| | 1) Financial Tremors With Possible Cosmic Impact?  ETERNAL VALUE REVIEW - Issue 4, Volume 10 - August 2007 - Wilfred J. Hahn, Editor
First off, an explanation of the above chart is required. It is a monument to the tragedy that America's leaders have allowed to fall upon its citizens these last 6 years or so. Surely, many people fell prey to their own lusts. But that would not be the entirety of the charts indictment. It also speaks to the sheer recklessness and greed of the people that both run and oversee Wall Street. That includes regulators and politicians, whether gullible or simply pliable.
| |  | The term Wall Street, though it is an actual road in Manhattan, refers to the entirety of the financial services industry in the US --- and indeed, the world. To be fair, other countries to various degrees, have been culpable for the same errors-among them Spain, the UK, Australia and others. But the capstone of recklessness to date is found here in North America. There, for some reason, greed runs deeper and more flagrantly.
Surprisingly, only recently has the financial world suddenly woken up to the real estaterelated troubles unfolding across the land. Credit markets have hiccupped and stock markets have experienced tremors in the fear that the unwinding of America's housing bubble may soon careen out of control. That this should be the case is not surprising. Any sober analyst could have predicted several years ago that a painful housing bust would occur at some point. Yet, what was surprising was the extent of the excesses and the breadth of the corruption. Now, given the sheer enormity of the emerging real estate and mortgage problems, a financial crisis and economic recession is likely.
But back to the chart. It lays bare incredibly reckless behavior. Despite the fact that housing prices have strongly appreciated over the past 5 to 6 years or so, the average household is worse off than before. Consider that the average homeowner's net equity ratio (the portion of home value after deducting all mortgage related debt) has declined over this period. Simply amazing!
It is important to gain a sense of the potential impact that this statistic unveils. As housing values soared between 70% and 100% over this period, the average home equity ratio should have increased as much as 16-17 percentage points to perhaps over 70% of home values (assuming debt growth in line with nominal growth rate of the economy). Instead, it decreased by approximately 5 percentage points, slumping to a new all-time low of 52.7% at the end of first quarter of this year (Fed Flow of Funds Z1 report). What happened to this wealth that should have been accumulated by the average homeowner?
It is obvious that an enormous amount of extra housing-related debt-likely amounting to $3 trillion and more over the period between end-2000 and the first quarter of 2007-has been piled up. Effectively, households have plunged into huge debts on the presumption that their home's value would continue to increase. The flipside is that debt-service and debtleverage for households has therefore increased sharply --- certainly far faster than underlying incomes.
The reality is that the average household is now in worse financial condition, as their debts are now much larger relative to their income. Even worse, this situation becomes a severe trap should housing prices ever decline. Then, an increasing number of homeowners will find themselves upside down --- i.e. having more debt against their house than it will bring in a sale after commission and other costs. Indeed, this is happening, foreclosures now accelerating. Last month, foreclosures in California already hit an all-time high. There surely is much more pain to come.
We do not enjoy being proven correct on our earlier warnings. Long-time readers will know that we issued our first warnings that an ill end would come of the then brewing mania in 2004. Actually, we grieve. It didn't need to happen --- and certainly not this badly. Many people and families will therefore suffer huge stresses. But even more than this, we worry about a weakening America. We worry about a scenario where America becomes mired in severe economic and financial troubles, precisely at this time.
There can be no doubt that now is a critical time viewed geopolitically. Various unaligned states are gaining power and influence, from Russia to Venezuela. In fact, Russia is becoming outright belligerent, taking almost any position just to spite America. Russia is again - or at least visibly - injecting itself into Mideast affairs, openly supporting Iran and supplying armaments to various countries in this theatre. China is swaggering on the world stage, and has rapidly emerged as the world's second largest trader of merchandise goods. America, in one sense, has already become China's servant as it has amassed huge holdings of US currency and fixed-income securities. Bond market trends this year already appear to indicate that the US has lost its monetary sovereignty.
America is already in a vulnerable position, its dollar having fallen to near all-time lows against the rest of the world. And now, the economic climate for Americans themselves is getting ugly. In tough times, what will be the priority of politicians? Keeping voters happy? Lower oil prices? Or continuing to support Israel? Unfortunately, this last policy will prove to be mutually exclusive with the other objectives.
Already, the legendary spendthrift consumer has begun to change behavior noticeably. The US consumer is beginning to conserve cash and lower consumption spending. There is both anecdotal and theoretical indicators of this shift. We list a number of these:
- Credit card debt increased 9.2% in May 2007, a sharp increase in growth. We consider this a sign of consumer duress, particularly as mortgage refinancing has fallen substantially.
- The US household sector has not acquired net financial assets for the past year. We interpret this as a symptom of insufficient cash flow.
- Consumer spending (despite a strong May statistic) has been steadily declining. The current growth rate level has usually coincided with the onset of a recession in the past.
- Interest rate costs are rising. Mortgage resets are currently accelerating as previous "teaser loan" features are coming to an end. Also, in recent months, long-term interest rates have soared to the highest levels since 2003.
- Employment gains remain sub-par for any economic recovery in 60 years. Recent corporate HR surveys, indicate that many companies anticipate higher lay-offs and outsourcing activities in the next year.
- Oil and gasoline prices are not declining. In recent months, the oil price has in fact risen, up more than 50% from year-earlier lows.
- On balance, consumer spending surveys show marked spending slowdowns as of late February this year. Even the mighty Wal-Mart has experienced negative sales growth during some periods.
- US import growth has slowed sharply in recent months, usually a sign of slowing spending.
In conclusion, these developments signal that the retrenchment of the average US household has begun. It stands to have global implications --- in time.
Why is this consumer change so pivotal? Quite simply, the biggest core contributor to the current world boom and its imbalances has been the willingness of the US household sector to run into deficit. (Canada is not far behind.) In short, the US household has been willing or forced to maintain spending well in excess of income growth. Related to this seminal impulse for global financial markets, was the US housing boom and the associated "mortgage" bubble.
Not only have US household savings rates collapsed over these past decades, they are at negative levels. Given the widening wealth skew in America-fast approaching Latin American-type Gini scores-one shudders how negative the savings rate may actually be for the "median" household. It goes without saying that this savings collapse is simply unprecedented and has been identified as such for some years by numerous analysts.
In conclusion, this housing bust is not just an insignificant financial event without global ramifications. It simply is not possible that the rest of the world will be unaffected. Crucially, the risk of an American housing bust always figured to have a prominent role in the geopolitical balance-a rapid power loss of America.
America, Canada and many other Western nations are post-modern, democratic countries. That means that their direction is primarily determined by the majority of its populace. This has been the case for centuries in some cases, and is certainly not new. But what has changed is the perspectives and values that the citizens of these nations now hold. Few hold a Biblical world view. A remarkably small portion of the population of these countries believes that Israel has as part in future prophetic events yet to play out across the world. To many, Israel is not important. Anti-Semitism is again on the rise and Israel is being pressured from all sides, whether Arabs, Muslims or Western nations (most of these with Christian heritage, and still professing to adhere to Christian values) and lately, even American evangelicals. (Letter to the President, Evangelicals for Social Action.)
Lastly, there is one other development that is new. The world today has become a creditor/borrower society. As commented upon elsewhere in this issue, this is the basest form of society. It has spurred the way to a boom in false wealth, the necessary flipside to this being rampant and deep indebtedness. (We profile some charts in this issue, as well as on our website, that provide eye-opening evidence of this fact.) The chart on this page shows one unprecedented aspect of how money is being fabricated around the globe. It is alarming that financial tremors are occurring under such loose conditions. Imagine what would happen in more sober times?
Given the mix of factors at play, it is a treacherous time. We can expect some desperate actions. Dear readers, keep your minds on eternal things. "Provide purses for yourselves that will not wear out, a treasure in heaven that will not be exhausted, where no thief comes near and no moth destroys." (Luke 12:33)
EVR
Eternal Value Review Website
Original Report Here 2) Experts Fear Repeat Of 1929 Economic Crash  Kuttner blames "insiders with conflicts of interest" for meltdown danger, tanking of dollar
PRISON PLANET/PROPAGANDA MATRIX - By Paul Joseph Watson - October 16, 2007
Two prominent economic experts have warned that "insiders with conflicts of interest" allied to the Fed's policy of tanking the dollar to bail out Wall Street could lead to a repeat of the economic crash of 1929, during a segment on Bill Moyers' PBS show [Ed. Note: See link below to watch video].
"I think there are three big parallels between what happened in the 20's and what has been happening in Wall Street lately," Robert Kuttner told Moyers.
Kuttner is a veteran economic journalist and a former legislative assistant in congress.
"One is insiders with conflicts of interest that are not fully disclosed to the public generally, secondly - there's much too much borrowed money....particularly in the financially engineered parts of the economy....and third is the lack of transparency - regulators and the public don't get any kind of disclosure," added the former BusinessWeek writer.
Kuttner blamed an economy based on "asset bubbles" for the rising tension in the markets and said that, similarly to the 1920's, "engineered euphoria" and companies cooking the books had combined to endanger the safety of the economy.
Kuttner called for more transparency and slammed the Fed for recycling a vicious circle of cheapening the dollar to bail out Wall Street, inviting another round of speculative excess.
"The risk is that every time we repeat this cycle, we get bigger and riskier bubbles. And with the dollar being in the tank-- it's not a costless kind of bailout," said Kuttner. "One would have thought that if the dollar were down to 140 Euros there'd be a run on the dollar. We're gonna see inflationary pressures as a result of the cheap dollar. So it's not as if the Fed can simply print more money to bail out these excesses, and there be no cost to everybody else."
William Donaldson, the former chairman of the Securities and Exchange Commission, also warned that the dollar was "disappearing" through the floor as a result of the Fed's policy of bailing out "devious" investors.
So I think that the central banks have a greater technique and ability to meet this problem," said Donaldson. "But insofar as they do-- we run into a moral hazard, i.e. we bail out the people who made bad or devious, or whatever you wanna call 'em, investment decisions. So you sort of are saying, "Go ahead and do whatever you want, and you can count on the good old Fed to bail you out."
See Also:
20 years later, could markets crash again?
Read Full Report  3) Are we heading for another Great Crash?
 MONEYWEEK, London [Agora Publishing] - October 26, 2007
October is a month of unpleasant anniversaries. The crash of 1929 occurred in October. And this month is also the 20th anniversary of the 1987 crash; 19 October saw a drop of over 22% in the Dow Jones index, the worst single-day decline in its history. The FTSE 100 lost 11% that day and 12% on Tuesday as it reacted to Wall Street's slide. So could it happen again?
The global backdrop was similar to today's: oil was on the rise, the dollar was under heavy pressure, and interest rates had been rising. That stoked fears of a slowdown crimping earnings, while stocks looked expensive on a p/e of 23. "So the conditions for a correction - if not a crash - were certainly there," says James Moore in The Independent. And a technical factor exacerbated the slide. In 1987, computer-driven portfolio insurance was all the rage: when stocks fell, index futures were automatically shorted to hedge positions. But when most big investors tried to short the market at once, the original falls ended up massively exaggerated.
Analysts point out that the main reason this can't happen now is that US stocks are cheaper than they were. But look at the cyclically adjusted p/e ratio, which smooths out the ups and downs of the profit cycle over the past ten years, and valuations are "above the levels associated with the top of a bull market", says John Authers in the FT. And contagion could prompt falls of Black Monday's magnitude, reckons William Strazullo of Bell Curve Trading. We can't predict what could spark a plunge, but once it starts, "you have a bunch of investors playing with borrowed money--- heading for the exits in London, New York and Tokyo".
The crucial worry for investors now, however, is that market conditions are resembling August 2007 in all sorts of ways. Risk-aversion has returned, with short- term US government bond yields up sharply last week and high-yield corporate debt spreads registering their biggest weekly jump since July. American stocks posted their worst week since late July last week and the FTSE also lost 3% over five days.
Yet more lousy housing data - September housing starts in the US have slumped to a 14-year low - and weak earnings reports lie behind the latest jitters. Industrial bellwether Caterpillar said several of the sectors it supplies are in recession. This stoked fears that the housing slump is spreading, while profit slides at Bank of America and Wachovia have undermined the assumption that the credit losses are somehow contained.
The superfund set up last week to stabilise the market for commercial paper - often backed by subprime mortgage assets - by preventing fire sales has backfired. Not only is it a reminder that credit markets are still a mess, but it is obvious that the bail-out could delay the necessary marking-down of assets. There is a suspicion that "the big four US banks are trying to hide their debts", says Hans Redeker of BNP Paris. What's more, says Liam Halligan in The Sunday Telegraph, with subprime defaults set to rise as low introductory interest rates start expiring, "bank balance sheets will start looking even worse".
US profits are now set to shrink for the first time since 2002 in the third quarter. As the prospect of a sharp slowdown grows, the expected earnings rebound to over 10% in the fourth quarter looks ever more optimistic. That's especially the case because margins are historically high and thus ripe for mean reversion; according to Rob Arnott of Research Affiliates, earnings are 60% above their ten-year average - a level that implies zero earnings growth over the next ten years. So, says Authers, even if America avoids recession, "there is every reason to fear that earnings growth will fall sharply next year". And "rare is the day", says Merill Lynch's David Rosenberg, that earnings are heading south and the market isn't doing likewise.
Read Full Report 4) Dollar Sinks to 26-Year Low Vs. Pound, Record Low Against Euro  Dollar Hits New Lows on Economic Data
ASSOCIATED PRESS - By Tali Arbel, AP Business Writer - October 30, 2007
NEW YORK -- The dollar fell to a new record low against the euro and a 26-year low against the British pound Tuesday after lower-than-expected consumer confidence data was released and ahead of Wednesday's Federal Reserve interest rate decision.
The dollar slid against the euro throughout the afternoon, as the euro peaked at $1.4440, the latest in a string of all-time highs against the dollar, before settling at $1.4434. The euro had finished at $1.4424 in New York late Monday, the same day it hit its last record of $1.4438.
The pound rose to $2.0679 in late New York trading Tuesday -- a level last seen in 1981, when Diana married Prince Charles and Margaret Thatcher was prime minister.
The British currency was powered by expectations that the Bank of England will keep its benchmark interest rate at 5.75 percent next week. The pound had finished at $2.0619 in New York late Monday.
The Canadian dollar hit a new 47-year high of $1.0510 Tuesday, according to Dow Jones' Interbank foreign exchange rates, before settling at $1.0488, down from $1.0495 in late New York trading Monday. The U.S. dollar bought 95.35 Canadian cents.
The Canadian dollar is a commodity-backed currency, benefiting when prices of its exports rise. Canada is a major producer of oil, and crude prices have risen 35 percent since August, hitting a string of record highs.
The euro and the Canadian dollar have been climbing steadily against the dollar, regularly touching new highs since August amid fears over the health of the U.S. economy -- worries stoked by the subprime credit crisis and disappointing economic reports -- and rising oil prices.
Tuesday saw the release of more disheartening economic data, as the Conference Board reported that its Consumer Confidence Index fell to 95.6 -- its lowest level since October 2005 -- from a revised 99.5 in September. It is the index's third consecutive monthly drop and signals consumers' insecurities over the economy and their jobs.
Other critical economic reports scheduled for the rest of week include an advance report on gross domestic product and the releases of figures on third-quarter manufacturing activity and October employment.
Markets expect the U.S. Federal Reserve to cut its key interest rate from its current level of 4.75 percent Wednesday -- adding to an unexpectedly bold half- point cut last month. - - - -
Additionally---
Canadian dollar hits 47-year high
AGENCE FRANCE PRESSE - October 30, 2007
The Canadian dollar reached on Monday a 47-year high versus the US greenback, gaining on the US currency's recent weakness, as well as soaring demand for oil and other natural resources.
At 1500 GMT, the American dollar was worth only 95.47 Canadian dollars, while the loonie, a sobriquet given to the Canadian dollar, was being traded for 1.0474 US dollars.
According to the Bank of Canada, the loonie had last seen such heights in March 1960.
Analysts noted that all major currencies were increasing in value against the US dollar in anticipation of an interest rate cut by the US Federal Reserve on Wednesday.
Most observers expect the Fed to cut its key lending rate by 25 percentage points, bringing it in line with Canada's rate of 4.50 percent.
As well, demand for oil, gold and other natural resources, of which Canada is a major exporter, has given the Canadian dollar a big boost of late.
Since the beginning of this year, the Canadian dollar has increased 20 percent, and jumped 69 percent since 2002, when it was trading at a historic low of 61.70 US cents.
Origina l Report Here
Also
This topic has been a continuous headline this year as you will see here:
Dollar Hits New Low Against Euro - Canadian dollar hits 47-year high
ASSOCIATED PRESS - By Matt Moore - October 29, 2007
FRANKFURT, Germany -- The U.S. dollar dipped to another record against the euro on Monday, trading below $1.44 for the first time as markets anticipated a likely interest rate cut by the Federal Reserve later this week. - - -
The euro has been climbing steadily against the dollar, soaring to new highs almost weekly since August amid fears over the U.S. economy's health -- stoked by the subprime credit crisis and increasingly disappointing economic reports. - - - -
Read Full Report
US Dollar Hits Record Low Against Euro
US Dollar Hits New Low Against Euro for 7th Straight Session; Canadian Dollar Hits 31-Yr. High
ASSOCIATED PRESS - By Tali Arbel - September 28, 2007
NEW YORK -- The dollar fell to a record low against the euro for the seventh consecutive session while the Canadian dollar hit a 31-year high as inflation data raised expectations that the Federal Reserve Bank would again lower interest rates. - - -
"Both personal income and spending are up," said Michael Woolfolk, senior currency strategist at the Bank of New York. "The consumer was undaunted by financial market turmoil." - - - -
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Canadian Dollar Trades Equal to U.S. for First Time Since 1976
BLOOMBERG - By Haris Anwar and Theophilos Argitis - September 20, 2007
Canada's dollar traded equal to the U.S. currency for the first time in three decades, capping a five-year run on the back of booming demand for the nation's commodities.
- - - The Canadian currency last closed above $1 on Nov. 25, 1976, when Pierre Trudeau was Canada's prime minister.
The move to parity marks a milestone for a currency dubbed the loonie for the bird that adorns the nation's one-dollar coin. Parity also symbolizes Canada's emerging clout in a world economy increasingly short of the energy, grains and metals the country produces. - - -
Canada, the world's eighth-biggest economy, has benefited from rising demand for copper, gold, wheat and oil from neighboring U.S. and emerging economies such as India and China. The country is the world's largest producer of uranium, the second- biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Canada is also the world's second-largest exporter of wheat, which rose to a record this month. - - - -
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Read Full Report 5) Dollar and oil hit new records  FINANCIALTIMES of LONDON - By Michael Mackenzie in New York - October 26, 2007
Oil hit a new record high of $93.80 and the dollar struck a new low on Monday as investors showed their growing certainty that the US Federal Reserve will cut interest rates on Wednesday.
The same conviction also saw gold approach $800 a troy ounce - its highest level for 28 years - while equities made gains. The move into gold reflects how investors fear rising inflation from the twin forces of higher oil prices and a weaker dollar.
Weighing on the dollar was the outlook for lower borrowing rates versus those of other economies when a two-day meeting of the Fed concludes on Wednesday.
Investors in Fed funds futures have largely priced in a 25 basis point cut in the 4.75 per cent overnight rate amid a deteriorating housing market and recent large write-downs at US banks.
"The Fed faces a quandary as they need to ease [rates] in order to get the economy going, but a weaker dollar, while good for US exports, does raise the concern that inflation will rise," said Gerald Lucas, senior investment adviser at Deutsche Bank.
Higher commodity and energy stocks propelled global equity markets while US multinational companies were buoyed by further weakness in the dollar.
In early afternoon trade on Wall Street, the S&P 500 was up 0.3 per cent. The FTSE Eurofirst 300 index rose 0.7 per cent.
Asian markets rose sharply. Markets in India, Hong Kong, South Korea, Malaysia and Indonesia set record highs. The Hang Seng rose 3.9 per cent and is up 55 per cent since the Fed cut its discount rate for banks and China said it would allow investors to buy Hong Kong stocks.
The dollar fell to a record low of 76.777 against a basket of six major currencies, as the euro climbed to a new high of $1.4438.
Also
Crude oil price likely to hit peak
FINANCIALTIMES of LONDON - By Javier Blas in London - October 29, 2007
Crude oil prices appear increasingly likely to hit a record in real terms reached during the second oil crisis in 1979, as nominal prices on Monday continued rising well above $90 a barrel.
West Texas Intermediate crude hit a fresh nominal all- time high of $93.20 a barrel on Monday on a combination of renewed geopolitical tension over Iran's nuclear programme, weakness of the US dollar and low inventories.
The price leap came after Mexico said it was shutting about 600,000 barrels a day of oil output, or 20 per cent of its total, due to bad weather in the Gulf of Mexico. Authorities hope to restore output in the near term as the cold weather front moves away from the production and terminal areas.
WTI moved $1.34 higher in early trading on Monday to a fresh nominal all-time high of $93.20 a barrel. It later pared gains to traded$1.03 higher at $92.89. Brent crude oil also continued upwards, hitting for the first time the $90-a-barrel key level, before easing back to stand $1.15 higher at $89.84 a barrel.
Barclays Capital's technical analyst said: "The bull channels keep our focus higher towards $93.45, with little standing in the way of $100 above there."
In real terms, adjusted for inflation, oil is at its highest price since the early 1980s but still below its modern historical peak - equivalent to about $100-$110 a barrel in today's money - reached in late 1979 after the Iranian revolution.
Oil traders said that strong speculative flows, Middle East tensions and supportive fundamentals could push crude oil prices towards, if not above, their real term record.
Even so, some analysts remain dismissive about the potential impact of reaching such a level, as the factors behind the price increase are different.
Adam Sieminski, chief energy economist at Deutsche Bank in Washington, said that the current price increase, driven by demand, was different from the 1979 crisis. "That crisis was driven by a supply shortage and turmoil in the Middle East. That has wider implications on business and consumers' psychology," he said.
Peter Voser, Royal Dutch Shell's chief financial officer, last week said that record oil prices were being driven by speculation and political tension, not a lack of supply.
There are also discrepancies among energy economists on which level represents the true adjusted record, as WTI futures did not exist in the early stages of the second oil crisis in 1979. That obliges to use for the calculation other crude oils streams that are not exactly comparable.
There is also disagreement about which inflation measure should be used to adjust the price - world inflation or US inflation. But most agree that $100- $110 a barrel will represent roughly the real terms record.
A measure taking account of the evolution over time of the rich countries' per capita income has crude oil prices well below the adjusted record. G7 per capita income is now sufficient to buy 456 barrels of crude oil, well above the 320 to 350 barrels between 1980 and 1982.
To bring G7 purchasing power down to this level would require oil prices rising to between $120-$130 a barrel, according to Deutsche Bank.
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Oil Rises but Pulls Back From $93 Record
ASSOCIATED PRESS - By John Wilen - October 29, 2007
NEW YORK -- Oil futures rose Monday, but pulled back from a new trading record above $93 set after Mexico's state oil company suspended a fifth of its oil production due to stormy weather.
The news that Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production came amid rising political tensions in the Mideast, a weakening U.S. dollar and a tight supply outlook that had already pushed crude oil to record prices.
"Mexico shut in production for a few days," which will likely disrupt imports and cut domestic oil inventories further, said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.
Oil prices have jumped 9 percent since the Energy Department on Wednesday reported that oil supplies dropped sharply during the week ended Oct. 19. The Mexican oil fields are expected to return to service later this week.
Prices were also supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S. government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer. - - - -
Read Full Report
CFR President: $200 Oil If War With Iran
ROGUEGOVERNMENT.com - By Lee Rogers - October 28, 2007
Richard Haass the President of the Council on Foreign Relations and Bilderberg luminary was recently interviewed by Katie Couric on the situation with Iran. During the interview [See Video], Haass predicted that the crisis over Iran's nuclear program could come to a head within the next few months and that war with Iran would result in oil prices rising to $200 a barrel. Haass also made it clear that sanctions would not be effective in changing Iran's stance on their nuclear program and that there was a real possibility of a U.S. military strike on Iran using aircraft and cruise missiles.
When Couric specifically asked Haass if he thought we would see a war with Iran, he responded.
"I don't think we are talking about invasion, the U.S. doesn't have ground troops. There could be a military strike using aircraft and cruise missiles, but if you ask me over the next year or two years can I imagine the U.S. and Iran moving to conflict? The short answer is yes. Is it definite? Obviously not, but is it a real possibility; for sure."
Haass also mentioned in the interview that war with Iran would result in the oil price reaching $200 a barrel. This specific prediction from Haass is interesting considering reports from previous Bilderberg meetings that the global elite have been seeking an increase in oil prices as part of an effort to further squeeze the U.S. middle class.
A $200 oil price is certainly not out of the realm of possibility considering oil recently eclipsed the $90 a barrel mark. The rising oil price has thus far been primarily due to a combination of geopolitical tensions in the Middle East along with the falling value of the U.S. Dollar. In addition, the Federal Reserve is widely expected to cut interest rates again which would send the price of oil even higher and the value of the U.S. Dollar even lower. Any military attack on Iran would certainly send oil prices much higher with the possibility of other countries with close ties to Iran like Venezuela cutting off oil sales in retaliation. - - - -
Read Full Report
Read Full Report 6) The Vortex Strategy KOINONIA HOUSE - Personal Update, August 2007
The Impending Monetary Crisis
We need to understand the precariousness of the U.S. dollar and its role in the international monetary markets: two-thirds of world trade is conducted in dollars; over 70% of central banks' reserves are held in the American currency; and, the U.S. dollar is the sole currency used by international institutions such as the International Monetary Fund (IMF).
This has conferred on the U.S. a major economic advantage: the ability to run a trade deficit year after year. It can do this because foreign countries need dollars to repay their debts to the IMF, to conduct international trade, and to build up their own currency reserves. A move away from the dollar could have a disastrous effect on the U.S. economy as the U.S. would no longer be able to spend beyond its means.
Worse still, the U.S. would become a net currency importer as foreigners would seek to spend back in the U.S. a large proportion of the estimated three trillion dollars which they currently own. The U.S. would also have to run a trade surplus-the first time in a century-providing the rest of the world with more goods and services than it was receiving in return.
The Oil Exporters
Up until the early 1950s, the U.S. dominated world oil production, so sales of oil and natural gas on international markets had been exclusively denominated in dollars. The U.S. in those days accounted for half or more of the world's annual oil production. That, of course, has drastically changed: we are entering a period in which we need to import almost 70% of our requirements!
The tendency to price in dollars was additionally reinforced by the 1944 Bretton Woods agreement, which established the IMF and World Bank and adopted the dollar as the currency for international loans. The "gold exchange standard" was also established: the U.S. dollar was to be convertible to gold by foreign governments. However, by the 1970s foreign dollar holdings had grown to five times the available gold. So, in August 1971, President Nixon suspended all gold payments. Today, depreciating paper dollars are backed only by the "reputation" of the U.S. Government.
The Quiet Game
While the denomination of oil sales is not a subject that is frequently discussed in the media, its importance is certainly well understood by governments. For example: when President Nixon took the U.S. off the gold exchange standard, OPEC considered moving away from dollar oil pricing, as dollars no longer had the guaranteed value they previously did. The U.S. response was various secret deals with Saudi Arabia in the 1970s to ensure that the world's most important oil exporter would stick with the dollar. What the Saudis did, OPEC followed.
The Think Tanks Warn Countries switching to euro reserves from dollar reserves will bring down the value of the U.S. currency. Imports would start to cost Americans a lot more--- As countries and businesses convert their dollar assets into euro assets, the U.S. property and stock market bubbles would, without doubt, burst---
-The Foundation for the Economics of Sustainability
The dollar's position is already on the decline in many countries.
-Federal Reserve Bank of San Francisco
China has officially declared that it will diversify a part of its foreign exchange holdings into oil by building a strategic petroleum reserve. The construction of huge storage tanks has begun and will take several years until completion.
On January 24, 2007, Kuwait announced that it is considering abandoning pegging its dinar to the dollar for fear of an anticipated slide in the value of the dollar. Last year, the central banks of Italy, Russia, Sweden, and the United Arab Emirates had announced similar shifts out of the dollar and into other currencies, or gold, citing the United States' "twin deficits" (federal deficit and the trade deficit) as the reasons for the expected fall in the dollar's value. - - - -
3 Part Series:
Part 1
Part 2
Part 3
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