Bernanke's Latest Tricks, Running for the Exit & Pipelineistan's Ultimate Opera

Mike Whitney reveals Bernanke's latest financial trickery to our disbelieving eyes. Or maybe not as we should be getting used to being used. (Emphasis marks added - Ed.)

A Dollar Rout Or More Bernanke Trickery?

Consumer credit is falling fast. In July, consumer credit plunged by $19 billion, followed by an August drop of $12 billion, a 5.8 percent annual rate. Credit card spending decreased by nearly $10 billion in August, while non-revolving debt, including auto loans, fell by $2 billion. Credit has shrunk for 7 consecutive months, the longest period of decline since 1991. The banks have shrugged off their commitment under the TARP program to increase lending to consumers and businesses. They've either deposited their excess reserves with the Fed, where they earn interest, or invested them in the equities markets for better returns. The bottom line: Credit is shrinking and the economy is slipping further into deflation.

From MarketWatch:

U.S. banks are reducing their lending at the fastest rate on record . . . According to weekly figures provided by the Federal Reserve, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace . . . if the decline is mainly due to weak banks unable or unwilling to lend, then a turnaround in credit creation may have to wait until banks' balance sheets are repaired, a process that could be delayed by further expected defaults in consumer loans, mortgages and commercial real-estate loans.

Unemployment is rising and the pool of creditworthy borrowers is declining. When credit contracts in an economy where salaries have stagnated and joblessness is increasing, demand falls and recession deepens. That is, unless government spending takes up the slack in excess capacity. There is no organic growth in the economy at present. The so-called recovery is a result of fiscal stimulus and the Fed's extraordinary liquidity injections into the financial system. True growth and prosperity do not come via the printing press. The Fed's actions are just putting more and more pressure on the dollar.

From Bloomberg today:

Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades . . . . Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June...the highest percentage in any quarter with more than an $80 billion increase.

. . . “It looks like they are really backing away from the dollar.” (Bloomberg News) Congress has no say-so. Neither do the American people. The decision to skewer the dollar was made by the big banks and their allies at the Federal Reserve. Everyone else is just along for the ride. The Fed wants a cheaper dollar to increase exports, provide cheap capital for Wall Street, and to lower the true value of household and financial sector debt. But there are many pitfalls to "inflating one's way out of debt". It is a policy which should have been debated by the representatives of the people and not decided by unelected bank-oligarchs pursuing their own self-interests.

The dollar's share of global reserves is steadily falling. Private industry and central banks are shedding dollars to avoid painful adjustments in the future. Last week, South Korea, Taiwan, Thailand, and the Philippines launched currency market interventions to keep the dollar from plummeting. The situation is grave. The Fed's monetization and liquidity programs have made dollar-holders jittery. The central banks actions are the first sign of a disorderly unwind. The prospect of a dollar crash is now real.

Surprisingly, there is also a good chance that the dollar will strengthen short-term and that the misinformation about the dollar's future is being used to achieve the Fed's objectives. Fed chair Ben Bernanke is already monetizing the debt (via quantitative easing) and has slashed interest rates to zero. What else can he do? The only way to weaken the dollar further is through asymmetrical warfare, a disinformation campaign aimed at triggering a sell-off before the dollar strengthens when the stock market corrects and credit tightens even more. Is that what Bernanke has in mind?

The Fed has its back to the wall. It will do whatever is necessary to micro-manage the dollar's decline and retain its stranglehold on the global system.

Should we be "running for the exit" as one commenter suggests?

I said it here before anyone else that the BRIC nations would have the last word on the US economy. Well it looks like they aren't buying any more US treasury bond and are starting to dump their dollars holdings. The FED has no other choice but to lowering interest rate and monetizing the debt destroying the dollar value. EVERYBODY RUN FOR THE EXIT.

~Ronin

Tom Burghardt's latest on the new state security apparatus makes me wonder if we will be able to run anywhere, let alone for the exit.

As social networking becomes a dominant feature of daily life, the secret state is increasingly surveilling electronic media for what it euphemistically calls “actionable intelligence.”

. . . “Anyone can tweet, but the truth is, sometimes speech can be criminal,” John Burkoff, a professor at the University of Pittsburgh School of Law, told The Pittsburgh Post-Gazette.

By that standard, anyone who has the temerity to question the legitimacy of a system that drives millions into poverty, wages preemptive war to secure (steal) other people’s resources, destroys the environment or uses “speech” to oppose said crimes against humanity – and cheekily urges others to do the same – is, by definition, guilty, in “new normal” America.

Read more of Tom's essay as he explains how we can be locked up for using Twitter to monitor our police state actions while our government urges Iranian protesters to do exactly the same to their government. Is this the Red Queen speaking or the White Queen? (Emphasis marks added - Ed.)

The good professor had another take on the matter and told the Post-Gazette, “Were they sending it to people simply to protest, or to commit further crimes?” “Further crimes”? What crime? Oh yes, legally protesting the depredations of the capitalist system, that crime!

That such a statement can be uttered by a purported legal expert is rather rich with unintended irony. Burkhoff’s maneuver to cast the best possible light on repressive police operations is all the more absurd given the fact that none other than the Obama administration’s State Department had stepped-in and pressured Twitter to forego a service upgrade, and downtime, just scant months earlier.

Oh well. It's a new day, folks.

As Millions Will Starve as Rich Nations Cut Food Aid Funding, Warns UN.

Tens of millions of the world's poor will have their food rations cut or cancelled in the next few weeks because rich countries have slashed aid funding.

The result, says Josette Sheeran, head of the UN's World Food Programme (WFP), could be the "loss of a generation" of children to malnutrition, food riots and political destabilisation. "We are facing a silent tsunami," said Sheeran in an exclusive interview with the Observer. "A humanitarian disaster is unrolling." The WFP feeds nearly 100 million people a year.

And if you think any of this bad news will affect the U.S. government's ability to carry out its current wars (and some future ones now in the planning stages), you haven't been paying attention. Tom Engelhardt enlightens us. Tomgram: Pepe Escobar, Pipelineistan's Ultimate Opera

Back before email, a world traveler who wanted to keep in touch and couldn't just pop into the nearest Internet café, might drop you a series of postcards from one exotic locale after another. Pepe Escobar, that edgy, peripatetic globe-trotting reporter for one of my favorite on-line publications, Asia Times, has been doing just that for TomDispatch readers as he explores the geography that undergirds our civilization, the pipelines that crisscross Eurasia through which flow energy - and trouble. This, then, is his third "postcard" from what he likes to call Pipelineistan. The first in March began laying out a great, ongoing energy struggle across Eurasia via an embattled energy corridor (and a key pipeline) that runs from the Caspian Sea to Europe through Georgia and Turkey -- and the Great Game of business, diplomacy, and proxy war between Russia and the U.S. that has gone with it.

In May, he plunged eastward into tumultuous Central and South Asia and the devolving battleground that, in Washington, goes by the neologism AfPak (for the Afghanistan-Pakistan theater of operations). Now, he heads west toward Europe and another developing struggle, this time over just how natural gas from the Caspian Sea will reach Europe. Think of this as a story that lurks under so many other stories. For instance, this very day, the representatives of Russia, Germany, China, France, Britain, and for the first time, the United States, will be sitting down with Iran's representative in Geneva for what's billed as an historic exchange. On the table - and in global headlines - will be the Iranian nuclear program, a previously secret Iranian nuclear site, Iranian medium-range missile tests, sanctions of various sorts, the possibility of future attacks on that country's nuclear establishment, and so on. What won't be in the headlines, or the accompanying reams of analysis, is the approximately 15% of the world's natural gas deposits Iran controls. As it happens, for the Europeans and the Russians (and so for Washington), that's the story hidden under the Iranian imbroglio, which is why we need Pepe Escobar.

Tom

I agree with both Toms. Suzan ______________________