Train Wreck of the Week
By Bob Chapman
July 3, 2005
George W. Bush has lied about WMD in order to create an excuse for war, and we now also find he lied about his actions and interest prior to the war. In August of 2002, he began military actions inside Iraq. First came the bombing extension and then the insertion of Special Forces Units for reconnaissance. Six months later the CIA and special operations were sent into Iraq. Our President was waging aggressive war long before official war and invasion began. This is George and the neocon's version of democracy. Our intelligence tells us that the same pre war, war preparations are going on in Iran, which is to be the elitists' next target. Our special units are already in Iran and have been for some time, and the BBC tells us our U2 spy plane was shot down while over Iran. Our government hasn't told us yet where the wreckage is, only that they are guarding and inspecting it. Essentially, we are already at war with Iran - we just haven't invaded yet. US trained infiltrators from Azerbaijan are already in Iran collecting intelligence, which we mentioned some months ago. We also have military aircraft in Azerbaijan with which we can attack Iran. Our government is in the process of creating another war for profit - to steal Iran's oil. If we do not impose tariff barriers on goods and services, America's economic structure will be destroyed. Yes, consumer prices will rise but that cost is far less than the destruction of our economic and financial system, which is now taking place. Free trade and globalization has been disastrous for our country.
If you live in a hot housing market you had best pay attention and beware that you will suffer the most from a downturn. The FDIC says the 22 major local markets with the fastest growing prices account for 35% of the nation's housing values, that is those that are up more than 30% over the past three years. In 2004, 55 of 362 markets qualified, and account for about 40% of national residential values.
Fannie Mae concludes that the probability of regional housing busts has risen sharply in certain parts of the country and current conditions mirror past conditions that preceded regional housing busts. Twenty-four percent of the sub-prime loans, included in private label securities, were adjustable rate mortgages with an interest-only payment provision. More than 30% of sub-prime loans were topped with a home-equity loan granted at the same time. Overall, mortgage borrowings rose to an average of 91% of home values.
We are totally convinced a national housing bubble exists and the risks to the economy are enormous. The Fed and government agencies are well aware of the situation. If they tighten the way they should, the stock market, bonds, real estate, and pensions will all fall in value. If they do nothing and continue to inflate, the boom will get further out of hand and the resultant fall will be worse. If the interest rates are not quickly increased and the credit punchbowl removed the downside will be ghastly.
Five years ago in early April 2000 we announced the end of the equity bubble and this fall we should start to see the end of the real estate bubble. Thanks to the Federal Reserve, one bubble led to another. It did not just happen that way; it was planned that way. The same crowd that saw equities fairly valued sees real estate fairly valued today. There are no fundamentals to drive the real estate market, only low interest rates. The situation is little different from 2000.
Over 2-1/2 years the S&P 500 fell 49%. Presently house price inflation is at a 25-year high in real terms. In the first quarter of 2005, double-digit house price inflation was evident in 23 states plus DC. In 25 of the top 100 metropolitan areas, the rate of home price appreciation was at least 20%. Investors, not owners are currently accounting for 11.5% of newly-originated conventional mortgage loans; that is up from a 2% low in late 1995. Mortgage financing is now a game of exotics; anything goes for now, who cares about tomorrow.
Prompted by low interest rates and exotic mortgages and low investment returns most everyone has jumped on the real estate bandwagon. This is a global bubble with only a few exceptions. This is, as we have said many times, the biggest financial bubble in history. It's not only the Fed; it's a number of central banks and governments that have added fuel to the fire. Sir Alan Greenspan was never concerned with irrational exuberance; he was the one responsible for running the stock market up from December 1995 to April 2000. He could have stopped it at any time simply by raising interest margin requirements, but he was not about to do that. He has definitely kept interest rates down to keep construction and the housing boom going and he is still at it. These were not blunders. These were deliberate acts. Greenspan almost single-handedly created the carry trades, yen, dollar, and gold. He has been the originator of the biggest financial excesses in history - and he knows they will end in financial tragedy. Greenspan made the American home into a piggy bank. The result is that household sector indebtedness now stands at 91% of GDP up 20% in just five years. It previously took 15 years to increase debt 20%. Household sector debt-service burdens are at historic highs when scaled by disposable personal income. This is truly astonishing in a climate of rock-bottom interest rates. Just a mild recession could easily turn into a real squeeze causing a financial domino affect. The negative leverage is there with the ARM share of newly originated mortgage loans at 40%. The worst part is almost no one has an exit strategy unless they are out of debt including their mortgages. It will not be comforting when you lose everything, because everyone else is in the same boat. Sir Alan Greenspan learned nothing from history or the recent Japanese fiasco, and that is because this collapse was deliberately engineered. This asset bubble, like all asset bubbles, will implode under its own weight. Get out of debt, particularly credit card debt, get gold and silver related assets and keep your powder dry.
We are told that in order to implement global taxation for the UN, Bilderberger's recommend that the best time to ask for taxes, is once the conflict in the Middle East subsides. Then the world will be subjected to brutal images of destruction. Some believed the time was now while the war rages.
On the question of higher oil prices, it was said $25.00 oil would bust the debt bubble.
Martin Feldstein said oil at $50.00 a barrel would cost the US $1 billion a day or 3% of 2004's GDP. Another said, oil at $120.00 a barrel will greatly benefit the elitists in the US and Britain, but Russia and China would be the biggest winners. As a major exporter, China would just pass on the higher costs to consumers. Russia could devalue the dollar by re-denominating its energy trade with Europe from dollars to euros. This would force Europe's central banks to balance their foreign exchange reserves in favor of the euro, not the US dollar.
Others were concerned about the viability of the airline and auto industries due to higher oil prices. They also referred to the pensions and Social Security.
The Nobel Committee is considering giving the Nobel Peace Prize to Mordechai Vanunu, who spent 18 years in prison, 11-1/2 of those years in solitary confinement, for providing evidence of Israel's nuclear arsenal to a British newspaper in 1986. The Israeli, America, and British are furious because Israel and the US are about to punish Iran for supposed doing the same thing. On the face of it, this was a very disappointing meeting for Bilderbergers, only to be followed by the EU constitution rejection.
Today's free-trade-globalism propaganda flies in the face of our history as we have mentioned many times before. From 1821 to World War II tariffs generally ranged from 25% to 50% with an average of 40%. From WWII to 1970 they were lowered to 12%. They now are about 5%. Adam Smith favored tariffs to protect national defense industries, to encourage domestic industries, to retaliate against nations that impose prohibitive tariffs, and to recover lost markets. Alexander Hamilton said the independence and security of a country appear to be materially connected with the prosperity of manufacturers. Thomas Jefferson believed duties were necessary to encourage domestic industry. He said every good citizen should use no foreign article that can be made within ourselves, without regard to difference in price. Henry Clay said poverty befalls a nation that neglects and abandons the care of its own industry, leaving it exposed to the action of foreign powers. Lincoln said, abandonment of protective policy must result in the increase of both useless labor and idleness; and so, in proportion must produce want and ruin among our people. One of the best comments was from professor of political economy, Friedrich List. Men are not part of a global community, in which their interest harmonized in a network of international commerce and division of labor. Between man and humanity was the nation. Each nation had its own history culture, stage of development and position of power relative to other nations of the world. And, the economic prosperity of each man was tied up with the success or failure of his own nation's struggle for political and economic influence and control in the global-competition between nation-states. For the nation's prosperity and betterment, it was often necessary for the individual to sacrifice his private interest in the area of trade and profit opportunities for the national interest of the country to which he belonged. Others who were against free trade were Karl Marx, Chancellor Otto Von Bismarck, Cordell Hull, and John Maynard Keynes who recanted his free trade view in 1930.
By the 1990s customs duties that once produced 50 to 90% of US government revenues yielded only 1%. Eight months after the crash of 1929, Congress passed Smoot-Hawley. Therefore, Smoot-Hawley did not cause the crash, the Federal Reserve did, and it was supposed to prevent such collapses. Besides it only increased tariffs from 40% to 59% and it only applied to one-third of US imports. These are the lies that have been promulgated by elitists. It applied to only 1.3% of GNP. It is totally inconceivable that an increase in tariffs of 1.3% of the GNP triggered the collapse of 5,000 banks, wiped out five-sixths of the stock market, caused a drop of 46% in GNP, and sent unemployment soaring to 25% - hardly. The decline in net exports was miniscule.
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