| 17) The Catastrophist View |
What would it take to send the
U.S.
economy-and New York's-into free fall? A doomsday primer
NEW YORK
MAGAZINE - By Duff McDonald - October 28, 2007
- - - Sitting
in a corner office of a nondescript building just off I-95 in Darien,
Connecticut, Schiff, the president of brokerage Euro Pacific Capital, and
author of Crash Proof: How to Profit From the Coming Economic Collapse, will
spend the next hour spelling out a singularly pessimistic view of the American
economy. And he will do so while exhibiting a curious juxtaposition unique
to the bearish prognosticator: He speaks of disaster with a smile on his
face. No, he's not happy about our impending doom. But he is happy that people
are finally taking him seriously.
Some people, anyway. The recessionary fears that were sparked by the global
liquidity crisis in August have eased, largely because of a resilient stock
market and a belief that the Federal Reserve's interest-rate cut in September
curtailed deeper losses. When Goldman Sachs invested in its own imploding
Global Equity Opportunities hedge fund in August, calling it an "opportunity"
and not a "rescue," people laughed. Guess who laughed last? Goldman, which
had reportedly enjoyed a $370 million gain on its $2 billion rescue by October.
The optimists stay focused on stories like Steve Jobs's next stroke of genius.
But Schiff, whom CNBC calls "Dr. Doom," has not, as bears do when winter
approaches, gone off to hide in a cave. Why not? Because every single one
of the underlying economic factors that he has identified as cause for concern
has worsened. And his is no longer a lone voice in the woods. If you don't
care to listen to a man nicknamed Dr. Doom, you can listen to people like
former Federal Reserve chairman Alan Greenspan, esteemed bond-fund manager
Bill Gross, or famed money manager Jeremy Grantham. They're part of a growing
chorus of voices that are saying many of the same things as Schiff.
Their bearish arguments come in many shapes and sizes, but here's the basic
one: The past five or six years have been deceptively fortunate ones for
the U.S. economy. That's because any troublesome developments-the surge in
oil prices from $28 per barrel in 2003 to about $87 today, for example-have
been papered over by rising home prices. Home equity has been used to buy
flat-screen TVs, SUVs, and more homes. Wall Street bought up all this debt
from lenders, thereby allowing them to lend more.
The softening of real-estate prices in most parts of the United States put
a crimp in this system, but it hasn't stopped it. The question is, what,
if anything, will? What will bring on the apocalypse that Schiff and others
believe is inevitable? They see it like this: - - - -
18) Vultures Are Circling Over Distressed Properties
THE
WASHINGTON POST - By Kenneth R. Harney - October 20, 2007
Call them grave
dancers, vulture funds, turnaround specialists or the more euphemistic
"opportunity investors." However you identify them, the deal is the same:
When hyperactive real estate markets lose their sizzle, or property owners
no longer can afford to hang on to their houses, well-capitalized investors
smell blood and move in.
That's happening in most of the "bubble" areas of the country that saw heavy
speculative activity and razzle- dazzle financing from 2001 through 2005.
But it's also happening in less volatile markets where unaffordable mortgages
and economic distress are producing record numbers of panic sales to investors
at fractions of former values.
In Miami Beach and elsewhere in South Florida, for example, real estate
consultant Jack McCabe said he is advising "hedge funds, high-net-worth
individuals, Wall Street investment banks, and groups of doctors and lawyers"
who all want a piece of the area's tottering condominium and townhouse sector,
where some properties are selling for 50 cents on the dollar.
McCabe, chief executive of McCabe Research and Consulting in Deerfield Beach,
Fla., said investment groups with capital "in the multiple billions" are
already active in South Florida, searching for fire-sale prices on properties
with good long-term prospects. In the greater
Miami area, McCabe estimates, there are 25,000 unsold condos and
townhouses on multiple listing services, which he calculates is a 35-month
supply at current absorption rates. Another 22,600 units are under construction,
and 4,000 more are to begin construction in the next year or two.
At one recent auction, McCabe said, investors walked away with three-bedroom
condos for $300,000 that originally sold for $550,000 to $675,000. Though
not all units are selling at giveaway prices, he says,
Miami
is an example for overbuilt, overpriced condo markets that were dominated
by speculators during the boom, many of whom have simply sent back the keys
and left.
McCabe declined to identify any of his roster of vulture- fund clients, "who
prefer to fly under the radar." But they are out in droves to acquire entire
buildings -- or floors or individual units -- then refurbish them, convert
them to different uses, rent them, out or hold them and resell at the first
sign that the local market is bouncing back. McCabe said that for many of
these units, this might not happen until 2010 or 2011.
McCabe's segment of the market tends toward big bucks, but around the country,
there are hundreds of smaller-scale investors on the prowl for turnaround
situations in otherwise stable markets. The largest organization of such
entrepreneurs is HomeVestors, a
Dallas franchiser started in the mid-1990s. Its
more than 260 franchisee partners are on track to buy more than 7,100 individual
houses in 35 states this year at value discounts averaging 35 percent to
45 percent, said John Hayes, president and chief executive.
Best known for its advertising slogan "We Buy Ugly Houses," HomeVestors trains
its franchisees to spot and capitalize not only on houses that need work,
but also on what Hayes calls "ugly situations" -- people with problems who
are motivated to sell for cash. Among the most common situations: divorce,
death, job loss, problem tenants and mortgage delinquencies caused by
unaffordable financing. - - -
-
Risk-Taker's Reign at Merrill Ends With Swift Fall
NEW YORK TIMES [NYTimes Group/Sulzberger] - By Landon Thomas Jr. and Jenny
Anderson - October 29, 2007
- - - Now after an $8.4 billion write-down and an unauthorized merger approach
to a rival bank, Wachovia, Mr. O'Neal has lost the confidence of his board
and is expected to resign as chairman and chief executive as early as today.
- - -
Mr. O'Neal's fall has been stunning in its speed and ferocity. This spring,
Merrill's stock was trading around $95 a share, and Mr. O'Neal was being
celebrated for transforming Merrill into a more aggressive, risk- friendly
institution. Last week, the stock sunk to as low as $59 a share.
The events underscore that on Wall Street, even the highest paid chief executives
with handpicked boards are not immune to the furies of investors and employees.
- - - -
Read
Full Report
Countrywide
Chief Is Said to Face S.E.C.
Inquiry
NEW YORK TIMES [NYTimes Group/Sulzberger] - By Gretchen Morgenson - October
18, 2007
The Securities and Exchange Commission has opened an informal investigation
into the stock sales of the chief executive of Countrywide Financial, a person
briefed on the matter said last night, the latest problem to hit the struggling
mortgage lender.
Countrywide's chief executive, Angelo R. Mozilo, has come under criticism
from shareholders who have questioned the timing of the sales, which allowed
him to gain more than $132 million in the months before the price plummeted
amid the deepening mortgage crisis. - - -
Since 2004, Mr. Mozilo has sold shares through prearranged selling programs,
known as 10b5-1 plans after an S.E.C. rule. But the pace of the sales, which
have generated $300 million in gains for him since 2005, began to increase
in October 2006 when he put a new program in place. - - -
Since October 2006, Mr. Mozilo has twice raised the number of shares that
could be sold under his plans. In December 2006, when Countrywide shares
were trading at $40.50, he increased the number of shares to be sold each
month to 465,000 from 350,000. Then in February, when shares hit a high of
$45.03, he increased the number of shares sold each month to 580,000.
Shares closed down 74 cents yesterday, to $17.35. - - - -
Read
Full Report
4 Major Banks
Tap Fed for
Financing
NEW YORK TIMES - By Eric Dash - August 23, 2007
The country's four biggest banks announced yesterday that they had each borrowed
$500 million from the Federal Reserve, taking an unusual step to ease the
credit squeeze that has been rattling the financial system for weeks.
The banks - Citigroup, Bank of America, JPMorgan and Wachovia - said that
they had tapped the so- called discount window of the Federal Reserve Bank
of New
York, five days after the central bank lowered the rate and loosened its
collateral standards in an effort to inject more money into the credit markets.
The coordinated moves were seen as largely symbolic, aimed at removing the
stigma of borrowing from the discount window, which is regarded as a last
resort for financial institutions. All four banks can borrow money more cheaply
elsewhere, and all said they had "substantial liquidity." - - - -
Read
Full Report
HSBC begins
US mortgage
cull
LONDON DAILY TELEGRAPH [Barclay] - By Philip Aldrick, Banking Correspondent
- August 23, 2007
The US sub-prime mortgage crisis claimed a handful of new victims yesterday
as the loans market continued to dry up and channels to short-term debt financing
remained closed for business.
HSBC, Europe's largest bank, revealed plans to shut down a mortgage servicing
office in Indiana and axe 600 staff, while San Diego-based Accredited Home
Lenders will close more than half of its mortgage operation, with the loss
of about 1,600 jobs.
Both banks have been forced to retreat after
US sub- prime borrowers started defaulting
on their loans and investors switched off wholesale funding, which has
effectively seized up the mortgage origination market.
High default levels have also devastated the credit markets, where debt is
now both expensive and difficult to access. As a result, H&R Block, the
largest
US income
tax preparation company, has resorted to tapping working capital lines for
funds. The move echoes Scottish bank HBOS, which said on Tuesday it would
fund revolving short-term loans in-house because the credit markets are now
too expensive.
H&R Block finance director William Trubeck said: "The credit markets
have become constrained and unstable. We have decided to substitute this
more stable source of funds to support our short-term needs." It has $2bn
(£1bn) in committed working capital lines that mature in 2010, which
it will continue to use until commercial paper markets stabilise and debt
pricing returns to normal.
Accredited is closing 60 retail branches and five support centres, as well
as halting US wholesale mortgage applications from brokers. The job cuts
will shrink its workforce to 1,000 from 2,600.
Some 14 US mortgage lenders have sought bankruptcy protection this year and
more than 90 have either shut down completely or sought buyers.
Read
Full Report
Californians
rush to pull money from Countrywide Bank
LOS ANGELES TIMES [Tribune Company] - By E. Scott Reckard and Annette Haddad
- August 17, 2007
LOS ANGELES - Anxious customers jammed the phone lines and Web site of
Countrywide Bank and crowded its branch offices to pull out their savings
because of concerns about the financial problems of the mortgage lender that
owns the bank.
Countrywide Financial Corp., the biggest home-loan company in the
United
States, sought Thursday to assure depositors and the financial industry that
both it and its bank were fiscally stable. And federal regulators said they
weren't alarmed by the volume of withdrawals from the bank.
The mortgage lender said it would further tighten its loan standards and
make fewer large mortgages. Those moves could make it harder to get a home
loan and further depress the housing market.
The rush to withdraw money - by depositors that included a former Los Angeles
Kings star hockey player and an executive of a rival home-loan company -
came a day after fears arose that Countrywide Financial could file for bankruptcy
protection because of a worsening credit crunch stemming from the sub- prime
mortgage meltdown.
The parent firm borrowed $11.5 billion Thursday by using up an existing line
of credit from 40 banks, saying the money would help the lender meet its
funding needs and continue to grow. But stock investors, apparently alarmed
that the company felt compelled to use the credit line, sent Countrywide's
already battered stock down an additional 11 percent.
Read
Full Report
20) Bush is the biggest spender since LBJ
MCCLATCHY NEWSPAPERS - By David Lightman - October 22,
2007
WASHINGTON -
George W. Bush, despite all his recent bravado about being an apostle of
small government and budget-slashing, is the biggest spending president since
Lyndon B. Johnson. In fact, he's arguably an even bigger spender than LBJ.
"He's a big government guy," said Stephen Slivinski, the director of budget
studies at Cato Institute, a libertarian research group.
The numbers are clear, credible and conclusive, added David Keating, the
executive director of the Club for Growth, a budget-watchdog group.
"He's a big spender," Keating said. "No question about it."
Take almost any yardstick and Bush generally exceeds the spending of his
predecessors.
When adjusted for inflation, discretionary spending - or budget items that
Congress and the president can control, including defense and domestic programs,
but not entitlements such as Social Security and Medicare - shot up at an
average annual rate of 5.3 percent during Bush's first six years, Slivinski
calculates.
That tops the 4.6 percent annual rate Johnson logged during his 1963-69
presidency. By these standards, Ronald Reagan was a tightwad; discretionary
spending grew by only 1.9 percent a year on his watch.
Discretionary spending went up in Bush's first term by 48.5 percent, not
adjusted for inflation, more than twice as much as Bill Clinton did (21.6
percent) in two full terms, Slivinski reports. - - - -
21) Ex-Mexican prez: 'Amero' on the way
Vicente
Fox confirms long-term deal worked out with President Bush
WORLDNETDAILY
- By Jerome R. Corsi - October 9, 2007
Former Mexican
President Vicente Fox confirmed the existence of a plan conceived with President
Bush to create a new regional currency in the Americas, in an interview last
night on CNN's "Larry King Live."
It possibly was the first time a leader of
Mexico,
Canada or the
U.S. openly confirmed a plan for a regional
currency. Fox explained the current regional trade agreement that encompasses
the
Western
Hemisphere is intended to evolve into other previously hidden aspects of
integration.
According
to a transcript published by CNN, King, near the end of the broadcast,
asked Fox a question e- mailed from a listener, a Ms. Gonzalez from Elizabeth,
N.J.: "Mr. Fox, I would like to know how you feel about the possibility of
having a Latin America united with one currency?"
Fox answered in the affirmative, indicating it was a long-term plan. He admitted
he and President Bush had agreed to pursue the Free Trade Agreement of the
Americas - a free-trade zone extending throughout the
Western
Hemisphere, suggesting part of the plan was to institute
eventually a regional currency.
"Long term, very long term," he said. "What we proposed together, President
Bush and myself, it's ALCA, which is a trade union for all the
Americas."
ALCA is the acronym for the Area de Libre Comercio de las Américas,
the name of the FTAA in Spanish.
King, evidently startled by Fox's revelation of the currency, asked
pointedly, "It's going to be like the euro dollar (sic), you mean?"
"Well, that would be long, long term," Fox repeated.
Fox noted the FTAA plan had been thwarted by Hugo Chavez, the radical socialist
president of
Venezuela.
"Everything was running fluently until Hugo Chavez came," Fox commented.
"He decided to combat the idea and destroy the idea."
Fox explained that he and Bush intended to proceed incrementally, establishing
FTAA as an economic agreement first and waiting to create an amero-type currency
later - a plan he also suggested was in place for NAFTA itself.
"I think the process to go, first step is trading agreement," Fox said. "And
then further on, a new vision, like we are trying to do with NAFTA."
Fox's reply to the CNN viewer was captured in a
clip
posted on YouTube.com.
CNN
posted video of the interview but did not include the segment with questions
from viewers. - - - -
22) 'Amero coming within decade'
Strategist
expects currency changes as Canadian dollar matches
greenback
WORLDNETDAILY
- By Jerome R. Corsi - October 5, 2007
BankIntro
ductions.com, a Canadian company that specializes in global banking
strategies and currency consulting, is advising clients that the amero may
be the currency of North America within the next 10 years.
"The amero would compete against other regional currency blocks,"
BankIntroductions.com
says. "At present, with the Canadian dollar approaching par, more talk
for an amero currency unit will become popular in Canada."
The company says that with the successful implementation of NAFTA, "the one
dragging component for the amero will be Mexico, but in time this will change."
"Implementation of the amero currency may actually give Mexico an economic
boost, thus helping to alleviate Mexican immigration pressures into the United
States for those Mexicans seeking financial gain," BankIntroductions.com
advises.
"The amero one day may well be circulating throughout North America."
Matt Bell, president of BankIntroductions.com, told WND in an e-mail to "feel
free to quote our currency research on Canada. Our general opinion on the
amero stands as stated."
As WND reported, coin designer Daniel Carr has issued for sale a series of
private-issue fantasy pattern amero coins that have drawn attention on the
Internet.
WND
also reported the African Union is moving down the path of regional economic
integration, with the African Central Bank planning to create the "Gold Mandela"
as a single African continental currency by 2010.
The Council on Foreign Relations also has supported regional and global
currencies designed to replace nationally issued currencies.
In an article in the May/June issue of Foreign Affairs, entitled "The End
of National Currency," CFR economist Benn Steil asserted the dollar is a
temporary currency.
Steil concluded "countries should abandon monetary nationalism," moving to
adopt regional currencies, on the road to a global "one world currency."
WND
previously reported Steve Previs, a vice president at Jeffries International
Ltd. in London, said the amero "is the proposed new currency for the North
American Community which is being developed right now between Canada,
the U.S., and Mexico."
A
video clip of the CNBC interview in November with Jeffries is now available
at YouTube.com.
WND
also has reported a continued slide in the value of the dollar on world
currency markets could set up conditions in which the adoption of the amero
as a North American currency gains momentum.
Also
"Common African
currency in 2010"
AFROL, AFRICAN NEWS AGENCY - By staff writer - November 29, 2006
The African Union Group of Eminent Persons on reparation has concluded plans
to introduce a bank of all African currency in 2010. Named Gold Mandela,
the suggested continental legal tender was expected to boost investment and
trade in
Africa.
Peter Alexander Egom, the Coordinator of African Capital & Commodity
Services Company, is organising a five day summit designed to bring together
more than 200 delegates from all over
Africa and the Diaspora to brainstorm, network
and exchange creative ideals towards the realisation of the project. Mr Egom,
said the proposed bank would issue Gold Mandela, as the legal tender for
transaction of business among members countries. - - -
"Indeed, the West African Monetary Institute (WAMI), which has had the mandate
to fast-track the emergence of the ECO, originally by January 2003, then
by July 2005 and has now rescheduled to fly by July 2009. Why ECO has been
a pipe dream is that the pillars or promoters of the currency are located
in France
and Europe, not in Africa," he said.
For years, nationals of the five West African states have been putting heads
together to introduce a single currency called the ECO. But the lofty idea
seems to be buried under the drawers and could not therefore be implemented.
And the irony of it all is that member countries of West Africa Monetary
Zone (WAMZ) - Ghana, The Gambia, Nigeria, Sierra Leone and Guinea - keep
deferring the launch of ECO.
While the fate of ECO hangs in the balance, Ghanaian officials on Monday
said even if ECO is launched, it would take their country three years to
do so. - - - -
Read
Full Report
23) Cyprus and Malta to adopt euros
Ed.
Note: According to BBC, the
Cyprus euro coin will show a 3,000 BC cruciform idol
[Pictured]
BBC NEWS
- July 10, 2007
Cyprus and Malta
will adopt the euro on 1 January 2008 after EU finance ministers gave them
the final go-ahead.
The 27 ministers decided that one euro would replace 0.585274 Cyprus pounds
and 0.4293 Maltese lira.
They will be the second and third of the countries that joined the EU in
2004 to enter the eurozone.
Slovenia started using euros on 1 January 2007.
New members have to meet strict criteria on inflation, interest rates, debt,
deficits and currency stability.
Lithuania,
which had also wanted to adopt the euro in 2008, failed because of its high
inflation rate.
Slovakia is next in line, hoping to switch to the single currency in
2009.
24) PetroChina Surpasses GE as Second-Biggest
Company
BLOOMBERG [Bloomberg L.P.] - By Winnie Zhu and Ying Lou -
October 15, 2007
PetroChina Co.
gained the most in five months in Hong Kong trading as oil rose to a record
above $85 a barrel, vaulting the state-owned oil producer over General Electric
Co. to become the world's second- largest company.
The stock climbed 13 percent, valuing Beijing-based PetroChina at HK$3.36
trillion ($434 billion), compared with General Electric's $420 billion. Asia's
biggest company is closing in on Exxon Mobil Corp.'s $518 billion value.
The rally, part of a record year for Chinese stocks, underscores PetroChina's
key role in supplying oil to the world's fastest-growing major economy. U.S.
billionaire Warren Buffett sold more than half of his stake in PetroChina
this year. The stock has soared 14-fold since its 2000 public share sale.
- - - -
25) IRS loses challenge to prove tax liability
Lawyer is acquitted after arguing income levy lacks legal
foundation
WORLDNETDAILY
- By Bob Unruh - July 26, 2007
The Internal
Revenue Service has lost a lawyer's challenge in front of a jury to prove
a constitutional foundation for the nation's income tax, and the victorious
attorney now is setting his sights higher.
"I think now people are beginning to realize that this has got to be the
largest fraud, backed up by intimidation and extortion and by the sheer force
of taking peoples property and hard-earned money without any lawful authorization
whatsoever," lawyer Tom Cryer told WND just days after a jury in Louisiana
acquitted him of two criminal tax counts.
And before you consign him to the legions of "tin foil hat brigades" who
argue against paying taxes, and then want payment to explain how to do that,
he addresses the issue up front.
"These snake oil peddlers have conned millions of dollars out of many
well-intended patriots and left a trail of broken lives in their wake. ---
These charlatans should be avoided, not only because they will lead you to
bankruptcy and prison, but because by association they discredit those who
are telling the truth," he said.
The truth, he said, is where he comes in, with the launch of a new Truth
Attack website that is intended to build on his victory, and create a coalition
of resources to defeat - ultimately - the income tax in the United States.
Although the legal citations in the case tend to run the length of paragraphs,
Cryer told WND the underlying issue is not that complicated. Essentially,
he argued that income is not necessarily any money that comes to a person,
but rather categories such as profit and interest.
He said the free exchange of labor for compensation has been upheld as a
right by the Supreme Court, but that doesn't necessarily make the compensation
income.
If ever such an argument were to be presented widely, Cryer said, the income
to the federal government would plummet. But not to worry, he said, the expenses
could be reduced equally by eliminating programs, departments and agencies
that also have no foundation in the Constitution.
"The Founding Fathers intentionally restricted the taxing powers of the new
federal government as a measure of restraint on its size. By exceeding that
limited taxing authority the federal government has been able to obtain resources
beyond its intended reach, and that money has enabled the federal government
to exceed its authority," he said.
For example, he said, the Constitution does not empower the federal government
to regulate education, or employment, and agriculture, yet it does so.
The jury in U.S. District Court in
Louisiana voted 12-0 to find Cryer, of
Shreveport,
not guilty of failure to file income taxes for two years. He had been indicted
in 2006 on charges of failing to pay $73,000 to the IRS in 2000 and 2001.
The next step in his personal case will be up to the IRS and prosecutors,
if they choose to continue the issue, he said.
But for the rest of the nation, he's working with Save-a- Patriot, the Free
Enterprise Society, Live Free Now and his own Lie Free Zone to spread the
message of the truth.
"There are three points that are important," he told WND. "There's no law
making the average working man liable [for income taxes], there's no law
or regulation that allows the IRS to contend that earnings are 100 percent
profit received in exchange for nothing, and the right to earn a living through
any lawful occupation is a constitutionally protected fundamental right,
and it is exempt from taxation."
Spokesman Robert Marvin in
Washington's IRS office told WND the Internal Revenue
Code provides for taxation on salaries or wages, but when pressed for a specific
citation, or constitutional provision, he said, "I can't comment."
Cryer's encounter with tax law began more than a decade ago when a friend
told him the income tax was sham. Cryer started researching, hoping to keep
his friend out of trouble. But his conclusions, after years of research,
were exactly what his friend told him.
He researched not only tax laws, but also the documents pertaining to the
drafting of the U.S. Constitution as well as the first income tax.
He said throughout his battle, he's offered at every turn to pay taxes if
the IRS could show him the authorization, and that never has happened.
"The Criminal Investigation Division and Department of Justice both responded
only with 'your position is frivolous.' I had never stated a position, so
how could they know whether it was frivolous?" he said. "Imagine my sending
you a bill for $1,000 and when you call me and ask what the bill was for
I simply said, 'that position is frivolous, just write the check and send
it in.'"
His acquittal, he said, was a precedent because it means "people can see
and recognize the truth."
He said multiple Supreme Court opinions have affirmed an individual's ownership
of his or her own labor, and "exercising your fundamental rights" is not
taxable. "It is definitely a trade. What most people receive in the form
of wages, salaries or in my case fees that they personally earned for their
labor is not received in exchange for nothing."
He said there might be a profit that should be taxable, but there might not.
"The IRS lets Wal-Mart sell a trillion dollars worth of goods, but they can
back out their cost of goods [before being taxed,]" he said. "The IRS considers,
in the case of a Wal-Mart wage earner, 100 percent of what he takes in is
profit."
"But he's using his life, energy and work lifespan, and depleting it as he
goes," Cryer told WND. "[Working] is a God-given fundamental right that is
protected under the Constitution and can't be taxed any more than exercising
freedom of speech." - - -
 Politics/World/USA |
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