Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.

Thursday 08.19.2010

Made in the USA! . . .

Eric's cousin, Mark, a special guest on today's show is the owner of
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Time is running out for the West
By Ambrose Evans-Pritchard - Telegraph.co.uk
The Great Recession has dramatically shrunk the time left for the big AAA states to prevent a full-blown sovereign debt crisis as their demographic time-bomb threatens, US rating agency Moody's has warned.
"Genuinely adverse debt dynamics were only expected to materialise in 15 to 20 years. The crisis has 'fast-forwarded' history, eroding all the time available to adjust," said the group's quarterly Sovereign Monitor.
Moody's fears that the US will crash through its safety buffer by 2013 if growth falters (adverse scenario), with interest payments topping 14pc of tax revenues. The debt-to-revenue ratio has already doubled in three years to 430pc.

While the Economists Lied the US Economy Died
Paul Craig Roberts - SilverBearCafe.com
On August 17, Bloomberg reported a US government release that industrial production rose twice as much as forecast, climbing 1 percent. Bloomberg interpreted this to mean that "increased business investment is propelling the gains in manufacturing, which accounts for 11 percent of the world's largest economy."
The stock market rose.
Let's look at this through the lens of statistician John Williams of shadowstats.com. Williams reports that "the primary driver of a 1.0% monthly gain in seasonally-adjusted July industrial production" was "warped seasonal factors" caused by "the irregular patterns in U.S. auto production in the last two years." Industrial production "shrank by 1.0% before seasonal adjustments."

The Boys From Brazil - Revisited
By: CAPTAINHOOK - GoldSeek.com
The economic news just keeps getting worse and worse (and worse), validating the view we spiraling down in another recession within a larger depression. Of course the effect this is having on an ever-decreasing population of traders (only the pros are left and their numbers are shrinking too as the trade patterns become increasingly bizarre) is to become even more bearish and keep on buying puts, because at some point stocks will turn lower to reflect the fundamentals, right? Unfortunately for surface dwellers that think like this they could keep the squeeze in stocks going far longer than most would remain solvent, being just fine with the bureaucracy because this will enable them to keep the illusion alive longer theoretically.

The World Won't Flock to Paper
National Inflation Association
On July 28th, NIA released an article entitled, "Gold and Silver Capitulation is Near". In this article NIA said, "The sentiment on gold and silver has abruptly changed to the negative like nothing we have ever seen before and to us this means the big move to the upside is right around the corner." It turns out that July 28th was the exact bottom for gold and silver prices. Since then, gold prices have risen 12 out of 15 days for a gain of 5.8% and silver prices have risen 11 out of 15 days for a gain of 5.2%.
It was just announced that China cut their long-term U.S. treasury holdings by $21.2 billion in June to $839.7 billion, their largest cut in U.S. treasury holdings in history. China's holdings of U.S. debt are now at their lowest level in a year. Meanwhile, China has more than doubled their holdings of South Korean debt. It speaks volumes that things have gotten so bad in the U.S. that China sees the need to diversify out of U.S. debt to buy the debt of a third-world nation.

Eighteen Signs That America Is Rotting Right In Front Of Our Eyes
The Economic Collapse - SilverBearCafe.com
Sometimes it isn't necessary to quote facts and figures about government debt, unemployment and the trade deficit in order to convey how badly America is decaying. The truth is that millions of Americans can watch America rotting right in front of their eyes by stepping out on their front porches. Record numbers of homes have been foreclosed on and in some of the most run down cities as many as a third of all houses have been abandoned. Unemployment remains at depressingly high levels and the number of Americans on food stamps continues to set new records month after month. Due to severe budget cuts, class sizes are exploding and school programs are being eliminated. In some areas of the U.S. schools are even going to four day weeks. With little to no funding available, bridges are crumbling and street lights are being turned off in many communities. In some areas, asphalt roads are actually being ground up and turned back into gravel roads because they are less expensive to maintain. There aren't even as many police available to patrol America's decaying cities because budget problems have forced local communities across the U.S. to lay off tens of thousands of officers.

10 Signs The U.S. is Becoming a Third World Country
Activist Post
The United States by every measure is hanging on by a thread to its First World status. Saddled by debt, engaged in wars on multiple fronts with a rising police state at home, declining economic productivity, and wild currency fluctuations all threaten America's future.
The general designations of the ranking system for world status date back to the 1950s, and have included countries at various stages of economic development. Since the Cold War, the definition has come to be synonymous with repressive countries where a wealthy class of ruling elites segment society into the haves and have-nots, many times capitalizing on the conditions that follow an economic crisis or war.

China Swallows Obama Stimulus Meant for U.S. Economy
Commentary by Andy Xie
Aug. 18 (Bloomberg) -- The global economy is like fried ice cream: If you don't act fast, it turns into a mess.
American pundits, Nobel laureates included, are predicting Japan-style deflation for the U.S. and Europe. They are urging the Federal Reserve to pursue another round of quantitative easing to stop the onset of an Ice Age for Western economies. The Fed didn't oblige at its last meeting, but it threw a bone to the deflation crowd by promising not to pull money out of its previous round of asset purchases to stimulate a recovery.

Mixed US Data Keeps the Dollar in a Tight Range
By Chris Gaffney - The DailyReckoning.com
08/18/10 St. Louis, Missouri - Chuck headed on a multi stop cross-country trek to get out to San Francisco today, so he left the Pfennig to me. I think he said he had to fly through Dallas to get over to San Francisco; just one of the joys of no longer being a 'hub'airport.
There was a plethora of data releases here in the US yesterday, but the numbers offset each other keeping the markets fairly stable. Surprisingly strong industrial production data was offset by weak housing starts. Other data showed that wholesale costs in the US increased in July for the first time in four months, throwing cold water on those warning of deflation. Commodity prices were the main driver of the increases of 4.2% versus last year. The core price index (ex food and energy) was still up 1.5%, slightly higher than economists' projections. The data will quiet those who are warning about falling prices and will likely keep the boys and girls over at the FOMC on a "steady as she goes" course.

The Capital-Scarce World To Come
Martin Hutchinson - SilverBearCafe.com
The last 15 years in global markets have been marked by one consistent factor: the ready availability, even overabundance of capital. Returns to investors have been driven down to dangerously low levels, both in debt and equity, by over-expansionary monetary policy, while asset values even after crashes have been far higher than their historical norms. Yet this insouciance about capital, this preparedness to waste it in one feckless bubble after another, must have an inevitable result: at some point in the near future we will face a world of capital scarcity, like the late 1930s in the United States, the early 1950s in Europe or the 1980s in Latin America.

Most Bush Tax Cuts Should Be Extended, Pimco's McCulley Says
By Mary Childs and Kathleen Hays
Aug. 18 (Bloomberg) -- President George W. Bush's tax cuts should be extended except for the top two brackets to help bolster the fragile economic recovery, said Paul McCulley, a managing director at Pacific Investment Management Co.
"Congress has to extend them or else the double-dip- recession risk will go up dramatically," McCulley said in a Bloomberg Radio interview with Kathleen Hays on 'The Hays Advantage.'

INFLATION 101
Jim Quinn - TheBurningPlatform.com
I know some of the people who come to this site understand financial concepts very well, but I also think there are many who might be confused by some of the terms we throw around on a daily basis. The most important concept for you to understand is inflation and how the Government and Federal Reserve have used it to screw you. They actually provide all the information you need to understand in one handy dandy chart. Here is the [download .txt file] link to that chart:
This chart provides the Consumer Price Index from 1913 until today. That is convenient because the Federal Reserve was created in 1913.
The CPI on January 1, 1913 was 9.8. Today it is 217.965. This means that a basket of goods that cost you $9.80 to buy in 1913 would now cost you $217.96. That is called inflation.
Another way to look at it is to divide 9.8 by 217.965. This equals .045. This means that a dollar in 1913 is now worth 4.5 cents. This is a 95.5% reduction in the purchasing power of a dollar in less than 100 years. The Federal Reserve has systematically screwed you for 97 years.

Prepare in August for Hyperinflationary Holidays
By: Dr. Jeffrey Lewis - GoldSeek.com
Ben Bernanke and the rest of the Federal Reserve are priming the pump for what could by a hyper-inflationary Christmas. While the Fed continues to build a pile of kindling, the spark could very well be this holiday shopping season.
Imagine that you had a pile of wood put together to make a camp fire. Your goal is to create the hottest fire imaginable, one that will last for quite some time. You start with the smallest pieces, a few leaves, a couple of pine cones, and a few small sticks. Next you throw on the larger timber. A few logs and some old fence posts will do here. Now, in the spirit of getting this camp fire going, you add a few gallons of pure gasoline. That should be enough to do it, right? Wait, what's that? You forgot the matches?!

The Fed Declares War on America
Drew Mason - SilverBearCafe.com
Bond markets aren't as forward-looking as Wall Street may believe
Does this title sound extreme? If you've been one of those Americans who has saved more than you borrowed and think your wealth is safe in savings accounts and bonds, this may not be extreme at all. As bond owners, CD holders and passbook savers, consciously or unconsciously Americans have stored wealth believing that the US government has their back. This week the Fed made it clear that additional quantitative easing is on the way and that savers of dollar-denominated investments won't be protected to any degree by Washington.

US Prepares For Gold Standard
By Bix Weir - GoldSeek.com
I have often written about the US Treasury and US Mint's very strange behavior when it comes to their part in continuing "business as usual" for the fiat monetary system. Although many have chalked up the Mint's rationing of Gold and Silver American Eagle coins to normal behavior of inept government employees and government bureaucracy, I have a much different take on the subject. I believe they are trying to DELAY and LIMIT the American Eagle program until such time as the US is ready to go back on a gold and silver standard.

The Great American Disaster:
How Much Gold Remains In Fort Knox?
by Chris Weber - LewRockwell.com
A Huge Mystery Remains To Be Solved
Yesterday marked the 39th anniversary of the day when the US Government declared bankruptcy. Oh, they didn't call it that at the time. But what happened on August 15, 1971 was that the US defaulted on its promise to pay gold for dollars.
Before that day, gold was the legal linchpin of the world monetary system. Although every currency was defined in terms of the US dollar, the dollar itself was legally defined as 1/35th of a troy ounce of gold.

All That Glitters...
Mary Anne & Pamela Aden - SilverBearCafe.com
It was another action packed month. The volatility never seems to end, at least that's the way it's been for many months now... actually, for the past few years.
The markets have essentially been reacting to the news of the day for what seems like ages. When the news is good, they rise. When it's bad, or perceived to be bad, the markets get nervous, they become vulnerable and they decline. And investors simply don't know what to do. They're still edgy and uncertain. And as long as this continues, the entire outcome could go either way....
Stay With Gold
So what's an investor to do? Stay in gold. Despite its recent volatility, it's the one investment that benefits during times of uncertainty. As you've seen, it does well during good times and bad. That's been true throughout history, and it still is.

Soros favoured gold in Q2, cut US equities
Gold now represents the billionaire investor's fund's biggest holding by dollar value and with the sale of so many other holdings, gold ETFs now represent almost 13% of the firms total equities
BOSTON (REUTERS) -
Billionaire investor George Soros in the second quarter stuck with his big bet on gold but slashed his holdings in dozens of major U.S. companies from Verizon Communications to Pfizer.
Soros also may have sold his entire holdings in Petroleo Brasileiro SA.
In a quarterly securities filing on Monday, Soros Fund Management reported owning substantially fewer U.S. listed stocks than three months earlier. The fund listed $5.1 billion of equities as of June 30, down 42 percent from $8.8 billion at the end of March.

Gold Rises for Third Day in New York as Demand for Haven Gains
By Millie Munshi
Aug. 18 (Bloomberg) -- Gold prices rose, capping a third straight gain, as investors purchased bullion as a haven.
Holdings in global exchange-traded-funds backed by bullion increased for five straight days, data compiled on Aug. 17 shows. That's the longest expansion streak since June 30. Gold reached a record $1,266.50 an ounce in June as investors sought a shield against financial turmoil and currency debasement.
"We're seeing a lot of clients increase their allocation to gold," said William Rhind, the head of U.S. sales and marketing for ETF Securities Ltd. in New York. "We're starting to see the safe-haven trade emerge again as people are uncertain about where growth is heading."

Gold price consolidation - poised for the next move?
Author: Lawrence Williams - MineWeb.com
The gold price appears to be consolidating again and we could well see its high tested and exceeded in September, historically a good month for the yellow metal.
LONDON - The pattern of the gold price over the past few days is for it to move up in steps - it has been reaching a level to prompt profit-taking by less-committed holders and once this profit taking is exhausted it pauses for breath, before moving up another small step. These steps have seemed to be at about $5 intervals of late. But lack of significant holding movement in the ETF sector also suggests the firmer holders are remaining with the precious metal.

Why gold bullion investment is risk free
By Stewart Thomson - CommodityOnline.com
"This is not working, let's try something new."
-approx. quotation from Deng Xiaoping, head of China, circa 1978.
Brilliant observation on Deng's part. Let's have a round of applause for Gman Deng. When you steal the entire wealth of your citizens for yourself, turn them into slaves, and murder millions of those who don't share your "enlightened new era vision," who prefer common sense instead of your Frankenstein Movie, yes, Deng, you need something new. Or maybe you shouldn't have tried to fix what wasn't broken by robbing and murdering millions. Just a "minor" observation on my part.
The past is the past, and Chinese corporations are moving forward, as is the Chinese Gman, (probably temporarily in the case of the Gman). Chinese citizens wonder if a day is coming where the goods in their dollar stores will be made in America. I don't see things going that far. It's a good thing that I don't. The 21st century will be about "the rise of many new major players" more than the new "Empire of China". Click here to read Jim "mighty man" Rogers' latest words on China, a view I not only share, but back up with personal buy action on the Chinese FXI-NYSE, the "Chinese Dow."

Protecting Your Cash, Part II
By Doug Casey - The DailyReckoning.com
08/18/10 Cafayate, Argentina - An Interview with Doug Casey from Cafayate, Argentina
Interviewer: Concerning the risk of foreign exchange controls here in the US, do you think people will have any warning at all?
Doug: I think it's going to come out of left field. It always does, with at most an official denial just before it happens. In August 1971, Nixon devalued the dollar, which immediately dropped against gold and all foreign currencies. I think there's a reasonable probability that the government will do that again. Gold may not be part of the equation, but they may decide to put in some sort of fixed exchange rate between the dollar and various foreign currencies.
The reason for thinking this is simple: with all the dollars outside the United States devalued by that much, that much of a liability just vanishes into thin air. And in the short term - it's never a long-term fix - US exports would go up. This would "stimulate" the domestic economy. Imports to the US would go down, which would make for fewer dollars leaving the US and adding to the $7 trillion overhang the US already has.

Gold resumes upward march
By Jeff Nichols - CommodityOnline.com
It looks increasingly likely that gold has already resumed its long upward march and before long could be registering new all-time highs.
Just in the past week or two there has been an important shift in world financial market sentiment and rising anxiety about the U.S. and global economic outlook is now prompting renewed investor interest in the yellow metal as a safe-haven asset.
Moreover, the latest news from the U.S. Federal Reserve, following last week's Federal Open Market Committee meeting, makes it clear that the Fed is resuming "quantitative easing," the Fed's code words for printing more money.

Gold turns volatile on profit selling
SINGAPORE (Commodity Online): Gold prices were slightly up but remained volatile in Asian trade Wednesday as some investors took to profit selling.
Gold for immediate delivery was seen trading at $1225. 81 an ounce at 12.00 noon Singapore time while U.S. gold futures for December delivery were steady at $1,227.5 an ounce.
Analysts however said, the precious yellow metal remained highly volatile and may swung between gains and losses during the day as record prompted some investors to sell to lock in gains.

Demand perspectives: driving the gold price ever higher
Six key demand factors which will come together and help drive the gold price upwards over the next couple of years.
Author: Julian D.W. Phillips - MineWeb.com
BENONI (GOLDFORECASTER.COM) -
At the moment, it appears that the gold price is being linked to the state of the global economic growth or lack thereof. Is it? Or are there other factors that contribute to the rise in the demand for gold? A look at the different types of demand gives us perspective on the real influences on the gold price.
CHINA
We start with this country's contribution to the gold price, because this week saw an announcement that China is now the second largest economy in the world as well as being the world's largest exporter. This is a landmark announcement as this country is headed fast to be the world's largest economy with the world's largest foreign exchange reserves.

Treasury Bonds Rise as Slowdown Fuels Fed Purchase Speculation
By Susanne Walker
Aug. 18 (Bloomberg) -- Treasury 30-year bonds rose, pushing yields to a 16-month low, as investors sought the highest- returning U.S. debt amid speculation the weakening economic recovery may prompt the Federal Reserve to boost debt purchases.
The Fed plans to acquire Treasuries due from 2016 to 2020 tomorrow, after buying $2.551 billion of debt yesterday, to hold borrowing costs down. It announced the purchases Aug. 10, saying it would buy securities for the first time since October using funds from principal payments of its holdings of mortgage-backed debt. Treasury notes erased gains as stocks rose.

Fed Buys $2.551 Billion Treasuries to Aid Economy
By Liz Capo McCormick and Mary Childs
Aug. 17 (Bloomberg) -- The Federal Reserve bought $2.551 billion of Treasuries in the first outright purchase of U.S. government debt since October to prevent money from being drained from the financial system.
The Fed bought 14 of the 25 securities listed for possible purchase. The notes mature from August 2014 to February 2016, the Federal Reserve Bank of New York said in a statement today on its website. The New York Fed conducts open-market operations to implement the policies of the Federal Reserve System.

Government Meddling: Bad News, Unless You're an Investor
By Ian Mathias - The DailyReckoning.com
08/18/10 Baltimore, Maryland - The stimulus debate du jour is how the government will save Fannie Mae and Freddie Mac. More government support is vital, said Treasury Secretary Timothy Geithner, the maestro of yesterday's White House housing summit, "to make sure that Americans can borrow at reasonable interest rates to buy a house even in a downturn." It is, after all, your God-given right.
To be clear, the Treasury "will make sure the GSEs have the resources to meet their financial commitments," Geithner added. Whatever the fate of Fannie and Freddie, it will be financed with tax dollars and controlled by government. Both companies, despite being at the very heart of the financial crisis, were left out of the recent Financial Reform Bill.

YOU WANT THEM TO CONTROL HEALTHCARE?
By Chuck Baldwin - NewsWithViews.com
Among the scariest words ever heard are, "We are from the federal government, and we are here to help you." Shiver me timbers, matey! When you hear those words, pick up your peg leg and RUN, because you are about to get hammered. And that is exactly what is fixing to happen to the American people when the new Obama national healthcare law is fully implemented: we are going to get hammered.

Fannie and Freddie: The Exit Doors are Shut
The Automatic Earth - SilverBearCafe.com
From a purely political point of view, it's a
simple story. Existing homeowners are a far more powerful force at the voting booth than potential owners, homebuyers, are. It's therefore very much in the interest of the incumbent government to keep home prices as high as it can. Let them slide too much and you will pay for that at the next election. For potential buyers you can devise plans that lower interest rates and down payments, but that's all. More affordability simply through power prices is not on the political table.

U.S. Banks May Face $180 Billion in Loan Buybacks, Fitch Says
By Laura Keeley
Aug. 18 (Bloomberg) -- Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. might face demands to repurchase as much as $180 billion of troubled mortgages from Fannie Mae and Freddie Mac, Fitch Ratings said.
At the end of June, the two government-sponsored loan guarantors held a total of $355 billion of troubled mortgages in their portfolios, of which half were serviced by the four banks, the largest in the U.S., Fitch wrote in a report. While it is "conceivable" that debt eligible for repurchase may surpass $175 billion in "an extremely adverse scenario," the banks are more likely to face lesser demands, depending on foreclosure rates and loan documentation.

Credit default swap deals unnerve California
By Nathaniel Popper, Los Angeles Times
Some say credit default swaps may influence the market for muni bonds.
Reporting from New York - Is Wall Street profiting from California's misery?
That's been a concern of state Treasurer Bill Lockyer, who takes a dim view of financial instruments - known as credit default swaps - that enable speculators to bet against California's ability to pay its debts.
Like other giant Wall Street firms, JPMorgan Chase & Co. helps investors place such bets against California but also earns hefty fees from the state for helping it get the best prices on the bonds it sells to finance capital improvements and other expenses.

Why the U.S. may not be the next Japan
By Paul R. La Monica
NEW YORK (CNNMoney.com) -- The fashionable thing for economists to worry about these days is deflation.
It's hard to go a day without someone proselytizing that the United States is the next Japan and that a Lost Decade looms on the horizon -- or might already have even begun.
The threat of deflation can't be cavalierly dismissed since there are plenty of troubling signs.
The job market is not recovering at a quick enough pace to spur consumers to spend. The housing market is still stagnant. And the Federal Reserve seems hell-bent on keeping both short-term and long-term rates low for the foreseeable future.

Letter from China: Where the consumer is queen
Fortune - CNNMoney.com
Fortune senior editor Jennifer Reingold is filing dispatches from China, where she is traveling with Procter & Gamble CEO Robert McDonald to observe the company's growing emphasis on Asia.
The apartment could be in an wealthy neighborhood in Paris or Manhattan: a gleaming kitchen with coffeemaker, a balcony with a child's bike perched outside, and his and her laptops. Instead, it belongs to an eager representative of China's exploding upper class, a 31-year old bank manager in Shanghai who is watching proudly as Bob McDonald, the CEO of Procter & Gamble (PG), inspects the contents of her bathroom cabinet.

Elephants in the Room
By Bill Baker - The DailyReckoning.com
08/18/10 Baltimore, Maryland -- Is it not heartening to politicians to seize and distribute today's wealth and promise more in future obligations knowing that erosion of the value of fiat currency will reduce the burden of government debt incurred?
Is not their public debt simply a scorecard representing the cumulative transfer of wealth mostly driven by past entitlements, for which politicians lacked the chutzpah to lay at the feet of the taxpayers?
To erase it with excessive printing of money would silently extract value from savers and investors, and most importantly cause capital to flee or be hoarded and essential investment to be foregone.

Tea, Tramadol & Today's Great Depression
By: Adrian Ash, BullionVault - GoldSeek.com
"Even at home there is generally a cup of tea going - a 'nice cup of tea' - and Father, who has been out of work since 1929, is temporarily happy because he has a sure tip for the Cesarewitch..."
- George Orwell, The Road to Wigan Pier (London, 1936)
SEVENTY YEARS AGO last month, just as the Battle of Britain began, tea rationing struck the seat of empire.
Really, Herr Hitler had gone too far this time!
Caffeine mixed with sugar, hot water and milk had fuelled the Industrial Revolution just as surely as did cheap coal and expensive sweat. From back-to-back slum to baronial pile - and starting long before London proclaimed Victoria the Empress of India in 1876 - the daily cares of imperial power had been eased every few hours by a "nice cup of tea". According to one 1749 record, a tradesman's family spent more on tea and sugar each week than they did on the basic staple of bread.

U.S. can no longer afford housing tax breaks
By Paul Wiseman, USA TODAY
WASHINGTON - Federal housing policy offers the wealthiest Americans billions in tax breaks without delivering much bang for the buck in increased homeownership, critics told government policymakers Tuesday.
"We aren't getting our money's worth," Mark Zandi, chief economist of Moody's Analytics, said at a government conference on reforming housing policy.
The government spent $230 billion last year to promote homeownership through tax breaks and spending programs. The biggest chunk - $80 billion - went toward the mortgage interest deduction, according to the Congressional Budget Office.

Loan Officer Survey Offers No Surprises. Credit Standards Still Tight
by Jann Swanson - MND Newswire
Credit appears to be slowly loosening according to the July Senior Loan Officer Opinion Survey on Bank Lending Practices conducted by the Federal Reserve. The change, however, is modest and concentrated on large banks lending in categories particularly affected by competitive pressures. The Fed defines large banks as those with more than $50 billion in assets and small banks as those with annual sales under $50 million. Fifty-seven domestic banks and 23 US branches of foreign banks responded to the quarterly survey.
Loosening of lending requirements was most pronounced in the area of commercial and industrial (C&I) loans. Residential lending was only modestly improved, with nearly as many banks reporting they had tightened credit as had loosened it.

Massive Taxpayer Liability or Somewhat More Expensive Mortgages For Everyone? Hmm, I'll Have to Think About That...
Peter Suderman - Reason.com
Policymakers in Washington held a confab yesterday over the head-scratching question of what to do about government-owned mortgage giants Fannie Mae and Freddie Mac. Discussions like these can sometimes be wonky and impenetrable, but, as this brief passage from The Washington Post's summary of the conference shows, the heart of the debate is actually fairly easy to grasp:
Bill Gross, who runs the world's biggest bond firm, Pimco, argued that the mortgage market should be completely nationalized...Gross's proposal could ensure that mortgages remain affordable for home buyers. That's because the government, which would borrow money to finance the mortgages, faces a relatively low interest rate in the markets. The downside is that taxpayers would be on the line for losses.

Are Federal Employees Compensating for Something?
By The Mogambo Guru - The DailyReckoning.com
08/18/10 Tampa, Florida - The US Bureau of Economic Analysis, an "official" source of news, reported what everybody has already known: Government worker compensation in now an average of more than $120,000, or about twice as much as the average private sector worker making less than $60,000.
I find this particularly interesting because I get a chance to answer some of my critics, who say to me, "Bah! Even though you are absolutely right about the foul Federal Reserve and how their continually creating more and more money is going to ignite an inflation in prices that will destroy us, and you are entirely correct that buying gold, silver and oil are terrific bargains right now because of it, and you are completely spot-on that Obama and Congress are repugnant socialist morons, but you are not as handsome as you think you are, and a lot more stupid, too. And lazy. For instance, you never do any real work."

Jobless millions signal death of the American dream for many
Paul Harris - The Observer - Guardian.co.uk
Even the criminals have fallen on hard times in America's poorest city as the long-term unemployed struggle to keep a grasp on normality
Richard Gaines is one of the best-known faces on Camden's Haddon Avenue. It is a rough-and-tumble street, lined with cheap businesses and boarded-up houses, and is prey to drug gangs. Gaines, 50, runs a barbershop, a hair salon and a fitness business. He works hard and is committed to his community. But Haddon Avenue is not an easy place to make a living in the best of times. And these are far from the best of times.
Just how badly the great recession has struck this fragile New Jersey city, which is currently the poorest in America, was recently spelled out to Gaines. In happier times - whatever that might mean for a city as destitute as Camden - local businesses on Haddon Avenue could at least rely on a bit of trade from those who made their money on the street.

Food Stamps or Paychecks?
by Newt Gingrich - HumanEvents.com
In the 2008 campaign, President Obama gave us all a hint of his socialist leanings when he promised to Joe the Plumber that he would "spread the wealth around." Last week, we found out that his policies and those of the Democrats are delivering on that promiseÉalthough probably not in the way they expected.
The use of food stamps hit a record high in May 2010, according to the U.S. Department of Agriculture, with 40.8 million Americans receiving Supplemental Nutritional Assistance Program (SNAP) subsidies for food purchases. This is more than one-eighth of the population.
Worse, the USDA projects the number of Americans using food stamps will rise to 43.3 million in 2011.

Schwarzenegger Orders Furloughs After Top Court Rules
By Michael B. Marois
Aug. 18 (Bloomberg) -- California Governor Arnold Schwarzenegger said 150,000 government workers must begin taking time off without pay starting Aug. 20 following a court ruling lifting an injunction temporarily blocking the furloughs.
The California Supreme Court, saying it would review the governor's plan, stayed decisions by lower courts that had halted the furloughs. Schwarzenegger directed state workers to take three unpaid days off each month to save cash. The high court set a Sept. 8 hearing on a challenge to the order.

California Budget Logjam May Lead to IOUs Next Month
By Michael B. Marois
Aug. 18 (Bloomberg) -- California may begin paying bills with IOUs in September for a second year in a row as a legislative logjam over erasing a $19 billion deficit prevents passage of a budget.
State Controller John Chiang said the IOUs may be issued in two to four weeks if the budget impasse persists. The warrants will pay for everything from contracted services to health-care clinics so California can preserve funds to make payments on priority items such as bonds.

US says it is not illegal for schools to spy on students at home
Nick Farrell - TheInquirer.net
IT LOOKS LIKE PROSECUTORS are not going to get involved in the bizarre case of the school which switched on laptops to spy on students while they were in their own bedrooms.
US Attorney Zane David Memeger told USA Today, investigators had found no evidence of criminal intent by Lower Merion School District employees who activated tracking software that took thousands of webcam and screenshot images on school-provided laptops.
A student and his family sued the district in February, claiming officials invaded his privacy by activating the software and the civil case is ongoing.
The school has admitted that it captured 56,000 screen shots and webcam images mostly so it could find missing student laptops. But in the case of this student the school appears to have been using the laptops to investigate home drug use.

USDA Rural Housing Program: Where's the Funding?
by Jann Swanson - MortgageNewsDaily.com
When the USDA ran out of money for its Section 502 guaranteed Rural Housing product in April, the program effectively shut down. At that time it was up to the Congress to appropriate the $150 million needed to continue the program through the September 30 end of the fiscal year. A month later, even though the legislation intended to provide the funding had not passed, USDA began issuing commitments for new loans, but there was a caveat: Loan approvals would be "subject to the availability of funds and Congressional authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans."

California broadband projects pick up $205 million in federal funding
LATimes.com
Rural California will become a little more wired.
California will receive over $205 million in American Recovery and Reinvestment Act funds for seven projects aimed toward bringing fast broadband Internet access to rural and remote communities in the state.
The grants are part of the $1.8 billion in Recovery Act funds announced today by Vice President Joe Biden. The grants were awarded to 94 broadband projects in 37 states.

Fannie's Cozy Ties to Countrywide
by Valerie Richardson - HumanEvents.com
The Obama Administration managed to move financial regulatory reform in July with almost no mention of Fannie Mae and Freddie Mac, a feat that could be likened to cracking down on fast food without mentioning McDonald's. But the latest revelations about the federally backed mortgage giants could give even the most hardened everyone-deserves-a-house-they-can't-afford Democrat pause.
It turns out that Fannie Mae officials weren't just doing business with the execs at Countrywide Home Loans, they were actively schmoozing them. An internal Fannie Mae "Customer Engagement Plan" issued in 2004 outlines strategies designed to "deepen our relationship at all levels with Countrywide," including squeezing into the same foursome at golf tournaments.

Sowing The Seeds Of Starvation
by John Myers - PersonalLibertyDigest.com
"One death is a tragedy; one million is a statistic." - Joseph Stalin
This summer's searing heat has put a fire beneath grain prices. But worse than another round of inflation is the potential for widespread famine, particularly in the former Soviet Union, which has been beset by the worst heat wave in 130 years.
The Ukraine is no stranger to starvation. The Terror-Famine struck the Ukraine in 1932-33 when as many as 10 million starved. It should come as little surprise that Joseph Stalin was the architect of that tragedy.
In the 1920s, Lenin proved his political savvy and made concessions to the peasantry. This led to The New Economic Policy (NEP) and a rethinking by the Kremlin.

GM Files for IPO That Will Reduce Treasury's Stake
By David Welch and Michael Tsang
Aug. 18 (Bloomberg) -- General Motors Co. filed for an initial share offering that will mark the return of what was once the world's largest automaker to public markets a year after it was bailed out by the government.
GM, 61 percent owned by the U.S. Treasury, didn't disclose the number of shares that will be sold in the initial public offering or the price in a statement filed with the Securities and Exchange Commission. The automaker will not sell any common shares itself while offering preferred shares alongside the IPO, the filing showed. The government will sell some of the common shares it owns in GM, according to the filing.

General Motors back from the brink and set for $20bn flotation
Andrew Clark in New York - The Guardian
Share offer comes a year after filing for bankruptcy and will allow some of state loan to be repaid
America's biggest carmaker, General Motors, has taken the first step towards a stock market flotation barely a year after struggling through bankruptcy, in a move that will allow Barack Obama's government to win political capital by recouping some of the billions in public money pumped into the company.
GM last night filed an official application, called an S-1 document, with the Securities and Exchange Commission that paves the way for one of the largest public share offerings in US history. GM did not reveal the pricing of its shares, but the company is likely to seek to raise between $10bn (£6.4bn) and $20bn in capital.

General Motors Files for an Initial Public Offering
By NICK BUNKLEY and BILL VLASIC - NYTimes.com
DETROIT - General Motors filed Wednesday for a landmark public stock offering that would let the federal government begin selling off its stake in the automaker as well as raise money for G.M.'s turnaround.
G.M. said that it would offer both common stock and preferred stock in the offering, which could begin as early as October, when the Obama administration will be seeking to portray its aid to the auto industry as a success before midterm elections in November.
The common shares will be sold by G.M's current shareholders, the largest of which is the federal government. It exchanged about $43 billion in aid to G.M. for a 61 percent interest in the automaker.

Where adults must always buckle up
Half the states require that all adults in a vehicle wear seat belts. In all states, children must be in restraints. - [see map]
States expand seat belt laws to cover rear-seat riders
States are moving to close a deadly gap in seat belt laws that allows rear-seat, adult passengers in half the states to ride legally without buckling up.
Six states - Indiana, Kansas, Louisiana, Minnesota, New Jersey and Texas - have expanded their seat belt laws to cover rear-seat occupants since 2007, according to the Insurance Institute for Highway Safety.
Twenty-five states and the District of Columbia require seat belts for all passengers. "The most important thing you can do in any vehicle at any time is wear your seat belt in all seating positions," says Michele Fields, general counsel at the Insurance Institute. "The gaps with regard to children younger than 16 have almost all been closed. But there are still gaps for adults."

Is the Web Dead? No. But It's at Risk
By SAM GUSTIN - DailyFinance.com
Want to kill the web? There's an app for that.
Wired magazine sure picked a good time to declare "the Web is dead" and herald the foreboding rise of the "Internet" -- by which it means a newly powerful, vaguely malevolent, premium-services-based online world with competing content fiefdoms, controlled by powerful corporate interests.
Wired's vision is prescient because it fits well with what Google (GOOG) and Verizon (VZ) seem to be proposing with their recently announced net neutrality compromise, if the worst of the pessimists' fears are realized. (Net neutrality is the basic concept that broadband providers can't pick winners and losers on the Web or discriminate against rival content.)

Florida May Seek Billion-Dollar BP Payment to Plug Budget Gap
By Jim Snyder
Aug. 18 (Bloomberg) -- Florida may ask BP Plc for an emergency payment of more than $1 billion to plug a hole in its budget after the largest U.S. oil spill, and neighboring Gulf Coast states are weighing their options.
Steve Yerrid, a Tampa lawyer chosen by Florida Governor Charlie Crist to advise him on legal issues concerning the spill, said the state may seek an initial payment in the "lower range" of billions of dollars to make up for lost tax revenue.
"We're hoping rather than jobs being sacrificed or services to Floridians being lost, that we can develop some type of dialogue to get interim relief until state claims can be properly calculated," Yerrid said in a phone interview yesterday.

Collapsing Marsh Dwarfs BP Oil Blowout as Ecological Disaster
By Ken Wells
Aug. 18 (Bloomberg) -- Claude Luke throttles down his 21- foot aluminum work boat. Off to the left, the snout of an alligator disappears near the mouth of a watery gash in the Louisiana marshland.
The 51-year-old Cajun crab fishermen is touring the epicenter of an unfolding environmental disaster that dwarfs the BP Plc spill and predates it by decades, according to state scientists and environmentalists. If unchecked, the destruction threatens to undermine the world's seventh largest estuary and one of the most important U.S. energy corridors.

Tea Party Border Rally Draws Mexican Observers
by Robert M. Engstrom - HumanEvents.com
Editor's Note:
Bob took a lot of great pictures at the rally. They are compiled here for easier viewing.
While Americans attending the United Border Coalition's rally at the border gathered in 100 degree temperatures on a ranch next to the Arizona/Mexican border Sunday, it was clearly visible that illegal border crossers have not been discouraged by SB 1070.
On a hillside less than a mile into Mexico, a group of observers appeared.
There was an earful for the English speakers in the group across the border. Former Rep. J.D. Hayworth and more than a dozen conservative political candidates and Arizona Sheriffs Joe Arpaio of Maricopa County and Cochise County's Larry Dever lambasted the Obama Administration's handling of border security and illegal immigration.

Drones Surge, Special Ops Strike in Petraeus Campaign Plan
By Spencer Ackerman - Wired.com
KABUL, Afghanistan - Ever since the Afghanistan war became a counterinsurgency fight, critics have charged that commanders' cautions about using force only inhibit the fight against the Taliban. But in the shadows, NATO Special Operations Forces are engaged in an intensely lethal war of their own.
According to information provided to Danger Room by Gen. David Petraeus, the top NATO commander in Afghanistan, in just the past 90 days these elite units have captured or killed 365 militant leaders, detained 1,335 insurgent foot soldiers and killed another 1,031 insurgents on top of that.

Where will China's long march end?
By Peter Foster - FT.com
China has gone past Japan to become the world's second largest economy, and is closing in on the United States. But it faces challenges ahead
It's official. Dice the data any way you please, China has now eclipsed Japan as the world's second-largest economy. And if it keeps up its current rate of double-digit, pell-mell growth, it will surpass the US as the world's largest economy by 2020.
Of course, these are artificial benchmarks: if you take into account China's "grey market", its economy passed Japan's some time back. But almost every day seems to provide more evidence of how far and how fast China's rise is reshaping the world, to offer more reasons to believe that China's emergence as a world power is inexorable and inevitable.

*****
Timely interview with Jeri Corsi on possible attack of Iran. Will the world stand at the brink of WWIII?

Coast to Coast AM - 1 of 3 Attack on Iran
George Noory interviews Jerome Corsi

Coast to Coast AM - 2 of 3 Attack on Iran
George Noory interviews Jerome Corsi

Coast to Coast AM - 3 of 3 Attack on Iran
George Noory interviews Jerome Corsi

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