n] Draft Riots Feared
----- Original Message -----
From: "John Perna is a FED PROPAGANDIST!"
To:
Sent: Thursday, August 12, 2004 10:11 PM
Subject: [Armaggedon Preperation] Draft Riots Feared
Draft Riots Feared
No Matter Who Wins in November, Draft Will Return
By Mike Blair
Regardless of the outcome of next November's presidential election, the
federal government will initiate a military draft in 2005, unless there is a
dramatic slackening of the need for U.S. troops for the ongoing war in Iraq
and for "peacekeeping" duties around the world.
Last June, the Senate overwhelmingly passed a bill to increase the size of
the Army by 20,000 persons, and a month earlier the House voted to add
30,000 soldiers and 9,000 Marines by 2007.
If current trends continue, several military experts have told American Free
Press, voluntary enlistments will not even dent the number of troops America
will need for its global over-commitments.
What is going to happen in late August at the Republican National Convention
in New York City many will see as a precursor of what will take place when
the nation starts drafting young men, and perhaps even women, for the
military.
It is expected that hundreds of thousands of demonstrators will converge
upon New York to protest the Bush administration's involvement in Iraq, a
situation that may become similar to what happened in Chicago in 1968, when
the Vietnam War and the selection of Vice President Hubert Humphrey for the
presidency at the Democratic convention there sparked massive protests that
turned violent.
There are already signs that there will be massive demonstrations against
the Bush administration's war in Iraq at the New York convention, and with
the possibility of terrorist acts a major consideration, federal, state and
local police officials are clearly concerned that the massive demonstrations
they expect may turn very ugly.
(Translated.... The greasy NAZI THUGS are going to have more POLICE STATE
TOTALITARIANISM in place!)
When the federal government initiates a draft to meet its military manpower
needs, which it no longer can do under an all-volunteer system, something
the Pentagon clearly knows, there will be an outpouring of public sentiment
against it.
Drafting means that a government program to conscript young men, and
probably women, taking into account the inefficient and unworkable unisex
military, is likely to cause a flap that will dwarf the Vietnam War
protests, by example, and may equal the Civil War-era draft riots in New
York in ferocity. Those riots required military force to control.
Already campus protesters are warming up to fight the coming draft.
As an example, a recent article in The Daily Texan, the student newspaper of
the University of Texas, President Bush's home state, compared the draft to
slavery, because "someone else owns your body and mind."
Actually, the Pentagon has already instituted a sort of draft, called
"stop-loss orders."
It has blocked the retirement of 40,000 soldiers, many from the National
Guard and reserves, both of which have been drawn down to dangerous levels
by extended deployments, which has wrecked the recruitment process to
procure the needed manpower.
(These people should QUIT EN MASSE!!!)
The Pentagon currently has in place a recruitment program to find 11,000
volunteers to reactivate 2,000 local draft boards around the nation, which
should make it obvious that there is a draft looming just down the road.
Neither President Bush nor the Democratic nominee, Sen. John Kerry, is
likely to bring the matter up until after the presidential election. That
would, they realize, be a political "no-brainer."
---------------------------------
From: Tim White
To:
Sent: Thursday, August 12, 2004 3:33 PM
Subject: OUT of the PENTAGON--COMBAT ARMS SURVEY
> 46. The U.S. government declares a ban on the possession, sale,
> transportation, and transfer of all non-approved firearms. A 30-day
> amnesty period is established for these firearms to be turned over to
> the local authorities. At the end of this period, a number of
> irregular citizen groups and defiant individuals refuse to turn over
> their firearms to authority. Consider the following statement: [SD D
> A SA NO]
>
>
> "I would fire upon U.S. citizens who refuse or resist confiscation of
> firearms banned by the United States government."
>
>
http://www.geocities.com/theawakeningnews/United_Nations-Palms_29.html
> --- End forwarded message ---
(Since TREASONOUS SATAN BOY BUSH has been sending our kids OUT and stocking
our military with Mexican, Canadian and German troops and MORE... They'd
certainly have NO QUALMS about shooting U.S.!!!
WE likewise should have no qualms about SHOOTING THEM!!)
---------------------------------
US Attacks On Najaf Are 'Unforgivable' & 'Shameful'
By Sam Hamod
8-11-4
Our shameful attacks on the Holy City of Najaf with F16s, Apaches,
Bradleys and tanks, destroying holy sites, people,s homes, hospitals and
schools is unforgiveable. This is a further black day in America,s
history. We have killed the native Americans, made slaves of African
Americans, abused the Third World for two centuries, killed foreign
leaders such as Allende of Chile, Bishop of Grenada, tried to kill Fidel
Castro and Mu'ummar Qaddafi of Libya, and have killed Imam Hakim in Iraq,
tried to kill Sistani and are now trying to kill a leader of the common
people, Muqtadr Al Sadr - all under the flag of 'democracy' and
'freedom'. Actually, we are the new colonialists and have been for some
time. It is once again time for us ordinary citizens to chastise our
government and its wrong doings in the world - this time in Iraq.
We are losing the cream of our youth in Iraq and Afghanistan, not only
that but the U.S. military has even recalled a 68 year old to service in
Iraq, has recalled many other grandfathers in their 50s, uncles and
fathers in their 40s - all to feed the Bush team of neo-cons frenzy to
control the oil of the Middle East and to keep the Arab world under the
feet of America and its brother power, Israel. This loss of American
lives for the Bush gang and the Likud of Israel gang is criminal and must
be stopped.
There must also be stop put to the American attacks on Iraqs Holy Cities,
and on such leaders as Al Sadr. He is correct to defend Mulsim holy
cities in Iraq, just as Catholics would defend Rome and the Vatican, Jews
the Wailing Wall and Muslims the other holy cities of Mecca, Medina and
Jerusalem. What the Bush team is doing is sacrilege - sin in the eyes of
God and of the educated and civilized world. This is barbarism"and as an
excuse, the intruders, the invaders, our American troops, are being
painted in our media as 'the good guys' when in fact, they are in the
wrong and the world knows it.
For what is morally right, American troops should withdraw from Najaf and
Karbala - should get out of Iraq and apologize to the people of Iraq for
their aberrant, sinful behavior in Najaf, Baghdad, Karabala and at Abu
Ghraib and other prisons throughout Iraq where more criminal cruelty took
place, and continues to take place under deceptive cover and non-entrance
allowed to the International Red Cross or UN representatives.
As for the fighting in Najaf - it was started by the American troops.
American journalists and natives of Najaf said the weapons that opened
fire first were the heavy American weapons, not the small arms fire of
the AK 47s used by the Iraqi police and the Medhi Army of Al Sadr.
Thus, once again, we want to punish the Iraqi resistance because
Negroponte, Bush and Allawi want total control before the November
elections. But, it,s not going to happen, unless thousands more Iraqis
are killed. But to Negroponte, the devil from South American days when he
helped the Contras, Bush with his ambition to take over Iraqi oil and
Allawi's desire to be safe in a land where he is an outsider, an exile
who is not welcome and is under death threat - the death of thousands of
Iraqis doesn't matter. As far as the Bush team is concerned, the Iraqis
are no better than dogs - this is evidenced by the way he, Cheney,
Rumsfeld, Ashcroft, Kimmit, Miller, Sanchez and others have treated the
Iraqis since they came into power in Iraq"with cruelty, disdain and
brutality.
So, let's make it clear - there is no reason to demonize Al Sadr - better
to demonize the real devils in this situation, Bush, Negroponte, Miller,
Allawi and 'defense minister' Naqib - not the U.S. servicemen who are
ordered to carry out immoral and un-Christian deeds, nor Al Sadr who is
defending the holy places of the Shi'a of Islam. If we allow the lies of
the U.S. media and the U.S. military and the U.S. politicians to prevail,
we shall all be complictous in this evil. Write congresspersons, your
senators, to the blackened White House (president@whitehouse.gov) to
protest this evil ... it is on all of our heads.
Professor Sam Hamod is a former advisor to the State Department; editor
of 3rd World News: Director of The Islamic Center of Washington, DC
(retired) and edits www.todaysalternativenews.com. He may be reached at
shamod@cox.net. To unsubscribe to the MOM list send an email to
mom-l-unsubscribe @mailman.montana.com
---------------------------------
This is URGENT,
Please read and take action immediately.
Thank you.
A year ago, this organization warned that the Bush Administration was
planning to do something unthinkable - they were seriously considering
signing a pact with Mexico that would give any Mexican who had worked in the
U.S., including illegal aliens, full U.S. Social Security benefits, paid out
of your Social Security Trust Fund!
It seemed so far fetched, we had trouble convincing the Congress that it
could happen. A White House spokesman denied our claim that it was on a fast
track, stating the ongoing discussions for Totalization were just informal
and preliminary.
But we knew better. We had obtained correspondence proving it was on a fast
track and had seen plans for erecting a huge new building at the U.S.
Embassy in Mexico City just to deal with the swarms of people anticipated to
sign-up for this raid on our Social Security Trust Fund.
Well, it was on fast track, just as we said it was and a few weeks ago, the
President signed the Totalization Treaty with Mexico and unless you and I
can persuade the Congress to stop it, millions of Mexicans, including
illegal aliens, will soon be living it up on your Social Security benefits!
The timing for repealing this outrageous treaty couldn't be worse. The few
days we have to repeal this treaty are the same few days preceding the
November election, when every Congressmen is campaigning hard for reelection
and the Congress is seldom in session. In short, it was a very underhanded
way to sneak a terrible treaty past the Congress.
So please click below to jump to our Congressional Action page and send an
email to your representative TODAY! http://capwiz.com/usbc
Also see:
Citizen Action: Reporting Illegal Aliens
http://www.usbc.org/info/crime/phonenumbers.htm
---------------------------------
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Something bad comes now 666666666666666666
Its infested the motherland and needs to be purged. Quick think fast can you
afford to just read and know whats comming.
Cmon print a flyer people say something. Make this not a bad dream; wake
yourself up and be ; be what you may say.
Many people when asked if they think they were born to do something great
say YES. Its this time in history that you and they are primed for in making
the great difference in their doing everything or nothing. You must be
greater than you are my friends. Aspire to surprise yourselves as to what
audacious acts you need now to do in these latest hours of freedom.
Lie not to yourselves fellow man, a wave of change commeth, that a few men
may actually divert catastrophe unless they do not join hands.
=====================================================
Torture has been going on for years in the US on children, women and men.
The issue can be discovered in the wolds sea of trouble, just another
problem bubbling to the surface. We all have so complex lives we cannot keep
up with learning of the misery.
Today they use microchips to torture us terribly, there are details of what
is to happen to you or whats happening to you. Now its time to discover here
do you have the symptoms. Been an activist, many report being attacked for
being such. Are you a patriot then surely you will be a target soon,
christians are 666 aware and are the enemies of the "New Worlds Owners"
Foward from the author of http://www.us-government-torture.com
with the issue that they have already have implanted millions of US citizens
and are now comming out of the proverbial closet. They have kept it a
secret, but now its time to groom and seduce the public further into a
lethargy of " hey their homeless so what"; well Mr/Ms Sheeple on my website
above is a list of RFID symptoms. Do you have any?
=============================================
Credit the following to :
http://www.couplescompany.com/Features/Politics/2004/RFID.htm
Run 2004
Mandatory sub-dermal tracking systems to be implanted in New York, San
Francisco, Bethlehem, Pennsylvania and Washington DC's Homeless Populations.
By Laura Dawn Lewis
PRINT
Reader Feedback
I
n the movie Logan's Run, all citizens are implanted with a tracking device,
which follows their movements once activated. On the day of each person's
thirtieth birthday, the tracking devices go off. Any citizen who fails to
participate in Carousel, state sanctioned murder packaged as soul renewal
and rebirth, is hunted down via this implant and killed by the Sandmen, the
state's killing enforcement squad.
Though the Radio Frequency Identification (RFID) tags set to be tested and
surgically implanted below the skin by the U.S. Department of Health and
Human Services in the homeless populations of New York, San Francisco,
Washington DC and Bethlehem, Pennsylvania are not being used to insure
killing as those in Logan's Run, they do turn the most vulnerable people in
America into cattle, tagged and monitored like animals. Mandatory,
compulsory and not a choice, the RFID tags are miniature radio transmitters
the size of a matchstick inserted under the skin that enable police and
government social programs to track and document the movements of homeless
people electronically.
Positioned as "A rare opportunity to use advanced technology to meet
society's dual objectives of better serving our homeless population while
making our cities safer," by HRSA Administrator Betty James Duke, some may
consider this government newspeak designed to quell the general population
investigation into the fact that this is a clear violation of our Fourth
Amendment right to be secure in our person. It brings up issues in the Fifth
Amendment by depriving the homeless of the only thing they have, freedom and
liberty. It allows the government to use private property, the body of each
homeless person, for public use. TOP
Implanting RFID's would not be an issue if the homeless chose to have this
implant, freely without the sacrifice of services, agreeing to all
restrictions, including the ability to be monitored and were paid or
compensated for participation. Then it is a person's choice. It is a
completely different issue when it is required or if a person of diminished
capacity accepts it without understanding what he or she is doing. When
this is the case, a person is used. The current presentation of this
program shows it to be mandatory rather than choice.
How does one argue that the compulsory implanting of a radio chip under a
person's skin is just? Sold to the American public as a necessary tool of
public good, one cannot help but reflect on the common saying, "The road to
hell is paved with good intentions." Abject poverty becomes a societal sin,
giving license to the government to monitor your every move. Poverty
becomes the sole justification for electronic imprisonment. This is a
deprivation of liberty. Making a person a monitored animal entrusts the
government with full authority to use any information collected for research
purposes or to round up and channel American citizens and non-citizens
alike. The homeless RFID program is set to go into effect in five American
cities now and possibly nationwide over the next several years.
WHAT EXACTLY ARE RFID'S?
United Press International reported April 3, 2004 that, "Participating
states will receive grants of $14 million to $58 million from the federal
Projects for Assistance in Transition from Homelessness (PATH) program,
which was created under the McKinney Act to fund support services for the
homeless. A second phase of the project, scheduled to be completed in early
2005, will wirelessly transmit live information on the locations of homeless
people to handheld computers running the Windows CE operating system."
RFID's are currently used in commerce to track purchases, inventory and in
some cases consumer behavior by transmitting information via a radio signal
that can be picked up by any person with a receiver tuned to that frequency.
Ford Motor Company implants RFID's in all tires since 2001 to quickly
identify the tires during service. Selected toll roads in Canada use RFID's
and Shell Oil implements them in their EasyPass® system. Future applications
being implemented include United Kingdom's Marks & Spencer's department
store's tagging of RFID's onto their clothing. The European Central Bank is
working to develop a hair-thin transmitter that can be imbedded in all Euros
by 2005 to prevent, the agencies implementing the transmitters in the
European currency state, laundering, black market transactions and bribery.
In Tokyo, RFID's are being tested to monitor in-store reading habits at
bookstores and newsstands, supposedly for market research. And the Western
Beef Development Center in
Canada implanted 292 calves to track the animals from growth through
slaughter.
Like the cattle in Canada, the HRSA proposes implanting RFID's in homeless
people to better track them, for his or her own good of course. The general
reaction of most Americans in this age of transparent civil liberties
coagulate around the idea that if this makes us "safer" the infringement
remains just. TOP
TARGET SOCIETY'S WEAKEST FIRST:
In Nazi Germany, Hitler first went after society's most vulnerable, the
mentally ill, homosexuals and handicap. The mentally ill, loose in society
often caused problems and can be a danger to others and themselves through
no fault of their own. To his "Great society", they were as much of an
embarrassment as an inconvenience. Convincing the German people their safety
would be greatly enhanced if these problem people were removed from society,
his policies of containment and execution began. Soon Catholics, gypsies,
communists, Poles and Jews would find themselves targets. TOP
How he soothed the German society into compliance illustrates classic
conditioning. Hitler tested the waters on policies, acclimating the
population slowly toward acceptance, beginning with the smallest, least able
to defend itself portions of society, the mentally ill. Ironically, the
majority of America's homeless suffer from mental illness, handicaps or
addiction. Far more concerning is the fact that thirty-six percent of
homeless people are families with children under the age of eighteen.
Reading through the escalation of persecution in Nazi Germany, correlations
with the United States since September 11th are evident. Fear consistently
used as the reason for all policies blinds Americans as we lay down our
freedoms for the perceived safety of our government guardian. From this
blind trust, the Patriot Act, CAPPS II, HR 3077 and the latest craziness
once thought unthinkable, The Republican National Committee's pressure on
the Federal Election Commission ("FEC"). The Republican National Committee
is calling for new rules to financially punish non-profit organizations that
dare to communicate with the public critically of President Bush or members
of Congress. Also unthinkable, now we want to brand people electronically.
Prior to September 11th, this idea would be unconscionable. It's time we
stopped using September 11th as an excuse for everything. Each of us has a
greater chance of being hit by lightning than killed by a terrorist. Nearly
100,000 Americans died last year from prescription mix-ups, over 400,000
from tobacco related illness. Contrast that with the total number of
civilian casualties by terrorists in the United States from January 1, 2002
through today: Zero. TOP
FOR OUR SAFETY AS A NATION?
Hitler tattooed those he wished to track. Rather than use sub-dermal ink,
America uses sub-dermal electronics to categorize, tag and track our
homeless, against their will, rationalizing for their protection and
society's protection. Who will be the next group requiring monitoring? Will
we implant RFID's into convicted shoplifters who have served their time so
that security can monitor them when they enter a store?
What about deadbeat dads and moms who fail to pay child support? Shouldn't
they too be monitored? Their lack of payment places children at risk and
creates situations that may cause children to become criminals Consider it a
pre-emptive strike against possible future activity. While we're at it,
under the guise of protection from abduction or getting lost, shouldn't an
RFID be inserted under every newborn's skin? Doesn't that make you feel
safer?
What about people collecting social security, unemployment or welfare?
Shouldn't they be monitored to make sure they do not abuse the programs our
tax dollars pay for? What about the criminal who is released? Sure they've
done their time, but society is safer if the police and parole officer
always know where they are. Don't forget every person with a DUI, (Driving
Under the Influence). Think of how many lives could be saved if every person
convicted of a DUI was tracked by the local police!
Then we have our War on Terror. All of the Arabs in this country, Christian
or Muslim could at some point become rebellious to the way we treat them and
ridicule their culture, faiths and traditions. We brand all as potential
terrorists with our self-righteous callousness, therefore for the safety of
Americans shouldn't all Arabs be tagged to prevent terrorism? While were at
it, why not implant and tag every Hispanic American so we can easily
identify who is here illegally? Or every African American who grows up in
the hood since statistics show many end up dead or in jails? TOP
CONCLUSION
It starts with the homeless, where does it end? In the movie Logan's Run,
freedom prevails. Two people escape the monitoring systems and in turn free
the entire society, finding themselves in an ancient ruin of Washington DC.
Logan's Run takes place in the USA, the ultimate irony. This movie is
supposed to be science fiction, not a prelude to reality.
Where does it end, America? Eventually each and every one of us will fall
under some category that must be monitored for our own or society's
protection whether due to circumstance of life, such as unemployment,
illness, old age or bad choices. Is this freedom? Is this what we fight for?
If we allow our government to exploit the most vulnerable, the homeless and
mentally ill in our society as implanting tracking systems within a person's
skin does, it is only a matter of time before they find an excuse to implant
us all.
Epilogue
An interesting footnote to all this, now that this story is leaking ever so
slowly, DHHS representatives amended their statements to press this will be
voluntary. Nobody will go on the record. Statements are taken under
anonymity and "off the record". We've been unable to confirm either way.
But here is something to think about. If it is voluntary, why implant the
transmitter under the skin? Wouldn't it be more voluntary if the homeless
who choose to be monitored have a bracelet that can be removed when he
decides he no longer cares to participate? It certainly would cost less.
And if it is voluntary, who's representing the homeless to make sure each
understands what he is agreeing to? If one chooses not to participate, what
do they forgo? These questions as of yet do not have answers. Perhaps in
time they will.
In the mean time, many in the government are pushing for a national database
that cannot be altered. Don't be surprised if one day in order to get a
drivers license, a job, (see article on Mexico below), social security card
or even gain admittance to a hospital, subdermal identification is required.
It will be sold as "good for you," but anything that allows the government
to track you, monitor you or obtain information about you isn't good for
you. It is good for them. And is this really what we call freedom?
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From: Iron & Clay
To: 1 Iron & Clay
Sent: Thursday, August 12, 2004 4:24 AM
Subject: Is a USA Economic Collapse Due in 2005?
I would thing the writer has to be an optimist in the extreme. I'd be
surprised if we get much past the election date ... which is not likely
to happen either.
Neal
Is a USA Economic Collapse Due in 2005?
by F. William Engdahl
The URL of this article is:
http://globalresearch.ca/articles/ENG407A.html
"The whole world is hostage to the misconceived economic policies of a
dollar standard out of control."
The US Senate just reconfirmed 78-year-old Alan Greenspan to an
unprecedented fifth term as chairman of the world's most powerful
central bank, the Federal Reserve, or Fed as it is known. The fact that
President Bush re-nominated Greenspan underscores how vulnerable the
global financial edifice is, and not how excellent a central banker
Greenspan is.
On the surface, world growth appears to be expanding finally, after
severe recession and the 60% fall of the US stock market in 2000-2001.
The Federal Reserve says it is so confident that growth in the US
economy is taking firm hold, that it raised its key interest rate from a
record low 1% to 1.25% last month, signaling it would slowly bring rates
up to "neutral" levels of 3.5-4.5% over coming months. Around the world,
strong growth of exports are being reported from Brazil to Mexico to
South Korea. Growth in China is so strong the government is worried it
is overheating. In Europe, the UK is expanding at the fastest pace in 15
years. France expects GDP to grow by 2.5%, and even Germany is talking
about stronger export growth. The driver is US economic growth.
The problem with this optimistic picture is the fact it is entirely
based on the dollar and unprecedented creation of cheap dollar credit by
Greenspan and the Bush Administration. Their only short-term goal has
been to keep the US economy strong enough to assure re-election for
George Bush in November. Washington reports are that Bush made a deal to
re-appoint Greenspan on the promise Greenspan would keep the economy
growing until the elections. They have done this by a combination of
historic low interest rates, rates only seen before in times of war or
depression, and by stimulating the economy by record budget deficit
spending, issuing government bonds to finance it. The world has been
flooded with cheap dollars as a result.
What is clear now is that this unsustainable effort is likely to come to
an end sometime in 2005, just after the elections, regardless of who is
President. Given the scale of the money-printing by the Fed and the US
Treasury since 2001, it is pre-programmed that the "correction" of the
latest Greenspan credit binge will impact the entire global financial
and economic system. Some economists fear a new Great Depression like
the 1930's. The world today depends on cheap US dollar credit. When US
interest rates are finally forced higher, dramatic shocks will hit
Europe, Asia and the entire global economy, unlike any seen since the
1930's. Debts that now appear manageable will suddenly become
un-payable. Defaults and bankruptcies will spread as they did in the
wake of the 1931 Creditanstalt collapse.
The US Home Bubble
The official US myth is that the recession of 2000-2001 ended in
November 2001 and "recovery" has been underway ever since. The reality
is not so positive. Using record low interest rates, the Fed has lured
American families into debt at record rates, creating what might be
called a "virtual recovery," financed by record amounts of new consumer
debt. There has never been a recovery before in which debt levels
increase, rather the opposite.
The American dream of owning an own home has been the source of the
record lending, helped by the lowest interest rates in 43 years.
Greenspan has often boasted this has been what has propped the US
economy since 2001. When families buy a home, they need furniture, they
employ construction workers, electricians, engineers, and the economy
grows. Record low interest rates have made it very easy for families to
get a bank loan, using their home equity as collateral or guarantee.
These loans, tied to the rising real estate prices, allowed American
families to finance new furniture, cars, and countless more. In 2003
banks made a record $324 billion in such home equity loans, on top of $1
trillion in new mortgage loans.
All this economic consumption has created the illusion of a recovering
economy. Behind the surface, a huge debt burden has built up. Since
1997, the total of home mortgage debt for Americans has risen 94% to a
colossal $7.4 trillion, a debt of some $120,000 for a family of four.
Bank loans for real estate purchases have risen since 1997 by 200%, to
$2.4 trillion. Average US home prices have risen by 50% in the period
since 1998. In 2003 alone a record total of $1 trillion in new mortgage
loans were made. In 1997 mortgages totalled $202 billion.
In many parts of the US, home price inflation has become alarming. An
apartment in Manhattan is now above $1 million. Home prices in Boston
have risen by 64% in five years. California real estate prices are
soaring. On average US home prices have risen 50% in six years, an
unprecedented rise, driven by Greenspan's easy credit. In seven years to
2004, prices of US homes had risen on paper by $7 trillion to a total of
$15 trillion, the highest in US history. The problem is so obviously
dangerous, that Greenspan recently was forced to deny existence of any
real estate "bubble," much as he denied a dot.com stock bubble in 2000.
But that is exactly what he has created with his low interest rates. The
dot.com bubble has been transformed into a larger and more threatening
real estate bubble. Families have been convinced to invest in a home as
an alternative to buying stocks for their pension years.
The rise in home prices has been driven by cheap interest rates and
banks rushing to lend with abandon. Because two semi-government
agencies, the Federal National Mortgage Association, known as FannieMae,
and the Government National Mortgage Association, or GinnieMae buy up
the bank's mortgage contracts, taking the risk from the local banks, so
the local lending bank has less pressure to guarantee that he lends to
low-risk credit-worthy families likely to repay the loan.
The US Congress has passed new laws making it even easier for families
to buy homes with no penny of their own money required initially as
"down payment." This has meant a huge rise in mortgage loans to
economically marginal or risky families. The number of such risky or
"sub-prime" mortgage loans has risen by 70% this year alone, and now
makes up 18% of all US mortgages. Many of these risky mortgages are made
under "adjustable rate mortgages". Today adjustable rates are low, just
above 4%. Because of this some 35% of all new mortgages are adjustable
today.
So long as rates stay low, the roulette wheel of debt rolls on. The
problem begins when interest rates rise and families, lured into buying
a home with variable interest rate payments, suddenly find their monthly
cost of paying the mortgage has exploded as interest rates rise. At that
point, US banks will face a serious bad loan problem, far worse than
that of 1990-92 when several of the largest US banks were on the brink
of failure. US rates began to rise significantly in May, and the Fed was
forced to raise its official rate on June 30 for the first time in four
years. Many banks have loans written in adjustable mortgage rates. As US
interest rates continue to rise over the next twelve months or so, that
will trigger a wave of mortgage defaults. Some industry experts fear a
"bloodbath" in 2005.
The American family is highly indebted, not just for their home. The
Federal Reserve data show a total US debt level now above $35 trillions,
or some $ 450,000 for a typical family of four. Average consumer debt
for credit cards, autos and such is at record highs. Carmakers continue
to offer car loans, with loans for up to six or even seven years. Many
Americans owe more on their car than it is worth. The debt grows. As
long as Fed rates are at 43 year lows, the debt is manageable. When US
rates rise, it becomes unmanageable for many. The rise has begun. There
are two ways rates are likely to rise from here.
First, the Fed itself has been forced to act, raising its Fed funds rate
the first time since four years, to 1.25% from 1% on June 30. It had no
choice. Greenspan has claimed for months that the US recovery was
"strong" and that rates would return to "normal" soon. It was a
calculated bluff. Had he not acted as US jobs data convinced investors
recovery might be real, he faced a major crisis of confidence in the
dollar. The Bush Administration reportedly manipulated employment
statistics to show better job growth for the election.
Ever since raising rates, Greenspan has calmed nervous markets by
stating that future rises will be ever so gradual. In other words: don't
worry, speculators. But if he is to keep the confidence of the large
bond markets, he must convince them that he is still vigilant against
inflation. That is tough when prices for everything from copper to oil
to lumber to soybeans and scrap steel are rising from 50% to 110% over
recent months. His only anti-inflation tool is higher interest rates, or
promise of same. The longer he fails to raise rates as prices rise, the
greater the risk of a dollar crisis, as foreign investors fear the
worst, namely that the US economy is in far worse shape than officials
admit. The Fed is in a trap.
Yet higher interest rates threaten to explode the trillion dollar home
mortgage debt bubble, where home values are estimated to be at least 20%
overvalued nationally, or $3 trillion.
When private bond investors such as major pension funds and banks lose
confidence in Greenspan's inflation commitment, the only other source of
support for low interest rates would be the willingness of Japan and
China above all, to pour billions more of their dollars into buying US
bonds.
Keeping the Bush Government Afloat
The largest buyers of US government debt have been the central banks of
the Asia-Pacific. The central banks of Japan and China alone hold more
than $1 trillion of US Treasury bonds as foreign currency reserves.
Worldwide foreign central banks hold some $1.3 trillion of US government
debt. If private debt is added, the United States is the world's largest
debtor, with some $3.7 trillion in net foreign debt, as of the start of
this year, likely well over $4 trillions by now. In 1980 when Ronald
Reagan was elected the US was the world's creditor with a plus of $1
trillion.
Nations depending on the large US export market, recycle their trade
surplus dollars back into buying US Treasury debt, to keep their
currency fixed to the dollar. Because Japan and China and others
continue to buy record sums of US debt, paying with their hard-earned
trade dollars, US interest rates can remain far lower than otherwise.
Were foreign buying of US bonds to reverse or even slow, the US Treasury
would have to offer higher interest rates to lure investors to buy the
debt. That would make interest rates on homes more expensive very fast.
Millions of homeowners would face default. Prices would collapse in many
regions, leading to higher unemployment.
This will not be like the dot.com crash, which was a deliberate crash
caused by the Fed raising rates to deflate that bubble. In 2000 interest
rates were 6.5% and the Fed had room to lower to 1% and create the
housing bubble alternative for money to keep the economy afloat on a sea
of debt. This time, rates are at historic lows, debt at historic highs,
dependency on continued foreign capital inflows is unprecedented.
Speculation has become global as never before. The cheap credit in the
dollar world has led to cheaper credit worldwide. The economies of
Brazil, Mexico and even Argentina benefit from banks and speculators
like George Soros who borrow at the super low US or Japanese interest
rates to invest in bonds in high interest rate lands like Brazil or
Turkey or Argentina. These so-called emerging markets have been booming
in the past year on Greenspan's promise to keep US rates so low. That
now is beginning to look very risky. As well, Bush Administration talk
of possible terror attacks around election-time, is making many major
investors fear risking investing in US stocks or bonds. They are instead
beginning to cash in their recent profits from the Greenspan stock boom
of 2003-04, and holding it in safe cash.
That is a major reason the US stock and other markets have been in
steady fall in recent weeks. The US debt bubble depends on maintaining
the myth of a US recovery to lure foreign capital to invest, helping
keep the dollar from collapse. Should foreign pension funds of the
central banks of China and Japan be convinced the US recovery is in
danger, there could be a major shift of funds out of dollars.
Yet China and Japan, fearing the dollar crisis, have recently begun
heavy buying of commodities, from oil to iron ore to copper to gold.
They are using their trade dollars to buy real commodities, instead of
US Treasury debt, which is mere paper. Chinese panic buying of oil for
stockpiling reserves is a major factor pushing oil prices again to
record levels of $42 barrels despite two major OPEC quota rises. Steel
prices have exploded due to China demand.
When Bush became President he inherited a Federal budget in surplus.
Since then he has created the largest deficits in US history, near $500
billion in 2004 and estimated to reach $600 billion in 2005. In 1971,
when Nixon took the dollar off the gold standard, the Federal budget
deficit was an "alarming" $23 billions.
These huge deficits are financed by the US Treasury selling government
bonds or similar paper to investors. Since 2001, the central banks of
Asia, led by Japan and China, have bought huge sums, some 43% of all US
Government debt. They in effect recycled their trade dollars gained from
exporting cars, electronics, textiles and other goods to the US
consumer. In the 12-month period to this April, the Bank of Japan spent
a record $200 billions to buy US dollar bonds or, in effect, to finance
the cost of Bush's Iraq war. The Banks of China, South Korea and Taiwan
bought almost as much dollar bonds.
They did this for clear reasons: Their currencies are linked to the
dollar, and were the dollar to fall against the Yen or the Yuan, Asian
exports would suffer a decline, endangering their economic growth and
leading to explosive rises in unemployment across Asia. By recycling
their trade dollar surplus into buying US Treasury debt, they argue they
are looking after their own needs. A dollar crisis in early 2005 could
signal the next global crisis. The whole world is hostage to the
misconceived economic policies of a dollar standard out of control.
--
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