than free-market forces...

I say this because there is a shortage of physical metal in the marketplace, yet prices have steadily and dramatically declined in the past several weeks. What is going on?

Great Article -- To Vote or Not to Vote... That IS The Question

Wilton D. Alston makes a great case that voting is completely irrelevant, and always will be in our current system of elections...

http://www.strike-the-root.com/82/alston/alston1.html

From early childhood onward, we are indoctrinated to believe that it is the solemn duty and responsibility of every adult American to vote in every election in which they are eligible to vote.

Well, there are some who point out that it doesn't matter if you vote or not -- that your efforts will simply further-establish the scope and grip of big-government upon you as an erstwhile free individual.

There are no longer any good choices offered up to us.

What do you think?

More About ShadowStats.com and Government Prevarication

Check out this website -- www.shadowstats.com -- a Shadow Government Statistics website that analyzes the TRUE money supply, TRUE CPI, REAL unemployment rates, TRUE gross domestic product figures, etc., etc. It is published by John Williams, and he has done fantastic work.

It is very instructive to see direct comparisons of what the government is telling its citizens, vs what really seems to be going on.

I think the traditional descriptions of cost-push vs demand-pull inflation make sense in localized markets over short periods of time, but I also think that the overriding influence and main cause of the type of inflation we're seeing right now, in the U.S. and worldwide, is the rapid acceleration in the creation of fiat currency by the US Fed and other nations.

Several things are acting strongly to devalue our currency -- the creation of billions of paper dollars more than are "retired" annually, AND, the massive write-down of hundreds of billions of dollars worth of wealth in the form of CDOs, CMOs, SIVs, Credit Default Swap premiums and the rest of the stinky "Tier-III assets."

Since in our fractional-reserve banking system, all money is "created" through the process of making loans, and since much of the debt in this country is backed with worthless assets used as collateral to secure those loans, massive defaults are going to be the natural result. A borrower defaulting on a loan, in our current system, is the worst possible outcome for a lender, because it means that the income stream from interest on that loan goes away, and that income stream is the ONLY thing that keeps the whole Ponzi Scheme from collapsing. Lenders honestly don't care that much about losing the loaned principle, since it wasn't theirs to lend in the first place! They want and need that interest-income stream.

These loan write-downs also have the same effect as printing more fiat-money -- there are suddenly far more paper dollars chasing after far fewer "real" assets... and the invariable result is that it soon costs more dollars in exchange for the purchase of the same number of assets... the very definition of inflation.

Fact: In the past hundred years, this inflation mechanism has resulted in our current dollar being able to purchase what only four cents would buy in 1908!

It's clear to me that the various government reporting agencies have been "trying to hide something" for several decades. They started changing the methodology of their data-gathering, data-analysis and reporting practices back in the late 70's when inflation numbers began to create political heat for too many incumbents.

Even now, the federal government is reducing funding to statistical reporting agencies, forcing them to reduce their sample sizes and/or leave entire segments of the economy un-reported.

What to do? Well for one thing, throw the bums out. I categorically vote against all congressional incumbents. I know some good ones will invariably be affected, but 99% of politicians just cannot seem to release their grip on the government teat once they latch onto it. It is totally and completely corrupting. You are living the result.

I'm willing to consider voting for an incumbent, if they prove themselves to be honest, forthright, full of integrity, leadership and if they sponsor "real money" policies and the right for law-abiding citizens to own and use any firearms. So far there have been "no takers" in any of my districts or on any of my ballots...

I'm also one of those pesky constituents who write letters (that are never read) to their elected representatives, and I've gone so far as to make appointments and meet with them when possible, just to let them know how I feel. I have a stack of meaningless auto-responder letters from my representatives and senators in Congress, thanking me for taking the trouble to contact them, and assuring me that my concerns are their concerns... blah, blah, blah...

Liars.

~H

"He can compress the most words into the smallest idea of any man I know."
-- Abraham Lincoln

A B-17 story worth reading...

A B-17 story worth reading...

(This may have been around previously but it's worth reading again) If you have time for only one story to read today, make it the B-17 story, for only a veteran can imagine the true heroism of this pilot and crew.

A B-17 Story

Tomorrow morning they'll lay the remains of Glenn Rojohn to rest in the Peace Lutheran Cemetery in the little town of Greenock, Pa., just southeast of Pittsburgh. He was 81, and had been in the air conditioning and plumbing business in nearby McKeesport. If you had seen him on the street he would probably have looked to you like so many other graying, bespectacled old World War II veterans whose names appear so often now on obituary pages. But like so many of them, though he seldom talked about it, he could have told you one hell of a story.

He won the Distinguished Flying Cross and the Purple Heart all in one fell swoop in the skies over Germany on December 31, 1944. Fell swoop indeed... Capt Glenn Rojohn, of the 8th Air Force's 100th Bomb Group, was flying his B-17G Flying Fortress bomber on a raid over Hamburg. His formation had braved heavy flak to drop their bombs, and then turned 180 degrees to head out over the North Sea. They had finally turned northwest; headed back to England, when they were jumped by German fighters at 22,000 feet.

The Messerschmitt Me-109s pressed their attack so closely that Capt Rojohn could see the faces of the German pilots. He and other pilots fought to remain in formation so they could use each other's guns to defend the group. Rojohn saw a B-17 ahead of him burst into flames and slide sickeningly toward the earth. He gunned his ship forward to fill in the gap. He felt a huge impact. The big bomber shuddered, felt suddenly very heavy and began losing altitude. Rojohn grasped almost immediately that he had collided with another plane. A B-17 below him, piloted by Lt William G. McNab, had slammed the top of its fuselage into the bottom of Rojohn's. The top turret gun of McNab's plane was now locked in the belly of Rojohn's plane and the ball turret in the belly of Rojohn's had smashed through the top of McNab's. The two bombers were almost perfectly aligned - the tail of the lower plane was slightly to the left of Rojohn's tailpiece. They were stuck together, as a crewman later recalled, "like mating dragon flies."

No one will ever know exactly how it happened. Perhaps both pilots had moved instinctively to fill the same gap in formation. Perhaps McNab's plane had hit turbulence. Three of the engines on the bottom plane were still running, as were all four of Rojohn's. The fourth engine on the lower bomber was on fire and the flames were spreading to the rest of the aircraft. The two were losing altitude quickly. Rojohn tried several times to gun his engines and break free of the other plane. The two were inextricably locked together. Fearing a fire, Rojohn cuts his engines and rang the bailout bell. If his crew had any chance of parachuting, he had to keep the plane under control somehow.

The ball turret, hanging below the belly of the B-17, was considered by many to be a death trap - the worst station on the bomber. In this case, both ball turrets figured in a swift and terrible drama of life & and death. Staff Sgt Edward L. Woodall, Jr., in the ball turret of the lower bomber, had felt the impact of the collision above him and saw shards of metal drop past him. Worse, he realized both electrical and hydraulic power was gone. Remembering escape drills, he grabbed the hand crank, released the clutch and cranked the turret and its guns until they were straight down, then turned and climbed out the back of the turret up into the fuselage. Once inside the plane's belly Woodall saw a chilling sight, the ball turret of the other bomber protruding through the top of the fuselage. In that turret, hopelessly trapped, was Staff Sgt Joseph Russo.

Several crewmembers on Rojohn's plane tried frantically to crank Russo's turret around so he could escape. But, jammed into the fuselage of the lower plane the turret would not budge. Aware of his plight, but possibly unaware that his voice was going out over the intercom of his plane; Sgt Russo began reciting his Hail Mary's. Up in the cockpit, Capt Rojohn and his co-pilot, 2nd Lt William G. Leek, Jr., had propped their feet against the instrument panel so they could pull back on their controls with all their strength, trying to prevent their plane from going into a spinning dive that would prevent the crew from jumping out. Capt Rojohn motioned left and the two managed to wheel the grotesque, collision-born hybrid of a plane back toward the German coast.

Leek felt like he was intruding on Sgt Russo as his prayers crackled over the radio, so he pulled off his flying helmet with its earphones. Rojohn, immediately grasping that crew could not exit from the bottom of his plane, ordered his top turret gunner and his radio operator, Tech Sgts Orville Elkin and Edward G. Neuhaus, to make their way to the back of the fuselage and out the waist door behind the left wing. Then he got his navigator, 2nd Lt Robert Washington, and his bombardier, Sgt James Shirley to follow them. As Rojohn and Leek somehow held the plane steady, these four men, as well as waist gunner Sgt Roy Little and tail gunner Staff Sgt Francis Chase were able to bail out. Now the plane locked below them was aflame. Fire poured over Rojohn's left wing. He could feel the heat from the plane below and hear the sound of 50 caliber machine gun ammunition "cooking off" in the flames. Capt Rojohn ordered Lt Leek to bail out. Leek knew that without him helping keep the controls back, the plane would drop in a flaming spiral and the centrifugal force would prevent Rojohn from bailing. He refused the order. Meanwhile, German soldiers and civilians on the ground that afternoon looked up in wonder. Some of them thought they were seeing a new Allied secret weapon - a strange eight-engined double bomber. But anti-aircraft gunners on the North Sea coastal island of Wangerooge had seen the collision.

A German battery captain wrote in his logbook at 12:47 p.m.: "Two fortresses collided in a formation in the NE. The planes flew hooked together and flew 20 miles south. The two planes were unable to fight anymore. The crash could be awaited so I stopped the firing at these two planes." Suspended in his parachute in the cold December sky, Bob Washington watched with deadly fascination as the mated bombers, trailing black smoke, fell to earth about three miles away, their downward trip ending in an ugly boiling blossom of fire.

In the cockpit Rojohn and Leek held grimly to the controls trying to ride a falling rock. Leek tersely recalled, "The ground came up faster and faster. Praying was allowed we gave it one last effort and slammed into the ground. The McNab plane on the bottom exploded, vaulting the other B-17 upward and forward. It hit the ground and slid along until its left wing slammed through a wooden building and the smoldering mass of aluminum came to a stop. Rojohn and Leek were still seated in their cockpit. The nose of the plane was relatively intact, but everything from the B-17's massive wings back was destroyed. They looked at each other incredulously. Neither was badly injured. Movies have nothing on reality.

Still perhaps in shock, Leek crawled out through a huge hole behind the cockpit, felt for the familiar pack in his uniform pocket and pulled out a cigarette. He placed it in his mouth and was about to light it. Then he noticed a young German soldier pointing a rifle at him. The soldier looked scared and annoyed. He grabbed the cigarette out of Leek's mouth and pointed down to the gasoline pouring out over the wing from a ruptured fuel tank.

Two of the six men who parachuted from Rojohn's plane did not survive the jump. But the other four and, amazingly, four men from the other bomber, including ball turret gunner Woodall, survived. All were taken prisoner. Several of them were interrogated at length by the Germans until they were satisfied that what had crashed was not a new American secret weapon. Rojohn, typically, didn't talk much about his Distinguished Flying Cross. Of Leek, he said, "In all fairness to my co-pilot, he's the reason I'm alive today." Like so many veterans, Rojohn got back to life un-sentimentally after the war, marrying and raising a son and daughter.

For many years, though, he tried to link back up with Leek, going through government records to try to track him down. It took him 40 years, but in 1986, he found the number of Leek's mother, in Washington State. Yes, her son Bill was visiting from California. Would Rojohn like to speak with him? Two old men on a phone line, trying to pick up some familiar timbre of youth in each other's voice. One can imagine that first conversation between the two men who had shared that wild ride in the cockpit of a B-17.

A year later, the two were re-united at a reunion of the 100th Bomb Group in Long Beach, Calif. Bill Leek died the following year. Glenn Rojohn was the last survivor of the remarkable piggyback flight. He was like thousands upon thousands of men -- soda jerks and lumberjacks, teachers and dentists, students and lawyers and service station attendants and store clerks and farm boys -- who in the prime of their lives went to war in World War II. They sometimes did incredible things, endured awful things, and for the most part, most of them pretty much kept it to themselves and just faded back into the fabric of civilian life. Capt Glenn Rojohn, AAF, died last Saturday after a long siege of illness. But he apparently faced that final battle with the same grim aplomb he displayed that remarkable day over Germany so long ago. Let us be thankful for such men. A great story. I wonder how many more stories like this one are lost each day as members of the Greatest Generation pass on.

Good Sites for Truth-Gathering...

Hey All,

If you want to see some interesting charts that show "official" government reporting superimposed on the "real" numbers, go to this link:

http://www.shadowstats.com/alternate_data

John Williams' site ShadowStats.com shows what I think is the real reason why Americans are so down on the economy -- the fact that our government is lying to us every day with these bogus "reports' on the state of inflation, unemployment, you name it...

If you read some of the captions accompanying the charts, you will come to realize that the government has constantly been changing the way it calculates these "facts and figures" so that today's published inflation index cannot even be compared to that of 10 years ago, which in turn cannot be compared to that of ten years prior, etc., etc. It is the same across the board for all the officially reported government statistics.

Many of us have been following these developments for years, but there may be some who aren't aware of this yet...

Also, check out www.chrismartenson.com and look through his "Crash Course on Economics." It is outstanding.

Intelligent? Conservative? In the Same Sentence?

Would anyone recognize one if they read it? (An intelligent conservative post, that is.)

Just wondering...

I mean, after all, the word "conservative" seems to have taken on a lot of meanings lately, as has "liberal."

For example, I don't believe that any of the top three presidential candidates are "conservative," including McCain.

I think that the most conservative of any of the candidates still in the running is Ron Paul, who does not seem to have much of a chance of winning, AND even he would not call himself a conservative -- I'd bet he'd rather be known as a libertarian...

So I think an "intelligent conservative post" would go something like this:

"Reduce taxes, reduce spending, shrink the government, (get it to) quit spying on Americans, stop printing money, re-define (downsize) the responsibility of the Fed, stop beating other countries over the head, start acting like a business partner as opposed to a bully, stop spending money persecuting and prosecuting drug-users, promote the free market and the free exchange of ideas and commerce, promote a strong (self) defense, institute individual retirement savings accounts and phase out social security, eliminate all government subsidies to corporations (including Medicare), enforce term limits on all politicians and encourage gun ownership among law-abiding citizens."

Just a thought...

What's the Alternative to the Money We Have Today?

It's hard to blame the American people for their complacency about the economy, when up until now it has been well-rewarded.

I have a STACK of auto-reply letters on fancy letterhead from my Representatives and Senators in Washington. They all say the same thing -- nothing.

I feel like a smart, motivated American who is ready, willing and able to help guide this country in the right direction, willing to help educate my friends and family as to the truth about the American economy, ready to deal with the harsh consequences of our leaders' bad decision making.

But, it doesn't matter. We can talk or write until we are blue in the face about the coming financial meltdown, and none of it will matter to, or motivate any of, the vast majority of Americans to DO something about it.

I think it will take a total collapse of the financial system, along with all the pain and suffering that will accompany it, in order to convince the American public that we need to do things differently.

Our fractional reserve central banking system must change. Radically. We must put ourselves back on a gold standard, and we must enforce the discipline of maintaining some very high proportion of deposits on reserve throughout our congress-controlled national banking system (if we even have one).

One of the questions we face (more of an unknown) is this: How much gold to we have? There are credible analysts who believe we (the United States) have sold ALL our gold to other countries and sovereign wealth funds. If we are truly out of gold, or have very little, starting over again with a our currency backed by gold will be very difficult if not impossible.

How to get it back? Good question.

The answer: BE PRODUCTIVE.

Let banks earn interest and income the old-fashioned way. Allow credit only to the extent that it is covered by collateral assets. In other words, lend only to those who don't need to borrow...

Where will the money come from to pay interest on loans if all the money on "day zero" is accounted for and backed by gold? It will come from productive borrowers earning more money than they owe, and paying a portion of their earnings to the lender as interest.

In a gold-backed financial system with very high fractional reserve requirements (such as 50% or 75% of deposits in physical possession in the banks) credit will be harder to get, borrowers will be far more qualified, and lenders will "create" far less money-from-nothing through the liquidity of credit.

Not all money will be "loaned into existence," as it has been from 1913 until now. Loans will have to be repaid with real money and real interest, effectively canceling the money created when the loan was originated. This will help immensely with the control of inflation, if not entirely eliminate it.

Wouldn't it be a great world if we could live without inflation? Our American ancestors did, for more than 300 years from prior to 1670 until 1970. The ONLY inflation during this entire span of history occurred during times of war, when the government printed money to finance their adventures. After the hostilities, the fiat currency was always rejected by the American people and withdrawn from circulation by the government. That choice between two forms of money was fundamental and key to the re-establishment of stable money after bouts of fiat-inspired inflation.

When allowed to freely choose among gold, currency backed by gold and currency backed by a "promise to pay," people invariably choose gold or the gold-backed currency.

In 1971 Nixon de-coupled the Dollar from gold, and starting at that moment, our economic fate was sealed. People no longer had a choice between fiat money and gold-backed currency.

Paper money began to inflate, and with every entitlement, defaulted loan, corporate bailout and FDIC-rescue of a failed bank, the future debt of this country continued to grow unchecked, placed squarely on the back of US taxpayers and continuously deferred ad infinitum.

It's going to be ugly.

But from out of the chaos that seems inevitable, we will hopefully be able to create a sane and stable money system, backed by gold.

Government Stats on Economy Are A Lie...

...and the question we should all be asking is, "WHY?"

Here is a GREAT piece of information I cannot recommend highly enough:

http://www.chrismartenson.com/fuzzy_numbers

This is just one chapter of a multi-part presentation that is free, concise, and clearly explains how our government is systematically destroying our dollars and lying to us about it.

No big deal...

Spanish Holiday Cut a Tad Short... It's Only Total Financial Collapse

The Prime Minister of Spain called an emergency session of the Parliament Friday (Aug 15th) in order to deal with the collapsing economy there:

http://tiny.cc/jT0qc

I hope the Spanish people get through this with a minimum of disruption and economic pain.

And Another Thing!

Our current financial morass has roots in President Nixon's disconnection of the dollar from a peg to gold in August of 1971. President Peanut's (er, Carter's) Community Reinvestment Act of 1977 and its revisions in 1995 (under Clinton) allowed lending institutions extreme (and unregulated) latitude in creating and valuing their portfolios of questionable debt (not yet called sub-prime mortgages at that time).

Things got worse under Reagan, during which time the very first Credit Default Swap instruments were created -- these simply ballooned under Bush I and Clinton.

The Savings & Loan fiasco of the late eighties and early nineties added a trillion dollars to the national debt through accounting gimmicks and congressional bailouts of their buddies, placing this future debt directly onto the backs of American taxpayers.

W (Bush II) and his administration has done nothing more nor less than any of his predecessors about our growing problems such as the inflating money supply, the massive increase in national debt, not holding Congress to its responsibilities for oversight of the financial industry, waging war against other nations to further "American interests," using fear-mongering to advance government control and invasion of our privacy on a massive scale, or promising far more than it can deliver.

So while I don't disagree that Bush has not been a stellar leader of our nation, I just want to point out that for what it's worth, We the People have allowed our leaders to pull this c*r*a*p on us for many, many decades. We have not found an effective way -- the political voice -- to "throw the bums out."

Americans are afraid to "throw the baby out with the bathwater" -- even though there's ample evidence that the "baby" is going to grow up and kill us all. I think Americans are afraid to $hit-can all their leaders, because "the devil you know is better than the devil you don't."

People reading and writing about this stuff within the various Internet communities are not the problem. We've got to help the rest of the 98% of Americans "grow a pair" and not be afraid to effectively excise the heart and soul of our biggest problem -- our non-leaders -- our endemic and all-pervasive lack of ethical leadership in the executive and legislative branches.

We need to encourage new leaders, ethical leaders, to step forward.

Support Ron Paul. Get him "written in" at the Republican convention. Throw out every incumbent, every time. Destroy the "continuity of corruption."

Harrrumphing About Environmental Politics

This whole corn-ethanol morass we find ourselves in got a huge kick-start with agribusiness lobbyists and all-too-willing congress-critters co-opting a bad environmentalist idea and making the result even worse.

There is an unending litany of "unintended consequences" -- nice-sounding government programs that begat Frankenstein Monsters of financial waste, fraud and abuse. For example how government subsidies of corn-for-ethanol has directly caused the price of milk to double, wheat to triple, and rice to quadruple in the past year.

Global Warming (Climate Change, whatever), is another such Frankenstein. Al Gore has been all too happy to use (and be used by) his fellow power-hungry environmentalists to seek another foothold in the political power-structure. If not Global Warming, then it would be Nuclear Power, or the Murder of Endangered Snail Darters, or the flushing of pharmaceuticals destroying the planet, or the inclusion of phthalate esters in plastics leading to worldwide destruction, or Nigerian Delta Oil Flares... pick your poison.

(Oooops! Turns out there are A HUNDRED times more endangered lowland gorillas than the experts had previously thought...)

I wonder why people fail to see what is really going on? It's all power politics, with enviro-lobbyists squaring off against corporate-lobbyists to see who can buy more congressional juice, and has little to do with the environment.

How To Fix Everything

Conservatives have been giving themselves a bad name lately (OK, forever). Classical Liberal politics is closer to what modern conservatism should be -- fiscally conservative and socially liberal. I think an "intelligent conservative post" should read something like this:

"Reduce taxes, reduce spending, shrink the government, (get it to) quit spying on Americans, stop printing fiat money, re-define (eliminate?) the Fed, link our currency to gold, stop beating other countries over the head, start acting like a business partner instead of a bully, stop spending money persecuting and prosecuting drug-users, promote the free market and the free exchange of ideas and commerce, promote a strong (self) defense, institute individual savings accounts and individual medical savings accounts, phase out social security, eliminate all government subsidies to corporations (including Medicare), eliminate all government subsidies to education, to housing and to illegal immigrants, enforce term limits on all politicians and encourage gun ownership among law-abiding citizens."

This would be a good start.

Go Get Yours Now

Best guesstimates show that the FED is printing about 15% MORE paper money each year (right now) than they are retiring. (See www.shadowstats.com)

Add to that the fact that hundreds of BILLIONS of dollars in value have just been erased in the on-going sub-prime mortgage fiasco, and are soon to be erased in the upcoming Alt-A mortgage meltdown, and now you have A WHOLE LOT of physical paper dollars out there, "describing the value of" far fewer remaining hard assets (goods and services) that still exist.

This is a perfect storm of inflation and devaluation (wealth destruction). In years past, the FED would respond to detractors by saying essentially, "Hey don't worry about it -- we're just going to grow the economy so fast that the extra dollars will be used to value (compete for) the rapidly-increasing goods and services, and no one will feel the effects of all our excess paper money."

Right now, all (well, most) of the oil traded on the world markets has to be bought and sold using US Dollars. This has the effect of keeping the value of the paper money much higher than it normally would be, because everyone needs dollars to use for oil transactions. Some countries are actively seeking ways to use Euros for oil transactions, and if that ever becomes a widespread practice (wars will be fought over this) the value of the US Dollar will suffer further.

Then there's the Credit Default Swap (CDS) marketplace, (a risk-sharing mechanism) which is in jeopardy of melting-down, to the tune of over 40-Trillion Dollars, so look for additional excitement later on this year or next.

A sack of "junk silver" (pre-1965) dimes or quarters, or a cache of 1/10th-ounce gold maple-leafs could be regarded as insurance against the loss of faith in the US Dollar. If the Dollar ever collapses, people will likely take silver coins (or reeeeally small gold coins), in exchange for essentials.

Even if the Dollar never collapses (weirder things have happened), the gold and silver coins will still be worth something (and more likely than not, worth a lot), so you're not really risking too much by acquiring some.

Lately the prices of gold and silver have been plummeting -- so it's an even better time to buy.

Thoughts on Self-Sufficiency

Yeah, I'm one of those weird scholar/athlete types who played football all through high school and some college, yet I actually like to read and think about things like women, guns, wine, airplanes, economics and the future (aka science fiction). Nothing like hiking into the backwoods and enjoying a nice campfire and keeping an eye on the dope-growers... man, those guys are everywhere. I could go on and on about the "war on drugs," but suffice it to say, if the government would just get a clue and legalize them, the whole drug underworld would vanish overnight, and the feds could have a nice little taxation revenue-stream to boot...

Of course, this assumes the feds don't already have an even better revenue stream from illegal drug traffic already.

At the risk of providing more fuel to the crowd who believe goldbugs are raving lunatics, I'd like to add my own observations to the discussion of personal responsibility and self-sufficiency:

I'm going to grow a nice big healthy garden with lots of tomatoes, beans, corn, squash and other goodies, and learn to can things too.

Having a couple of 55-gal barrels of drinking water in a cool, dark place is not a bad idea.

A little spare gasoline and a Honda generator are nice-to-haves, and a motorcycle or two will provide cheap transportation when infrastructure breaks down.

I also like (and own) the Glock Model 22 semi-auto in .40 cal., mainly because it has nearly the same kinetic energy as the .45 cal, but will hold 15 rounds in the double-stacked magazine, vs 9 in the single-stacked .45. I have a Browning Buckmark semi-auto in .22 for cheap target practice. I like the Remington 700 series of bolt-action rifles, and mine is the short-action bull-barrel in .308 caliber, with a Leupold Vari-X III scope on top. It will put 10 shots through a quarter at 100 yards. The good old Remington Express 870 pump-action shotgun with Premier AccuTip Bonded Sabot Slugs alternated with double-ought shells is also good to have close by if bad people with bad intent come into your home.

As far as what to use for money when the "fecal matter whacks the rapidly-rotating air movement device" and all ATMs are boat-anchors, my first choice is a $1000 face-value sack of "junk silver," either 4000 quarters or 10,000 dimes. All the coins are pre-1965 with 90% pure silver content, and my guess is that when dollars are worth less than toilet paper, people will gladly accept silver dimes and/or quarters in exchange for food, water, medicine and good red wine or single-malt scotch.

That's my story and I'm stickin' to it!

Consequences of Fed Policy and Lack of Congressional Oversight

The dollar is really just an "idea" in the minds of people the world over who are familiar with it. Dollars are a "promise to pay" and are freely exchangeable for goods and services. They used to represent fixed amounts of gold or silver, but no longer, and as a result, their value fluctuates (while the value of gold and silver -- expressed in how much gold or silver one needs to "buy something" -- has remained pretty much the same).

If lots of people familiar with the dollar begin to think that it might become worth less in the future, then one could say they have less faith in the "promise to pay" and will probably demand more dollars for their goods and services. This can make the dollar "drop like a rock."

At the same time, there are monumental efforts afoot to "prop up" the dollar at home and abroad, not the least of which are vast sales of gold and silver futures and leases by the central banks of the world. These send the dollar-price of precious metals plunging and raise the value of each paper dollar.

It's hard to imagine that there is enough gold and silver in the world to counterbalance the immense debt levels that have been generated in the past 20 years, however. Something has to give, and pretty soon.

The FED is creating more dollars than are being retired, at an annual rate of somewhere around eight to eighteen percent more (we can't be sure because the FED no longer will say how many dollars it's printing), and this alone causes the value of each dollar issued to decline. They HAVE to do this however, in order for there to be enough extra money each year to pay the interest on the ever-increasing numbers of outstanding debts we owe to the world...

Large financial institutions create investments out of "packages of loans" of which the value can no longer be determined, and this has destroyed the value of the dollars used to purchase those investments (to the tune of billions of dollars ). This has also caused the dollar to "drop like a rock" through the devaluation that destruction of wealth causes.

Lately, several large investment banks have begun "voluntarily" spending billions of dollars to buy back the "auction-rate securities" they've sold to unwitting municipalities and retirement funds. This is no doubt to stave off what would surely become an orgy of congressional finger-pointing and public wrath when it is determined that these investments are worthless...

There are a lot of other currencies in the world, most of which are also based on "promises to pay," and so depending on how people feel about the relative strength of one country's economy vs another's, the dollar will decline or rise relative to that currency. Really, even "the experts" find all this too complex to understand or predict, due to the high number of variables. There really is no one in control of the economic situation -- they're all just hanging on to the steering wheel for dear life...

For an excellent explanation of how the economy works (or not) take Chris Martenson's "Crash Course" in economics at www.chrismartenson.com/crashcourse .

The one main thing to keep in mind as we think about a currency that is not based on precious metal (say, like... the dollar for example) -- the more of them we print and put out in the world, the less each one is worth. When we do this on an exponential basis, and we've reached the "point of verticality" in the chart of the numbers of dollars in the world, look out!

Hope for the best, but prepare for the worst...

Ron Paul -- Bushwhacking McCain at the Convention

As a lifelong Libertarian I've followed Dr. Ron Paul's candidacy and I support his campaign. I had to change party affiliation to vote for him in my state's primary. Not a problem really, since I always vote the candidate and not the party.

But that brings up an interesting point: Is it because Ron Paul is a Republican candidate that he's been effective at all? I can't help thinking he would have had even less Main Stream Media (MSM) coverage as a Libertarian candidate. Yet he really is a Libertarian.

Can anyone here name the Libertarian presidential candidate? I love that Ron Paul's influence is within a major party, where he is somewhat more effective and cannot be completely ignored.

This is a valuable lesson for all future Libertarian candidates. Since we have been almost completely ineffectual in past campaigns, perhaps the paradigm must now shift to working within one of the two major parties. It may be time for a full-time Libertarian Caucus within the Republican Party.

And... Who's to say that there couldn't be a groundswell of disaffection "coming out of nowhere," and suddenly the MSM (along with McCain) finds itself "blindsided" by an actual FIGHT in the Republican convention between supporters of the status-quo and Ron Paul. If enough people got active between now and the convention, it could happen.

Naysayers will declare these ideas ridiculous and tantamount to "handing the election to Obama" or whatever, but the process is designed to allow this to happen if enough people act. Always act and VOTE YOUR PRINCIPLES, even if it seems hopeless.

It doesn't matter if our candidate has fewer "leadership qualities" than the charismatic opponent. We can wish all day long that Ron Paul was taller, that he didn't sound so whiny, that he wasn't treated so outrageously unfairly in the debates, etc., etc.

He is the one ethical candidate. He is the one supporter of Constitutional ideas, behavior and values. He is the only acceptable alternative.

Credit Default Swaps -- "So What?" You Ask...

Here's a pretty decent primer about Credit Default Swaps:

http://www.moneymorning.com/2008/04/02/credit-default-swaps-a-50-trillion-problem/

If the premise is true, then I'm not sure I fully understand the argument that there is always a winner and a loser in a CDS transaction and thus no net gain or loss of wealth.

Put the Blame Where It Belongs...

THE reason why all the banks and financial institutions have gone on a wild rampage of free-credit and gorging on billions of dollars in tier-three debt is precisely because our government leaders allowed them to do it. Congress abdicated its authority and responsibility for oversight.

Our senators and congressional reps repeatedly signed the legislation that the financials wrote (via their lobbyists) and THAT, plus the unbridled creation of billions in funny-money by the Fed have put us into this situation. We complain about the government because THAT's where the blame lies. A free market with simple rule of law would quickly bring alleged perpetrators to justice via lawsuit and the courts would determine if anyone was harmed. Don't blame free markets for our current predicament, for heaven's sake!

Truly free markets haven't existed for a long time, and if they did, things would certainly "work better."