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Old 05-16-2009, 06:28 PM   #61
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Canada has some significant innate advantages over the US...the primary one being that our FDI is essentially immobile.
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Old 05-17-2009, 10:29 AM   #62
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Originally Posted by AnnRKeyintheUSA View Post
The con is, we are sinking deeper into debt as a country and soon will be owned by China.
i believe china only owns about 7% of the national debt.
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Old 05-17-2009, 10:41 AM   #63
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Canada has some significant innate advantages over the US...the primary one being that our FDI is essentially immobile.
We have a higher reserve ratio for cash. It's harder for there to be a run. The U.S. should change theirs.
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Old 06-03-2009, 11:37 AM   #64
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Do The Math

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Do The Math
Hernando De Soto, National Post

As a Peruvian educated by British and American teachers, I learned never to embark on a major task without first "doing the math." No more of that Latino "happy go lucky, trust your gut and say three Hail Marys" approach to life.

Without measurement, my teachers advised, I wouldn't be able to identify and disentangle the very reality before my eyes. By doing the math, I would see order and coherence, the way things were organized; invisible relationships would come into view, and right behind order would come meaning, followed by confidence. Thanks to my Anglo-Saxon education, I learned the lesson: You cannot manage what you have not previously measured.

So imagine how I have felt watching my role models go to war over weapons of mass destruction that they never actually assessed, or now, watching them wage a losing war against derivatives -- which both Warren Buffet and George Soros have called "financial weapons of mass destruction" -- without locating or counting them either.

And, man, do those financial instruments need measuring: Pooled, packaged and traded around the world, they are now the principal reason for today's massive credit contraction. The fear among financial institutions that potential borrowers and users of credit and capital could be burdened with so many nonperforming derivatives that they would be unable to repay their loans and protect their investments has plunged the global economy into a recession.

The U. S. Securities and Exchange Commission estimates that derivative paper is worth $596-trillion (all figures in U. S. dollars) -- 10 times the value of total world production -- while studies at the Bank for International Settlements in Basel, Switzerland, conclude that it could be twice as much --$1.2-quadrillion.

Exactly how many of those derivatives are actually nonperforming and would have to be surgically removed to stop their toxicity from spreading and destroying trust among creditors and investors? Nobody knows that for sure either. U. S. Treasury Secretary Timothy F. Geithner has set aside $1-trillion to assist in buying those toxic assets, but the SEC has guesstimated that there might be upward of $3-trillion worth.

With so much at stake, clearly an accurate accounting is in order. Once this paper is brought "into the sunshine," as former SEC chairman Christopher Cox said at the beginning of the crisis, "money and credit will begin to flow again." Government has to assure that it is located, quantified and usefully categorized so that the market can again gauge risks and restore trust by isolating the toxic from the healthy paper.

So what are we waiting for? Many worry about government meddling in the affairs of financial institutions. Some contend that Wall Street has Washington in its pocket. Others suspect that the bankers are afraid that the numbers will be so high as to spark a run on their banks. And then there are those who still believe that the market will be able to sort it all out -- if we would just stand back and let the vulture capitalists dispose of the toxic stuff in their discreet and profitable ways.

Let me offer just four of the many good reasons I could give for why "doing the math" -- right now -- is still the best strategy for halting the global economic meltdown threatening us.

First, the vultures I've talked to tell me that buying a significant amount of paper in the dark will take years. With information about derivatives not standardized and thousands of idiosyncratic bonds sold, resold and scattered helter-skelter all over the market, it will be difficult for any individual vulture to calculate their worth until someone locates and categorizes them.

In fact, some derivative paper is so sloppily structured that banks have been unable to figure out the contents of their own portfolios, and U. S. courts continue to reject many foreclosures that are based on this kind of paper. So before we could really hand over the solution to the vultures, someone still would have to do the math.

And even while the vultures are, minimally, at work, the contamination will continue as this huge shadow economy of derivative paper infects everything it touches. Consider that a mere 7% default on subprime paper -- equivalent to maybe $1-trillion or $2-trillion -- quickly contaminated other paper, creating a $50-trillion hole in the U. S. economy from losses in stocks, home values and revenues in less than one year. By not counting and identifying derivatives one by one and drawing a legal boundary around each by means of the rules of property law (things such as registration, traceability and standardized identification), we are unable to protect every asset and every particular interest on that asset from contamination. The longer we wait to do the math, the worse it will get. And the more likely the anarchy of this shadow economy will spread.

In the world where I come from, it is the typical state of affairs. In fact, apart from the elite Westernized minority, most people's assets are covered by paper that is endemically toxic: not recorded, not standardized, difficult to identify, hard to locate, its real value so opaque that ordinary people cannot build trust in each other or be trusted in global markets. In short, for shadow economies outside the U. S. and Europe, "credit crunch" and "meltdown" are chronic conditions.

You don't want to go there: It will wipe out your middle class, nurturing radical politics, class confrontation, violence, crime and massive drug production and narco-trafficking. (North Americans only know drug consumption; just wait until you see the supply side of the deal.)

Finally, you can't continue the bailouts, monetary infusions and tax breaks because you will eventually run out of money -- and still have little credit available. That is because the overwhelming amount of available credit is not made up of money but assets documented in property records, such as fungible real estate titles, mortgages, bonds and derivatives, which have some of the financial attributes of money -- what economists used to call "moneyness." In fact, although there is only $13-trillion in cash notes and coins worldwide, there are hundreds of trillions of dollars in "property paper," when moneyness is taken into account.

If you want to get credit flowing again, you must restore trust in paper as soon as possible. And that means measuring the assets, recording them, finding and purging those that are toxic and preventing future debasement of the paper -- in essence, submitting it to property law just like all the other assets that we own and value.

Before we can get out of this recession, we need to concede that we just don't have the right information. At present, the world of derivatives is devoid of useful facts and a structure from which we can extract the meaning, knowledge and confidence required to end the credit crunch.

And before anyone can get those facts, we have to do the math.

-Economist Hernando de Soto is the author of the The Other Path and The Mystery of Capital. He has helped carry out property-reform programs for heads of state in about 20 countries. He will be in Toronto tonight to participate in the Munk Debate on foreign aid to developing countries. This article originally appeared in the Los Angeles Times.
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Old 06-05-2009, 12:09 PM   #65
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http://www.nytimes.com/2009/06/04/bu...omy/04fed.html

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June 4, 2009
As Deficits Mount, Fed Chief Calls for a Path to Fiscal Balance
By JACK HEALY
The Federal Reserve chairman, Ben S. Bernanke, said on Wednesday that the United States needed to develop a plan to restore fiscal balance, even as the government builds huge budget deficits as it tries to spend its way out of the worst economic crisis since the Great Depression.

In remarks to the House Budget Committee, Mr. Bernanke said that the government must address the immediate problems of a crippling recession that has erased trillions of dollars in household wealth, hobbled investment portfolios and raised unemployment to its highest levels in a generation. Still, he said, the government needs to think about putting its fiscal house back in order.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” he said.

The deficit is expected to reach $1.8 trillion this year as the country spends feverishly on financial bailouts, a sweeping stimulus package, lending programs, rescues for the automobile industry and more. Those are the highest budget deficit projections as a share of gross domestic product since World War II.

President Obama has vowed to reduce the budget gap by half by the end of 2012, a promise made even as tax revenue is falling and the administration is trying to cobble together an overhaul of the health care system. In addition, the country faces trillions more in Social Security and Medicare obligations as baby boomers retire.

“Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance,” Mr. Bernanke said.

Lately, financial markets have started to quaver on worries about the government’s spending plans and how they are piling more obligations onto the country’s $11 trillion national debt.

Investors in the bond markets, where the Treasury Department goes to raise money to keep the government running, are getting skeptical about the scale of Washington’s spending. The yields on Treasury notes have risen to their highest points in five months as investors who once thronged to the safety of government debt begin to invest elsewhere.

“These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows and technical factors related to the hedging of mortgage holdings,” Mr. Bernanke said.

But Mr. Bernanke made no mention of whether the Fed would increase its purchases of $300 billion worth of government securities. Such a move could help to push down interest rates on longer-term Treasury notes, but it could raise the prospects for inflation down the road.

The movement away from Treasuries, which rose to record prices at the height of the credit crisis, is a good thing on some levels. It suggests that investors are becoming more confident in riskier investments like stocks and corporate bonds.

But rising interest rates on Treasury notes make it costlier for the government to raise money. And higher yields on government debt can also push up interest rates on mortgages and other loans, making borrowing more expensive for consumers and homeowners.

The yield on the benchmark 10-year Treasury note sank to a record low of 2.06 percent in late December before bouncing back to as high as 3.74 percent recently. While that is still low by historical standards, the swift rise in yields has stirred fears they may continue to head higher as investors seek other perches.

In his testimony, Mr. Bernanke said that some corners of the once-frozen financial markets were edging toward normal. Major banks deemed in need of additional capital are raising money by issuing billions in common stock and notes, and markets for short-term loans among banks are functioning more smoothly, Mr. Bernanke said.

He noted that some financial institutions were weaning themselves off government-backed loan programs as they sought to pay back the money they took under the $700 billion financial bailout.

“It is encouraging that the private sector’s reliance on the Fed’s programs has declined as market stresses have eased, an outcome that was one of our key objectives when we designed our interventions,” he said.

Mr. Bernanke again cited numerous flickers of stability and growth in the economy, and said that the economy’s swift declines were slowing. He predicted growth would resume later this year, but he discouraged any hopes of a swift recovery and said that the economy would probably heal slowly.

“We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly,” he said. “In particular, businesses are likely to be cautious about hiring, and the unemployment rate is likely to rise for a time, even after economic growth resumes.”
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Old 06-30-2009, 11:19 AM   #66
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Mr. Popular? Ron Paul Wins Supporters to Fed Sunshine Bill - Political News - FOXNews.com

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Mr. Popular? Ron Paul Wins Supporters to Fed Sunshine Bill
Rep. Ron Paul so far has won 245 co-sponsors to a bill that would require a full-fledged audit of the Federal Reserve by the end of 2010.
By Judson Berger

FOXNews.com

Tuesday, June 30, 2009

All of a sudden, Congress is paying close attention to Ron Paul.

The feisty congressman from Texas, whose insurgent "Ron Paul Revolution" presidential campaign rankled Republican leaders last year, now has the GOP House leadership on his side -- backing a measure that generated paltry support when he first introduced it 26 years ago.

Paul, as of Tuesday, has won 245 co-sponsors to a bill that would require a full-fledged audit of the Federal Reserve by the end of 2010.

Paul attracted just 18 co-sponsors when he authored a similar bill, which died, in 1983. While the impact Fed policies have on inflation is once again a concern, fears about loose monetary policy and excessive federal spending appear even more widespread in 2009.

"In the past, I never got much support, but I think it's the financial crisis obviously that's drawing so much attention to it, and people want to know more about the Federal Reserve," Paul told FOXNews.com.

With the Federal Reserve holding interest rates at rock-bottom levels, pumping trillions into the economy and now poised to have new powers to oversee the financial system under President Obama's proposed regulatory overhaul, Paul said lawmakers want transparency.

"If they give them a lot more power and there's no more transparency, that'll be a disaster," he said.

The bill would call for the comptroller general in the Government Accountability Office to audit the Fed and report those findings to Congress. The GAO's ability to conduct such audits now is severely restricted.

A slew of top Republicans are backing the bill, as are many Democrats.

"Ron Paul has the right idea on this," said Sen. Jim DeMint, R-S.C., who supports similar legislation in the Senate. "I'm just hoping we can get a clear audit. ... We need to know what they're up to."

House Republican Leader John Boehner, who signed on as a co-sponsor this month, wrote in a recent blog post that the "lack of transparency and accountability" regarding federal dollars committed by the Fed and Treasury Department raise "serious concerns" and make an audit critical.

"The Federal Reserve Transparency Act would remove all of these restrictions, and allow GAO to get real answers from the Federal Reserve to protect American taxpayers," Boehner wrote.

Unfortunately for Paul, the bill appears to be idling in the House Financial Services Committee, which is chaired by Barney Frank, D-Mass. The bill has been sitting there, gathering co-sponsors, since Paul introduced it in late February.

"You've kind of got to rely on the Democratic leadership (to move the bill along)," a Boehner aide said. "I haven't heard a lot of support from Chairman Frank."

Calls to Frank's office were not returned.

Paul acknowledged that his bill hasn't advanced but said Frank has "promised" him he will deal with his bill and is willing to give it a hearing. Paul said it's easily got the "momentum" to pass the full House.

A representative with the Federal Reserve could not be reached for comment.

Obama, though, voiced confidence in Fed Chairman Ben Bernanke last Tuesday and defended the Fed's overall ability to regulate effectively as well as his proposal to give the body more power.

"If you look at what we've proposed, we are not so much expanding the Fed's power as we are focusing what the Fed needs to do to prevent the kinds of crises that are happening again," Obama said. "We want that power to be available so that taxpayers aren't on the hook."

Sen. Bernie Sanders, I-Vt., introduced a bill similar to Paul's in the Senate in March, which so far has attracted just three co-sponsors -- DeMint and Republican Sens. David Vitter of Louisiana and Mike Crapo of Idaho.

But DeMint told FOX News last week that the measure would have a good chance of passing the Senate if supporters can push Paul's to a vote, which he said would be successful, in the House.

"I think if we can get that much attention on this bill, I don't believe senators could vote against it, if people knew what they were voting for because everyone is suspicious of the Federal Reserve," DeMint said.

Paul's underlying goal is to abolish the Federal Reserve, which he finds contemptible.

"I blame almost everything on the Fed because they create the bubbles, they create the credit," Paul said.

But the move to require an audit, which Paul described as "neutral," puts him a bit more in the congressional mainstream.

That's a change of pace. The long-time congressman's GOP primary bid was decidedly outside the mainstream. His campaign drew enthusiastic support last year, and though it wasn't enough to pose an electoral threat to the top candidates, he even staged his own September counter-convention in Minneapolis -- down the road from the official Republican National Convention in St. Paul. His "Rally for the Republic" drew more than 10,000 supporters and was complete with a rock band and a slew of faux-delegates wielding signs for their states.

Paul frequently plays the role of party and congressional outsider. Most recently, he was the lone "no" vote on last Friday's resolution to condemn the Iranian government's crackdown on protesters.

He cited constitutional concerns in that vote, as he has in his criticism of the Fed and a slew of other issues.

"The whole process is unconstitutional. There is no legal authority to operate such a monetary system," Paul said in February, in a statement calling for Washington to "end the Fed." He introduced the Federal Reserve Transparency Act the following day.
Audit of the Federal Reserve seems like a no brainer.
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Old 07-17-2009, 09:28 PM   #67
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Of course the obvious tax hike is coming:

YouTube - In Taxes They Trust
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