Another One Bites the Dust

After receiving $2.3 billion in TARP funds from the treasury last year, CIT is history, well until they come out of bankruptcy.  The whole thing is a joke, and so is The Wall Street Journal .  Get this line:

Taxpayers could have lost more, though. Despite likely losing its $2.3 billion investment, the U.S. government saved possibly billions more in losses when it rebuffed further bailout requests over the summer, after concluding CIT's demise wouldn't threaten the broad financial system.

HAHA.  Excuse my outburst of laughter, but I will not insult your intelligence by explaining how stupid such a statement is.  But it does beg the question;  Why are the taxpayer's the ones who will write off their "investment".  Look what is being offered to Carl Icahn and other senior bondholders:

 Under the bankruptcy plan, senior bondholders would trade their current debt for new debt maturing later worth about 70 cents on the dollar. They would get 92.5% of the equity in a restructured CIT.

So why are they being compensated when the taxpayer, who was held at gunpoint to invest funds, is written off with a complete loss?  There is no other way of viewing this than simply a forced taxpayer payout of $2.3 billion to senior bondholders.  For their own good, of course.

The Wall Street Journal is a joke.  They will go bankrupt in the near future too, absent a bailout.  That could explain the pussycat journalism they have shown this last year in the midst of the largest robbery in the  country's history (maybe the world's, I could see the FDR gold confiscation being a challenger to this, though).

Movie Watching Paradigm Shift

Drive –> Mail- > Stream

Back in the 90s, you would have had to drive to Blockbuster to rent a VHS tape if you wanted to watch a flick. DVD’s created better quality and no rewinds. Then Netflix came around to offer a whole library of movies via the postal service. Blue ray disc offers 1080p high definition video. Steaming movies over the internet is where we are at. Just like no one had a DVD player when DVD’s came about, boxes connected to the internet (wired or wireless) to your HDTV is the future. Netflix has caught onto this by offering a box for $100, but all of the movies and the true HD quality is not there, especially if you have the cheap $20 per month internet connection plan. So, it is getting there. The cable companies video on demand service is improving, but does not have the capacity to host an entire library of movies and tv shows.

I recently bought a $300 tiny desktop PC (the size the Nintendo Wii ) called the ASRock ION-330 and cheap $10 remote. With binary newsgroups (access is $13 a month) I can download blueray movies and 720p HD TV shows. Each movie is 5-7GB so it take apx 90 mins to download. If I paid $80 a month for the 50Mb internet plan, each movie would take 15 mins to download. I only watch 2-4 movies a month, so I just queue them up and download them at night. My main point is that I have access to every movie and tv show for $13 a month + the cost of the internet connection. There is no point in buying a expensive blue ray player since physical media is dead. I took it so far as to sell all of my old DVDs on ebay. If I want to watch a movie, I will just download it. I save on gas, time and there are no scratches. I cannot see the point in buying a movie since all the movies are “in the cloud” 24/7 in HD.

Goldman Cuts US GDP 3rd Quarter Outlook to 2.7% Growth

Today Jan Hatzius of Goldman Sachs released a short client note downgrading their outlook on U.S. GDP growth for the third quarter from 3.0% to 2.7%. With the official numbers scheduled to be released tomorrow, the 3.0% number has been priced into the market in anticipation of the release. If the official numbers fall in line with Goldman's prediction, things could get ugly tomorrow. Did their buddies at the Fed tip them off? Or maybe they are purposely disseminating flawed information to take advantage of other investors. It will be interesting to see what happens.

Is the Municipal Bond Market the Next Crisis?

This report, by Frederick J. Sheehan, details what may be the next crisis to hit the United States economy. With more than $3 trillion dollars of the United States economy invested in Municipal Bonds and approximately $2.7 trillion dollars of outstanding debts from state and local governments nationwide, something has to give. Municipal debts are getting bigger, at the same time, government employee salaries continue to rise. For years people have been told that Municipal Bonds are one of the safest investments that they can make. This certainly has the potential to develop into the next big crisis.

Peter Schiff

Matty Baby, I thought you may enjoy this.

Appreciate Technology and Capitalism

Re:Re: Superpower

This is a thought provoking article on democracy (not an attack on Obama) about the defect(s) of democracy:

"...if I were to send a private Predator drone to Pakistan to fire explosive missiles into villages, killing women, children, and other innocent persons, I would be seen as a monstrous mass murderer, and demands would be made that I be apprehended and “brought to justice” or killed. Yet when President Obama causes deaths in this way, no such demands are made. How did Barack Obama come by the right to kill innocent people?  By democratic election to the presidency of the United States, of course."

Re: Superpower

Didn't you learn anything from GI JOE.  Everything is cut and dry as the good guys (GI JOE) and the bad guys (Cobra Commander).  In our case it all has to do with where you were born.  For instance, since I was born in the USA, naturally I am a good guy.  Sorry for anyone born in the Middle East, especially if there is oil under your feet, you are born in the wrong place and naturally bad.  Simple, you see:

Superpower

While the below post questions the constitutionality of the Hate Crimes Prevention Act, it is important to note that the bill which contains the Hate Crimes Prevention Act is a standard military appropriations bill, which continues to feed the Military Industrial Complex that is driving our nation. The 2008 movie Superpower takes a close look at the Military Industrial Complex. All my life I have been told that the USA is the "good guys." Are we?

Is the Matthew Shepard and James Byrd, Jr. Hate Crimes Prevention Act Constitutional?

As you are probably aware, President Obama signed H.R. 2647 on October 28, 2009, making it Federal law. For the most part, H.R. 2647, titled The National Defense Authorizations Bill for Fiscal Year 2010, is what its title implies: an appropriations bill for the defense budget in 2010. However, tacked on to the final ten pages of the bill is the Matthew Shepard and James Byrd, Jr. Hate Crimes Prevention Act ("The Hate Crimes Prevention Act"). The Hate Crimes Prevention Act states that:

Very Good Free Market Explanation and Summary of Rothbard's Production Theory

In the great book Man, Economy, and State , Rothbard's vast compendium of economic wisdom, we read much that has not yet been properly popularized. Rothbard's production theory, for example, is quite different from the standard account. I have tried to distill this theory into the following synopsis, although it is by no means the only part of the book that warrants exposition.

Ummm...?

Hate Crimes

George Soros Talks about the Managed Decline of the Dollar

Soros also talks about the change in reserve curency status, the declining US economy, and towards the end explains that the US will be a drag on the global economy in the future while China leads the way.

Lazard Fund Dumping the Dollar

Could this be the start of a new trend?

Can Peter Schiff Win?

Peter Schiff is running for US Senate in Connecticut.  If he receives the republican nomination, he will be running against Chris Dodd, who currently chairs the Senate Banking Committee.  These guys are polar opposites.  Chris Dodd is a career politician, Peter Schiff is brand new to the game and reluctantly decided to run after being encouraged and in a way "drafted" by Americans on the internet.  Chris Dodd knows nothing about economics while Peter Schiff, who is of the "Austrian" School of thought saw the bust coming, told everyone about it and is able to explain the cause and solution clearly (as is easily done when one understands Austrian Business Cycle Theory).

The comparison of the two runs similar to these and the list goes on.  The basic theme is, Chris Dodd is the typical dishonest, currupt politician who has never had to earn anything he has and has never had to bear the consequences of a mistake made (perfect example being right now, the guy is still caking while many are suffering as a result of bad policy he played a large part in implementing).

On the other hand, Peter Schiff is (from what I can tell) honest, far from corrupt, and making it all the better wants nothing to do with the politicians in Washington and will not play the games they play.

Read his recent letter to supporters:

Dear Friends,

As you may know, I am running for the U.S. Senate from my home state of Connecticut. I did not arrive at this decision lightly; but, thanks to the encouragement of thousands of folks around the country, particularly young Americans, I have enthusiastically accepted the challenge

Winning a U.S. Senate seat will not be easy. First, I need to get through a Republican primary featuring some very well-funded and high-profile opponents. Then, I need to defeat a five-term incumbent Democrat who chairs the Senate Banking Committee. Though Chris Dodd is unpopular now, he has a lot of powerful friends, including President Obama, and he will certainly use incumbency to his advantage.

However, these are unique times, and politics-as-usual may no longer be enough. Though Dodd will try to turn my lack of political experience into a liability, it is much more likely to be an asset in the current climate. Conversely, Dodd's lack of private sector experience raises questions about his ability lead this country out of an economic crisis, especially one that he and his buddies created.

While I can protect my investments from the ravages of Washington's mistakes, it infuriates me that I can do little to protect the country itself. As the father of a seven-year-old boy, I can no longer sit on the sidelines while career politicians destroy my heritage and my son's future. This is a pivotal time in American history and we need to make sure the pendulum shifts back toward freedom. With your help, I will do everything in my power to ensure such an outcome.

However - and I cannot stress this enough - I need your help. If everyone reading this letter gets involved, I am confident we can win. There are several ways you can help, but two in particular stand out:

First and foremost, you can make a donation to my campaign atwww.schiffforsenate.com. All donations will make a difference. As this will be an expensive race, requiring as much as twenty million dollars to win, the larger the donation, the closer we will get to victory.

The maximum allowed donation is $2,400 per person in the primary and another $2,400 in the general election. However, both donations may be made upfront, so $4,800 is the most one person can donate today (married couples can donate a maximum of $9,600). If I do not advance to the general election, the second $2,400 will be refunded. However, since the primary is just a few months before the general election, it helps to raise money for both right now.

I realize that this is a lot of money to donate in a recession, but this is one election where your contribution can truly make an impact.

Think about it: can you imagine the political waves that would result from my arrival in the U.S. Senate? If I can win this seat, no incumbent will be safe. And unlike other newly arrived Senators, I will have no interest in playing ball in exchange for cozy committee assignments or re-election funding. I will arrive with one mission: telling the truth in the halls of power.

To accomplish this, we have to act. I am willing to lead the charge, but I need an army of support behind me. I will work tirelessly over the next year to spread our message, but my real strength will be the thousands of dedicated supporters who make this campaign their own.

My plan is to utilize your support to shock my opponents and potentially revolutionize modern political campaigning. So even if you cannot donate much money, your time will be just as valuable. And even if you can't travel to Connecticut, we can still use your help.

To donate either time or money, just go to my web site at www.schiffforsenate.com.

If you prefer to donate by check, please mail your contribution, made payable to "Schiff for Senate," directly to my campaign at:

Schiff For Senate
P.O. Box 1134
Weston, Ct 06883

Thank you for your time and for sharing this message with your friends and relatives. I'll see you on the campaign trail.

Regards,
Peter Schiff

CFR Charts: Who is buying US Government Debt?

So...What happens if the FED stops buying in the first quarter of 2010 as it claims? 

Or worse yet, what happens if they don't?

Fine Swine: Government Reaction Not in Line with Reality

Lebron James Got the Swine Flu and Thinks It May Have Been Caused by His Vaccination

Steve has been talking about the swine flu vaccine, and how it's really just a scam meant to actually give people the virus, since the swine flu first became a big story in the mainstream media earlier this year. I have to admit that I was a bit skeptical, although I certainly was not running out to get a flu-shot either. Well tonight ESPN broke the story that Lebron James has Influenza A, and maybe the swine flu. This really isn't an interesting story at all (seriously, who cares that Lebron drank a gallon of water every day to get over being sick) except for this little gem buried in the bottom of the article: "James believes he may have gotten the flu from the shot he and his teammates got recently to fight the virus. He said his two young sons have not shown any symptoms of being sick." Whoa. Maybe Steve has been right all along about this.

Global Warming or Global Cooling?

So I logged in to Yahoo! this morning to check my e-mail and this article was on the front page warning us that the Arctic ice cap is going to disappear within the next 20 to 30 years. Is the mainstream media telling us the truth with these kind of alarmist stories regarding global warming? Just yesterday I stumbled across this article, which was written in January of 2009 and states that the world has actually been in a period of global COOLING for the past 8 years. Doing a little more research, I found this article, which discusses a recent speech by one of the world's leading climate change scientists, Professor Mojib Latif of Germany's Leibniz Institute, where he acknowledged that the world has now entered a cooling phase and was likely to remain in that cooling phase for the next 10 to 20 years. What makes this really interesting is that Latif was formerly one of the most outspoken scientists in the world regarding the threat of global warming. Even more interesting, and also being ignored by the mainstream media in the United States, is the fact that the Antarctic ice cap is now growing and scientists are attributing that fact to the Ozone hole. WHAT? So now the ozone hole is causing more sea ice? What exactly is going on here? Quite possibly, no one knows what the real answer is. The world's climate and weather patterns are being affected by an almost infinite number of variables. As a result, it is impossible to create a model attempting to predict patterns of climate change without failing to control for any number of variables.

Obama's War

After watching this video, one can't help but to ask: What the hell are we doing in Afghanistan?

Something Tells Me This Resembles Current G20 and FOMC Meetings

Read this , at least the first 20 or so pages about Gold, SDR's, the IMF, and whether the dollar should remain the world reserve currency.  This is from the memorandum of discussion at the FED on September 21, 1971.  Here is  a quick little bit if you are too lazy to read or click on the link:
Page 5:

The responses of the others present, excluding the

United States, may be summed up along the following

lines:

(1) Quite clearly all those present wanted to

return to a relatively fixed rate system with wider

margins to add flexibility.

(2) Any new system should be based on a "neutral

reserve instrument" rather than be one in which the

dollar had special privileges.

(3) A new system clearly requires a process of

realignment to which all must make a contribution.

(4) There was general agreement that the condi

tions of the world economy were potentially as

Mr. Zijlstra had described them.

(5) All were agreed that the U.S. surcharge was

a major impediment to realignment, a major prod to

restrictions elsewhere; and they pressed for early removal.

Pages 8-9:

Central to the discussion also was a statement

by the Managing Director of the International Monetary

Fund, Mr. Schweitzer, who listed the main issues, sepa

rating them out in terms of possible stages. The

Managing Director had made a strong plea for beginning

to negotiate the issues in the first stage, and at the

concluding session of the Ministers on Thursday much

attention was given to the possibility of adopting

9/21/71

this as a work program. Mr. Schweitzer's list of issues

was as follows:

(i) A realignment of currencies.

(ii) A decision on the price of currencies in terms

of gold and, what is perhaps more important, in terms of

SDR's and positions in the Fund.

(iii) The adoption of somewhat wider margins, at

least on a temporary basis in present uncertainties.

(iv) The abolition of the U.S. surcharge.

(v) Measures designed to improve the U.S. balance

of payments that lie outside the exchange rate field.

(vi) New understandings about the role and the

convertibility of the U.S. dollar and, for the longer

term, on the place of reserve currencies, gold, and

SDR's in the international monetary system.

(vii) The desirable way of handling flows of capi

tal between industrial countries, including controls,

monetary policy, etc.

Mr. Schweitzer had included the first four in his

immediate work program. This was, however, rejected by

Secretary Connally on the grounds that we should have

some time to have our Deputies take a hard look at this

program; and, more particularly, because it seemed to

demote the trade and burden-sharing issues to a subse

quent phase and to put the gold price in the forefront

of the issues.

To read more historical FED documents and minutes go here.   Pick a year and just search for key words in the document.  For Example, 1970 and 1971 using a word find for gold, SDR, or IMF is what I used.  But just pick a year where something interesting happened and try to see if it was discussed and to what length.  It can be pretty interesting and doesn't take long at all.

This is Who is in the Driver's Seat

Yahoo!: "White House "Not Cool" With Trillion Dollar Deficits as Far as the Eye Can See

http://finance.yahoo.com/tech-ticker/article/353917/White-House-%22Not-Cool%22-with-Trillion-Dollar-Deficits-as-Far-as-Eye-Can-See?tickers=dia,spy,xlf&sec=topStories&pos=8&asset=&ccode=

This seems believable...

Dow Hits 10,000, Obama and Co. Have Saved the Day! Well, Not Really, But It Makes For a Great Story

Earlier today the Dow Jones Industrial Index hit the 10,000 mark for the first time since October of 2008. Browsing around the internet and reading the mainstream financial news websites one would think that this is a huge accomplishment for the Obama admistration, Bernanke, and the rest of the jokers creating economic policy in the United States. Articles like this one http://www.bloomberg.com/apps/news?pid=20601087&sid=amsnf8SEmjxc from Bloomberg, and this one from Yahoo! http://finance.yahoo.com/news/DJ-industrials-pass-10000-apf-3139746992.html?x=0&sec=topStories&pos=main&asset=&ccode= loudly proclaim this as a great milestone for the Dow, and for the "recovery" in general. According to Yahoo!, "Cheering erupted from traders on the floor of the New York Stock Exchange as stocks briefly moved above the psychological barrier." However, read a little closer. Yep, buried in both articles are little snippets mentioning that the ICE Futures U.S. Dollar index hit its lowest point since August of 2008 and that the dollar fell against 15 of the 16 most traded currencies. Further, taking a look at the graphs that I have posted below, which track the Dow vs. the price of gold and silver over the last ten years, it becomes plain to see that, even during this supposed "recovery," the Dow has lost significant value in relation to the price of gold and silver. Over the duration of the last ten years, the Dow is down more than 120% compared to gold and silver. But lets not worry about that. After all, the Dow is back to 10,000, Obama and Co. have saved the day, and we can all go back to more important things, like making sure that our fantasy football lineups for this week are unbeatable.


DJIA v. Gold/Silver over the past year:

DJIA v. Gold/Silver over the past 5 years:

Dow v. Gold/Silver over the past 10 years:

The Dollar Falls Further out of Favor

The Unwinding Strategy Laid Out by Bernanke

I was worried that the FED had ignored the problem of unwinding their new positions, but Bernanke has addressed it:

Go to Slide 7 at the bottom of the page and see the unfallable plan:

Slide 7

Exit Strategy

• Wind-down of short-term lending
  

• Interest on reserves
  

• Reverse repurchase agreements
  

• Time deposits for depository institutions
  

• Runoffs and asset sales
  

Whew, they got it under control.

Ballin'

Federal Reserve Bank of San Francisco Confirms Obvious

I admit, this is from August, I too am behind on this.  But are these guys serious?  I encourage you to read the entire brochure so you can see why we pay so much for these guys.  Granted they are just San Fran, just one of the 11 meaningless regional banks that are supposed to give the false impression that the NY FED shares authority.

One of my favorite lines in the brochure is, "A housing market recovery cannot occur without an increase in sales."  First, is that really why you went to 10 years of school and learned complex stochastic calculus and leach on taxpaying citizens so you can tell us what the kid selling lemonade on the corner understands.  Unfortunately, these people don't even understand why they only right by accident, because they hold the belief that consumption is always the answer.  They fail to acknowledge the correct event needed to take place in order for recovery to follow.  For recoveries to take hold after artificial asset bubbles (see Austrian Business/Trade Cycle Theory for the cause of these bubbles) the readjustment must be allowed to take place.  Unfortunately, since people are wisely not buying and instead saving, the FED and the Government have taken it upon themselves to make sure the full adjustment does not take place.  This is a topic covered at great length, so do a quick Google search if you want to hear the reasons why this will only lengthen the time we wait for recovery.  

The point I wanted to make here is simply, no one needs it explained to them that in order to sell things we need sales to increase.  But thanks, I would like to be able to chalk it up to lack of sleep since someone has to be manning the printing press 24 hours a day.  Here is a link to another pamphlet or brochure , whatever it is supposed to be.  Long story short, the numbers are ugly, super-ugly.  

The FED is filled with guys who are good enough at math to develop any significant theory or contribution, not good enough to be trusted with real responsibility, however. They misuse physics that work well when applied to the physical world in controlled experiments,  but they are far too arrogant to understand that physics and neat integrations do nothing to explain human action and the market.  Anyone can develop endless confusing and complicated (dare I say irrelevant and useless?) equations that go on for over 100 pages and are summarized in 1 paragraph at the end,  but just because no one understood anything that was developed does not mean anything other than no one understood what was done and time was completely wasted, for what is the use of a language that can only be used to communicate with oneself.  Before getting on the high horse of it being the few who understand who are able to exploit these mathematically found opportunities and relationships, you would have to participate in a free market, which we don't expect of you, real risk may be too much of a shock.   

But its not fair to expect these guys to actually earn their money by contributing something of value that will be a benefit to consumers and living standards of society as a whole, is it?  It certainly would be asking a lot of these Doctorate educated types to understand how to do anything besides draw graphs of events that have already occurred and fit models that predict the past.

I heard Hans-Hermann Hoppe talk at the Mises Institute this summer on a podcast, and he said it pretty well.  I will summarize, but essentially he equated the current economics profession as a huge welfare program for economists.  They are paid to prove the obvious such as "water flows down" and in the more ridiculous case the impossible "that it flows up."

Oh, I may have forgot to mention, California and that whole district 12 is in some serious trouble and they are doing nothing but compounding problems.  Good work guys.

Population Atlas: Population Density Map of the World

This was something I found interesting and thought was worth sharing.

Dollar Continues to look weak, will printing more help?

The past six months of the December 2009 dollar index futures contract:

"Bizarro Peace Prize Awarded to Obama"

Justin Raimondo:

Let’s say you’re the President of the United States — okay? And you’re on the brink of escalating what promises to be a wider, more intense war than that which George W. Bush launched in Iraq. You’ve already sent in reinforcements, but you’re undecided about just how many more troops you’re going to send to Afghanistan – could be20,000, could be 40,000, or even 60,000. But, in any case, you’ve ruled outwithdrawal and diplomacy: the only option you have left is more war.

In addition, you’re moving – slowly but surely – toward full-scale involvement in Pakistan, where your drones are daily wreaking death and destruction on innocent civilians, and destabilizing a government that is increasingly hostile to your machinations – even though you’re bribing them with billions that never reach their ostensible beneficiaries and only serve to fatten the purses of your Pakistani sock-puppets.

Read the rest here

Top 10 Iran Myths

The smear campaign run against Iran is built on mostly misinformation.  Read this article to learn about 10 commonly held beliefs that are not true.

HIV/AIDS: Bogus?

Always ask questions , and do your own research.  A new documentary may shed some light on what could end up being one of the greatest lies ever sold to the world.

FED Increases SDR Holdings

It appears the FED has began to accumulate SDR's.  As of September 23 , they were showing $5.2 billon of SDRs, while only a week earlier  they had just $2.2 billion, according to the H4.1 statistical release.  This leads us to the IMF who announced recently:

General allocations of SDRs. General allocations have to be based on a long-term global need to supplement existing reserve assets. Decisions to allocate SDRs have been made three times. The first allocation was for a total amount of SDR 9.3 billion, distributed in 1970-72 in yearly installments. The second allocation, for SDR 12.1 billion, was distributed in 1979–81 in yearly installments.

The third general allocation was approved on August 7, 2009 for an amount of SDR 161.2 billion and will take place on August 28, 2009. The allocation would mean a simultaneous increase in eligible members’ SDR holdings and in their cumulative SDR allocation by about 74.13 percent of their quota.

    Special allocations of SDRs. A proposal for a special one- time allocation of SDRs was approved by the IMF’s Board of Governors in September 1997 through the proposed Fourth Amendment of the Articles of Agreement. Its intent is to enable all members of the IMF to participate in the SDR system on an equitable basis and correct for the fact that countries that joined the Fund after 1981—more than one-fifth of the current IMF membership—have never received an SDR allocation. This allocation would increase members' cumulative SDR allocations by SDR 21.5 billion using a common benchmark ratio as described in the amendment.

The Fourth Amendment became effective for all members on August 10, 2009 when the Fund certified that at least three-fifths of the IMF membership (112 members) with 85 percent of the total voting power accepted it. On August 5, 2009, the United States joined 133 other members in supporting the Amendment. The special allocation will be implemented on September 9, 2009.

How much did the US get of the allocations?  Of the General allocation the US received 27.54 in SDR and an additional 2.877 bilion in the special issue, for a total of 20.416 billion.  You can find that the exchange of 1 SDR is equal to 1.57727 US dollars. 

So what does this mean?  One thing is for sure, the IMF has increased its role and power.

Looking at the numbers, the new "General allocation" is very significant giving the size,  an increase in the SDR "quota" of 74.13%.

If we look at the Treasury website and the US Reserve position and Exchange Stabilization Fund (ESF) section, the August 21 and August 28 statements show a significant change in SDR holdings.  Further, while the IMF reserve position shows no significant change. 
From the Treasury website:

U.S. International Reserve Position 

November 14, 2008

The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.reserve assets totaled $70,408 million as of the end of that week

(2) IMF reserve position 2	4,398
(3) SDRs 2	8,930

August 21, 2009

The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.reserve assets totaled $83,585 million as of the end of that week

2) IMF reserve position 2	12,665
(3) SDRs 2	9,515

As of August 28, 2009

The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.reserve assets totaled $127,018 million as of the end of that week

(2) IMF reserve position 2	12,656
(3) SDRs 2	52,589

September 25, 2009

The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.reserve assets totaled $133,969 million as of the end of that week

(2) IMF reserve position 2	12,812
(3) SDRs 2	57,792

This is nothing groundbreaking to those of us who pay attention but certainly is not something the US government advertises.  

I interpret this as follows.  

Think of a inverted (upside down) pyramid such as fractional reserve banking and the pyramid of debt.  An upside down pyramid seems like a pretty unstable structure and it is.  The tip of the pyramid (normally the top), the bottom in our fractional banking system, has to increase leverage and allow the factors above it do the same to allow the top heavy pyramid continue to grow upward and wider at the top.  Now a physical structure that continues to decrease its size/mass at the bottom and increase it towards the top becomes less stable as a result of higher center of gravity.   Although gravity is no factor in the inverted debt structure, the idea that it takes less effort or force to cause a fall is what needs to be remembered.  Not only does it take less to cause more damage, there are an increased number of factors that can be responsible for causing the damage. 

Ever play Jenga?  Although not a pyramid, the concept is the same.  You always have the same amount of blocks (call this our capital) but the tower gets higher and less stable as the game goes on.  It also takes less and less to cause a collapse, even breathing too hard may knock your Jenga tower over at a certain point.  Many believe that printing money can bring wealth, but without an increased capital base, like the block in Jenga, it just steals from the bottom (savings) and stacks it on top.  

I think you get the picture.  A taller tower is an illusion of something good if one blindly holds the assumption that height is what makes a tower good and stable.  The same can be said about the value of ones home or the stock market if one blindly looks only at them nominally.  But this neglects one thing, that the bottom must be built up first or else there can be no stable growth, only illusions. 

This will not work to stabilize the world's economies, if such is the intention of an international monetary authority.  Now they can not only take savings of individuals but also use the accounts of entire countries.  If a country saves too much the IMF can use inflation to steal and give where it feels the need is.  This is just adding a layer of leverage and a lender of last resort to the lenders of last resort.  

More leverage, more debt, more paper money, larger swings and crisis,  more redistribution of wealth all to be done with less to distribute.  I know this is hard for many to grasp, but printing money does not create anything other than more printed money and instability.  The IMF will not stabilize the economy.  In fact, they will accomplish just the opposite.